Is the end nigh for the Euro? [vol. 3]

[Steffan]

Andy Zarse said:

Steffan said:

Changes are coming to the EU and politics therein. Matter of conjecture how the EU leaders will fail to deal with this collectively. They will fail just as their other efforts have failed. I am very doubtful that the " Whatever it takes" nonsense carries the weight it did once. Reality time I think.

Good point. "Whatever it takes" does not seem to extend as far as the ECB directly buying bonds of southern countries. I guess we will have to wait until Thursday, but the widely predicted idea of channelling of QE through national central banks is a complete cop out. The Germans have strongly objected to the ECB (AKA The Bundesbank) buying Portugese and Italian bonds. And quite frankly, who can blame them?

And as to trusting the word of central bank govenors, one only has to look at Switzerland and the pronouncements of Gov. Thomas Jordan who two weeks ago was saying the peg was "a cornerstone policy". Ten days later; BOOM! To a lesser extent, Mark Carney has made himself look more like Fred Carno, with his "forward guidance" turning out to be worth little more than hot air.

So what price Denmark's currency peg to the Euro? Apparently, this time it's all different...

I did enjoy your Fred Carno comment on Carney which was absolutely spot on. Bankers are not gifted visionaries with enormous awareness of reality economics. That is why the last banking crisis occurred. If they had those attributes they would have avoided that crisis. The EU is steadily running out of options. Tragically a very large numbers of entirely innocent Europeans will be seriously affected. Way of the world as it is today it would seem.

[Andy Zarse]

Steffan said:

Andy Zarse said:

Steffan said:

Changes are coming to the EU and politics therein. Matter of conjecture how the EU leaders will fail to deal with this collectively. They will fail just as their other efforts have failed. I am very doubtful that the " Whatever it takes" nonsense carries the weight it did once. Reality time I think.

Good point. "Whatever it takes" does not seem to extend as far as the ECB directly buying bonds of southern countries. I guess we will have to wait until Thursday, but the widely predicted idea of channelling of QE through national central banks is a complete cop out. The Germans have strongly objected to the ECB (AKA The Bundesbank) buying Portugese and Italian bonds. And quite frankly, who can blame them?

And as to trusting the word of central bank govenors, one only has to look at Switzerland and the pronouncements of Gov. Thomas Jordan who two weeks ago was saying the peg was "a cornerstone policy". Ten days later; BOOM! To a lesser extent, Mark Carney has made himself look more like Fred Carno, with his "forward guidance" turning out to be worth little more than hot air.

So what price Denmark's currency peg to the Euro? Apparently, this time it's all different...

I did enjoy your Fred Carno comment on Carney which was absolutely spot on. Bankers are not gifted visionaries with enormous awareness of reality economics. That is why the last banking crisis occurred. If they had those attributes they would have avoided that crisis. The EU is steadily running out of options. Tragically a very large numbers of entirely innocent Europeans will be seriously affected. Way of the world as it is today it would seem.

This is what happens when you set up a nasty protectionist customs union and dress it up as a prosperity-building free trade area. Notwithstanding the fact the EU has today scrapped its insane ban on the import of fresh Indian mangos, it ultimately set itself up to fail from day one.

[RYH64E]

Andy Zarse said:

This is what happens when you set up a nasty protectionist customs union and dress it up as a prosperity-building free trade area.

Being part of a nasty, protectionist customs union isn't all bad, better than being outside in my (entirely unbiased, filthy capitalist) opinion...

[Andy Zarse]

RYH64E said:

Andy Zarse said:

This is what happens when you set up a nasty protectionist customs union and dress it up as a prosperity-building free trade area.

Being part of a nasty, protectionist customs union isn't all bad, better than being outside in my (entirely unbiased, filthy capitalist) opinion...

Why? You've already said you trade freely with the USA and other countries? We're not in NAFTA are we? It wouldn't make the slightest bit of difference to your business whether we are in or out.

ETA any true capitalist would by his natural inclination be against such a closed shop as the EU. You're only a pseudo-capitalist, you want to keep cheaper competition out of your marketplace.

[RYH64E]

Andy Zarse said:

It wouldn't make the slightest bit of difference to your business whether we are in or out.

You can't possibly know that, you know little about my business and can only speculate on any post-exit deal with the rest of the EU.

As the Greeks are likely to find out shortly, there are two sides to any negotiation and a domestic party's mandate isn't binding upon the EU.

Andy Zarse said:

You're only a pseudo-capitalist, you want to keep cheaper competition out of your marketplace.

Works for me, I prefer an easy life.

[Andrew[MG]]

Andy Zarse said:

Why? You've already said you trade freely with the USA and other countries? We're not in NAFTA are we? It wouldn't make the slightest bit of difference to your business whether we are in or out.

ETA any true capitalist would by his natural inclination be against such a closed shop as the EU. You're only a pseudo-capitalist, you want to keep cheaper competition out of your marketplace.

What cheap competition is the EU managing to keep out?

[anonymous-user]

Andy Zarse said:

He's changed his tune a bit quick hasn't he. Is he saying QE was only effective for 5 years? From the ECB perspective I would question the point of such sovereign asset purchases when a 10yr Bund is already at 0.4%.

Anyway, it's nice to see Merv finally agrees with me

I think that's exactly his point. UK 10yr was over 5% at the start of QE and hit 1.5% by the end. The final 50bn tranche of QE in mid 2012 did nothing, infact the implied rate doubled to 3% by 2013 after that. The point of sovereign purchases at this point is clearly not to drive bund yields lower as you realise, its simply a bailout of the periphery. Its hard to see anything the ECB can do at this point that will not be a huge flop. The EZ needs growth and I have not seen a single pro-growth policy come out of the EU since the crisis. Short 6EH5!

[Steffan]

fblm said:

Andy Zarse said:

He's changed his tune a bit quick hasn't he. Is he saying QE was only effective for 5 years? From the ECB perspective I would question the point of such sovereign asset purchases when a 10yr Bund is already at 0.4%.

Anyway, it's nice to see Merv finally agrees with me

I think that's exactly his point. UK 10yr was over 5% at the start of QE and hit 1.5% by the end. The final 50bn tranche of QE in mid 2012 did nothing, infact the implied rate doubled to 3% by 2013 after that. The point of sovereign purchases at this point is clearly not to drive bund yields lower as you realise, its simply a bailout of the periphery. Its hard to see anything the ECB can do at this point that will not be a huge flop. The EZ needs growth and I have not seen a single pro-growth policy come out of the EU since the crisis. Short 6EH5!

I entirely agree with you. Particularly the "EU needs growth and that you have not seen a singe pro-growth policy emanating from the EU" remarks. That is the esssence of the massive problem that the EU faces now. They really are in a very difficult jamb, albeit entrely of their own making over the years.

QE, which seems to be the only weapon the EA can actually use without recourse to the member states, cannot create the growth that the EU are seeking desperately. From the comlpete failure of the EU to be aware of confidence in the markets failing and to therefore allow the Euro to fall, without immediately acting to support the Euro, I do not think they have the necessary ability to manage and escape from this hole now. Inevitably the failing states will fail. How that will be managed remains to be seen, but I am not expecting dynamic resourceful activity from the EU leaders because of the catelogue of dreadful failures, they have evinced in this matter.

[Art0ir]

Given QE looks like it will be as effective in solving the Eurozone ills as a not very effective thing, what's people's thoughts on real helicopter economics? Printing the same amount of money but lodging it in every taxpayer's account across the area.

Was it Australia did something similar not so long ago?

[Andy Zarse]

fblm said:

Andy Zarse said:

He's changed his tune a bit quick hasn't he. Is he saying QE was only effective for 5 years? From the ECB perspective I would question the point of such sovereign asset purchases when a 10yr Bund is already at 0.4%.

Anyway, it's nice to see Merv finally agrees with me

I think that's exactly his point. UK 10yr was over 5% at the start of QE and hit 1.5% by the end. The final 50bn tranche of QE in mid 2012 did nothing, infact the implied rate doubled to 3% by 2013 after that. The point of sovereign purchases at this point is clearly not to drive bund yields lower as you realise, its simply a bailout of the periphery. Its hard to see anything the ECB can do at this point that will not be a huge flop. The EZ needs growth and I have not seen a single pro-growth policy come out of the EU since the crisis. Short 6EH5!

Draghi is a good egg but he's been dealt a truly crappy hand by the failure of politicans to confront the reality of EMU. It means debt sharing as a bare minimum.

[Andy Zarse]

Andrew[MG] said:

Andy Zarse said:

Why? You've already said you trade freely with the USA and other countries? We're not in NAFTA are we? It wouldn't make the slightest bit of difference to your business whether we are in or out.

ETA any true capitalist would by his natural inclination be against such a closed shop as the EU. You're only a pseudo-capitalist, you want to keep cheaper competition out of your marketplace.

What cheap competition is the EU managing to keep out?

Take a look at the external tariffs they impose on a whole raft of goods and services. The EU’s Common External Tariff averages between five and nine per cent – higher than Britain had in the 1920s.

Edited by Andy Zarse on Tuesday 20th January 16:52

[Axionknight]

Art0ir said:

Given QE looks like it will be as effective in solving the Eurozone ills as a not very effective thing, what's people's thoughts on real helicopter economics? Printing the same amount of money but lodging it in every taxpayer's account across the area.

Was it Australia did something similar not so long ago?

Surely that would devalue the currency as there is more of it in circulation and drive prices up?

[s2art]

Axionknight said:

Art0ir said:

Given QE looks like it will be as effective in solving the Eurozone ills as a not very effective thing, what's people's thoughts on real helicopter economics? Printing the same amount of money but lodging it in every taxpayer's account across the area.

Was it Australia did something similar not so long ago?

Surely that would devalue the currency as there is more of it in circulation and drive prices up?

Maybe a more competitive currency, a bit more inflation and a load of money sloshing around the system could be just what the doctor ordered. (except for Germany perhaps)

[LongQ]

Carney had his critics when he ran things in Canada.

His term coincided, so I understand, with rampant property inflation that was hardly beneficial to the majority of Canadians but might seem normal to Brits.

Magic Mario has words to play with but nothing much else. He, just like the others in similar positions, has limited options to deal with whatever "events" come hurtling at him from afar. For example the sudden political expediency of manipulating the price of oil and other fuels. No control, no insight (probably) into the real politics involved and no clue how the results will pan out and what side issues may suddenly become key drivers of policy. Oil prices may well not be so significant anyway in the longer term.

The potential of even relatively small financial impacts on the larger economies to have a greater net effect than Greece and Cyprus combined in ant scenario once might envisage for them almost makes them irrelevant - and I don't mean that in any nationalistic or negative way. I just see some potential for other matters to have a far greater and more influential effect.

[Art0ir]

s2art said:

Axionknight said:

Art0ir said:

Given QE looks like it will be as effective in solving the Eurozone ills as a not very effective thing, what's people's thoughts on real helicopter economics? Printing the same amount of money but lodging it in every taxpayer's account across the area.

Was it Australia did something similar not so long ago?

Surely that would devalue the currency as there is more of it in circulation and drive prices up?

Maybe a more competitive currency, a bit more inflation and a load of money sloshing around the system could be just what the doctor ordered. (except for Germany perhaps)

"That's a bingo!" - Colonel Hans Landa.

[anonymous-user]

Andy Zarse said:

Draghi is a good egg but he's been dealt a truly crappy hand by the failure of politicans to confront the reality of EMU. It means debt sharing as a bare minimum.

It's not rocket surgery

fbrs on this thread in 2012... said:

one way or another, if the euro is to survive and southern debts are not going to spiral out of control, there will be (continue to be) a massive transfer of wealth south. there are lots of ways it can happen; direct forgiveness of debt, default, cheap loans, direct bond purchases to lower yield [QE], northern countries guaranteeing southern, eurobonds (shared debt) all of which have a direct or indirect cost to vichy-axis taxpayers wink

so now we have omt's, which will drive down pigs funding costs but thats about it. the 'new' euros won't ever see the light of day and will sit in bank deposits and reserves at the ecb. without stable funding costs the periphery is dead but it is far from enough. the periphery is still locked in a death spiral of uncompetitive low productivity economies, high unemployment, high welfare costs and low tax receipts with fx devaluation impossible. instead their standards of living will be devalued.

in a few years things will be (even more) miserable in the periphery, at some point the german economy will turn down and closer european integration inculding eurobonds and full fat qe will become politically possible...maybe. it would be a massive long term gamble that they should probably have tried when times were good but i'm not sure they have the politicians with enough credibility to accomplish it today

[anonymous-user]

I don't normally post news but as this has been out all day and no one else has...

50bn euros a month QE for at least a year according to people familiar with the matter a leak to judge market reaction prior to tomorrows real announcement.

http://www.wsj.com/articles/ecb-executive-boards-q...

[NicD]

fblm said:

I don't normally post news but as this has been out all day and no one else has...

50bn euros a month QE for at least a year according to people familiar with the matter a leak to judge market reaction prior to tomorrows real announcement.

http://www.wsj.com/articles/ecb-executive-boards-q...

150 point move on the DAX

[number 46]

fblm said:

I don't normally post news but as this has been out all day and no one else has...

50bn euros a month QE for at least a year according to people familiar with the matter a leak to judge market reaction prior to tomorrows real announcement.

http://www.wsj.com/articles/ecb-executive-boards-q...

I think alot of this may be already priced in, still 50 bn euros a month for a year is a st load of cash, I do wonder if it is just too late though. Oddly the Eur/usd went up today?

[NicD]

It went up to 116.8, then back down to 115.6, now halfway between.