Is the end nigh for the Euro? [vol. 2]
Discussion
bosscerbera said:
Mikeyboy said:
Italy is however fundamentally capable of paying its money back, even if their economy had never really performed as well as it should. It had a balanced budget and by the simple expedience of raising a little more in tax, while unpopular still acheievable it could have begun to pay back what was basically a historic debt rather than one based upon an ongoing budget deficit.
The banks and EU though have panicked and set them onto the path of "austerity" and what will be an inevitable shrinkage in their output.
Italy is no-where near the basketcase Spain has been since 2009. As you say I believe Spain will have to default, Italy doesn't. It just needs someone to put their foot down at the EU and with their lenders.
Nice theory. The banks and EU though have panicked and set them onto the path of "austerity" and what will be an inevitable shrinkage in their output.
Italy is no-where near the basketcase Spain has been since 2009. As you say I believe Spain will have to default, Italy doesn't. It just needs someone to put their foot down at the EU and with their lenders.
Nowadays apparently there is no discount!!
All through the books, with official receipts being given.
Perhaps they are a changing???
As Bosscerebra Mickeyboy and Digga have commented Italy is in a very different economic position from Spain, Portugal and Greece.
Greece is utterly insolvent: Spain is utterly insolvent: Portugal is utterly insolvent. IMO all three need to be outside the Euro and addressing the their currency difficulties with their own currency. No other solution.
They will have very serious difficulties outside the Euro, but far less than they would have, trying to repay 50% of their debts, plus interest, within the Euro.
It cannot be done and they will all three need to default.
In that way all three lose hundreds of Billions of debt AND the interest on that debt. They simply have no other means of escape.
Italy is in very serious difficulty.
There is a need for permanent change in the black markets of Italy, down to near zero, and all the Italians need to pay tax at a sensible level.
Italy could recover from this mess: whether there is the will in either the EU or Italy itself I really do not know. It would take years of hard boring penury in Italy as debt is paid off. But is is possible.
My concern is the domino effect on Italy.
If Spain Portugal and Greece have all gone bust in short order, despite the strutting, grandstanding and dithering of Merkozy will the creditors stand another attempt at holding the Italians up.
There will be widespread disbelief and loss of confidence in the real determination of the EU to solve any of this. This may be a bridge too far.
On balance, I fear for Italy. But there is still a slim chance.
I think the EU may throw it away with their dishonest manipulation and funny money programs.
Greece is utterly insolvent: Spain is utterly insolvent: Portugal is utterly insolvent. IMO all three need to be outside the Euro and addressing the their currency difficulties with their own currency. No other solution.
They will have very serious difficulties outside the Euro, but far less than they would have, trying to repay 50% of their debts, plus interest, within the Euro.
It cannot be done and they will all three need to default.
In that way all three lose hundreds of Billions of debt AND the interest on that debt. They simply have no other means of escape.
Italy is in very serious difficulty.
There is a need for permanent change in the black markets of Italy, down to near zero, and all the Italians need to pay tax at a sensible level.
Italy could recover from this mess: whether there is the will in either the EU or Italy itself I really do not know. It would take years of hard boring penury in Italy as debt is paid off. But is is possible.
My concern is the domino effect on Italy.
If Spain Portugal and Greece have all gone bust in short order, despite the strutting, grandstanding and dithering of Merkozy will the creditors stand another attempt at holding the Italians up.
There will be widespread disbelief and loss of confidence in the real determination of the EU to solve any of this. This may be a bridge too far.
On balance, I fear for Italy. But there is still a slim chance.
I think the EU may throw it away with their dishonest manipulation and funny money programs.
Stefan - I was watching Warren Buffet this morning on CNBC, and I got the impression he feels the same.
Well at least (my words) that this latest loan is just papering over the cracks.
Mind you he did say that late 2011 he put EURO 175 million each, into 8 European Business because "They were Cheap"!
Would be interesting to know which and where these 8 were.
Well at least (my words) that this latest loan is just papering over the cracks.
Mind you he did say that late 2011 he put EURO 175 million each, into 8 European Business because "They were Cheap"!
Would be interesting to know which and where these 8 were.
Bing o said:
From what I understand, my company (one of the largest Euro clearers) won't look at the possibility of a breakup because if news got out that we were looking at the possibility, the news in itself would pretty much be the end.
But they are looking at that possibillity aren't they? I mean, they'd have to be, right? Otherwise....The Excession said:
But they are looking at that possibillity aren't they? I mean, they'd have to be, right? Otherwise....
Not from what I know, and it's come from a senior source. Plus, the level of detailed planning would be hard to hide from everyone. Think how many systems the average bank uses. Hundreds, if not thousands. Multiply that up by the number of banks and other financial institutions.It took us a long time to set up offshore renminbi trading (effectively a new currency in HK). And that was without countries defaulting, civil disorder etc. I agree with Steffan that these countries are insolvent and should leave the Euro. I disagree that there is any possibility of this happening from a finance perspective, and without creating civil war at the least in the southern states of Europe.
Bing o said:
The Excession said:
But they are looking at that possibillity aren't they? I mean, they'd have to be, right? Otherwise....
Not from what I know, and it's come from a senior source. Plus, the level of detailed planning would be hard to hide from everyone. Think how many systems the average bank uses. Hundreds, if not thousands. Multiply that up by the number of banks and other financial institutions.It took us a long time to set up offshore renminbi trading (effectively a new currency in HK). And that was without countries defaulting, civil disorder etc. I agree with Steffan that these countries are insolvent and should leave the Euro. I disagree that there is any possibility of this happening from a finance perspective, and without creating civil war at the least in the southern states of Europe.
On a purely practical note I do not believe that countries in as much of a hole as Greece, Portugal and Spain can possibly remain within the Euro unless constant subsidy is provided direct to the country by the EU to make essential payments.
All three countries have major defecits on their balance of payments. All three countries have huge growing unemployment. All three countries have totally insolvent exchequers. All three countries have rising social unrest.
I understand you belief that the EU will not allow default,
Can I ask you, if you could explain what mechanism, the EU could use to effect this continued membership?
The subsidy has stopped now with the last trance agreed.
How can the countries function without more and more subsidy?
Which the EU are saying is ended.
I cannot see a way but perhaps there is one.
So essentially, is this heads in the sand ignoring the problems or simply a case of no one really has a clue what to do?
I'm minded of an analagy where if your car doesn't run and you put some petrol into it and it still doesn't run, how long are you going to stand there pouring petrol in?
Though I guess in this case, the car does just about run but there is a gaping hole in the fuel tank. So long as you can throw enough petrol in it might just get you to the next petrol station. The fact that it's pissing fuel out almost as fast as you can pour it in and no one knows how to fix the hole seems some what obvious in this context..
I'm minded of an analagy where if your car doesn't run and you put some petrol into it and it still doesn't run, how long are you going to stand there pouring petrol in?
Though I guess in this case, the car does just about run but there is a gaping hole in the fuel tank. So long as you can throw enough petrol in it might just get you to the next petrol station. The fact that it's pissing fuel out almost as fast as you can pour it in and no one knows how to fix the hole seems some what obvious in this context..
Steffan said:
I appreciate your different view.
On a purely practical note I do not believe that countries in as much of a hole as Greece, Portugal and Spain can possibly remain within the Euro unless constant subsidy is provided direct to the country by the EU to make essential payments.
All three countries have major defecits on their balance of payments. All three countries have huge growing unemployment. All three countries have totally insolvent exchequers. All three countries have rising social unrest.
I understand you belief that the EU will not allow default,
Can I ask you, if you could explain what mechanism, the EU could use to effect this continued membership?
The subsidy has stopped now with the last trance agreed.
How can the countries function without more and more subsidy?
Which the EU are saying is ended.
I cannot see a way but perhaps there is one.
I agree Steffan. There is probably no mechanism which staves off default. But there is no mechanism to leave the Euro and re-establish a local currency in an orderly fashion either. We are talking reducing supposed first world european countries - our neighbours - to having banana republic economies. I think that this will lead civil war, and mass migration into the rest of the EU. Which means we will need to expel these countries from that too (unless you want every corner shop to turn into a kebab shop).On a purely practical note I do not believe that countries in as much of a hole as Greece, Portugal and Spain can possibly remain within the Euro unless constant subsidy is provided direct to the country by the EU to make essential payments.
All three countries have major defecits on their balance of payments. All three countries have huge growing unemployment. All three countries have totally insolvent exchequers. All three countries have rising social unrest.
I understand you belief that the EU will not allow default,
Can I ask you, if you could explain what mechanism, the EU could use to effect this continued membership?
The subsidy has stopped now with the last trance agreed.
How can the countries function without more and more subsidy?
Which the EU are saying is ended.
I cannot see a way but perhaps there is one.
The Excession said:
So essentially, is this heads in the sand ignoring the problems or simply a case of no one really has a clue what to do?
I'm minded of an analagy where if your car doesn't run and you put some petrol into it and it still doesn't run, how long are you going to stand there pouring petrol in?
Though I guess in this case, the car does just about run but there is a gaping hole in the fuel tank. So long as you can throw enough petrol in it might just get you to the next petrol station. The fact that it's pissing fuel out almost as fast as you can pour it in and no one knows how to fix the hole seems some what obvious in this context..
No, it's a case of the problem being so big that there is no point in looking at it until it breaks. Most banks will have hundreds of systems that process and value Euros. We have curves and greeks used to calculate all sorts of Profit and Loss, Risk etc. We have thousands of spreadsheets all linked to the existing currency. We link into central clearers etc. We already are under huge pressure from the regulators to change how we conduct our business (and rightly so) - Basel III, Dodd-Frank etc etc.I'm minded of an analagy where if your car doesn't run and you put some petrol into it and it still doesn't run, how long are you going to stand there pouring petrol in?
Though I guess in this case, the car does just about run but there is a gaping hole in the fuel tank. So long as you can throw enough petrol in it might just get you to the next petrol station. The fact that it's pissing fuel out almost as fast as you can pour it in and no one knows how to fix the hole seems some what obvious in this context..
The resources required to manage a Euro breakup will be huge - project teams in the 1,000s per bank. A lot of that expertise doesn't grow on trees and will cost (bare in mind, we aren't talking about the people who lost everyone else their money, we are talking about back office staff - project managers, business analysts, IT etc etc).
Guam said:
Digga said:
can add an anecdotal about Italy.
we are seeing the same with US suppliers increasingly they wont ship to Europe now, without cash up front <even if you dealt with them for years>.A lot of them are edgy about EU companies
So really this "risk aware" computer say no policy makes anyone applying for a bit of extra credit (beacause they need cash obviously)too much of a risk,the banks then are only lending to asset rich entitys who dont need money ,and whos account demographic is always away from the top of their limit and nowhere near stagnation.
Bit like Greece then???
And a world away from real world borrowing criteria.
Bit like Greece then???
And a world away from real world borrowing criteria.
Gary11 said:
So really this "risk aware" computer say no policy makes anyone applying for a bit of extra credit (beacause they need cash obviously)too much of a risk,the banks then are only lending to asset rich entitys who dont need money ,and whos account demographic is always away from the top of their limit and nowhere near stagnation.
Bit like Greece then???
And a world away from real world borrowing criteria.
Although the Banking crisis and the subsequent worldwide knee jerk aversion to any lending which requires any form of risk, was not directly connected with the Sovereign states crisis we are now seeing, in all its glory, there are clearly consequential difficulties that are conspiring to produce impossible trading difficulties, internationally.Bit like Greece then???
And a world away from real world borrowing criteria.
The Banks simply are not the clever, superbly organised, lithe, dynamic organisations that Bankers generally seek to portray. They never were.
They are in fact, poor managers of money, who have acted like lemmings in overextending credit to poor credit risk property loans worldwide and have now compounded the problem bu grossly overextending loans to Sovereign states who cannot possibly afford to repay those loans.
Every Bank in the world has made exactly the same mistake not once but twice.
Either of these gross errors over many years of reckless lending would be sufficient to ruin the Banks everywhere at one fell swoop.
Both together, one following the other, a few years apart must cause a fundamental review of the whole approach to Banking.
The knee jerk reaction of Politicians, led by the financial idiot, Gordon Brown, was to smother the first disaster with taxpayers money over the Banking crisis. GB actually claimed this was a real victory. Please!
There is now a second banking crisis, caused by the impending default on Billions of Euros worth of debt, when the Sovereign states default, which they must.
It goes without saying that he knee jerk reaction of Politicians, led by the financial idiots, Merkozy and Co, will be to smother the disaster with taxpayers money once againover the second Banking crisis.
Merkozy have also developed a new process to hide reality. Funny money printing.
Oh Joy!
Clearly, this is not going to work.
Ordinary borrowers are completely locked out of borrowing unless they have a surfeit of assets and merely require liquidity, or massive deposits and perfect credit scores.
Industry and commerce simply cannot expand and grow with such a Banking system. The Banking system is not fit for purpose.
Recession beckons at an ever increasing rate. Politicians are doing everything in their power to assist it with open arms.
Less strutting about the Worlds stages, less bravado based on printing someones else's IOU's, and a good dose of reality is what is needed in modern politics.
This banking crisis will grow and grow until the nettle is grasped. I can see no sign that any of our leaders have either the ability or the determination to actually deal with this problem.
The problem with the spin merchants and Svengali's like Blair, Mandelson, Andy Coulson, Alistair Campbell, is that they are very good at feathering their own nests. But not at actually addressing the problems.
If you think Cameroon, Boy George and Billy Hague are any likely to achieve any more you are braver men than I. I see no resolution to any of this in the current political scene.
The problem is bigger then the players.
Mikeyboy said:
So if it does mean disorderly departure from the Euro for a few of these places which do we thnk will also have major civil disorder?
I really do think Spain. They have form.
I was in the Costa Blanca last week.I really do think Spain. They have form.
Saw some brief reports and footage on the tv of riots in Valencia.
Further south (where I was) the Guardia were on EVERY street in town, all within sight of each other. There was no sign of problems though.
1point7bar said:
Mikeyboy said:
So if it does mean disorderly departure from the Euro for a few of these places which do we thnk will also have major civil disorder?
I really do think Spain. They have form.
I was in the Costa Blanca last week.I really do think Spain. They have form.
Saw some brief reports and footage on the tv of riots in Valencia.
Further south (where I was) the Guardia were on EVERY street in town, all within sight of each other. There was no sign of problems though.
So S&P say Greece is now in default: http://uk.reuters.com/video/2012/02/28/greek-defau...
1point7bar said:
Mikeyboy said:
So if it does mean disorderly departure from the Euro for a few of these places which do we thnk will also have major civil disorder?
I really do think Spain. They have form.
I was in the Costa Blanca last week.I really do think Spain. They have form.
Saw some brief reports and footage on the tv of riots in Valencia.
Further south (where I was) the Guardia were on EVERY street in town, all within sight of each other. There was no sign of problems though.
The shopping centres had the usual expensive outlets selling eurotat - gold handbags and shiny black fur collared anoraks etc - that only Russians seem to buy, but they weren't busy with people spending money. The outlying areas looked a bit grim. The oranges were nice. The harbour seemed pretty quiet, not many ships in dock. I couldn't fathom how the economy worked, something which is even vaguely possible in Italy.
Valencia was pleasant enough but I wouldn't go back.
- The UK via the EU, Spanish banks financing insane developments etc.
Andy Zarse said:
I went on a corporate weekend to Valencia in late 2010. My over-riding impression was that they'd* spent a utter fortune on fancy architecture and roads but beyond that there wasn't much backing it all up.
The shopping centres had the usual expensive outlets selling eurotat - gold handbags and shiny black fur collared anoraks etc - that only Russians seem to buy, but they weren't busy with people spending money. The outlying areas looked a bit grim. The oranges were nice. The harbour seemed pretty quiet, not many ships in dock. I couldn't fathom how the economy worked, something which is even vaguely possible in Italy.
Valencia was pleasant enough but I wouldn't go back.
Somewhere else they spent fortunes for some 'global' expo I'd never heard of is Zaragoza. Loads of incongruous 'legacy' architecture ...a bit like Greece's Olympic mementoes.The shopping centres had the usual expensive outlets selling eurotat - gold handbags and shiny black fur collared anoraks etc - that only Russians seem to buy, but they weren't busy with people spending money. The outlying areas looked a bit grim. The oranges were nice. The harbour seemed pretty quiet, not many ships in dock. I couldn't fathom how the economy worked, something which is even vaguely possible in Italy.
Valencia was pleasant enough but I wouldn't go back.
- The UK via the EU, Spanish banks financing insane developments etc.
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