Is the end nigh for the Euro? [vol. 3]
Discussion
I caught the briefest snippet of BBC news around 7 last night, where a very eloquent Greek commentator, in Athens, was commenting on the utter unsustainability of the austerity program. He likened the destruction and demographic dislocation (the exodus of youth and talent) to being carpet bombed by the Troika.
Digga said:
Timmy40 said:
Really? UK House prices outside of London are at or below pre bust levels, and London itself has seem house price inflation for a number of reasons most of which have absolutely nothing to do with QE and more to do with Global security.
I think given where we might well be without QE ( look at the EU for an example ) it can be judged to have been a massive policy success.
I meant inflation of shares etc. which certainly has happened.I think given where we might well be without QE ( look at the EU for an example ) it can be judged to have been a massive policy success.
If this sounds like a hairshirt commie whinge, I should point out that I watched a number of personal investments far exceed my own expectations of them, so I'm not crying or saying "not fair" because I missed out. What worries me - and knowing the UK SME market very well I have a decent idea of this - is how tight credit remained throughout and how little upside there has been to the real economy during the period of QE.
Nobody has ever managed to explain to me why, if QE was intended to get banks lending, it was ever necessary to introduce such a scheme as FLS. Doesn't this fact demonstrate categorically that, on this metric at least, QE failed to deliver the goods? And of course, we have to factor in our brain dead banks who used the vast majority of almost free money provided by FLS to lend to the residential mortgage and property markets. They should have called it Funding for Mortgage Lending. Which is precisely what this country does not need. Until we start investing in proper businesses we will never get anywhere.
One of my themes, particularly in the early days of this thread, was that we need to reform our banks in order to get our economy growing on anything other than another pwoperty boom. That necessity hasn't, in my opinion at least, changed.
Edited by Andy Zarse on Friday 23 January 10:40
I think the inquiry, lead by Lawrence Tomlinson and the subsequent Panorama program illustrate merely the tip of the iceberg of what went wrong and, as Andy says, is still essentially wrong.
I've had accounts of the destruction from friends and acquaintance on both sides of the fence - from within 'big' banks lending to SMEs and also from SME owners - and neither side contradicts the other; the banks were bailed out by the state whilst simultaneously raiding capital of SMEUK. We've lost several normal generations of SME and there has been little upside - not much creation to show for the destruction, to use the free market "creative destruction" argument.
I've had accounts of the destruction from friends and acquaintance on both sides of the fence - from within 'big' banks lending to SMEs and also from SME owners - and neither side contradicts the other; the banks were bailed out by the state whilst simultaneously raiding capital of SMEUK. We've lost several normal generations of SME and there has been little upside - not much creation to show for the destruction, to use the free market "creative destruction" argument.
Andy Zarse said:
One of my themes, particularly in the early days of this thread, was that we need to reform our banks in order to get our economy growing on anything other than another property boom. That necessity hasn't, in my opinion at least, changed.
Good grief, we agree again!It seems to me ridiculous that banks have been able to get money almost free and then offer it out to small businesses at 10% p.a. - followed by statements like "we have money available for small businesses but they just aren't there to take it".
In recent years I have funded a business myself which I should never have needed to fund. Why did I do it? Because it's simply so much more effective than going to the natural providers of money into the economy - the banks. Let's face it, even Sainsbury's and Tesco are running their own banks and able to offer savers some of the best interest rates in the market. As of today, DOUBLE the rate of interest (Tesco vs Santander) with the same level of risk for the saver.
Digga said:
I think the inquiry, lead by Lawrence Tomlinson and the subsequent Panorama program illustrate merely the tip of the iceberg of what went wrong and, as Andy says, is still essentially wrong.
I've had accounts of the destruction from friends and acquaintance on both sides of the fence - from within 'big' banks lending to SMEs and also from SME owners - and neither side contradicts the other; the banks were bailed out by the state whilst simultaneously raiding capital of SMEUK. We've lost several normal generations of SME and there has been little upside - not much creation to show for the destruction, to use the free market "creative destruction" argument.
I have met Lawrence socially (good friends with good friends) and a more intelligent and straightforward bloke you couldn't hope to meet. His Panorama program summed it up perfectly. I've had accounts of the destruction from friends and acquaintance on both sides of the fence - from within 'big' banks lending to SMEs and also from SME owners - and neither side contradicts the other; the banks were bailed out by the state whilst simultaneously raiding capital of SMEUK. We've lost several normal generations of SME and there has been little upside - not much creation to show for the destruction, to use the free market "creative destruction" argument.
It was also cool being driven in his Land Cruiser by a Le Mans winner!
Andy Zarse said:
I have met Lawrence socially (good friends with good friends) and a more intelligent and straightforward bloke you couldn't hope to meet. His Panorama program summed it up perfectly.
It was also cool being driven in his Land Cruiser by a Le Mans winner!
Way back when he had his Eclipse TVR GT racing team, my mate knew him, I think through Shane Lynch's co-driver whose name escapes me now. He always spoke highly of LT. Taking on that government advisory role was a poisoned chalice and he was pretty brave to have done it.It was also cool being driven in his Land Cruiser by a Le Mans winner!
Claudia Skies said:
Andy Zarse said:
One of my themes, particularly in the early days of this thread, was that we need to reform our banks in order to get our economy growing on anything other than another property boom. That necessity hasn't, in my opinion at least, changed.
Good grief, we agree again!It seems to me ridiculous that banks have been able to get money almost free and then offer it out to small businesses at 10% p.a. - followed by statements like "we have money available for small businesses but they just aren't there to take it".
In recent years I have funded a business myself which I should never have needed to fund. Why did I do it? Because it's simply so much more effective than going to the natural providers of money into the economy - the banks. Let's face it, even Sainsbury's and Tesco are running their own banks and able to offer savers some of the best interest rates in the market. As of today, DOUBLE the rate of interest (Tesco vs Santander) with the same level of risk for the saver.
Given that we appear to agree on several important issues, it is fair to assume you are a man of high intellect and insight
So I am now even more bemused why you don't see the Euro for the festering dog's breakfast it is, nor the trail of destruction and human misery its ill-conceived implementation has wrought across half a continent. The EU were told they couldn't have EMU without political union and debt sharing or the result would be perpetual crisis. And boy, have such critics have been proved correct.
Even ignoring the tortured birth of this b
dized currency, if you were Italy why the juddering buggery would you ever want to tie your currency to the DM? You simply destroy your home industry and give the Germans a huge advantage of a fixed exchange rate. It's utterly insane. By the way, in the twelve month to Dec 2014, Italian industrial production fell again, this time another 1.6%. I have been posting these statistics of doom since the original thread in 2011, and frankly I'm getting sick of it...
It's not too late for you to have a conversion on the road to Domestos!
Digga said:
I caught the briefest snippet of BBC news around 7 last night, where a very eloquent Greek commentator, in Athens, was commenting on the utter unsustainability of the austerity program. He likened the destruction and demographic dislocation (the exodus of youth and talent) to being carpet bombed by the Troika.
Spotting the problem is the easy part, working out what to do about it is much more difficult. The ideal solution for Greece would be debt write off combined with never ending subsidy from the more successful European states, unfortunately I don't think their neighbours generosity will stretch that far. Cheap holidays and olive sales aren't sufficiently lucrative to maintain the lifestyle many now expect, that's the hard truth imo.RYH64E said:
Digga said:
I caught the briefest snippet of BBC news around 7 last night, where a very eloquent Greek commentator, in Athens, was commenting on the utter unsustainability of the austerity program. He likened the destruction and demographic dislocation (the exodus of youth and talent) to being carpet bombed by the Troika.
Spotting the problem is the easy part, working out what to do about it is much more difficult. The ideal solution for Greece would be debt write off combined with never ending subsidy from the more successful European states, unfortunately I don't think their neighbours generosity will stretch that far. Cheap holidays and olive sales aren't sufficiently lucrative to maintain the lifestyle many now expect, that's the hard truth imo.In which case you not only concede the Euro has failed, but that it cannot possibly succeed without huge fiscal transfers from the richer to the poorer areas. Good luck with wrangling that one with Angela, Schauble and in fact the entire German nation...
RYH64E said:
Spotting the problem is the easy part, working out what to do about it is much more difficult. The ideal solution for Greece would be debt write off combined with never ending subsidy from the more successful European states, unfortunately I don't think their neighbours generosity will stretch that far. Cheap holidays and olive sales aren't sufficiently lucrative to maintain the lifestyle many now expect, that's the hard truth imo.
No doubt the country had severe problems without the Euro - statistically it has been in default for 50% of its existence as a nation - and that the chicanery deployed to enter the currency saddled it with yet more debt (payable to our friends at GS) but also a false sense of prosperity which saw money pisssed up the wall and down the drain with equal measure.However, they would have had at their disposal, the means to devalue and default and re-set and that without the risk of pulling the whole Euro edifice down around them.
Digga said:
No doubt the country had severe problems without the Euro - statistically it has been in default for 50% of its existence as a nation - and that the chicanery deployed to enter the currency saddled it with yet more debt (payable to our friends at GS) but also a false sense of prosperity which saw money pisssed up the wall and down the drain with equal measure.
However, they would have had at their disposal, the means to devalue and default and re-set and that without the risk of pulling the whole Euro edifice down around them.
More to the point, they would never have had access to the huge debts they've managed to run up by virtue of sharing Germany's credit rating. But they couldn't afford their desired lifestyle with the Drachma, can't afford it with the Euro, and won't be able to afford it with the New Drachma. No country can use the devalue and default mechanism to maintain unsustainable spending, it's a one shot trick.However, they would have had at their disposal, the means to devalue and default and re-set and that without the risk of pulling the whole Euro edifice down around them.
RYH64E said:
More to the point, they would never have had access to the huge debts they've managed to run up by virtue of sharing Germany's credit rating. But they couldn't afford their desired lifestyle with the Drachma, can't afford it with the Euro, and won't be able to afford it with the New Drachma. No country can use the devalue and default mechanism to maintain unsustainable spending, it's a one shot trick.
Cannot disagree with a single word of that.The whole affair is a tragedy and is not going to end well. It is already unpleasant for many on the ground in the blighted nations.
Digga said:
RYH64E said:
More to the point, they would never have had access to the huge debts they've managed to run up by virtue of sharing Germany's credit rating. But they couldn't afford their desired lifestyle with the Drachma, can't afford it with the Euro, and won't be able to afford it with the New Drachma. No country can use the devalue and default mechanism to maintain unsustainable spending, it's a one shot trick.
Cannot disagree with a single word of that.The whole affair is a tragedy and is not going to end well. It is already unpleasant for many on the ground in the blighted nations.
We talk of feckless southerners but what of stupid northerners? Many of these foolish lenders were northern European banks, who got bailed out. The North passed all the pain back South by the bailout mechanisms. These banks should have been toast in my opinion but that's another story.
Andy Zarse said:
These banks should have been toast in my opinion but that's another story.
That I do agree with. It's a two way street, Greece shouldn't have tried to borrow as much as they did and they shouldn't have been lent as much as they were (neither of which is a result of using the euro imo). Let them default, that's what usually happens when a company, individual or country is bust.Convert said:
Euro currently trading down 1.89% against Sterling.
Are we seeing start it's slow slide to oblivion, or is it just finding a new level post CHF and QE?
The latter. And I for one am looking forward to a nice cheap, sunny, boozy Southern European holiday. It might even be time soon to buy a house in Southern France before prices start to pick back up. Are we seeing start it's slow slide to oblivion, or is it just finding a new level post CHF and QE?
RYH64E said:
Convert said:
Euro currently trading down 1.89% against Sterling.
Are we seeing start it's slow slide to oblivion, or is it just finding a new level post CHF and QE?
GBP is down 13% against the USD since the summer and about 1.6% this week, what conclusion would you draw from that?Are we seeing start it's slow slide to oblivion, or is it just finding a new level post CHF and QE?
Timmy40 said:
It might even be time soon to buy a house in Southern France before prices start to pick back up.
I'm no property expert, but I'd be wary of holiday property in any Euro nation. Second-homers is an emotive subject for socialist economies, as is wealth itself - look at the Paris mansion tax. We have already seen that confiscation and default are well within the scope of desperate administrations.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff