Is the end nigh for the Euro? [vol. 3]
Discussion
LongQ said:
Welshbeef said:
FN2TypeR said:
How long until the depositors and bond holders start getting a haircut?
Why didn't Cyprus do this instead of giving the depositors a kicking?I don't think any were given equity swap instead a straight reduction of savings. I wonder how many companies went bankrupt or on he day of the savings removal they had vat saved or corporation tax saved or payroll saved ready to be paid
Gargamel said:
Where is the EU political response, where is the flexibilty and adaption to a changing world that will enable smooth sailing in troubled times?
The way the have set up and governed the Euro is appalling.The complete lack of support from the centre now it's all going tits up is far worse.
This is a banking union, right? So the lender of the last resort is the ECB, no?
AC43 said:
The way the have set up and governed the Euro is appalling.
The complete lack of support from the centre now it's all going tits up is far worse.
This is a banking union, right? So the lender of the last resort is the ECB, no?
Well you want to cripple countries and ensure they follow your direction no question. The complete lack of support from the centre now it's all going tits up is far worse.
This is a banking union, right? So the lender of the last resort is the ECB, no?
B'stard Child said:
jonah35 said:
What exactly has happened?
The bank has been bailed out. By Italy. But where id the money come from and who has suffered a loss?
Where is this free money coming from?
It's printed.......... Doesn't cost much per noteThe bank has been bailed out. By Italy. But where id the money come from and who has suffered a loss?
Where is this free money coming from?
If they can why wouldnt every bank/country in europe beg for free money and the rest of europe would just have to put up with it.
Im deliberately being slightly simple here (as i do understand this in a bit of depth, at least i think) but i dont think many people fully understand what is going on.
So what ph is saying is that the ecb are printing free money and giving it to italy at the expense of other european countries?
IIRC and it was discussed before in the early days of the GFC with specific reference to both Greece and Germany; each Eurozone nation does have the ability to print currency. Strictly speaking there are rules, but, as we see with Italy's bailing out of their own bank, rules are for someone else.
jonah35 said:
What exactly has happened?
The bank has been bailed out. By Italy. But where did the money come from and who has suffered a loss?
Where is this free money coming from?
It's a bit messy, but it boils down to something like this.The bank has been bailed out. By Italy. But where did the money come from and who has suffered a loss?
Where is this free money coming from?
Imagine you are a country that has one tonne of gold as its total assets. Your currency consists of 1,000 "one groat" banknotes, meaning that in effect one groat is worth the same as 1kg of gold - at today's rates, that's $35,000 per groat, give or take a bit, meaning your total assets are worth $35,000,000.
So imagine that you made a decision to print some more one groat banknotes as one of your banks has over-extended itself. Let's say you print another 1,000 one groat notes. There are now 2,000 groats in circulation, but you still only have the same 1,000kgs, worth the same $35,000,000, but each groat is now only worth $17,500.
It's an extreme example but it goes to the core of the issue - banks can create money but they don't create value.
davepoth said:
jonah35 said:
What exactly has happened?
The bank has been bailed out. By Italy. But where did the money come from and who has suffered a loss?
Where is this free money coming from?
It's a bit messy, but it boils down to something like this.The bank has been bailed out. By Italy. But where did the money come from and who has suffered a loss?
Where is this free money coming from?
Imagine you are a country that has one tonne of gold as its total assets. Your currency consists of 1,000 "one groat" banknotes, meaning that in effect one groat is worth the same as 1kg of gold - at today's rates, that's $35,000 per groat, give or take a bit, meaning your total assets are worth $35,000,000.
So imagine that you made a decision to print some more one groat banknotes as one of your banks has over-extended itself. Let's say you print another 1,000 one groat notes. There are now 2,000 groats in circulation, but you still only have the same 1,000kgs, worth the same $35,000,000, but each groat is now only worth $17,500.
It's an extreme example but it goes to the core of the issue - banks can create money but they don't create value.
Italy have / are allowed to give the bank the money but they have to take it from somewhere else. Normally bondholders. But, the bondholders are not going to like that as theyre ordinary italians so they are trying to do something to cook the books to let them keep the money too or take a smaller loss. But, where and who is shouldering the rest of the loss? Where is the money coming from?! That is the bit that makes me think its a big ponzi scheme and that is what worries me.
BUT, who will invest in bank shares/banks or bank bonds now? Why are people still doing so?
jonah35 said:
I dont think thats it dave. Lets say me and you and 3 others are mates, 5 in total and we all have 100 groats. If i have the only printing machine then if i just print myself 1m groats then your money is effectively worthless as i can buy everything and you guys lose. Why would italy and italy alone be allowed to do this at the expense of other euro countries? If this were the case each country would be printing as much as they could to win.
Italy have / are allowed to give the bank the money but they have to take it from somewhere else. Normally bondholders. But, the bondholders are not going to like that as theyre ordinary italians so they are trying to do something to cook the books to let them keep the money too or take a smaller loss. But, where and who is shouldering the rest of the loss? Where is the money coming from?! That is the bit that makes me think its a big ponzi scheme and that is what worries me.
BUT, who will invest in bank shares/banks or bank bonds now? Why are people still doing so?
The ECB is printing money, the Bank of England is printing money, the Fed is printing money, it's hardly just an EU/euro problem. Apart from bailing out dodgy banks (again, not just an EU problem) they're all looking for a bit of competitive devaluation, and there's little or no inflation to worry about anywhere in the developed world. Italy have / are allowed to give the bank the money but they have to take it from somewhere else. Normally bondholders. But, the bondholders are not going to like that as theyre ordinary italians so they are trying to do something to cook the books to let them keep the money too or take a smaller loss. But, where and who is shouldering the rest of the loss? Where is the money coming from?! That is the bit that makes me think its a big ponzi scheme and that is what worries me.
BUT, who will invest in bank shares/banks or bank bonds now? Why are people still doing so?
Edited by RYH64E on Monday 26th December 09:23
Useful chart in this article showing who did QE and when;
http://www.zerohedge.com/news/2016-07-26/global-ce...
I suppose that one could argue that it is preventing deflation rather than creating inflation.
The Italian government issues bonds that are bought by the Italian Central Bank by adding to its balance sheet (more zeros on a computer screen). The Euros created are poured into the black hole that is MPS's balance sheet. No new money emerges into the system to devalue the current stock of Euros.
Without the rescue, then MPS implodes and savers, depositors, bond holders (individuals, pension funds, institutions), have lost money and that is effectively sucked out of the system. All they are doing is refilling the stock to account for what has been destroyed.
Not sure I buy it as that money was destroyed months ago.
The Italian government issues bonds that are bought by the Italian Central Bank by adding to its balance sheet (more zeros on a computer screen). The Euros created are poured into the black hole that is MPS's balance sheet. No new money emerges into the system to devalue the current stock of Euros.
Without the rescue, then MPS implodes and savers, depositors, bond holders (individuals, pension funds, institutions), have lost money and that is effectively sucked out of the system. All they are doing is refilling the stock to account for what has been destroyed.
Not sure I buy it as that money was destroyed months ago.
loafer123 said:
Useful chart in this article showing who did QE and when;
http://www.zerohedge.com/news/2016-07-26/global-ce...
http://www.zerohedge.com/news/2016-07-26/global-ce...
It's all going to end in tears.
All that jazz said:
loafer123 said:
Useful chart in this article showing who did QE and when;
http://www.zerohedge.com/news/2016-07-26/global-ce...
http://www.zerohedge.com/news/2016-07-26/global-ce...
It's all going to end in tears.
AstonZagato said:
I suppose that one could argue that it is preventing deflation rather than creating inflation.
The Italian government issues bonds that are bought by the Italian Central Bank by adding to its balance sheet (more zeros on a computer screen). The Euros created are poured into the black hole that is MPS's balance sheet. No new money emerges into the system to devalue the current stock of Euros.
Without the rescue, then MPS implodes and savers, depositors, bond holders (individuals, pension funds, institutions), have lost money and that is effectively sucked out of the system. All they are doing is refilling the stock to account for what has been destroyed.
Not sure I buy it as that money was destroyed months ago.
Ok thanks. Useful post. So, the italian government have just got into even more debt then? Why are people still lending the italian govt money then via buying govt debt? They are clearly bankrupt. Wont the italian central bank be absolutely skint/in debt? I know they can keep doing this for a while but surely there will be an almighty crash when no more money can be lent?The Italian government issues bonds that are bought by the Italian Central Bank by adding to its balance sheet (more zeros on a computer screen). The Euros created are poured into the black hole that is MPS's balance sheet. No new money emerges into the system to devalue the current stock of Euros.
Without the rescue, then MPS implodes and savers, depositors, bond holders (individuals, pension funds, institutions), have lost money and that is effectively sucked out of the system. All they are doing is refilling the stock to account for what has been destroyed.
Not sure I buy it as that money was destroyed months ago.
What are the oknock on effects of this? What amd who will eventually suffer?
I cant help but think the credit crunch may look tame in comparison to what will happen when the house of cards falls this next time
jonah35 said:
AstonZagato said:
I suppose that one could argue that it is preventing deflation rather than creating inflation.
The Italian government issues bonds that are bought by the Italian Central Bank by adding to its balance sheet (more zeros on a computer screen). The Euros created are poured into the black hole that is MPS's balance sheet. No new money emerges into the system to devalue the current stock of Euros.
Without the rescue, then MPS implodes and savers, depositors, bond holders (individuals, pension funds, institutions), have lost money and that is effectively sucked out of the system. All they are doing is refilling the stock to account for what has been destroyed.
Not sure I buy it as that money was destroyed months ago.
Ok thanks. Useful post. So, the italian government have just got into even more debt then? Why are people still lending the italian govt money then via buying govt debt? They are clearly bankrupt. Wont the italian central bank be absolutely skint/in debt? I know they can keep doing this for a while but surely there will be an almighty crash when no more money can be lent?The Italian government issues bonds that are bought by the Italian Central Bank by adding to its balance sheet (more zeros on a computer screen). The Euros created are poured into the black hole that is MPS's balance sheet. No new money emerges into the system to devalue the current stock of Euros.
Without the rescue, then MPS implodes and savers, depositors, bond holders (individuals, pension funds, institutions), have lost money and that is effectively sucked out of the system. All they are doing is refilling the stock to account for what has been destroyed.
Not sure I buy it as that money was destroyed months ago.
What are the oknock on effects of this? What amd who will eventually suffer?
I cant help but think the credit crunch may look tame in comparison to what will happen when the house of cards falls this next time
B'stard Child said:
And one of my key reasons for my vote to leave. The U.K. will still be affected when it does but I'd rather we were outside watching than inside being dragged down into the mire
If the EU and/or the euro were to collapse (and I don't think that either will) do you think it would make any difference whether we were in or out? The resulting chaos would be equally disastrous for the UK.RYH64E said:
If the EU and/or the euro were to collapse (and I don't think that either will) do you think it would make any difference whether we were in or out? The resulting chaos would be equally disastrous for the UK.
Two things will happen. Firstly, all trade agreements the EU has will become null and void, and secondly the new Deutschmark will become a reserve currency and skyrocket in value which will make British exports much cheaper than German ones. We will have the jump on the rest of the former EU in getting trade deals with important partners, and anyone who was buying stuff from Germany will be put off by the prices.
RYH64E said:
B'stard Child said:
And one of my key reasons for my vote to leave. The U.K. will still be affected when it does but I'd rather we were outside watching than inside being dragged down into the mire
If the EU and/or the euro were to collapse (and I don't think that either will) do you think it would make any difference whether we were in or out? The resulting chaos would be equally disastrous for the UK.Gassing Station | News, Politics & Economics | Top of Page | What's New | My Stuff