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

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

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Discussion

Gargamel

14,958 posts

260 months

Sunday 26th February 2017
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Fastdruid said:
Great article, clearly explains something I have often heard about but never properly understood.


grantone

640 posts

172 months

Monday 27th February 2017
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Time for creative ways to remove the imbalance...

Germans get an extra week of holiday if they promise to go to the Med?

Perik Omo

1,883 posts

147 months

Monday 27th February 2017
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For some time i've had an interest in Target 2 and it's underlying technicalities and not really understanding the mechanisms, that article has cleared a lot of my mis-understandings of how it works - good find.

davepoth

29,395 posts

198 months

Monday 27th February 2017
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LongQ said:
For the Euro more Europe may be the only rational option.
But the only way that can work is full fiscal union, with Germany standing behind the debts of southern Europe. There's about as much chance of Farage becoming PM.

stongle

5,910 posts

161 months

Monday 27th February 2017
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Fastdruid said:
Thanks, very interesting. The ECBs dismissive responses were similar to those we witnessed at the GFF Conference in Luxembourg in Jan.

Target2 just adds a supercharger to the ECBs Asset Purchase program and ludicrous liquidity rankings (several pages ago I mentioned the infinite liquidity trade or gaming their ratios). At the rate the ECB is going, Wonga debt will rank pari-passu to Bunds shortly. They are already talking up Corporate debt (going to be interesting given how little is rated).



Edited by stongle on Monday 27th February 08:01

Digga

40,206 posts

282 months

Monday 27th February 2017
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Fastdruid said:
Great article. Like all good journalism, it explains thoroughly and does not hide it's own lack of comprehennsion behind jargon.

paulrockliffe

15,639 posts

226 months

Monday 27th February 2017
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Digga said:
Fastdruid said:
Great article. Like all good journalism, it explains thoroughly and does not hide it's own lack of comprehennsion behind jargon.
It's fascinating and frightening isn't it.

Parts of the Eurozone can't afford to buy stuff and German can't afford not to sell stuff, so they carry on the buying and selling, but the banks just don't bother transferring the money. The German tax payer is on the hook for 800bn Euros of outstanding invoices that they have had no say in and haven't been told about.

Amazing.

And no one says anything, that I'm reading this on some random website and not the proper news is staggering.

Digga

40,206 posts

282 months

Monday 27th February 2017
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Giving the matter further thought, this transfer of capital is not new - it went on prior to the inception of the Euro, hence why all the joke currencies had such high denominations. The ECB merely provides a framework to throw the issue into starker relief.

stongle

5,910 posts

161 months

Monday 27th February 2017
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paulrockliffe said:
It's fascinating and frightening isn't it.

Parts of the Eurozone can't afford to buy stuff and German can't afford not to sell stuff, so they carry on the buying and selling, but the banks just don't bother transferring the money. The German tax payer is on the hook for 800bn Euros of outstanding invoices that they have had no say in and haven't been told about.

Amazing.

And no one says anything, that I'm reading this on some random website and not the proper news is staggering.
I tend to agree. Its either that the real issues are too difficult to understand and thus report on (so reside in technical blogs) – perhaps the press being lazy OR noisy headline stories are being fed in to divert attention from the real underlying issues.

It’s been very convenient to use banks and the Finance industry as the whipping boys for all the (global) economic ills since 2008; but now we’re seeing an issue where post crisis regulation has been supporting public sector debt burdens. No-one is saying that the (banks) naughty behaviour didn’t need a slap – BUT the policy response was completely wrong in a low growth environment – particularly if political pressures were cooking the books. Not only did the Global policy smash the on-off ramp into the real economy for Monetary Policy (Leverage Ratio) – they’ve given the wrong incentive scheme to banks encouraging capital flight (and arbitraging the ECBs QE program).

These issues become compounded with Brexit and even worse if the US stops cooperating with the FSB. There is no easy way out now, its either radical and painful reform, Germany steps up or f**k it and do helicopter money.


Gargamel

14,958 posts

260 months

Monday 27th February 2017
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In fairness the article even quotes AEP in the Telegraph, who does regularly go on about Target 2

However as every column he writes suggests the sky is falling it gets very little traction.

superlightr

12,842 posts

262 months

Monday 27th February 2017
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its the old chestnut of the government spending money they don't have and don't have a realist plan of getting. Living beyond their means with our money. Promising things they cant pay for.

I understand that countries borrow money in the same way that individuals have a mortgage just that there terms are much longer and amounts larger and the debts are split and sold off around the globe.

These amounts of debts are not just from 1 or 2 years of issues but a decade or so. Its been in the interest of the people in govt to kick the can down the line so its not on their watch. Its self serving - all these loans/juggling of loans and debts earn money for the people doing the juggling and for those that ask for the juggling. Its in their interest to juggle and keep it juggling. Its only now when these debts are getting to such huge mangos and the UK and other will be leaving the EU and thus removing 1 arm of the juggler that the balls will come falling down.

anonymous-user

53 months

Monday 27th February 2017
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superlightr said:
its the old chestnut of the government spending money they don't have and don't have a realist plan of getting. Living beyond their means with our money. Promising things they cant pay for.
Its not the same thing at all IMHO.

This is an issue of transfer of real money between the Euro Zone countries central banks, not an issue of government deficits.

Its basically using the tax payer of Germany to underwrite the rest of the Eurozone. If the other states in the Eurozone default, the national debt of Germany jumps by the amount the other nations owe.

That's a very different situation to running up your own debt as a nation.

Rovinghawk

13,300 posts

157 months

Monday 27th February 2017
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superlightr said:
Living beyond their means with our money.
Are we on the hook for any of this?

LongQ

13,864 posts

232 months

Monday 27th February 2017
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davepoth said:
LongQ said:
For the Euro more Europe may be the only rational option.
But the only way that can work is full fiscal union, with Germany standing behind the debts of southern Europe. There's about as much chance of Farage becoming PM.
Also one Federal Government.

For that I would imagine they need at least a few more generations of internal migration to occur and take root.

They should probably start with creating a European Football League that sits over the current "national" leagues. That might introduce a better concept of "belonging" to "Europe" than anything they could engineer politically or fiscally.



anonymous-user

53 months

Monday 27th February 2017
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[quote=LongQ

They should probably start with creating a European Football League that sits over the current "national" leagues. That might introduce a better concept of "belonging" to "Europe" than anything they could engineer politically or fiscally.

[/quote]

Like the Eurovision song contest? Bringing us all closer together grumpy

Andy Zarse

10,868 posts

246 months

Monday 27th February 2017
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LongQ said:
They should probably start with creating a European Football League that sits over the current "national" leagues. That might introduce a better concept of "belonging" to "Europe" than anything they could engineer politically or fiscally.
Maybe they could call it something like the UEFA Champions League! smile Or perhaps the Fairs Cup; I mean, fair's fair.

Fastdruid

8,623 posts

151 months

Digga

40,206 posts

282 months

Monday 27th February 2017
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Fastdruid said:
I think this part sums up where we are now:

Stiglitz said:
The euro has failed to achieve either of its two principal goals of prosperity and political integration: these goals are now more distant than they were before the creation of the eurozone. Instead of peace and harmony, European countries now view each other with distrust and anger. Old stereotypes are being revived as northern Europe decries the south as lazy and unreliable, and memories of Germany’s behaviour in the world wars are invoked.

LongQ

13,864 posts

232 months

Monday 27th February 2017
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Andy Zarse said:
LongQ said:
They should probably start with creating a European Football League that sits over the current "national" leagues. That might introduce a better concept of "belonging" to "Europe" than anything they could engineer politically or fiscally.
Maybe they could call it something like the UEFA Champions League! smile Or perhaps the Fairs Cup; I mean, fair's fair.
Ah, but those, like the Euro, already exist albeit it in something more like a "Cup" contest than a country based league.

The next stage of European integration would require the teams of all "countries" to be playing in a single league structure, not the country structure and then some overarching money generation exercise.

Of course none of this will matter once China owns football and betting on results is made legal, indeed encouraged.


wink

Andy Zarse

10,868 posts

246 months

Tuesday 28th February 2017
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LongQ said:
Ah, but those, like the Euro, already exist albeit it in something more like a "Cup" contest than a country based league.
No way! Who knew? wink