Is the end nigh for the Euro? [vol. 3]
Discussion
Ridgemont said:
I wonder if UVdL is getting ready to pull on her big girl pants and actually try and wield the new ‘instrument’ while explaining to the market in real-time how it’s going to work.
She doesn't know her arse from her elbow, how do you expect her to understand and explain the EU's finances. Broom handles for riffles is her limit.Ridgemont said:
That Italian news is very Italian: shocker an Italian government collapses. The problem is the right wing wingnuts get ever closer to power and those spreads will get wider. While Bloomberg is wetting itself about hedging, I wonder if UVdL is getting ready to pull on her big girl pants and actually try and wield the new ‘instrument’ while explaining to the market in real-time how it’s going to work.
Skipped a bit, apologies.The ECB is already balls deep in price support. The monumental shift is Germany failing the TPI (GSP budget deficit <3%) test. That's why they have ponyed up medium term can kick. They are literally rewriting every rule possible but because everyone is locked in up the wazooo (because GFC punishment beatings), absolutely no one is looking for the door. Until the balloon goes up.
They can't contain Italy. It burns the entire house down.
The problem is NOT the Euro or how great an ideal it is, but post crisis regulation and how Govts made private sector support public sector debt balloon and got a Central Bank to ignore credit capacity (ECB).
jsf said:
Ridgemont said:
I wonder if UVdL is getting ready to pull on her big girl pants and actually try and wield the new ‘instrument’ while explaining to the market in real-time how it’s going to work.
She doesn't know her arse from her elbow, how do you expect her to understand and explain the EU's finances. Broom handles for riffles is her limit.Ridgemont said:
jsf said:
Ridgemont said:
I wonder if UVdL is getting ready to pull on her big girl pants and actually try and wield the new ‘instrument’ while explaining to the market in real-time how it’s going to work.
She doesn't know her arse from her elbow, how do you expect her to understand and explain the EU's finances. Broom handles for riffles is her limit.Ridgemont said:
Ridgemont said:
jsf said:
Ridgemont said:
I wonder if UVdL is getting ready to pull on her big girl pants and actually try and wield the new ‘instrument’ while explaining to the market in real-time how it’s going to work.
She doesn't know her arse from her elbow, how do you expect her to understand and explain the EU's finances. Broom handles for riffles is her limit.Constantly amazes me
It’s not a good thing Stongle 
Nobody in their right mind wants Italian govts going tits up on a semi regular basis or the mayhem brigade waltzing in.
I don’t highlight this crap for s
ts n giggles. It’s because, to quote No 1 Battery on the Mighty Mo, someone is about to kiss the donkey!
As to the fx rate - well, I’ve posted enough about it over the last decade or more. You can’t live a life, or run a business either side of the channel unless it’s your mistress.
Nobody in their right mind wants Italian govts going tits up on a semi regular basis or the mayhem brigade waltzing in. I don’t highlight this crap for s
ts n giggles. It’s because, to quote No 1 Battery on the Mighty Mo, someone is about to kiss the donkey!As to the fx rate - well, I’ve posted enough about it over the last decade or more. You can’t live a life, or run a business either side of the channel unless it’s your mistress.
stongle said:
The problem is NOT the Euro or how great an ideal it is, but post crisis regulation and how Govts made private sector support public sector debt balloon and got a Central Bank to ignore credit capacity (ECB).
There is that. But I struggle to see how the debt balloon is not intimately related to the inability to fiscal transfer.The only thing that held the US together after the civil war was the fiscal transfer. We are now in a similar zone with, as you say an enormous public sector debt across too many to count economies, but in the Euros case an absolute inability to leverage overall scale without playing bluff with the market. Which they seem intent on doing again and again. Because the mutualising is politically difficult.
Well that will work until it doesn’t. And then not only Italy’s house burns down but the whole shebang.
Ridgemont said:
There is that. But I struggle to see how the debt balloon is not intimately related to the inability to fiscal transfer.
The only thing that held the US together after the civil war was the fiscal transfer. We are now in a similar zone with, as you say an enormous public sector debt across too many to count economies, but in the Euros case an absolute inability to leverage overall scale without playing bluff with the market. Which they seem intent on doing again and again. Because the mutualising is politically difficult.
Well that will work until it doesn’t. And then not only Italy’s house burns down but the whole shebang.
Apologies bypassing DeeljRC, but we are way beyond historical observation. We are so deep in uncharted territory, its scary sThe only thing that held the US together after the civil war was the fiscal transfer. We are now in a similar zone with, as you say an enormous public sector debt across too many to count economies, but in the Euros case an absolute inability to leverage overall scale without playing bluff with the market. Which they seem intent on doing again and again. Because the mutualising is politically difficult.
Well that will work until it doesn’t. And then not only Italy’s house burns down but the whole shebang.
t. If they don't mutualise debt, and the North jumps into cover the peripherals AND France, they could take out their entire zone. It's not because EU good, UK bad; but examination of post crisis financial reform. The governments made the banks support public sector debt largesse. If that goes into overdrive the banks have to derisk to cover Sovereign risk. If economies tank, Sovereign risk cost increases. It's doom loop. It's a total, total clusterf
k.Absolutely, no one wants this. What people are asking for is a f
king realisation of the risks and a sort the st out plan. But Brexits or some other s
t for MB.There was no public sector debt largesse.
What happened was the governments bailed out the bad debts of the banks and put it on the debt burden of the state.
The rich got bailed, the poor got blamed and have the debt burden to carry.
That has been the basic model for the last 30 years since the break was made between productivity growth and wages.
This is what is driving the st that is about to hit the fan when the workers give up on sensible politics and go for the extremes, just as we saw in the 30's.
What happened was the governments bailed out the bad debts of the banks and put it on the debt burden of the state.
The rich got bailed, the poor got blamed and have the debt burden to carry.
That has been the basic model for the last 30 years since the break was made between productivity growth and wages.
This is what is driving the s
t that is about to hit the fan when the workers give up on sensible politics and go for the extremes, just as we saw in the 30's.jsf said:
There was no public sector debt largesse.
What happened was the governments bailed out the bad debts of the banks and put it on the debt burden of the state.
The rich got bailed, the poor got blamed and have the debt burden to carry.
That has been the basic model for the last 30 years since the break was made between productivity growth and wages.
This is what is driving the st that is about to hit the fan when the workers give up on sensible politics and go for the extremes, just as we saw in the 30's.
You contradicted yourself on the 2nd sentence.the state rolled the debt, the banks had to hold it as capital....What happened was the governments bailed out the bad debts of the banks and put it on the debt burden of the state.
The rich got bailed, the poor got blamed and have the debt burden to carry.
That has been the basic model for the last 30 years since the break was made between productivity growth and wages.
This is what is driving the s
t that is about to hit the fan when the workers give up on sensible politics and go for the extremes, just as we saw in the 30's.The wages growth was a bust.
What the G20 did was made sure Banks always had to hold Sovereign debt, and had CBs ensure it was ALWAYS deemed cash. Unless like the ECB the backers started to look at credit risk.
The 2008 bailouts were Mickey Mouse to what the politicians were going to do. They stole the ball and run with it.
Edited by stongle on Monday 8th August 22:54
In the case of Euro bailouts, which is probably what we should stick to here, the bailout money that went to Greece went straight back out to clear the bad loans made by the banks, mostly French. Thats what was going on with all the Sarkozy Merkel summits at the time.
What should have happened was they should have let Greece default and the banks fail, it would have been cheaper, especially for Greece, only issue there was the French banks had 300% of Frances GDP on its books as bad debt, it would have killed the French state.
We cant allow that.
What should have happened was they should have let Greece default and the banks fail, it would have been cheaper, especially for Greece, only issue there was the French banks had 300% of Frances GDP on its books as bad debt, it would have killed the French state.
We cant allow that.
Mortarboard said:
Yeah, better off with uk bonds & gilts, amirite?
M.
Whether or not UK gilts are worthless it’s hardly a systemic risk tho is it? And they are market adjusted as we saw this week.M.
The problem with Euro bonds is that it sits on a massive assumption: Germany.
And if that tumbles then it’s a continental risk. Orders of magnitude greater than the U.K. and the current currency hedging.
But sterling. Amirite?
Mortarboard said:
"Market adjusted"? This year has seen the largest drop in 40 years. That's some adjustment!
And if the euro fails, the UK won't just be affected, it'll be covered in as much of the brown sticky stuff as France or Germany. At best.
M.
I think you miss my point re market adjusted. Right now gilts reflect market pricing. That may or may not be good news but it is the market functioning. I look at the spread on Euro bonds as being a market failure: what is the impact on the ability of any of the impacted economies to finance their debt (ie there is none). That’s not a market adjustment: that’s a market failure.And if the euro fails, the UK won't just be affected, it'll be covered in as much of the brown sticky stuff as France or Germany. At best.
M.
And yes no doubt when the brown stuff hits the fan the UK will be covered in it, but I repeat it’s systemic as opposed to the U.K. position which is as a result of our particular circumstances.
Mortarboard said:
I'd call it market interference rather than market failure.
What do we think the effect on the wide euro would have been if Greece (much smaller) had been allowed fail, for example?
M.
It would have been an accurate reflection of banking exposure and risk but we danced this dance back in 2012 as DeeRJ notes and apparently no one wanted to play but carry on heaping up the risk. That should be fun! Ironically the answer to the thread is that the Euro will never fail, but economy after economy will be eviscerated by the continual disparity between Germany’s ability to absorb shock and the market’s ability to ignore the shadow correction mechanism (Target2). The thing is that the questions will keep on piling up. But ironically this autumn may be an inflection point. How far are the European economies prepared to pay for German energy insanity.What do we think the effect on the wide euro would have been if Greece (much smaller) had been allowed fail, for example?
M.
But anyhow everything is lovely. Until it won’t be.
Ridgemont said:
How far are the European economies prepared to pay for German energy insanity.
I was with you until you went all Daily Express with that.And it amuses me when certain folk point out how much gas is going to cost in the EU this winter, as if "global energy prices" stopped at the channel. And in the next breath they decry the 15% proposed usage reduction. There's a lot of folk who seem to think that "sovereignty" is somehow going to make the UK immune to the effects of the ails of other countries.
The EU doing something stupid does not make Brexit a success.
M.
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