Is the end nigh for the Euro? [vol. 3]
Discussion
REALIST123 said:
Mrr T said:
Blackpuddin said:
Presumably the UK would also get a similar dispensation given that we are still members. Good on the Italian electorate for waking up and fighting oppression.
If by oppression you mean suggesting to Italians it might be a good idea they pay their taxes and stop spending money they do not have, then yes it oppression. However, for most people in the real world that’s common sense. Edited by Blackpuddin on Tuesday 29th May 10:34
They want their cake and eat it.
The Italians weren’t doing too badly at all, thank you, until the EU came along to affix it’s ball and chain.
Now, there is no share of cake to even think of eating, their debt is unconscionable and unemployment and immigration are running riot.
Way to go, the EU.
Italy was founder member in the EU in 1957, there is no evidence Italy was doing so well in the post war period which and this was effected by joining the EU.
Since WW2 (and before) Italy has consistently suffered economic problems, failing to collect taxes and high government expenditure, has always meant high interest rates. Italy had really only survived by constant devaluations of the Lira. The devaluations were a contact drag on the economy and kept the costs of debt very high.
When Italy joined the euro (like the other high debt countries) it saw spreads on its debt fall to German levels. This had a huge impact on its potential budget deficit. The evidence showed with just mild spending cuts the replacement of old debt as it matured with debt at the new low spreads meant Italy could balance its budget and reduce its debt levels.
That did not happen the Italians voted for politicians who promised to spend more and more. They spent so much that debt levels rose again. As spreads widened again Italy the deficit position got worst and worst.
The fact is the euro offered Italy a once in a life time opportunity to balance its economy. It chose not to do so, it chose to eat cake.
The Italians have voted again to eat cake, the problem is there is no money for cake and the bill for last year’s cake is still due.
It's fair to argue that Italy is, and always has been, a black market economy. Their decision to join the EU may well have been driven by thoughts of having their cake and eating it, ie operating in the old ways at a local level while at the same time benefitting from EU 'improvement' money (now rearing up as unredeemable loans, eg Greece) at a national level. That was never going to work.
But that's all history. Where we're at now is all that matters. Carrying on with a social experiment that has now been proved not to work (Greece already, with Italy and all the other usual dominoes next to drop) is counter productive at best and ruinously perverse at worst. Better, surely, to endure the pain of lancing a boil early on rather than ignoring it until it goes septic.
The EU now is all about safeguarding the few at the cost of the many, with the ever-worsening reality continuing to be successfully suppressed by the elite.
But that's all history. Where we're at now is all that matters. Carrying on with a social experiment that has now been proved not to work (Greece already, with Italy and all the other usual dominoes next to drop) is counter productive at best and ruinously perverse at worst. Better, surely, to endure the pain of lancing a boil early on rather than ignoring it until it goes septic.
The EU now is all about safeguarding the few at the cost of the many, with the ever-worsening reality continuing to be successfully suppressed by the elite.
Rovinghawk said:
Bringing DDR up dragged BRD down.
Of course you're right about GDP- i'm thinking of actual Marks/Euros in pockets rather than a fabricated measure of economic activity. Reunification hit Germany quite hard.
I agree. You don't get rich by importing poor people; but you can boost your gdp!Of course you're right about GDP- i'm thinking of actual Marks/Euros in pockets rather than a fabricated measure of economic activity. Reunification hit Germany quite hard.
Blackpuddin said:
But that's all history. Where we're at now is all that matters. Carrying on with a social experiment that has now been proved not to work (Greece already, with Italy and all the other usual dominoes next to drop) is counter productive at best and ruinously perverse at worst. Better, surely, to endure the pain of lancing a boil early on rather than ignoring it until it goes septic.
If you mean Italy (and Greece) should leave the euro then you should consider the implications. Italy would immediately lose access to the capital markets, it would have to apply to the IMF for emergency lending, this would require it to make immediate and very substantial spending cuts. It would almost certainly default on existing debt much of which will be held as domestic saving. This will wipe out the saving of many. The banking system would fail and have to be nationalised. Restructuring would again have to come from bail in so further effecting savers. You would see an immediate significant upturn in unemployment as business fail. You could argue the pain will be high but the lower currency value should aid recovery. My own view is the pain would be to great and could easily see the state being overthrown. Unfortunately, there are no quick fixes.
Mrr T said:
Blackpuddin said:
But that's all history. Where we're at now is all that matters. Carrying on with a social experiment that has now been proved not to work (Greece already, with Italy and all the other usual dominoes next to drop) is counter productive at best and ruinously perverse at worst. Better, surely, to endure the pain of lancing a boil early on rather than ignoring it until it goes septic.
If you mean Italy (and Greece) should leave the euro then you should consider the implications. Italy would immediately lose access to the capital markets, it would have to apply to the IMF for emergency lending, this would require it to make immediate and very substantial spending cuts. It would almost certainly default on existing debt much of which will be held as domestic saving. This will wipe out the saving of many. The banking system would fail and have to be nationalised. Restructuring would again have to come from bail in so further effecting savers. You would see an immediate significant upturn in unemployment as business fail. You could argue the pain will be high but the lower currency value should aid recovery. My own view is the pain would be to great and could easily see the state being overthrown. Unfortunately, there are no quick fixes.
fblm said:
Out of the frying pan into the fire. Of course a currency union between disparate economies can work great, witness the US Dollar, but that works with massive fiscal transfers from direct federal government taxation... I can't quite see that catching on somehow!
Are you insinuating that those who have benefitted most from the Euro currency have a "beggar thy neighbour/f
k you Jack, I'm alright" attitude towards their erstwhile European compatriots? 
Solidarity when it suits!
FN2TypeR said:
fblm said:
Out of the frying pan into the fire. Of course a currency union between disparate economies can work great, witness the US Dollar, but that works with massive fiscal transfers from direct federal government taxation... I can't quite see that catching on somehow!
Are you insinuating that those who have benefitted most from the Euro currency have a "beggar thy neighbour/fk you Jack, I'm alright" attitude towards their erstwhile European compatriots? Solidarity when it suits!
As a German said to me a few months ago "we lend the money, we call the shots"
Expected to read the usual “prepper central” alarmist rubbish in this article, but is does say a few things that intrigue me.
https://www.zerohedge.com/news/2018-08-06/debate-o...
“Häring sees three ways in which Germany could reduce its Target2 surplus. First, the Bundesbank could buy a trillion euros' worth of real or financial assets in other eurozone member states. Not only is that kind of investment spree by a central bank unusual, but the Bundesbank insisted on not sharing the purchases of other member states' debt as part of the ECB's QE programme. But the point stands. If Germany were to constitute a dedicated sovereign wealth fund to invest only in non-German eurozone assets, it could eliminate its Target2 balance. The Swiss central bank for example has engaged in such massive purchases of foreign assets in the past.
The second way is for the German government to engage in a trillion-euro public investment drive to modernise and repair Germany's infrastructure. For this to reduce Germany's Target2 surplus the country would have to resort largely to expertise, labour and materials from other eurozone countries.
The third way to reduce the German Target2 balance is for German wages and prices to increase significantly. This would allow and encourage German consumers to buy goods and services elsewhere in the eurozone. But export competitiveness and wage suppression have been central to the German economic model since the time of Gerhard Schröder.”
Ok, so the third way is not going to happen, the Germans a far too wary of expansionist economics after their Weimar experiences, but the other two ideas for them to use the trillion € Target2 balance to buy things or services in debtor countries “for free” had never occurred to me. Could that really work, as in they “buy” Italian infrastructure but only pay for it by writing down part of the Target2 debt? A fascinating opportunity if it really is as easy as that, and a means of allowing the € to endure.
https://www.zerohedge.com/news/2018-08-06/debate-o...
“Häring sees three ways in which Germany could reduce its Target2 surplus. First, the Bundesbank could buy a trillion euros' worth of real or financial assets in other eurozone member states. Not only is that kind of investment spree by a central bank unusual, but the Bundesbank insisted on not sharing the purchases of other member states' debt as part of the ECB's QE programme. But the point stands. If Germany were to constitute a dedicated sovereign wealth fund to invest only in non-German eurozone assets, it could eliminate its Target2 balance. The Swiss central bank for example has engaged in such massive purchases of foreign assets in the past.
The second way is for the German government to engage in a trillion-euro public investment drive to modernise and repair Germany's infrastructure. For this to reduce Germany's Target2 surplus the country would have to resort largely to expertise, labour and materials from other eurozone countries.
The third way to reduce the German Target2 balance is for German wages and prices to increase significantly. This would allow and encourage German consumers to buy goods and services elsewhere in the eurozone. But export competitiveness and wage suppression have been central to the German economic model since the time of Gerhard Schröder.”
Ok, so the third way is not going to happen, the Germans a far too wary of expansionist economics after their Weimar experiences, but the other two ideas for them to use the trillion € Target2 balance to buy things or services in debtor countries “for free” had never occurred to me. Could that really work, as in they “buy” Italian infrastructure but only pay for it by writing down part of the Target2 debt? A fascinating opportunity if it really is as easy as that, and a means of allowing the € to endure.
YankeePorker said:
Expected to read the usual “prepper central” alarmist rubbish in this article, but is does say a few things that intrigue me.
https://www.zerohedge.com/news/2018-08-06/debate-o...
“Häring sees three ways in which Germany could reduce its Target2 surplus. First, the Bundesbank could buy a trillion euros' worth of real or financial assets in other eurozone member states. Not only is that kind of investment spree by a central bank unusual, but the Bundesbank insisted on not sharing the purchases of other member states' debt as part of the ECB's QE programme. But the point stands. If Germany were to constitute a dedicated sovereign wealth fund to invest only in non-German eurozone assets, it could eliminate its Target2 balance. The Swiss central bank for example has engaged in such massive purchases of foreign assets in the past.
The second way is for the German government to engage in a trillion-euro public investment drive to modernise and repair Germany's infrastructure. For this to reduce Germany's Target2 surplus the country would have to resort largely to expertise, labour and materials from other eurozone countries.
The third way to reduce the German Target2 balance is for German wages and prices to increase significantly. This would allow and encourage German consumers to buy goods and services elsewhere in the eurozone. But export competitiveness and wage suppression have been central to the German economic model since the time of Gerhard Schröder.”
Ok, so the third way is not going to happen, the Germans a far too wary of expansionist economics after their Weimar experiences, but the other two ideas for them to use the trillion € Target2 balance to buy things or services in debtor countries “for free” had never occurred to me. Could that really work, as in they “buy” Italian infrastructure but only pay for it by writing down part of the Target2 debt? A fascinating opportunity if it really is as easy as that, and a means of allowing the € to endure.
The expert economists here will surely comment on that but I just went to the very start of the thread to see what year it was (2011?) and to check the Euro state at that time compared to now. https://www.zerohedge.com/news/2018-08-06/debate-o...
“Häring sees three ways in which Germany could reduce its Target2 surplus. First, the Bundesbank could buy a trillion euros' worth of real or financial assets in other eurozone member states. Not only is that kind of investment spree by a central bank unusual, but the Bundesbank insisted on not sharing the purchases of other member states' debt as part of the ECB's QE programme. But the point stands. If Germany were to constitute a dedicated sovereign wealth fund to invest only in non-German eurozone assets, it could eliminate its Target2 balance. The Swiss central bank for example has engaged in such massive purchases of foreign assets in the past.
The second way is for the German government to engage in a trillion-euro public investment drive to modernise and repair Germany's infrastructure. For this to reduce Germany's Target2 surplus the country would have to resort largely to expertise, labour and materials from other eurozone countries.
The third way to reduce the German Target2 balance is for German wages and prices to increase significantly. This would allow and encourage German consumers to buy goods and services elsewhere in the eurozone. But export competitiveness and wage suppression have been central to the German economic model since the time of Gerhard Schröder.”
Ok, so the third way is not going to happen, the Germans a far too wary of expansionist economics after their Weimar experiences, but the other two ideas for them to use the trillion € Target2 balance to buy things or services in debtor countries “for free” had never occurred to me. Could that really work, as in they “buy” Italian infrastructure but only pay for it by writing down part of the Target2 debt? A fascinating opportunity if it really is as easy as that, and a means of allowing the € to endure.
It's disappeared though and all you get is "nothing to see here". What's that about then?
Driller said:
I just went to the very start of the thread to see what year it was (2011?) and to check the Euro state at that time compared to now.
It's disappeared though and all you get is "nothing to see here". What's that about then?
I think it's to do with the archiving process - You can find it with Google normally - obviously try the search facility on here first It's disappeared though and all you get is "nothing to see here". What's that about then?
It's here
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Edited by B'stard Child on Tuesday 7th August 16:24
YankeePorker said:
Ok, so the third way is not going to happen, the Germans a far too wary of expansionist economics after their Weimar experiences, but the other two ideas for them to use the trillion € Target2 balance to buy things or services in debtor countries “for free” had never occurred to me. Could that really work, as in they “buy” Italian infrastructure but only pay for it by writing down part of the Target2 debt? A fascinating opportunity if it really is as easy as that, and a means of allowing the € to endure.
I don't think so. My understanding is that if Mr Italian buys something from Mr German, the end result is that MI has lost €1000 and MG has gained €1000. Italy's TARGET2 balance is now €1000 higher, but it's never reconciled. Italy never pays their TARGET2 obligations to Germany.
If Germany buys Italian Infrastructure, who is paying for it? Italy doesn't have €400-odd billion sat around doing nothing.
It seems to me that Germany would have to spend €400-odd billion of their own money to reduce Italy's TARGET2 liability with them. Which would go down well
This article explains TARGET2 well IMO https://moneymaven.io/mishtalk/economics/fuse-is-l...
Edited by amusingduck on Tuesday 7th August 17:04
amusingduck said:
I don't think so.
My understanding is that if Mr Italian buys something from Mr German, the end result is that MI has lost €1000 and MG has gained €1000. Italy's TARGET2 balance is now €1000 higher, but it's never reconciled. Italy never pays their TARGET2 obligations to Germany.
If Germany buys Italian Infrastructure, who is paying for it? Italy doesn't have €400-odd billion sat around doing nothing.
It seems to me that Germany would have to spend €400-odd billion of their own money to reduce Italy's TARGET2 liability with them. Which would go down well
This article explains TARGET2 well IMO https://moneymaven.io/mishtalk/economics/fuse-is-l...
I was going to question that saying maybe the ECB would be the one paying if the Germans buy Italian infrastructure/services, but your link just informed me that that ECB have borrowed 150 billion from the Germans too! My understanding is that if Mr Italian buys something from Mr German, the end result is that MI has lost €1000 and MG has gained €1000. Italy's TARGET2 balance is now €1000 higher, but it's never reconciled. Italy never pays their TARGET2 obligations to Germany.
If Germany buys Italian Infrastructure, who is paying for it? Italy doesn't have €400-odd billion sat around doing nothing.
It seems to me that Germany would have to spend €400-odd billion of their own money to reduce Italy's TARGET2 liability with them. Which would go down well
This article explains TARGET2 well IMO https://moneymaven.io/mishtalk/economics/fuse-is-l...
Edited by amusingduck on Tuesday 7th August 17:04
Oh dear.An interesting article from the Telegraph.
IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
YankeePorker said:
“Häring sees three ways in which Germany could reduce its Target2 surplus. First, the Bundesbank could buy a trillion euros' worth of real or financial assets in other eurozone member states. Not only is that kind of investment spree by a central bank unusual, but the Bundesbank insisted on not sharing the purchases of other member states' debt as part of the ECB's QE programme. But the point stands. If Germany were to constitute a dedicated sovereign wealth fund to invest only in non-German eurozone assets, it could eliminate its Target2 balance. The Swiss central bank for example has engaged in such massive purchases of foreign assets in the past.
So basically enconomic colonialism? The exact thing China is doing in Africa. And what we did a few hundred years ago.The British empire was mostly built the same way though business acquisitions and usually only got nasty to protect these assets.
What do you think the likes of China even Germany will do when these nations they have bought realise they have sold half their national off for some shiny beeds to people they don't really like. And decided they want it back but can't afford to pay the bill? Greece is a very tame example of what happens.
AstonZagato said:
An interesting article from the Telegraph.
IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
well that's all right then - all forgiven no harm done!!!!!IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
Fecking idiots!!!
AstonZagato said:
An interesting article from the Telegraph.
IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
I picked up Varoufakis's book 'Adults in The Room' for a bit of EU indulgence a couple of weeks ago; holiday read.IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
Telling. Scary, actually.
Mrr T said:
The Italians have voted again to eat cake, the problem is there is no money for cake and the bill for last year’s cake is still due.
It seems uniquely one sided to have a centralised currency, membership of which prevents certain fiscal controls from being exercised, yet the body that oversees the currency appear either unwilling or unable to restrict deepening problems in it's members.It doesn't matter who's 'fault' it is - it seems rather like the payday loans system where the final outcome can be catastrophic. Blaming the debtors is disingenuous at best.
AstonZagato said:
An interesting article from the Telegraph.
IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
“Some [IMF] staff members warned that the design of the euro was fundamentally flawed but they were overruled.”IMF admits disastrous love affair with the euro and apologises for the immolation of Greece
https://www.telegraph.co.uk/business/2016/07/28/im...
"The International Monetary Fund’s top staff misled their own board, made a series of calamitous misjudgments in Greece, became euphoric cheerleaders for the euro project, ignored warning signs of impending crisis, and collectively failed to grasp an elemental concept of currency theory. "
The economists advising the European Commission on the creation of the € said the same to no avail.
amusingduck said:
I don't think so.
My understanding is that if Mr Italian buys something from Mr German, the end result is that MI has lost €1000 and MG has gained €1000. Italy's TARGET2 balance is now €1000 higher, but it's never reconciled. Italy never pays their TARGET2 obligations to Germany.
If Germany buys Italian Infrastructure, who is paying for it? Italy doesn't have €400-odd billion sat around doing nothing.
It seems to me that Germany would have to spend €400-odd billion of their own money to reduce Italy's TARGET2 liability with them. Which would go down well
This article explains TARGET2 well IMO https://moneymaven.io/mishtalk/economics/fuse-is-l...
Still thinking about this. Yes of course you are right, the German state could not buy privately owned Italian infrastructure as the owners would have to be paid and the central Italian bank does not have the wonga. BUT, the Germans could “buy” Italian state owned assets and reduce Target2 debt in exchange. So we’re back to the concept of the Greeks giving Germany a few islands.....My understanding is that if Mr Italian buys something from Mr German, the end result is that MI has lost €1000 and MG has gained €1000. Italy's TARGET2 balance is now €1000 higher, but it's never reconciled. Italy never pays their TARGET2 obligations to Germany.
If Germany buys Italian Infrastructure, who is paying for it? Italy doesn't have €400-odd billion sat around doing nothing.
It seems to me that Germany would have to spend €400-odd billion of their own money to reduce Italy's TARGET2 liability with them. Which would go down well
This article explains TARGET2 well IMO https://moneymaven.io/mishtalk/economics/fuse-is-l...
Edited by amusingduck on Tuesday 7th August 17:04
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