The future of the Euro-Zone: Comments,opinions and info

Greece should be allowed to leave and sort themselves out - whats the point of loaning more cash to them when they cant afford to pay back what they already owe!!!! Spain and Italy are much more dangerous and will cause massive problems.....Cant see germany leaving to be honest.

No matter what happens it will have massive impacts on the UK - i think the UK should definitley re-negotiate the amount of control that the EU have over them and claw back some respct for the british people....

Of course if the UK do get a referendum and they pull out of the EU where does that leave the many ex pats living here...

Hi toon,

the UK pulling out of the EU would leave you as TCN's ( Third-country nationals).

It certainly would make things more difficult -)))

Let's hope that it doesn't happen but if your fellow Brit's in the UK choose to decide that way in a referendum, what then ?

As to Germany. If you've been following the German news there is commmon public consent that as Greece asked for a referendum it is only correct to ask the German people about bail-outs for Greece and other countries including and especially Italy. I wouldn't dare sign off Germany leaving the Euro-Zone and Angela following Berlusconi in stepping down from power. If the referendum goes through in Germany they are out!If it doesn't go through Merkel is out -)))

Cheers
Ricky

You are raising the question of democracy. Probably the Greeks, if allowed to vote, would vote for leaving the euro zone,because the austerity is killing them. Iceland was allowed to vote, choose to default on the debt and is recovering. But now, with Italy one step from the abyss, a Greek referendum is not permitted, for fear of an Italian referendum and a collapse of the whole system. The EU is an union of sovereign states, and each state should be allowed a democratic choice: in principle. In practice democracy has been suspended. A former vicepresident of the ECB has been selected to govern Greece and a former member of the European commission to govern Italy. Their mission: save the big stupid banks, not the peoples.
That said, it is also true that technically it is extremely complicated and dangerous for a country to exit the euro zone, because the debt will still be denominated in euro and the switch to another currency would cause a run on the local banks, that would be bankrupted, some weeks of paralysis, economic and social cahos

Hi referra,

that said, the ruling German party ( Merkel's party) is preparing the law that will allow Germany to leave the EU on short term. My German bank just advised me to to withdraw my funds from Malta!

It will be very easy for EU countries to leave the EU if they can afford to pay their debt - in any future currency:

http://www.focus.de/politik/deutschland … 83210.html

The countries that can't afford that have a big problem - just like any private person that has his overdraft withdrawn. And that just happened to Italy .....

Cheers
Ricky

My understanding is that Germany is preparing to form a smaller euro area, togheter with France and Northern Europe. If they reverted to the DM, the DM would be the strongest currency in the world, yes, but so high that German exports would collapse. So it makes sense to keep a currency common to a vast area. May be your bank is suggesting to repatriate the money so that it will be converted into Northern euro, and not Souther euro or MTL

In addition:
were Germany to leave and revert to the DM, the debts would be repaid not in DM but in deflated euro.
And I don't think Germans are ready to "attack" France. Remember that France needs some euro zone and the ECB, that will be asked to bail out the French banks. Without the ECB France is toast, and when even France is toast, Germany is kaputt

I think it would have been better letting Greesce go but now I think its too late and we have to see this crisis through

Yes, they should have found a way to let Greece go, it should have avoided bigger troubles.
The EU problem is the difference in productivity and efficiency among member states. Take Greece and Germany. If they have a common currency, equivalent to a fixed exchange rate, the currency, being based on an average of DM e Drakma, will be too low for Germany and too high for Greece. Germany will export more and Greece less. Greece will be depleted of capital and will ask, and receive for a while, credit from Germany, but when the Greek debt becomes excessive the Germans will stop lending and Greece will fall into a hole. Besides, when you prevent the market to arbitrate the two currencies, the speculation  attacks the sovereign bonds. Even if a miracle could save and heal Greece, this cycle would start again and create another crisis. Inside a single State, like Italy for example, money is transferred from the more productive north to the less productive south. If Europe were united, the north would help the south, and everybody could have the same currency (and the same common European bonds). It does not seem likely that the Germans and other northern peoples will accept such an arrangement. So we cannot have a single currency.

If you are interested in this topic, you can read an excellent (and scary) article published yesterday by John Mauldin:

http://www.johnmauldin.com/frontlinetho … ting-press
(you have to subscribe but it is free)

Hi,

although I'm British I like to look at the transfer costs in Europe with a German 'eye', just to see the scale of what is being talked about and because I work there and pay taxes there.

The costs of German unity ( East/West) have been estimated at about 1.6 Trillion Euro's ( nearly the amount of the Italien sovereign debt). This was financed through a special tax on all the former 'West-Germans' to cover for about 16 Million former 'East-Germans). This money transfer has been going on for 20 years at a rate of about 100 Billion/yesar and there is no end to it. So sadly or luckily, the Germans are very efficient at collecting taxes and it is difficult,if not impossible,to avoid paying.

The Germans also participate in a so-called ' Länder-Ausgleich) which is the same as North-Italy sending funds to the poorer regions of Southern Italy.

I'm saying this as it seems that at the moment the so-called European solidarity is calling on the 'richer' European countries to transfer money to weaker EU countries.

We have come to the point where debts that have been taken up in the past have to be repaid! Germany , and other European countries that have kept their budgets more or less balanced, are not willing to pay the bill.

Berlusconi just went down and Angela Merkel will probably be the next!

Cheers
Ricky

The consequences of a common currency should have been analyzed before launching the euro. If you want the common currency you also need common bonds, a real central bank like the Fed, as a lender of last resort, and you must accept transfers from the strong to the weak. If you do not want common bonds and transfers, stick with the old national currencies. You cannot have the advantages and not the disadvantages. Now it will take twenty years of pain to disentangle this mess.

Hi - I have insomnia tonight so am catching up on the forum.

This is interesting - our news media here are almost silent on EU problems because of our own dismal economy.  But rferra, be a little careful what you wish for as far as the "real central bank" such as the Fed. Would you want to model it after the US Fed?  Many people here regret its existence but it is so entrenched I don't see anything changing. Ever read Hayek?  I wish our fearless leaders in the US would.

Duffy

I agree with you Duffydoodle, I am an “Austrian”…
But each European country HAS a central bank, and all central banks behave the same way, for the same reasons and benefitting the same interests. Henry Ford, the founder of Ford, said: “If people understood how monetary politics work, a revolution would start before tomorrow morning”.
Now, if a union of countries with central banks wants a common currency it should also adopt a common central bank and common T-bonds. Otherwise it is certainly better to keep national currencies and national bonds: the market, even  with the interferences of central banks, will keep somewhat in balance the currencies and the economies.
Today either a real ECB “saves” with monetary inflation (and devalues) the euro zone, either the weak countries drop out and join the Catholic club (Greece, Portugal, Spain, Ireland, Italy, soon France, Malta and Belgium – not totally catholic but enough to qualify). Get ready later for a remake of Wars of religion in the continent…
The only thing central banks do is to manage inflation, sometimes losing control of it, as it happened in the Seventies, and then braking brutally, as they did. Both ways real wealth is transferred from the majority to the minority.
The tragedy we are living in is the result of the machinations of central banks, together with the banks and financial institutions that are the owners of central banks, and the politicians fed by the same institutions. Democracy was supposed to ensure a clean system. It failed. In his time president Eisenhower, who was certainly not a leftist, had warned against the power of big capital (the military-industrial complex, today the financial complex).
Can we get rid of central banks, in the middle of the hurricane? It cannot be imagined. The only two ways of slashing the mountains of crippling debt everywhere – Europe, US, Japan – are massive deflation (defaults make debts disappear) or  massive inflation (debts are devalued). The wealth that is not “real” (created by work, consumption, savings, investment), the apparent wealth created in the last sixty years by credit and Mickey Mouse money from central banks and financial institutions, will evaporate. We all will be much poorer than we fear we are becoming, and all social and political hells will ravage the world. Hayek and Mises, I guess, would not find at this late stage a third solution. They would opt for the first one. They would encourage us to bite the bullet and choose max pain with min duration, and later build a better system (maybe in the Forties of our century).
R F

rferra,

I don't disagree with anything you've said - for some reason the Austrians aren't really taught here.  I stumbled on them by accident and just kept reading and thinking it made so much sense, so why are we still being stupid?

When I took my first banking class and learned how "money" was "created", I was ready to go start that revolution Henry Ford alluded to myself!  I've never heard that quote before but that's about how I felt in the class.  I looked around me and nobody seemed to get the bigger picture, they were just calmly taking notes.   

In the US at least, I don't trust any of the gov't figures without getting access to raw data - which is harder now that I no longer have free access and am trying to be frugal. But if I were going to guess, I'd bet on deflation here.  Nobody agrees with me, so I'm probably wrong.

Our bailouts were so criminally stupid I wish we had the mechanism the UK has (I think - I'm in US) to declare a vote of no confidence, dissolve the government,and start over.  We have to wait for another corrupt election. There will be massive suffering no matter what, so just let it happen and then we can start to recover.

And if I EVER hear the phrase "Too Big To Fail" again, I am going to vomit.  No company is too big to fail and we threw so much good money after bad I wonder if our fearless leaders slept through the explanation of a sunk cost.

But, MOST importantly to me anyway, it looks like I have missed my window of opportunity for anything more than a vacation in Malta with everything going on.    

I think this is really interesting because it is from people who are actually there and not media propaganda.

 
Duffy

PS - what do you mean by "Catholic Club'?  Is that an insult?  No snark intended, just curious.  Does it refer to religious prejudice or culture or something else?

Duffydoodle,

Austrian economics are taught nowhere, because they forbid all kinds of government interference and manipulation. Politicians love to be seen “doing something” for the electors, even if what they do in the end will bring misery. They promise and intervene, promise and intervene until everything collapses. I remember, for example, when in 1970 the socialist French government lowered the retirement age from 65 to 60. All experts declared that the reform would create havoc in the future, but the move was popular.

Politicians love Keynes, as he promoted government intervention. Of course Keynes was not an idiot. What he said was: use deficit spending in recessions, but when the recession is over accumulate public savings to be spent when the economy slows down again. Politicians only heard the first part and year after year inflated the deficit bubbles. (In addition, Keynes was living in the gold standard age, that put some brakes to money printing).

Your bet on deflation: maybe deflation will be forced on us, because the states will not be able to inflate as much as the wealth deflates (or will they really drop money from helicopters?). Probably deflation is better than inflation, at least for its speed in realigning the economy, but it is brutal and make the politicians look ugly. So the governments will prefer to inflate if they can. That is what they always tried to do (with the approval of the elites, who have more advantages from inflation than for deflation – even if the biggest fortunes were built at the end of deflations, when you can buy all sort of assets at basement sale prices).

The Catholic Club: not an insult. I could also call it the Club of the sunny countries (well, Ireland is not, but the Irish are so sunny inside, a marvelous people). Every culture has strong and weak points. Work and keep your money outside of Catholic countries; eat, have fun, take your holidays and make love with Catholics. The strength of US is that you have a mix of Protestants, Catholics and Eastern Confucians plus a sprinkling of everything else.
R F

Euro, Malta and the Scheme

Does anyone know why on earth, eleven months after the old scheme was cancelled, and two months after the new one was announced, the HNWI program is still not open for applications? Was it de facto aborted? Are they waiting for the euro breakup, so the question I had raised would no longer be a complication? (I had asked how the minimum thresholds labeled in euro would be converted into Southern euro or MTL –  If the South devalues 40% and the thresholds are based on the old euro the bill will be 40% higher for applicants from Southern countries). The IRS web page has not changed since September 15, it offers the Application form but not the list of Authorized mandatories, to whom the Application form must be addressed. No further information is given. Mysterious Malta.

rferra wrote:

The Catholic Club: not an insult. I could also call it the Club of the sunny countries (well, Ireland is not, but the Irish are so sunny inside, a marvelous people). Every culture has strong and weak points. Work and keep your money outside of Catholic countries; eat, have fun, take your holidays and make love with Catholics. The strength of US is that you have a mix of Protestants, Catholics and Eastern Confucians plus a sprinkling of everything else.
R F

RF - hey, that's a relief.  I'm Catholic and don't want to be hated at first sight. I'm starting to look at South America too - they have been through their collapses and are starting to recover - sorta.

But have always wanted to live in Malta - logical or not.  Or at least visit - the new scheme put an end to that dream unless I can find a job.  I am going to visit though at least, as soon as I can get some things sorted here.

It made me wonder when former pres Bush bought all that land in Paraguay, though.  That family didn't get rich by being stupid.  And everybody I've met from there is nice, hospitable, to the point that I am now debating btwn Malta and a few countries in SA. 

Duffy

interesting to note that a recent survey showed that the top 4 places for brits to retire are in south america.....so maybe not a bad idea really

From The Telegraph:

British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.
Diplomats are preparing to help Britons abroad through a banking collapse and even riots arising from the debt crisis. The Treasury confirmed earlier this month that contingency planning for a collapse is now under way. A senior minister has now revealed the extent of the Government’s concern, saying that Britain is now planning on the basis that a euro collapse is now just a matter of time.
Recent Foreign and Commonwealth Office instructions to embassies and consulates request contingency planning for extreme scenarios including rioting and social unrest.
Diplomats have also been told to prepare to help tens of thousands of British citizens in eurozone countries with the consequences of a financial collapse that would leave them unable to access bank accounts or even withdraw cash.

From The Economist:

The risk that the currency disintegrates within weeks is alarmingly high… The prospect that one country might break its ties to the euro, voluntarily or not, would cause widespread bank runs in other weak economies. Depositors would rush to get their savings out of the country to pre-empt a forced conversion to a new, weaker currency. Governments would have to impose limits on bank withdrawals or close banks temporarily. Capital controls and even travel restrictions would be needed to stanch the bleeding of money from the economy.

Hi rferra,

we are living in interesting financial times.

I'm not sure if the Telegraph is the best source of information and I'm certainly not sure if the GBP is the safe haven for money. Let's see how the public strike on Wednesday in the UK goes - we have already seen civil unrest there recently !

Japan and America are already following with downgrades or potential downgrades.

If you have your money in a weak country I would try to get it out too - like the Greek or Italians'

If you think you have your money in a 'strong' country then you are on the safe side!

Let's speculate, as Expats in Malta , which side Malta will be on-)))

Cheers and happy speculating
Ricky

ricky wrote:

Let's speculate, as Expats in Malta , which side Malta will be on-)))

which side would Germany want Malta to be on ?  I think we all know the reality, a quick look at a map says all

Hi George,

just to make it clear that I am British but have a very good knowledge of Germany-)))

Angela Merkel,as the present German chancellor, has made it quite clear that she wants to stick to the EU rule that every country should be responsible for it's own debts and if that where to be changed then the EU contract will have to be changed.

So,back to your question of where Germany see's Malta. First I doubt whether it is actually in any focus or on any German map due to it's size and more importantly , the low level of it's sovereign debts as compared to most other European countries. Any country (or private person for that) is ok as long as he can pay the interest on their debts without having to rack up even more debts. Usually a debt level of 90 % of GDP is considered a critical level , especially when it leads to interest rates of more than 7 %.Being able to pay the debt back finally is nice for the investors too....

If the official figures are anywhere near reality then Malta should be fine and Angela will be happy too-)))

Personally, I'm not sure if the published figures show the real situation (looking at numbers for Enemalta,AirMalta, public pension and healthcare) so the reality could hit back sooner or later (this is my personal fear and speculation part-)))

But that it also true of Germany too if you include future pension liabilities for civil servants and other hidden costs.

So of course Germany would want to see Malta on the strong Euro side as with as many other countries as possible. Just because Malta is in the Mediteranean wouldn't be the main issue- just numbers!

Cheers
Ricky

As you say, in reality, Germany doesn't really care one way or the other about Malta - its too small to matter. However, if Italy drops out the euro, I think Malta will have no choice but to follow - Malta couldn't compete economically if it was in a strong euro.


One of Malta's biggest problems is the automatic increase in wages in line with inflation, meaning Malta is becoming steadily less competitive. The other is the hidden debts you mention at the pseudo private sector companies. Malta needs to move away from 1970's socialism - why is the state running an airline, generating electricity and (until very recently) building ships.

The external value of the euro is an average based on the strength of the different economies. So the euro is much lower than the D Mark would be and much higher than the Italian or Maltese Lira would be. The consequence is an explosion of the trade surplus of the strongest countries, with higher productivity, and a parallel explosion of the trade deficit of the weakest ones. Some countries accumulate capital and others lose it. The losers can borrow from the winners, only up to the point where the debt becomes unsustainable.

The big winner in the game is Germany, distant second Netherland. If they left the system their national currencies would shoot up and their exports nosedive. Finland and Denmark would have currencies more or less at par with the present value of the euro. All the other currencies should drop lower or much lower to balance the trade account.

This vicious game would go on even if  Greece, Italy, Spain, Portugal, Ireland… left the table. Little by little France would fall in the same predicament, then Finland and Denmark…

The system of fixed exchange rates (the euro) is simply wrong. Either Europe accepts fiscal union and transfers of wealth from the North to the South (as in Italy, where we have such transfers from the North to the South) – something that seems out of the question, especially during a global economic slowdown – or the euro game must be stopped.

This simple truth is not told, because the big banks, full of sovereign bonds, don’t want to spit their teeth – and because Germany has an interest (hope) in keeping the euro and in addition becoming the European Master dictating the rules to everybody.

Money is thrown away to “save” today Greece and Italy, tomorrow other countries, but even if the crisis could be averted, it would recreate itself immediately, if the productivity of Mediterranean countries cannot be quickly improved up the level of Germany, something impossible. The only solution is dismantling an experiment that has no historical precedents because it is absurd, and say good by to the euro.

The failed banks would have to be nationalized, the German Export Wermacht would have to retreat, all the countries would be forced to compete without enjoying low German interest rates and without begging for handouts. No currency advantages, no free meals, no money thrown away, end of socialist spending not covered by fiscal revenues.

"So the euro is much lower than the D Mark would be and much higher than the Italian or Maltese Lira would be." - I agree about Germany and Italy, but not about Malta - I think the current value of the euro is about right for Malta

What concerns me is it being either tied to a smaller, stronger euro - if Italy leaves the euro, I think Malta would have to do so as well, but best for Malta is for the eurozone to stay as it is (or with Greece out)

Hi rferra,

don' make it so complicated!

The only question is who is going to pay the bill!

As it won't be Angela Merkel and the next elections in Germany are closing in, believe me , the German's will not be paying for the free-for-all debt making of the past 10-15 years!

She could well be the next 'looser' if she lets Germany transfer money that it does not have to the Mediterranean.

Today's news in German press is the 'Elite bond' which clearly shows you the direction.

All EU countries that cannot pay their debts have to get their act together and they won't get money from any other country. The debt game is over ! Not even the IMF have anywhere near enough money to bail out Italy and others !

Cheers
Ricky

Hi rferra,

you are in Italy.

What is your interest in Malta? Do you plan to come to Malta in the near future ?

I would look forward to meeting you here in Malta and to discussing these issues at one of our expat meetings.

Regards
Ricky

George,
I could not find the estimate for Malta. Probably, as you say, the current value of the euro is about right. But tourism is an important source of revenue, and if some Mediterranean countries devalued, Malta would be priced out of the market if it did not devalue as well. Then, being in the Southern zone, with higher interest rates, would be, I guess, a negative for the property and building sector, that is also important in Malta. As you say, best for Malta is for the eurozone to stay as it is – but it is a dream.

Ricky,
Germans don’t want to pay the bill of the deficit countries, and nobody else wants or is able to pay it. So the experiment of one currency fits all is finished. End of the euro, and Germans eat your Mercedes because we wont be able to import them for a long time. Southern peoples will be poorer and Germans less rich. European banks that were the biggest givers of loans to Eastern Europe, Africa, Asia will stop loaning, and those countries will be in dire straits. China, who was the top engine of the world and whose No. 1 market is Europe, will have a dangerous recession. American banks exposed to European sovereign debt will take a moderate hit, plus a killer one: sovereign default swaps sold mainly by American banks to insure against default will go sour, taking down all the over the counter (unregulated) derivatives market, whose notional value is 70 trillion dollars, equal to about ten years of economic GDP of the whole world.
We wanted globalization, and we have it. Greece took down Italy, Italy takes down Europe, Europe will take down the planet.
Now, say we adopt two euros, one strong and one weak. If Italy and Greece have the same currency, again Greece is terribly disadvantaged, in the same proportion of its productivity gap with Italy. So the can will just be kicked down the road for some time.

Ricky,
I will hopefully come to Malta. When? Ask the Inland Revenue. I wrote one week ago they were ready to open the applications for HNWI, but I was wrong. They need more time to fix some details. Eleven months after they had suspended the old scheme they are still not ready with the new one, announced in September. In general, when it takes you a very long time to draw a plan, it means you don’t know exactly what you want to achieve, and the result is a flop.
I’ll let you know when I come and will be glad to meet other expats

What do you make of the Anschluss? I mean, of the German victory in Brussels? Malta’s ambitions to develop its financial services will be hit by regulations and taxations. And the number of tourists from southern countries will fall, as the German medicine will mean for those countries decades of austerity and recession, with increased taxation, wages plummeting, joblessness skyrocketing (and debt problems worsening in fact). Add the recessionary injunction to bring the Maltese deficit to a simple 0,5% as for the maximum allowed “structural deficit”.

Frau Merkel imposed a one size fits all rule. And it is the German size that is supposed to fit countries like Greece, Portugal, Italy and Malta as well. What's good for Germany is good for everybody! If you don’t agree you can walk out of Europe, drop the euro: in practice hang yourself, because the costs and consequences would be even more catastrophic.

In exchange the Germans will kindly accept to keep this euro currency, with an external exchange rate much lower than the D Mark would have, and so continue enjoying the advantage that allowed them to multiply by a factor of 4 the exports to the PIIGS and by a factor of 10 to China.

Well, in politics you play to win, and the losers have only themselves to blame. But did Frau Merkel win? Or did she start a process that in the end will disintegrate Europe?

As someone who rarely watches the news or reads newspapers, I didnt really understand much about the Eurozone until I read this article. The article focuses on how it affects the UK, but as a lot of expats are from the UK, I thought I would post it for anyone else who doesnt really "understand it all".

http://www.bbc.co.uk/news/uk-16082752

Today either a real ECB “saves” with monetary inflation (and devalues) the euro zone, either the weak countries drop out and join the Catholic club (Greece, Portugal, Spain, Ireland, Italy, soon France, Malta and Belgium – not totally catholic but enough to qualify). Get ready later for a remake of Wars of religion in the continent…

Erm just wanted to point out that Greece is not a Catholic country, the religion is Greek Orthodoxy.

The usual religious arguements which are trotted out in every spat of European fisticuffs seems to be doing the rounds again. Not cool.

If the financial situation in Europe could be discussed without bringing religion into it that would be great. As a continent we've been there before and it's not a good path to walk.

Peace in Europe is fragile enough as it is.

Shall we stick to financial facts and figures and speculation on governmental decisions and have a bit of decorum, eh chaps?

Hi rferra,

I was away at Golden Bay for the weekend so I couldn't add my bit to the comment earlier.

As to the ' Anschluss' I think you are trying to put Angela Merkel in a corner that she does not want be !

There is a German saying : Wer die Musik bestellt bestimmt die Melodie! But most Germans will not go along with Merkel when they get the chance to vote. She will be the next looser in the EU. You will find opinions similar to the ones in the UK at the moment. The German population don't want to pay the bill of all the rest of the EU and I'm sure it will be cheaper for them in the end not too ,as they have made the necessary changes to the economy in the last decade to weather out the coming storms.

All the polital yapping in Brussels has not solved a single problem , noboday has started being austere yet alone paid a cent of the debts back. They kicked the can further down the street ! That's all.

But I feel sorry for the British Expats in Malta. All is looking like they will soon become TCN's and bear the brunt of the decisions being made in the UK.They were already not part of the Schengen area and now the UK wants to leave the EU. The GBP will not be worth that much , many will struggle to match the requirements to stay in Malta and there will be no work permits for TCN's unless they are highly qualified!

The decisions made in Brussels last week were not good for any of us Expats in Malta.

Cheers and lets see what the next weeks bring.
Ricky

ricky wrote:

But I feel sorry for the British Expats in Malta. All is looking like they will soon become TCN's and bear the brunt of the decisions being made in the UK.They were already not part of the Schengen area and now the UK wants to leave the EU. The GBP will not be worth that much , many will struggle to match the requirements to stay in Malta and there will be no work permits for TCN's unless they are highly qualified!

Many of the Brits living in Malta were from before Malta joined the EU, and it wasn't a big issue then with the exception of work permits - residency visas were easily renewable every 3 or 6 months. The UK almost certainly won't leave the EU - once people calm down, it will be realised its to all countries advantage for the UK to remain (including the UK). Bear in mind anyway that most of the rights of EU citizens to live and work in Malta equally apply to EEA countries as well, and almost certainly if the UK did leave the EU, it would join the EEA alongside Finland and others.

“nobody has started being austere”

Not exactly. The Greeks have already been crushed and bled white, without solving their problems. And Italians will now start paying more taxes, losing their rights to retirement, having their pensions no more protected from inflation and so on. Without solving the problems.

The bitter German medicine will not work – and no better medicine has been suggested, because probably there is none.

I don’t want to seem anti-German. In fact the Germans were right. They did not like and did not want the euro. The euro was a French invention and was imposed to Germany as a condition for allowing the reunification (and, it must be added, the euro helped attract European capitals to the German debt market and finance the reunification, and grow German exports).

Germany got something in the deal, and we got as well something: the low “German” interest rates. But the gift was used in the most dumb ways: in Ireland and Spain (maybe in Malta as well, I don’t know) to inflate the property bubbles that are killing their banks; in Italy to prop up an inept government, and so on.

We’ll have to pay. Austerity first, then, when it fails, a stronger form of austerity called economic depression.

Hi rferra,

I'll go right to your last line. We'll all have to pay . No, those with debts or those who lent money to countries with debt will habe to pay.

If the countries don't pay you call it 'default' or ,on private basis, bancruptcy .

Then, as you say, austerity starts ( private word is saving or at least not spending so much).

So much for those countries who can't pay. I still believe that there are many countries that can pay their bills. THe other ones are in for a lot more trouble than they have experienced so far .

The Greeks are stll squandering money they don't have. Read the OECD report and you know what I mean.

And, if property bubbles are killing banks? It's their own fault - there is something called risk management! I have absolutely no sympathy for those highly paid idiots (banksters) who get their banks into major trouble and then are forced to leave with a huge severance payment ! I would jail them on the spot !

No fun- no risk !

Cheers
Ricky

Ricky,

If the payers are first those with debts, and in case of partial or total default those who lent them money, we have already a jolly band together.

Add in the countries whose banks are linked to the banks that bought the defaulted sovereign  debts.

Add in the exporters to the countries falling into recession or depression, exporters who will consequently receive an economic hit. Among them China.

Further add the banks of another indebted and gasping county, US, the banks that sold the majority of insurance (the credit default swaps) on European debts and will be requested to pay.

In the end add the few safe and clean countries in the world: will they be spared in a world catastrophe?

We had Globalization, right? ALL will pay, some an awful lot, some just enough to cry.

As for the banksters, they are the real bastards and we would gladly jail them. But you see that everything is done to save them with our money, from the US to Japan to Europe. They own the central banks, the “own” the politicians, they “own” Brussels…

Yesterday we said we’d like to send the banksters to jail. Today we will say we‘d like to hang them…

Here is the latest bomb, more deadly than sovereign bonds or even CDS. It is the daisy-chain rehypothecation played in secret by banks and brokers all over the world, and recently discovered when big broker MF blasted off in the US.

We know what hypothecation is: if you buy a flat with money lent by a bank, the bank hypothecate the flat with a mortgage that gives her the right to seize the property if you fail to pay.

Now imagine that the bank makes money on your mortgage re-hypotecating it with another bank, and this bank does the same with another bank that will do the same… In the end there will be several institutions having the same right on your flat. But the flat is only one.

Further imagine that this job is done as well with sovereign bonds of dubious quality, corporate bonds, equities, any asset held for example by hedge funds in brokerage accounts.

That’s it. That is what happened. The discovery was made when MF went into bankruptcy for having made wrong bets with money got by re-hypothecating the assets deposited by investors as a collateral for margins in futures trading. The boss of MF was asked by the judge: “Where is the money left?”, and he candidly replied: “I don’t know”. He said the truth, because how many times have the assets been re-hypothecated and by whom?

In a daisy-chain when one link breaks the whole chain goes. And those chains are linked to other financial chains: credits, derivatives… One bad hit and all the financial institutions collapse.

This makes clear why in the sovereign debt saga the governments are concentrating on protecting the banks.

As for the British stand against EU regulations in the financial sector, it’s questionable. In fact, as the American law limits the amount than can be re-hypothecated, the assets were transferred, without the owners assent, to London, where there is no such limit, no regulation, no supervision, in the name of “freedom”. Freedom for the crooks.

All the collateral assets have been pledged and re-pledged four times on average, generating an awful lot of liquidity (created out of thin air) that was invested, creating gains as well as dangerous losses. If the bad European sovereign bonds have been re-hypothecated four times, imagine what can happen if those bonds go sour. Apocalypse.

For more info, here is a good (and long) article not too technical:

Why The UK Trail Of The MF Global Collapse May Have Apocalyptic Consequences

http://www.zerohedge.com/news/why-uk-tr … anks-jeffe

Hi rferra,

as todays markets showed you are on the right track. The EU poli-criminals just produced a lot of hot air and kicked the can...

I always have to think about the Suzie Orman show ...show me the money girlfriend !

So what should those with a bit of money do with it to avoid the big crash ?

Reasonably priced property and stocks of conservative companies or even gold ? What would you suggest ?

Cheers
Ricky

If it is ingots, gold in a safe deposit (hoping that you will not find the bank doors closed one day). If it is small pieces, hide them in the garden or somewhere.

And CASH (perhaps in different currencies), under the mattress (or in a better place). The day you’ll find the bank doors closed and the ATM machine stopped, you ‘ll be a rich man, even if your euros are devalued, compared to those without cash and unable to buy anything.

Good stocks will go down, and maybe down a lot, before going up, and maybe up a lot. Buy them after the fall. For the moment don’t try to make gains, just concentrate on not losing your shirt.