Last chance saloon for the Euro - Just make a decision will you

Doodah

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Nov 14, 2010
Messages
1,067
I actually think they will let a certain number of banks crash. This has a positive effect - as the domino falls deposits migrate to perceived stronger banks thus giving them a free recap as it were. Fewer players leads to a more profitable platform and a tighter bind between the institutions (EU and financial).
A couple of weeks ago, Merkel made the (in)famous public comment about private bondholder liability towards sovereign debt and this was followed by the IMF's Strauss-Kahn's public comment that the Irish problem was a banking one, due to one bank in particular (obviously Anglo).

Now, the bail-out plan requires the actual closure of Anglo.
Closing it, on it's own, would restore confidence.
The question then is the detail of the "closure".
More recent comments from the ECB suggest bondholder liability would be tackled on a "case by case" basis, post-2013.
Anglo liquidation would seem a logical and ideal candidate for the implementation of the theory, but the implementation, such is the intensity of the crisis, would/could begin next month.
I am guessing that under Irish or EU law, the banks debts could be removed from the sovereign guarantee on the basis that the bank lied/defrauded the government.
Again under Irish/EU law, the bank would be liquidated with the unfortunate bondholders taking a hit, or alternatively the ECB taking on the liabilities and dealing with the bondholders itself.

Is this legally possible?
If so, markets may or may not panic.
I would guess that if it proven that Anglo acted illegally, it would be acceptable to markets that it's bondholders would have to assume a liability for it's debts. Thems the rules, and justice would be seen to be done.
The EU needs to set a precedent and this is an ideal opportunity.

I posted this scenario a couple of weeks ago asking was it possible or illogical and it wasn't contradicted, though it was probably ignored.
 


Ulster-Lad

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Oct 26, 2006
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9,989
I do not disagree with anything in that article. My point is that there is a two tiered Europe. The rich countries and then the PIIGS. The PIIGS can not survive under the current system and regulations that have been imposed by Europe. These regulations favour the Germans and the French obviously.

This chart explains the problem in more detail. Germany is at full employment while Ireland's is set to rise.

Graphics Gallery: The Euro Crisis in Numbers - SPIEGEL ONLINE - News - International
 

SkatesOn

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Feb 12, 2009
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59
Choice no1: Amputation. Basically this involves cutting off the weaker members of the Eurozone to preserve the core members. So we would have Greece, then Ireland, then Portugal and Spain with the added possibility of Italy. This is like an amputation of a limb to preserve the body politic. Te question is how deep you have to cut to preserve the patient.

Consequences for Ireland. This depends on whether we generate our own currency (Hello Punt) or whether we join the rest of the NOBU (not good enough to be in the Euro) in some sort of bastardised and permanently sick younger sibling. The consequences will be massive deflation and some sort of debt forgiveness as we won't be able to fund our debt in Euro with our new crap version. We'll be printing Cheuros and be massively deflating the currency whilst inflation and high interest rates become the norm. The positives are that our economy will become incredibly competitive, particularly with the UK.

You can expect to see the return of a domestic manufacturing industry as imports will become very expensive resulting in large scale job creation. Exports will power on based on currency rates and comparatively cheap labour costs. In fact, we'll start turning the screw on Central European countries as all the advantages we previously had, in conjunction with our low corporation tax, conspire to ensure we remain the destination of choice for FDI. From a domestic point of view however, the crippling interest rates will ensure some sort of domestic debt forgiveness as those in negative equity cannot afford to pay their mortgages. The enduring problem of funnelling endless wheelbarrows of cash into the banks will cripple the economy for a generation to come.

You mention both massive deflation and inflation. I believe we would see high inflation following a devaluation - similar to our own experiences in the past: 1986 devaluation. This would in turn increase property prices and ease the negative equity issues. If we get enough inflation we are back to the boom times!
 

Colonel Kurtz

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Joined
Nov 4, 2008
Messages
121
I do not disagree with anything in that article. My point is that there is a two tiered Europe. The rich countries and then the PIIGS. The PIIGS can not survive under the current system and regulations that have been imposed by Europe. These regulations favour the Germans and the French obviously.

This chart explains the problem in more detail. Germany is at full employment while Ireland's is set to rise.

Graphics Gallery: The Euro Crisis in Numbers - SPIEGEL ONLINE - News - International
I agree Irelands is set to raise. But we are responsible for electing the govt and also not holding it to account - yet. We can't complain about a 2 tier Europe if can't be arsed at the domestic level. It doesn't wash.
 

Squire Allworthy

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May 31, 2007
Messages
1,404
Awesome post, Squire (I mean the one on the other thread)

"Quantitative easing for the entire banking system coupled with financial reform, but still leaving states with their proper budgets to sort out"

I'm sold but will the Germans go for it?
Thanks, I was in a right mood when I wrote that.

As for Germany, Germany is not the EuroZone, but its interests are tied to the well being of its partners in that zone and the rest of the EU. If these economies go into recession Germany will feel it. If Spain defaults Germany will be in serious trouble.

The markets like will exploit any weakness and take positions. You need to be ahead of that pack, or it will cost billions.


I wonder how many have sat back and considered what their aims should be in all this?

  • Stability (of what markets, currency, civil unrest, political).
  • Growth in the economy.
  • Increased employment.
  • The narrow interests of your own country or that of the EuroZone?
  • Break up of EuroZone.
  • Maintain economic discipline.
  • More effective financial structures.
and so on................


Apart from trite generalities is there any agreement of what the aims and objectives should be? Whose interests are being represented?

Is there anyone in there representing the best interests of the EuroZone and the EU or is that secondary to the interests of the various member states?

Do the interests of ordinary citizens count at all?

If there is no clarity of purpose then little wonder if there is dithering and indecision.
 

Colonel Kurtz

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Joined
Nov 4, 2008
Messages
121
Thanks, I was in a right mood when I wrote that.

As for Germany, Germany is not the EuroZone, but its interests are tied to the well being of its partners in that zone and the rest of the EU. If these economies go into recession Germany will feel it. If Spain defaults Germany will be in serious trouble.

The markets like will exploit any weakness and take positions. You need to be ahead of that pack, or it will cost billions.


I wonder how many have sat back and considered what their aims should be in all this?

  • Stability (of what markets, currency, civil unrest, political).
  • Growth in the economy.
  • Increased employment.
  • The narrow interests of your own country or that of the EuroZone?
  • Break up of EuroZone.
  • Maintain economic discipline.
  • More effective financial structures.
and so on................


Apart from trite generalities is there any agreement of what the aims and objectives should be? Whose interests are being represented?

Is there anyone in there representing the best interests of the EuroZone and the EU or is that secondary to the interests of the various member states?

Do the interests of ordinary citizens count at all?

If there is no clarity of purpose then little wonder if there is dithering and indecision.
Oh $DEITY. When I hear the bland political soundbites of

1) job creation
2) economic growth and stability

that's a sure sign that someone is trying to sell you the status quo. Either because they have a vested interest in keeping things as they are or they don't know any better.
 

SKELLY

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Feb 23, 2009
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3,110
Do the interests of ordinary citizens count at all?
Well imo further destruction of the tax base would suggest no.
But there is an argument that we never had a proper tax base to begin with.
So its possible that question could be a maybe ie the status que
 

Squire Allworthy

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Joined
May 31, 2007
Messages
1,404
Oh $DEITY. When I hear the bland political soundbites of

1) job creation
2) economic growth and stability

that's a sure sign that someone is trying to sell you the status quo. Either because they have a vested interest in keeping things as they are or they don't know any better.
The status quo at this moment in time? Believe me when I say that I would like to see fundamental reform.

My personal vested interests would probably be best served by a collapse of the Eurozone and depreciating new currencies.

If your aims are Ireland first and foremost, new punt and control of money supply and interest rates taken in Dublin then fine that is clarity of purpose.

So lower tier withdraws out of the Euro and defaults on its Euro based debts? What effect do you think that will have on the remaining Eurozone?

We are told that Tier 2 countries will have cheaper currencies and therefore be able to trade competitively. Cost of imports rocket as do interest rates. If wage increases stay ahead of inflation and interest rates below rate of inflation then most people will pull through, but if the reverse happens you have real problems.
 

Mitsui2

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Joined
Nov 13, 2009
Messages
32,351
A couple of weeks ago, Merkel made the (in)famous public comment about private bondholder liability towards sovereign debt and this was followed by the IMF's Strauss-Kahn's public comment that the Irish problem was a banking one, due to one bank in particular (obviously Anglo).

Now, the bail-out plan requires the actual closure of Anglo.
Closing it, on it's own, would restore confidence.
The question then is the detail of the "closure".
More recent comments from the ECB suggest bondholder liability would be tackled on a "case by case" basis, post-2013.
Anglo liquidation would seem a logical and ideal candidate for the implementation of the theory, but the implementation, such is the intensity of the crisis, would/could begin next month.
I am guessing that under Irish or EU law, the banks debts could be removed from the sovereign guarantee on the basis that the bank lied/defrauded the government.
Again under Irish/EU law, the bank would be liquidated with the unfortunate bondholders taking a hit, or alternatively the ECB taking on the liabilities and dealing with the bondholders itself.

Is this legally possible?
If so, markets may or may not panic.
I would guess that if it proven that Anglo acted illegally, it would be acceptable to markets that it's bondholders would have to assume a liability for it's debts. Thems the rules, and justice would be seen to be done.
The EU needs to set a precedent and this is an ideal opportunity.

I posted this scenario a couple of weeks ago asking was it possible or illogical and it wasn't contradicted, though it was probably ignored.
Speaking as a non-economist or even soi disant expert at anything, this is a very interesting post.

And may I say, to the clearly knowledgeable people contributing to this thread, that the thread itself is a great example of what can happen (in a positive way) on a site like P.ie.

One reason I say this now is that shortly the weirdos are bound to discover it and the thread will be derailed. Thanks to everyone who has posted here (at least till the time of my post). We, the generality, have had a terrible crash course in at least the terminology of economics recently. While there's stuff here that still goes right over my head, there's also a lot of food for (even my uneducated) thought.

Equating a society with an economy still sucks, though.
 

gatsbygirl20

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Joined
Dec 1, 2008
Messages
22,551
Speaking as a non-economist or even soi disant expert at anything, this is a very interesting post.

And may I say, to the clearly knowledgeable people contributing to this thread, that the thread itself is a great example of what can happen (in a positive way) on a site like P.ie.

One reason I say this now is that shortly the weirdos are bound to discover it and the thread will be derailed. Thanks to everyone who has posted here (at least till the time of my post). We, the generality, have had a terrible crash course in at least the terminology of economics recently. While there's stuff here that still goes right over my head, there's also a lot of food for (even my uneducated) thought.

Equating a society with an economy still sucks, though.
+1

Some very bright, well-informed people on here. This thread (and the excellent post on another thread by Absurdo) is very interesting and helpful to those of us with no background in this stuff.
 

JCR

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Joined
Jul 22, 2009
Messages
6,241
There are some very knowledgeable people posting on here with some interesting points/solutions. However I would suggest to those who think their opinions matter less in some way - you can learn practically everything you need to know about economics in three days to have a viable opinion. Orsen Welles said the same about filmmaking. Its also worth remembering that the markets are not rational, in fact they are crazy, driven demented by greed. 450 trillion in deratives (way back in Clintons time) when the US spends one trillion on a stimulus for its entire economy (right now) might say a lot about how rational the markets are.
 

Vote_No_on_Everything

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Joined
Feb 16, 2009
Messages
1,139
A couple of weeks ago, Merkel made the (in)famous public comment about private bondholder liability towards sovereign debt and this was followed by the IMF's Strauss-Kahn's public comment that the Irish problem was a banking one, due to one bank in particular (obviously Anglo).

Now, the bail-out plan requires the actual closure of Anglo.
Closing it, on it's own, would restore confidence.
The question then is the detail of the "closure".
More recent comments from the ECB suggest bondholder liability would be tackled on a "case by case" basis, post-2013.
Anglo liquidation would seem a logical and ideal candidate for the implementation of the theory, but the implementation, such is the intensity of the crisis, would/could begin next month.
I am guessing that under Irish or EU law, the banks debts could be removed from the sovereign guarantee on the basis that the bank lied/defrauded the government.
Again under Irish/EU law, the bank would be liquidated with the unfortunate bondholders taking a hit, or alternatively the ECB taking on the liabilities and dealing with the bondholders itself.

Is this legally possible?
If so, markets may or may not panic.
I would guess that if it proven that Anglo acted illegally, it would be acceptable to markets that it's bondholders would have to assume a liability for it's debts. Thems the rules, and justice would be seen to be done.
The EU needs to set a precedent and this is an ideal opportunity.

I posted this scenario a couple of weeks ago asking was it possible or illogical and it wasn't contradicted, though it was probably ignored.
If this was the route that was to be taken then we would have saw Seanie & Fingers in jail by now, or in Hague,the fact that they are living it up in the Sun is a guide to who the Eu are going to send the bill to, 'the Workers'

(I should add, Im only starting to get my head around some of this stuff, but common sence still tells me where things are heading, - call it the knowledge of innocence)
 


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