The Eurozone crisis/break-up may crash the system?

[SleeperService]

It's getting hard to keep up with the developments. In the last 24 hours we've had Gordon Brown saying Italy and France are close to needing bailouts, Angela Merkel attacking the French for "allowing their economy to stall", the Spanish PM calling for Greeks to vote to stick with the euro (but not saying who they should actually vote for) and central banks all over the place promising to print however much money is asked for.

What I want to know is this: do the people who are running the EU actually have a plan for what Europe is going to look like when this is all over, or have they really spent the last four years failing to make any contingency plans for the inevitable disaster that is about to happen? Because I rather suspect the answer is the latter. I think their only plan, throughout, was to try to save the status quo by any means possible, and that now they may have no more idea where this thing is going than you or I do.

Despite claiming to not understand UE you're doing far better than many who job it is to follow this.

ALL the economies in the Eurozone are in danger, all that remains uncertain is the order of their collapse (just like the banks as above). Germany and Denmark will probabily be the last ones standing.

The Mont Pelerin crowd (who are behind all this) always believe a setback is temporary and a step forward permanent. That's why there's no exit strategy from the Euro. That piece of arrogance is going to bring it all down hard. You're right they are clueless

[UndercoverElephant]

This is a superb article from automatic earth, which has a new website:

http://theautomaticearth.org/Finance/th ... ality.html

How about this for some perspective:

This was the fallout from the collapse of Argentine economy, which led the South American nation to default on $100bn (£64bn) of debt – the biggest sovereign default in history until Greece's partial restructuring three months ago.

The default that followed led to a huge debt restructuring and Argentina was shut out of international financial markets. It still is today. There remain debts to settle. Members of the Paris Club are still owed $7bn while creditors that held out and 'vulture' funds have taken their cases to the World Bank.

I think this makes clear just how big a threat this crisis is to the existing system. The article is actually about how Argentina needed a total default, not a partial default, and that this was the key to its subsequent recovery. But Argentina is still being punished by the people who run the system as a warning to any other nation thinking of taking the same route out of a debt crisis. Some of the creditors still haven't given up trying to get their money back, even a decade later.

First it tells us something about the scale of the potential default that may be about to happen relative to previous sovereign defaults. The partial Greek default 3 months ago was the biggest in history? A full-blown set of eurozone defaults, including France and Italy, would make that partial Greek default look like a speeding fine.

Second it tells us that indeed this threatens to completely break the system. When it's just Argentina and a few "banana republics" who have been sent to coventry for refusing to submit to the kleptocracy/plutocracy that runs the world then the system can just keep going. Greece is an EU country, and not supposed to be a banana republic, but it is very small. But if the club of countries thrown out of the system for defaulting suddenly includes Spain, Italy, Portugal, Ireland and France then the game changes, especially if the electorates of those countries do the sensible thing and elect extremely left wing governments in response.

The parasites need hosts. If they kill their hosts, the parasites die.

[Aurora]

The Guardian - 16/06/12

World Bank warns that euro collapse could spark global crisis

Europe 'facing Lehmans moment' says outgoing head Robert Zoellick as Greeks are warned over key election.

Article continues ...

The Guardian - 17/06/12

Powerless ministers are waiting in terror to see if the asteroid will hit

Fear grips the Treasury and the Bank about the consequences of the total disintegration of the eurozone.

Article continues ...

[Lord Beria3]

http://www.marketoracle.co.uk/Article35176.html

Another good article on the eurozone crisis.

Portillo on This Weeks edition on BBC2 was saying that we akin to 1913 - massive crisis looming for the eurozone and he is pretty sceptical that it can survive much longer.

[Lord Beria3]

http://online.barrons.com/article/SB500 ... rticle%3D2

Structural? Cyclical? Please explain.

There is too much debt in the industrialized world and the financial system is virtually bust. Real disposable personal income is stagnating or declining. Employment participation keeps heading south. This produces a chain reaction: Weaker consumer demand in the West weakens manufacturing in places like Asia, which weakens natural-resource producers such as Australia or Brazil.

As for the euro, it is a misconstruction. As I said in January, I expect the disintegration to begin in the second half of this year. That should lead the world into financial and economic chaos. My two major themes into 2013 are euro disintegration and China weakness, due to the bursting of a real-estate boom.

Sounds like a fun year.

The global economy is weakening cyclically on top of a highly fragile credit system. It is an explosive cocktail. The tower of debt is compounded by the gigantic over-the-counter derivatives market. In the past 10 years the notional value of derivatives worldwide has grown from $100 trillion to almost $800 trillion. The numbers are mind-boggling. If something goes wrong in the real economy, it could shake the whole credit system dramatically. It is a dangerous situation.

Great article on the fragility of the financial system... and how close it is to collapse. Only massive and continual printing money by the central banks will stave of collapse.

[Aurora]

The Guardian - 19/06/12

The Eurozone's people are like prisoners in Colditz

Incarcerated in a citadel of currency union with the flexibility of granite, their governments give them no chance to escape.

Article continues ...

Europe is bankrupt. This means its bankers cannot hope to recoup the trillions of debts built up by the Mediterranean states over the past decade, short of their descent into eternal indenture and impoverishment. At present the "bailouts" allowed by the German authorities to Greece and Spain are not aiding those economies; they are merely propping up the dud loans of their own and other banks.

Needlessly shutting people out of work and depriving them of spending power is immoral and counter-productive. That was the message Keynes drew from the Great Depression, to widespread agreement. Friedman, the so-called monetarist, had no quarrel with him on this. As with a patient haemorrhaging blood, cash had to be injected into a collapsed economy.

With painful slowness it is becoming accepted that some "orderly" default of European bank debt is inevitable, along with a drastic boost to European demand. The claim that bond market confidence cannot stand the shock of default – or of rising deficits – merely postpones the day of reckoning. The important thing is to implement the defaults and the stimuli quickly. Ben Bernanke, the US Federal Reserve chairman, made his reputation by arguing this during Japan's long and disastrous flirtation with austerity in the 2000s.

[energy-village]

I hate to inject any sort of up-beat note (I haven't done a lot of it in the past) but the UK has somehow, Houdini-like, escaped hideous financial messes before. If Europe collapses, the world economy suffers almost as much, in a few cases a lot worse. It isn't over quite yet.

Britain has been running a huge debt since the seventeenth century. Before the Napoleonic Wars it was thought by some that Britain could not possibly afford a major war without risking bankruptcy.

By 1913 the UK really was barasic, fortunately the US set up their central bank (aka a state credit card) and loaned us vast sums to fight another major war.

After the Second World War we had a level of debt that would make our eyes even today water (more US loans, growth, oil/gas revenues to the rescue).

The parrot is not quite dead.

[Aurora]

I hate to inject any sort of up-beat note (I haven't done a lot of it in the past) but the UK has somehow, Houdini-like, escaped hideous financial messes before. If Europe collapses, the world economy suffers almost as much, in a few cases a lot worse. It isn't over quite yet.

Britain has been running a huge debt since the seventeenth century. Before the Napoleonic Wars it was thought by some that Britain could not possibly afford a major war without risking bankruptcy.

By 1913 the UK really was barasic, fortunately the US set up their central bank (aka a state credit card) and loaned us vast sums to fight another major war.

After the Second World War we had a level of debt that would make our eyes even today water (more US loans, growth, oil/gas revenues to the rescue).

The parrot is not quite dead.

He's looking distinctly Nordic and blue though.

[emordnilap]

<pedant>boracic</pedant>

[energy-village]

He's looking distinctly Nordic and blue though.

This is no place to inject humour!

Talking of dead parrots . . . given the financial situation AND a possible football match in the not too distant future, this seems quite appropriate.

http://www.youtube.com/watch?v=ur5fGSBsfq8

[energy-village]

<pedant>boracic</pedant>

Oops .

It's a word we'll probably all have to get used to spelling. Rhyming slang I believe.

[UndercoverElephant]

I

After the Second World War we had a level of debt that would make our eyes even today water (more US loans, growth, oil/gas revenues to the rescue).

We also still made stuff. We had a large and diverse industrial sector - or at least we were in a position where we could easily rebuild those sectors after the damage caused by the war. Now all we make is things like racing cars and hi-tech military equipment. We have built an economy based on finance, higher education and "services" and import most of the useful stuff from abroad instead of making it.

[UndercoverElephant]

This is a very good explanation of the mechanics of what is going on, well worth reading if you want to get your head around what is actually happening in the eurozone regarding politicians, bankers and rules:

http://www.mauldineconomics.com/images/ ... 061612.pdf

Summary:

German taxpayers ---> UNBELIEVABLE MESS ---> Greek and Spanish cashpoints haemorrhaging euros at an increasing rate, nobody in control.

[emordnilap]

<pedant>boracic</pedant>

Oops .

It's a word we'll probably all have to get used to spelling. Rhyming slang I believe.

As in 'Peer Gynt'.

[RenewableCandy]

<pedant>boracic</pedant>

Oops .

It's a word we'll probably all have to get used to spelling. Rhyming slang I believe.

sorry, what does it rhyme with? [/thick]