Is the E.U. on the Brink?

[Acting Like Godot]

Originally Posted by Beingist

But, who "creates" the money? Back in the days of the gold standard, no one "created" the money (it wasn't created at all, in fact, but mined and minted)--what there was, was held in reserve: limited money supply. Such might limit growth, but at the same time it limits debt.

There's no difference.

You can print a million currency notes or you could make a million gold coins.

You can borrow money, or you can borrow gold coins.

The only difference is that this is a stupid idea for countries whose land just didn't have gold. They would probably use nickel, or bronze, or silver, or stone, or aluminium.

Oh, what a nuisance. Just use paper. It's easier.

[Beingist]

Originally Posted by Beingist

But, we've been on a digression of sorts (not that there's anything wrong with that). I was really looking to see if any Europeans could chime in (but thanks again to Pete for doing so). Seems like they just don't want to talk about it.

[aelle]

Originally Posted by Beingist

But, we've been on a digression of sorts (not that there's anything wrong with that). I was really looking to see if any Europeans could chime in (but thanks again to Pete for doing so). Seems like they just don't want to talk about it.

I'm a European, although I don't live there. But how would my geographical location grant me instant macroeconomic knowledge? From talking with European people I know the economy is poor, people are distressed, qualified jobs are harder to find and purchasing power has been shrinking for the majority of households for 5 years or so. But it doesn't allow me to know where we are with regards to a tipping point that would mean the collapse of the Euro.

[Peterw]

Originally Posted by Beingist

But, we've been on a digression of sorts (not that there's anything wrong with that). I was really looking to see if any Europeans could chime in (but thanks again to Pete for doing so). Seems like they just don't want to talk about it.

For us in the UK there is a worry about jobs, everyone's complaining about the spending cuts (except the tube (subway) drivers who are threatening strike action so they can get paid more and work less) and the occupy movement are in full swing. On the flip side people are still spending money and going out, it will be interesting to see what the Xmas spending numbers are like for this year.

I think a lot of the doom is created by the media who have a huge responsibility which is being overlooked. They will sensationalise any negative number that comes out in order to sell their newspapers. This can cause people to worry and panic which means they are less inclined to buy stuff, businesses are more inclined to put off growth plans/projects in favour of stockpiling their warchests and the economic gloom becomes a self fulfilling prophecy thanks to media companies blowing stuff out of proportion to boost their profit margins.

That being said, I would not like to be a small/start-up business right now and I'm going to be unemployed in 2 weeks. I'm not too worried though because I've worked hard to make myself a useful person to have around and I'll take a low paying crappy gig if I have to if things get really tough. But I'm placing myself in the '1%' even if I'm not quite there financially yet

Oh yeah - and I'm short EURO and Gold which is helping

Like I said though I'm not average Joe European though. I'd be very upset if I was Greek or Italian or Spanish.

The UK is going through the austerity now which of course is unpleasant for many and they are letting their feelings known. The southern European nations are having a much worse austerity forced on them which is a massive change to what they are used to. It's not their fault that their tax receipts/government borrowing went toward who knows what (Bunga bunga parties anyone? How about there being more Porsches registered in Greece than tax payers who earn over 50k Euros a year?)

The US will need to go though some austerity as well, but I think there are elections coming up so I don't think anything upopular will be brought in until that's all over and done with. Nice to see politicians getting their priorities in order.

Our lot waited until straight after they'd won the election before imposing massively unpopular cuts that are being criticised as 'to deep and too fast' - but of course they want to see the benefit in time for the next election so they can say "Look we fixed it, I know it was hard at the tims but isn't it great now and do you really want to let the other lot in and start spending us back to oblivion?" Gotta love politicians

[Beingist]

Originally Posted by Peterw

For us in the UK there is a worry about jobs, everyone's complaining about the spending cuts (except the tube (subway) drivers who are threatening strike action so they can get paid more and work less) and the occupy movement are in full swing. On the flip side people are still spending money and going out, it will be interesting to see what the Xmas spending numbers are like for this year.

I think a lot of the doom is created by the media who have a huge responsibility which is being overlooked. They will sensationalise any negative number that comes out in order to sell their newspapers. This can cause people to worry and panic which means they are less inclined to buy stuff, businesses are more inclined to put off growth plans/projects in favour of stockpiling their warchests and the economic gloom becomes a self fulfilling prophecy thanks to media companies blowing stuff out of proportion to boost their profit margins.

That being said, I would not like to be a small/start-up business right now and I'm going to be unemployed in 2 weeks. I'm not too worried though because I've worked hard to make myself a useful person to have around and I'll take a low paying crappy gig if I have to if things get really tough. But I'm placing myself in the '1%' even if I'm not quite there financially yet

Oh yeah - and I'm short EURO and Gold which is helping

Like I said though I'm not average Joe European though. I'd be very upset if I was Greek or Italian or Spanish.

The UK is going through the austerity now which of course is unpleasant for many and they are letting their feelings known. The southern European nations are having a much worse austerity forced on them which is a massive change to what they are used to. It's not their fault that their tax receipts/government borrowing went toward who knows what (Bunga bunga parties anyone? How about there being more Porsches registered in Greece than tax payers who earn over 50k Euros a year?)

The US will need to go though some austerity as well, but I think there are elections coming up so I don't think anything upopular will be brought in until that's all over and done with. Nice to see politicians getting their priorities in order.

Our lot waited until straight after they'd won the election before imposing massively unpopular cuts that are being criticised as 'to deep and too fast' - but of course they want to see the benefit in time for the next election so they can say "Look we fixed it, I know it was hard at the tims but isn't it great now and do you really want to let the other lot in and start spending us back to oblivion?" Gotta love politicians

Indeed, I really wish we in the U.S. could do things more like the U.K. Not that things are perfect, there, but there is something to be said about the "splendid isolation" of the Great Island across the pond. I cheered after the vote came in to not submit to the Euro, and even though the austerity measures no doubt have their effect, I don't think it's as bad as it will be in the U.S., once that goes into effect here.

(Oh, and good move on shorting gold and the Euro )

[Peterw]

Originally Posted by Beingist

Indeed, I really wish we in the U.S. could do things more like the U.K. Not that things are perfect, there, but there is something to be said about the "splendid isolation" of the Great Island across the pond. I cheered after the vote came in to not submit to the Euro, and even though the austerity measures no doubt have their effect, I don't think it's as bad as it will be in the U.S., once that goes into effect here.

(Oh, and good move on shorting gold and the Euro )

Thanks, the gold short worked out well, the EURO one is being a bit odd...

I don't think our approach over here is better than anyone else's, I see it more as a matter of timing, because there are elections etc coming up over there they are holding off making any unpopular decisions while there are votes to be canvassed for. Kind of like our lot going straight in 'too deep, too fast' as soon as they could so that the results would be evident come next election..

Even Merkel and Sarkozy are making decisions bgased on getting themselves re-elected rather than what actually needs to be done.

Politicians eh!

[Beingist]

Originally Posted by Peterw

Thanks, the gold short worked out well, the EURO one is being a bit odd...

Not sure how anyone can be buying paper. Any paper. Short or long (though long term, I can see shorting the Euro a better bet). I'm just hoarding silver (not that I have a lot to hoarde ).

Interesting, your mention of timing and politicians. I'm wondering what the pols here will be doing, when that critical time comes.

[Peterw]

Originally Posted by Beingist

Not sure how anyone can be buying paper. Any paper. Short or long (though long term, I can see shorting the Euro a better bet). I'm just hoarding silver (not that I have a lot to hoarde ).

Interesting, your mention of timing and politicians. I'm wondering what the pols here will be doing, when that critical time comes.

Someone is propping up the EURO, not sure exactly who (People are mentioning the ECB, the Swiss, Middle east, Chinese - who knows! - interesting article here). Fundamentally it should be falling off a cliff and technically it's in a down trend so the next big wave down should be soon. People are speculating that this upward consolidation is just a push up to a good resistance level to short from, we'll see..

Gold and silver look like good bets, I'll be going into physical bullion just as soon as I get a new contract whenever that is. Careful of silver though, it's quite manipulated by some big names who have the volume to move it around to where they want it (JP Morgan or Morgan Stanley? One of the 'Morgans' amongst other names...)

Kitko is a very good site and forum for all things gold and silver.

I'm looking to get a bit longer term when I've built up some more equity. Need a bigger account for those wider stop losses to ride out longer term moves.

[Beingist]

Originally Posted by Peterw

Someone is propping up the EURO, not sure exactly who (People are mentioning the ECB, the Swiss, Middle east, Chinese - who knows! - interesting article here). Fundamentally it should be falling off a cliff and technically it's in a down trend so the next big wave down should be soon. People are speculating that this upward consolidation is just a push up to a good resistance level to short from, we'll see..

But, isn't all this Euro talk relative to the U.S. Dollar, or U.K. Pound? This is why I always end up measuring currencies against gold to get their value. For that, right now, give me the Swiss Franc (though didn't they recently announce an intended inflationary move?).

As for the Euro being propped up, my ego says that what's doing that is general ignorance of fiat currencies.

Gold and silver look like good bets, I'll be going into physical bullion just as soon as I get a new contract whenever that is. Careful of silver though, it's quite manipulated by some big names who have the volume to move it around to where they want it (JP Morgan or Morgan Stanley? One of the 'Morgans' amongst other names...)

Indeed, and the volatility kills me, sometimes. I have to keep telling myself "long term, long term, long term..."

[SnerpGoodWord]

Originally Posted by Beingist

So, you think they'd be wiser to just keep printing up the money, and bailing everyone out? When would (or even could) that ever stop?

The whole point of a soft money policy in a case like this is that no bailout is required. There are basically 3 options for dealing with an unpayable sovereign debt:

1) default on the bonds
2) "soft" default by devaluing the currency until the debt isn't excessive
3) borrow yet more money and kick the can down the road aka "bailout".

Of the three, history shows that #2 is the least disruptive. Greece has soft defaulted 4 or so times in the post-war, pre-Euro era. Not once did it cause any sort of Eurozone wide crisis. But by virtue of them now being on the Euro, #2 is no longer an option because Greece doesn't control the valuation of the Euro. #1 would cause massive bank failures across Europe and thus is not really an option, although Greece is happy to use it as a thread against Germany and Frace, which I heartily support for entertainment value if nothign else.

Hence #3 wins by default. In other words, bailouts are required in this case BECAUSE a hard money policy is being forced on Greece by their adoption of the Euro.

The end game has to be that Greece exits the Euro, because as you correctly imply #3 is unsustainable (especially in Italy's case) and the other options are unacceptable as long as Greece is a member of the monetary union.

[Beingist]

Originally Posted by SnerpGoodWord

The whole point of a soft money policy in a case like this is that no bailout is required. There are basically 3 options for dealing with an unpayable sovereign debt:

1) default on the bonds
2) "soft" default by devaluing the currency until the debt isn't excessive
3) borrow yet more money and kick the can down the road aka "bailout".

Of the three, history shows that #2 is the least disruptive. Greece has soft defaulted 4 or so times in the post-war, pre-Euro era. Not once did it cause any sort of Eurozone wide crisis. But by virtue of them now being on the Euro, #2 is no longer an option because Greece doesn't control the valuation of the Euro. #1 would cause massive bank failures across Europe and thus is not really an option, although Greece is happy to use it as a thread against Germany and Frace, which I heartily support for entertainment value if nothign else.

Hence #3 wins by default. In other words, bailouts are required in this case BECAUSE a hard money policy is being forced on Greece by their adoption of the Euro.

The end game has to be that Greece exits the Euro, because as you correctly imply #3 is unsustainable (especially in Italy's case) and the other options are unacceptable as long as Greece is a member of the monetary union.

Thanks for this elaboration, Snerp. I couldn't help but chuckle at the idea of Greece using possible default as a threat against Germany and France as "entertainment value." Classic.

Otherwise, I can't help but be curious about how Greece's adoption of the Euro is called a "hard money policy." I presume it's called such, because Greece has no means to inflate or deflate it, but I find it ironic, in that the Euro, which is not a metals-based currency, can hardly be called "hard money."

[SnerpGoodWord]

Originally Posted by Beingist

Thanks for this elaboration, Snerp. I couldn't help but chuckle at the idea of Greece using possible default as a threat against Germany and France as "entertainment value." Classic.

Otherwise, I can't help but be curious about how Greece's adoption of the Euro is called a "hard money policy." I presume it's called such, because Greece has no means to inflate or deflate it, but I find it ironic, in that the Euro, which is not a metals-based currency, can hardly be called "hard money."

In this case by "hard money" I mean simply a money supply that is not manipulated with the economic cycle. Historically that has usually meant metals-based money, but in this case it's the political situation (namely, Greece's small size and lack of control relative to the rest of the Eurozone) that is making the money supply "hard". Which is why I mentioned that they're headed for a 19th century style bank panic (one of the two major weaknesses of metallic money systems) despite being on a fiat currency. It is indeed ironic, but it's also an interesting case study because it separates issues of money supply from issues of money composition. Such examples are rare in history.

[Beingist]

Originally Posted by SnerpGoodWord

In this case by "hard money" I mean simply a money supply that is not manipulated with the economic cycle. Historically that has usually meant metals-based money, but in this case it's the political situation (namely, Greece's small size and lack of control relative to the rest of the Eurozone) that is making the money supply "hard". Which is why I mentioned that they're headed for a 19th century style bank panic (one of the two major weaknesses of metallic money systems) despite being on a fiat currency. It is indeed ironic, but it's also an interesting case study because it separates issues of money supply from issues of money composition. Such examples are rare in history.

Actually, I do recall reading somewhere that Greece was experiencing a rather gradual "run on the banks," which I found interesting. Do you think that is likely to happen in Italy?

Also, what is the other major weakness of metallic money? Limited growth potential?

[SnerpGoodWord]

Originally Posted by Beingist

Also, what is the other major weakness of metallic money? Limited growth potential?

The limits on growth I think are related to the bank panics - basically they all result from the supply of money being chosen more or less arbitrarily (via mining). But I could see considering them separate issues - the bi-metalism period in the US is an example where at least public perception was that the money supply didn't fit the size of the economy.

But the downside I was thinking of what the tendency of metallic money to turn making money literally into making the stuff of money - mining gold or silver. Before fiat currency an amazing amount of capital and labor was directed towards mining gold and supporting miners - everything from the exploration and conquest of the new world to the various North American gold rushes were driven by the desire literally to make more currency. That's effort that isn't put into farming food, building, educating, etc. In the age of exploration that may even have made sense, but now metallic money would represent a downgrade in quality of life for everyone as those efforts would have to be re-started. I think this is the major reason fiat currency has won worldwide.

[SnerpGoodWord]

Originally Posted by Beingist

Do you think that is likely to happen in Italy?

I think Italy will play out differently because of its size and relatively stronger economy compared to the rest of the PIIGS. I really don't know. What I do know is that it's not economically possible for Germany and France to bail out Italy. With Greece it's economically possible but politically unpopular. So if and when Italy starts to go the solutions will be of a totally different type.

[Beingist]

Originally Posted by SnerpGoodWord

The limits on growth I think are related to the bank panics - basically they all result from the supply of money being chosen more or less arbitrarily (via mining). But I could see considering them separate issues - the bi-metalism period in the US is an example where at least public perception was that the money supply didn't fit the size of the economy.

But the downside I was thinking of what the tendency of metallic money to turn making money literally into making the stuff of money - mining gold or silver. Before fiat currency an amazing amount of capital and labor was directed towards mining gold and supporting miners - everything from the exploration and conquest of the new world to the various North American gold rushes were driven by the desire literally to make more currency. That's effort that isn't put into farming food, building, educating, etc. In the age of exploration that may even have made sense, but now metallic money would represent a downgrade in quality of life for everyone as those efforts would have to be re-started. I think this is the major reason fiat currency has won worldwide.

Interesting points, Snerp.

Indeed, as much as I favor a metals-based currency over fiat, I understand that there are some drawbacks, and currently, I'm weighing which is the lesser of the two evils.

[Beingist]

More news that makes me wonder ...

News Headlines

[SnerpGoodWord]

Originally Posted by Beingist

More news that makes me wonder ...

News Headlines

I think they're overstating their case more than a little - the NBC properties are known to do that. The WSJ story is a bit more reasonable. I think this does show that the PIIGS issues, Italy in particular, can be contagious to Germany and France. Which isn't exactly news - the shear size of Italy, as the third largest economy in Europe, was an indicator all along. That said, a 1% slide in the EUR/USD and 20 basis point slide in Bunds does not completely re-arrange the financial world as the article seems to imply.

Ultimately I believe the Euro fails, either disappearing entirely or becoming in effect the FrancMark. But I don't think this auction is the reason why.

[Beingist]

Originally Posted by SnerpGoodWord

Ultimately I believe the Euro fails, either disappearing entirely or becoming in effect the FrancMark. But I don't think this auction is the reason why.

Yes, I understand, and am likely to agree.

[Beingist]

Updates...

http://www.nytimes.com/2011/11/26/bu...e.html?_r=1&hp

[Peterw]

Doing the rounds at the moment are some conspiracy theories that Germany will not allow a break up of the EU. As unpleasant and un-PC as it sounds people are saying that they are in the process of getting what they've already gone after twice but this time without firing a single shot...

Also the IMF (US tax payer) is getting involved and there was another (&$%^ing!) rumour that they would help bail out Italy who are too big to save by Germany/France etc.

Today everything is rallying (stocks/the EURO/Gold/Commodities/risk-on instruments), but this may just be a temporary pullback in the recent down move. There's also talk of fund managers doing some end of year 'Window dressing'...

I'm long AUD until it turns back down again when I'll short EUR again. Up, down, sideways makes no difference to me

[Beingist]

More updates ...

The eurozone really has only days to avoid collapse - FT.com

From everything I've read, the Euro seems it is on its death bed.

[Reefs]

Originally Posted by Beingist

More updates ...

The eurozone really has only days to avoid collapse - FT.com

From everything I've read, the Euro seems it is on its death bed.

From what I have gathered the Euro is declared dead every year by US papers. And when the Euro is out of the headlines the USD is declared dead by European papers. I'm watching this soap opera for several years now.

[Beingist]

Originally Posted by Reefs

From what I have gathered the Euro is declared dead every year by US papers. And when the Euro is out of the headlines the USD is declared dead by European papers. I'm watching this soap opera for several years now.

Such doesn't surprise me in the least bit. Only thing, in the past several years, there have been some serious monetary challenges to both, particularly in the form of debt crises.

Maybe they'll go down together?

[Reefs]

Originally Posted by Beingist

Such doesn't surprise me in the least bit. Only thing, in the past several years, there have been some serious monetary challenges to both, particularly in the form of debt crises.

Maybe they'll go down together?

Currencies are like concepts, they don't exist in their own right. I wouldn't bank on any scenario (Euro dead / Dollar dead / both dead). Fact is no currency lasts forever or is able to keep it's value.

[Beingist]

Originally Posted by Reefs

Currencies are like concepts, they don't exist in their own right. I wouldn't bank on any scenario (Euro dead / Dollar dead / both dead). Fact is no currency lasts forever or is able to keep it's value.

Agreed. And I'll be sure not to "bank" on any scenarios

[Reefs]

Originally Posted by Beingist

Agreed. And I'll be sure not to "bank" on any scenarios

Ideas are the real currency.

[Beingist]

Originally Posted by Reefs

Ideas are the real currency.

Nice quip.

[Beingist]

More news (as well as the reason I started the thread)--

http://www.nytimes.com/2011/11/29/bu...europe.html?hp

[MariconesUnited]

Originally Posted by Reefs

Currencies are like concepts, they don't exist in their own right.

You could say the same about the individual.

Whoa d00d. Whoa