Euro revisited

[Fole_Penalt]

When the financial crisis hit the US, as some here were singing the virtues of Europe and its economy over the US, I stated that Europe will end up paying through the nose for Euro. I did not know that it would be so soon. It will be much, much worse for Europe than it is today, before it is over. What a blatantly stupid idea Euro has been. Continental Europe as a whole, has never understood economy in their entire history. They have only reluctantly emulated what UK and then the US has done because they have had no choice or else they would fall dramatically behind. Euro was their brilliant idea. It shows total lack of understanding of reality, realities of economy. Of course pockets of intellectuals within continental Europe have gotten it but they have never been able to get even minimal traction.

As industrious, intelligent, and disciplined the German people are, if left alone, they would bring economic ruin upon themselves time and again, because they simply do not understand economy. If the US had not been holding up Europe they would be in much, much worse condition.

Germans simply do not understand what the current problem is in Europe to be able to help fix it. They are making the situation worse, and will end up shooting themselves in the foot. Their only hope is to follow what the US has already prescribed for them.

Euro is nothing but a fixed exchange rate regime. Fix exchange rate, means dramatically less freedom, hence, it will always without exception be harmful. Europeans are still holding on to the dream of Euro as an alternative currency to the dollar-how delusional! Don't believe me, just watch.

 

[Niloufar]

interesting view..thanx for sharing FT jan.

Ur right, the economic aspect of it, on how to fix the economy when the crisis hit was never considered it seems. ECB doesnt even have a system like Federal Reserve to bail out.
But looking at it from other perspective, the concept of shared currency, basically lack of border for EU citizens, gives them great labour flexibility.For years Germany has benefited from cheap labour coming from Eastern Europe.
At the same time, during this crisis, you could argue if it wasnt because of few countries trying to hold on to EU and hold troubling govts accountable, some of the absolutely incompetent corrupt govts like Greece and Italy would never change internally..
but at the end as u said, they should have thought this over better from beginning, cuz from the looks of it IMF is bailing out a lot of the troubling banks-govts. & considering %70 of IMF budget comes from U.S, economically(if not politically) Euro will be dependent on U.S and its conditions.

 

[Mahdi]

ECB doesnt even have a system like Federal Reserve to bail out.

well, it kind of had. ESFS is basically that. It's just too little and the problems are different.

But looking at it from other perspective, the concept of shared currency, basically lack of border for EU citizens, gives them great labour flexibility.For years Germany has benefited from cheap labour coming from Eastern Europe.

Well, this is the big issue. They didn't have borders but labor movement for various reasons(language, culture mainly) wasn't as flexible as in the US. The major problem is that Europe wasn't ready yet for a common currency as the divergence in economies was still too much, unlike say US. Although labor mobility between say France, Netherlands, Austria, Germany, Belgium isn't that much the issue as there's a lot and those regions are more or less 1 but it turns different once you move to Spain.

At the same time, during this crisis, you could argue if it wasnt because of few countries trying to hold on to EU and hold troubling govts accountable, some of the absolutely incompetent corrupt govts like Greece and Italy would never change internally..

Spain's government wasn't corrupt and they even ran surpluses, more than Germany even, yet they are more fucked than anybody else. It's not so much about corrupt governments. despite it's corrupt government, if Italy had it's own currency, it could just devalue and get over with it. In the end, it comes down to false romanticism of a couple European bureaucrats over reality.

And let me put it this way: When the Euro was introduced, there was no actual debate about the benefits and dangers of the Euro. Now we know better, but back then the persisting issues that come to hunt Europe now, among them the Maastricht criteria being an even more rigid Gold Standard, the lack of economic integration in Europe, weren't really discussed. You had right wing nutters being against the Euro and reasonable parties pro, but the nutters never could tell why they were against it.

Anyway, the only way to solve Europe right now might just be to break the Euro up or finally bring in Eurobonds, though the latter might come a year too late. The problem right now is that the ECB and Europe are about 1 year behind the curve and Italy is where Argentina was in 2000-2001.

 

[Mahdi]

When the financial crisis hit the US, as some here were singing the virtues of Europe and its economy over the US, I stated that Europe will end up paying through the nose for Euro. I did not know that it would be so soon. It will be much, much worse for Europe than it is today, before it is over. What a blatantly stupid idea Euro has been. Continental Europe as a whole, has never understood economy in their entire history. They have only reluctantly emulated what UK and then the US has done because they have had no choice or else they would fall dramatically behind. Euro was their brilliant idea. It shows total lack of understanding of reality, realities of economy. Of course pockets of intellectuals within continental Europe have gotten it but they have never been able to get even minimal traction.

As industrious, intelligent, and disciplined the German people are, if left alone, they would bring economic ruin upon themselves time and again, because they simply do not understand economy. If the US had not been holding up Europe they would be in much, much worse condition.

Germans simply do not understand what the current problem is in Europe to be able to help fix it. They are making the situation worse, and will end up shooting themselves in the foot. Their only hope is to follow what the US has already prescribed for them.

Euro is nothing but a fixed exchange rate regime. Fix exchange rate, means dramatically less freedom, hence, it will always without exception be harmful. Europeans are still holding on to the dream of Euro as an alternative currency to the dollar-how delusional! Don't believe me, just watch.

and how wrong we were....

What's going on in Europe is actually quite scary...on many levels. from a democratic point of view where one country dictates a change of government to the economic future were the 3rd and 4th largest economies are on the bring of default or at least in the case of Spain about 10-15 years of recession.

 

[Fole_Penalt]

and how wrong we were....

What's going on in Europe is actually quite scary...on many levels. from a democratic point of view where one country dictates a change of government to the economic future were the 3rd and 4th largest economies are on the bring of default or at least in the case of Spain about 10-15 years of recession.

I think it is even scarier. This goes well beyond Europe. Because of fractional reserve system, whereby banks generate or destroy money, this is already resulting in massive money supply contraction across the world and it can get much worse. And Germans are once again the center and driver of it.

 

[Niloufar]

well, it kind of had. ESFS is basically that. It's just too little and the problems are different.



Well, this is the big issue. They didn't have borders but labor movement for various reasons(language, culture mainly) wasn't as flexible as in the US. The major problem is that Europe wasn't ready yet for a common currency as the divergence in economies was still too much, unlike say US. Although labor mobility between say France, Netherlands, Austria, Germany, Belgium isn't that much the issue as there's a lot and those regions are more or less 1 but it turns different once you move to Spain.



Spain's government wasn't corrupt and they even ran surpluses, more than Germany even, yet they are more fucked than anybody else. It's not so much about corrupt governments. despite it's corrupt government, if Italy had it's own currency, it could just devalue and get over with it. In the end, it comes down to false romanticism of a couple European bureaucrats over reality.

And let me put it this way: When the Euro was introduced, there was no actual debate about the benefits and dangers of the Euro. Now we know better, but back then the persisting issues that come to hunt Europe now, among them the Maastricht criteria being an even more rigid Gold Standard, the lack of economic integration in Europe, weren't really discussed. You had right wing nutters being against the Euro and reasonable parties pro, but the nutters never could tell why they were against it.

Anyway, the only way to solve Europe right now might just be to break the Euro up or finally bring in Eurobonds, though the latter might come a year too late. The problem right now is that the ECB and Europe are about 1 year behind the curve and Italy is where Argentina was in 2000-2001.

I think it is even scarier. This goes well beyond Europe. Because of fractional reserve system, whereby banks generate or destroy money, this is already resulting in massive money supply contraction across the world and it can get much worse. And Germans are once again the center and driver of it.

thanx Mahdi, so true..it was just showing Manuel Barros, European Commission chief and he said "its very difficult if not impossible to hold on to single currency".poor guy was pissed!!

He proposed Euro Bonds plan tonight..I dont understand why Germany is against issuing Euro bonds? how exactly do Germans want to fund failing European countries then?!

http://www.bbc.co.uk/news/business-15854116

EU chief Barroso unveils controversial eurobonds plan

 

[Mehran(ISP)]

well, it kind of had. ESFS is basically that. It's just too little and the problems are different.



Well, this is the big issue. They didn't have borders but labor movement for various reasons(language, culture mainly) wasn't as flexible as in the US. The major problem is that Europe wasn't ready yet for a common currency as the divergence in economies was still too much, unlike say US. Although labor mobility between say France, Netherlands, Austria, Germany, Belgium isn't that much the issue as there's a lot and those regions are more or less 1 but it turns different once you move to Spain.



Spain's government wasn't corrupt and they even ran surpluses, more than Germany even, yet they are more fucked than anybody else. It's not so much about corrupt governments. despite it's corrupt government, if Italy had it's own currency, it could just devalue and get over with it. In the end, it comes down to false romanticism of a couple European bureaucrats over reality.

And let me put it this way: When the Euro was introduced, there was no actual debate about the benefits and dangers of the Euro. Now we know better, but back then the persisting issues that come to hunt Europe now, among them the Maastricht criteria being an even more rigid Gold Standard, the lack of economic integration in Europe, weren't really discussed. You had right wing nutters being against the Euro and reasonable parties pro, but the nutters never could tell why they were against it.

Anyway, the only way to solve Europe right now might just be to break the Euro up or finally bring in Eurobonds, though the latter might come a year too late. The problem right now is that the ECB and Europe are about 1 year behind the curve and Italy is where Argentina was in 2000-2001.

To me it basically comes to living beyond your means just to say you kept up with the other EU countries. Greeks shouldn't be able to live like Germans just because they get a credit line as a member of EU. These countries keep borrowin money to a level that some it's 100% of the GDP, did they really think they could run this ponzi scheme for ever? There is eventually gone be a point where you have to borrow money just to pay your old debt and interest and people are realizing this. It's about time they learn this the hard way. I'm usually an anti-capitalis as the next guy but these countries will have to learn it the hard way through these austerity measures so people can get used to a life style which is more suitable for them and not on a credit line.

 

[R.BAGGIO]

FP jaan

what do you think will happen to the US dollar in the next few years given that the euro will most likely lose value. My point is with "quantitative easing" being the policy of choice at the moment, the US dollar I presume will lose value also. This whole mess being a currency problem and also given the G20 meeting in 2009 where the agreement was to devalue the currencies of countries with debt I think a big drop in US dollar is coming but also I don't understand how China would feel about this having huge assets in US dollars.

My question is what do you see happening to the US dollar and the Euro opposite other currencies with Asia holding most of the world's foreign reserves and relatively little debt and Europe and USA being in so much debt ?

 

[Mahdi]

I think it is even scarier. This goes well beyond Europe. Because of fractional reserve system, whereby banks generate or destroy money, this is already resulting in massive money supply contraction across the world and it can get much worse. And Germans are once again the center and driver of it.

Yes, and the fact that their bond sales this week where rather underwhelming should maybe tell them that their approach to the Euro crisis is rather useless, but I hardly doubt that they will change. They are probably happy that they have their first class ticket on the Titanic. But as you say, the crisis is not limited to Europe or western developed world. It's all so interconnected that Brazil, Australia, Tiger countries etc. feel the contraction too and everyone will be hit.

To me it basically comes to living beyond your means just to say you kept up with the other EU countries. Greeks shouldn't be able to live like Germans just because they get a credit line as a member of EU. These countries keep borrowin money to a level that some it's 100% of the GDP, did they really think they could run this ponzi scheme for ever? There is eventually gone be a point where you have to borrow money just to pay your old debt and interest and people are realizing this. It's about time they learn this the hard way. I'm usually an anti-capitalis as the next guy but these countries will have to learn it the hard way through these austerity measures so people can get used to a life style which is more suitable for them and not on a credit line.

Well, it depends. Yes, they were living beyond their means, even Spain but it was financed by very cheap money. You need to see it this way....Spain as an example went from an interest rate of 12% on Pesos to 3% on the Euro. The level of consumerism in Spain is just as bad as in the US. Now you have all these half empty/half built buildings no one lives in, a massive drop in value and due to the expensive Euro no competitive economy. But as said, as an example, Spain's government had a more balanced budget than Germany.
So I don't know how austerity might help Spain because austerity hasn't been much of an issue for Spain. Spain would need to devalue internally, bring it's own wages down, which is not really easy, since ECB won't devalue Euro. What might help for Spain in some parts of the country is a labor market reform as it's still a very bureaucratic country that isn't really investor friendly. So that could lead to something. But that would only help in areas that are already doing not so bad. People in Andalucia have education levels below the worst you will find anywhere in the US.

 

[Fole_Penalt]

FP jaan

what do you think will happen to the US dollar in the next few years given that the euro will most likely lose value. My point is with "quantitative easing" being the policy of choice at the moment, the US dollar I presume will lose value also. This whole mess being a currency problem and also given the G20 meeting in 2009 where the agreement was to devalue the currencies of countries with debt I think a big drop in US dollar is coming but also I don't understand how China would feel about this having huge assets in US dollars.

My question is what do you see happening to the US dollar and the Euro opposite other currencies with Asia holding most of the world's foreign reserves and relatively little debt and Europe and USA being in so much debt ?

In my opinion, the dollar will remain the world's reserve currency for the foreseeable future. I do not see the Asian currencies replacing the dollar, neither can precious metals play the role the dollar plays. A reserve currency has to be liquid, safe, and widely available. If you look at the US treasuries, the reason people just gobble it up, is that when you want to park large sums of money, there simply is absolutely no alternative. Nothing on the horizon can rival the dollar. This will allow the US to print money as it has, without causing serious problems at home. As far as the value of dollar, it will continue to slowly loose value for now. This may reverse in the future. I really cannot see how the Euro can survive in its current form. One way or another it will fail or has to be reformed.
In the longer run, countries will perform according the their structural strength. Money itself is a huge part of structural strength or weakness of a nation, but there are other factors. US' position has weakened in relative terms, partly because it has structural issues that it has not address and partly because others have copied the US system, closed the gap, and in some instances exceeded the US in certain aspects. For example, healthcare cost is costing the US dearly.

 

[Behrooz_C]

You tell'em Nige

[video=youtube;xuA8XZwcsk4]http://www.youtube.com/watch?v=xuA8XZwcsk4&feature=player_embedded[/video]

This one is excellent

[video=youtube;gJEh6B47TrE]http://www.youtube.com/watch?v=gJEh6B47TrE&feature=player_embedded[/video]

True:

[video=youtube;61XmlUcAze0]http://www.youtube.com/watch?v=61XmlUcAze0&feature=player_embedded[/video]

The best:

[video=youtube;7tQ1ylp_qYc]http://www.youtube.com/watch?v=7tQ1ylp_qYc&feature=player_embedded[/video]

 

[Mahdi]

he is the man! he might be a bigot chauvinist Brit otherwise but for this he is spot on. UK, Sweden and Denmark did the best thing ever not joining Euro.

 

[Behrooz_C]

^^^ I'll vote UKIP next time. Just because I am sick of both Labour and the Tories.

 

[Fole_Penalt]

and how wrong we were....

What's going on in Europe is actually quite scary...on many levels. from a democratic point of view where one country dictates a change of government to the economic future were the 3rd and 4th largest economies are on the bring of default or at least in the case of Spain about 10-15 years of recession.

One country, Germany, is dictating to every other nation in the Euro zone. Hitler would be proud. The irony is that Germany is wrong. Yes, it is good that budgets be brought inline, however, Germany does not understand that they are dictating deflation. By the time that deflation can be measured, Europe will be in a deep recession and could very well head to a depression.

 

[Behrooz_C]

The Euro as a currency maybe saved or the immediate future, but long term it's dead. I am also very happy that Cameron didn't sign the treaty last week. I want to see less UK involvement in Europe.

 

[Fole_Penalt]

The Euro as a currency maybe saved or the immediate future, but long term it's dead. I am also very happy that Cameron didn't sign the treaty last week. I want to see less UK involvement in Europe.

I agree and I agree. Germans, in particular truly do not understand money. I trust them to do good engineering but I would never trust Germans with my money. It just goes right over their heads.