Tag: euro

Austerity and Growth Don’t Mix

Cross posted from The Stars Hollow Gazette

Former Greek Prime Minister of Greece George Papandreou inherited a failing economy when he was sworn in on October 9, 2009. He resigned two years later during failed talks of a bailout with the “troika” of the International Monetary Fund (IMF), the European Central Bank and the European Union. Mr. Papamdreou discussed the cost of austerity with Chris Hayes, the host of “All In,” economics journalist Chrystia Freeland, managing director and editor of Consumer News at Thomson Reuters, and  economics professor Radhika Balakrishnan,  executive director of the Center for Women’s Global Leadership at Rutgers University.

In the news today, Greek Finance Minister Yannis Stournara announced that Greece had reached an agreement on economic measures for the release of €2.8bn in the coming weeks, followed by a further €6bn in May. The cost to bail out the banks: go site some 15,000 employees would be fired by 2015 with 4,000 redundancies by the end of the year.

Meanwhile Greek unemployment has reached a record high:

Greece’s unemployment rate reached a new record of 27.2 percent in January, new data has showed, reflecting the depth of the country’s recession after years of austerity imposed under its international bailout. [..]

The jobless rate has almost tripled since the country’s debt crisis emerged in 2009, and was more than twice the eurozone’s average unemployment reading of 12 percent. [..]

Unemployment among youth aged between 15 and 24 stood at 59.3 percent in January, up from 51 percent in the same month in 2012.

Despite the “happy talk” from Prime Minister Antonis Samaras about this deal showing that the six years of austerity was paying off, the people of Greece are not very optimistic and are still suffering under the weight of EU demands for more austerity.

The Euro Crisis by the numbers

  Slowly, painfully, the world is coming to grips with the realization that the Euro, as we know it, is entering its last days, and what consequences we are likely to see.

 As the Italian government struggled to borrow and Spain considered seeking an international bail-out, British ministers privately warned that the break-up of the euro, once almost unthinkable, is now increasingly plausible.

  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.

  Many people, especially those that trade stocks, have been having trouble believing that the Euro will die. After all, just a few years ago the Euro was considered the alternative reserve currency of the world. So much work and money has been spent on this unproven endeavor, not to mention the complete lack of a “Plan B”, that few could picture its demise.

  Yet, just like the inability of so many to foresee the end of the housing bubble, reality is intruding again. The farther we get down the road of failure, the more clear the picture becomes.

The last gasp of the Euro

  The financial crisis of the past week, that claimed the leaders of two European governments, came within a whisker of recreating the 2008 Finance Crisis, but was averted by timely action from European financial leaders.

  At least that is how it is being reported in the media.

 Prime ministers fell, markets shook and there were rumours that the eurozone would split up. But it survived – for now

 The stock market rallied on news of new austerity measures, a former central banker becoming leader of Greece’s new government, and agreements on a new bailout plan.

 The thing is, this was never a stock market problem. This is a enter credit market problem, and the credit markets don’t believe any of it. Most importantly, they don’t believe in the bailout.

 Sources said the EFSF had spent more than € 100m buying up its own bonds to help it achieve its funding target after the banks leading the deal were only able to find about €2.7bn of outside demand for the debt.

   The revelation will be seen as a major failure and a worrying sign of future buyers strike after EFSF officials and their bankers had spent recent weeks travelling the world attempting to persuade key investors, including China’s national wealth fund and Japanese government funds, to buy its bonds.

 To put this as plainly as possible: a central bank being forced to buy up the debt that it just issued, in order to hide the fact of the failure to find buyers for its debt, is the perfect example of a Ponzi scheme reaching its end game.

Iceland, Greece, & The Future

Iceland survived by taking over the domestic units of its banks and leaving the foreign creditors to bear losses. An 80 percent slump in the krona against the euro offshore in 2008 sent the trade deficit into surplus within months, while government spending cuts helped rein in the budget. Iceland will post a shortfall of 1.4 percent of gross domestic product next year after 2011’s 2.7 percent deficit, the Organization for Economic Cooperation and Development said on May 25.

Instead of bailing out its banks using taxpayer funds like the United States did, Iceland let its bank default.

Some economists, such as Joseph Stiglitz and Paul Krugman, now think that letting the banks default was the right thing to do for Iceland’s economy, and some see it as a model for other debt-stricken European nations.

http://www.businessinsider.com…

Here’s the 5 year view of it’s currency vs the USD:

http://www.xe.com/currencychar…

Pretty good, huh? It’s more or less doubled.

Of course, that’s the key difference, the 500,000 Icelanders have their own currency, the 11, 283,000 million Greeks no longer do. (nor do the 60 million Italians, 46 million in Spain, etc etc) So, with Germany and France controlling the currency, they can’t follow that route.

And, there’s no painless way for these countries to go back to their own currencies–really there may be no way at all to go back, painful or otherwise; they’re probably stuck in the zone, if they were ever to go back to their own currencies, it would only be after the Germans have carried off everything that wasn’t tied down, and most stuff that was too. How would the Parthenon look on the Rhine?

When all is said and done, what we’re watching play out is a bloodless war- perhaps planned a decade or decades ago.

Where the economic powers of France and Germany, etc. (and likely also the UK and maybe US to some extent)  will take the actual assets of the south, leaving those countries poor, with no assets, and in perpetual debt. I suspect that then we’ll see a two tier euro zone-where the borders are no longer so open, but ‘guest worker’ programs will return as the broke and out of work of the south, compete for subsistence wage jobs in the northern zone, or maybe no wages at home. More or less, then, a return to the 1980s.  

Calm like a Bomb

  It’s taken a very long time, but the easily predictable implosion to Europe’s sovereign debt crisis is finally approaching.

  The same day that thousands of protestors against austerity measures returned to the streets in Athens, the Greek bailout talks also collapsed.

 “I expect a hard default definitely before March, maybe this year, and it could come with this program review,” said a senior IMF economist who is keeping close tabs on the situation. “The chances for a second program are slim.”

 Europe’s financial leaders want Greece to cut its budget further in order to make up for the gap that has been caused by the deepening recession. Of course the cuts are making the fiscal gap worse by slowing the economy further.

  Meanwhile, yields on 1-year Greek bonds have hit 70%, a level so far above affordable that a Greek default is already priced into.

No more tomorrows for the Euro

    Unlike the deficit ceiling standoff in Washington, Europe is experiencing a follow site real financial crisis, and today it began to get out of control.

 The European money markets have begun to seize up as pressure mounts on the Italian and Spanish banking systems, tracking the pattern seen during the build-up towards the financial crisis in 2008.

   “Europe’s money markets are undoubtedly starting to freeze up,” said Marc Ostwald from Monument Securites.

   “It’s not as dramatic as pre-Lehman but it is alarming and shows the pervasive degree of fear in the markets. People are again refusing to lend except on a secured basis.”

 Italian banks have been hit especially hard, with almost daily suspensions of their stock trading due to selling pressure. But today things went to a different level.

 Italian bank’s main stock market collapses, causing the suspension

 They called it a “technical problem” that just happened to coincide with a collapse in Italian bank stocks.

Europe’s Black Swans

  The financial news from Europe is getting increasingly distressing.

A new EU report warns that economic conditions in Portugal and Spain could “result in a high ‘snowball’ effect on the government debt.”

  French financial group AXA says “there is a fatal flaw in the system and no clear way out.” They are predicting the Eurozone to break in half or completely disintegrate in the next 18 months.

  Over 13% of Europe’s investors are betting on a Black Monday-style collapse in stock prices (think 1987).

Gold hits new record

  The price of gold surpassed its 2009 peak today, hitting an all-time record high of $1,232.50 an ounce. The reason for this is quite simple – Europe is printing nearly $1 Trillion dollar to stem their financial crisis and the markets think all that money will be wasted.

  This is leading people to blasphemous conclusions.

 “People are in panic mode,” said Matt Zeman, a metals trader at LaSalle Futures Group in Chicago. “There is absolute panic over the risk of contagion spreading to other countries in Europe. Yields on Treasuries are so low, people are starting to look to gold as an alternative.”

  “This is the beginning of the unraveling of fiat currencies,” said Michael Pento, the chief economist at Delta Global Advisors Inc. in Huntington Beach, California. “Money has to be backed by something. People are beginning to realize that gold is the world’s reserve currency.”

  “When the sovereign-debt crisis laps onto our shores, there will be a global realization that gold, not the dollar, is the world’s reserve currency,” Pento of Global Advisors said.

A Trojan Horse in Berlin

PIIGS is an unfortunate acronym for the relatively poor countries in the EU (Portugal, Ireland, Italy, Greece, and Spain), but the real pigs in Europe are now and forever the Germans.

The top German pigs have been imposing a reasonable facsimile of the neo-con agenda on their unwary population for about http://cinziamazzamakeup.com/?x=comprare-vardenafil-online-consegna-rapida a decade of stagnant wages and increasing job-insecurity…

Especially over the past decade, German manufacturers — already juggernauts of industry — became some of the most globally competitive companies. Just as American firms did, they turned to outsourcing and overseas production hubs. http://maientertainmentlaw.com/?search=read-and-buy-from-online-drugstore-genuine-merck-finasteride They kept salaries down at home, with average wages stagnating in Germany for a decade. Germany still has no uniform minimum wage, and aggressive cost-cutting has resulted in more and more Germans laboring in temporary or contract enter jobs with lower pay and less job security.

German consumers responded by saving their pfennigs, and German domestic consumption crashed while exports ballooned to a trade surplus of drug interaction with lasix users $184.9 billion, second only to Saudi Arabia.

So the benefits of neo-Reaganism in Germany accrued almost entirely to bankers and other billionaires, while the rank-and-file repaired their old cars and appliances, and patched up their pitiful overcoats.

levitra originale effetto Harharharhar!!!

Even in prosperous countries, almost everybody gets screwed!

Meanwhile the PIIGS used their brand new credit in the Eurozone to borrow piles of money, expand government services, and increase public-sector salaries.

But according to the dogma of http://maientertainmentlaw.com/?search=lasix-mg-of-metolazone-day globalization, neo-Reaganism’s Democratic twin, all that debt would eventually be repaid by the rising tide of global prosperity, which lifts all boats, turns slumdogs into millionaires, and…

here Harharharhar!!!

It never happened! Globalization was bullshit and top-down predation, and while Germany exported BMW’s, Greece exported olives, and went broke.

Now Greek government bonds are about to turn into junk-bonds, and that would set off a godawful chain-reaction, because the forward-thinking Eurozone is about to disallow junk-bonds (rated less than A2) as loan collateral, and German banks are holding a heck of a lot of Greek sovereign debt.

That’s the Trojan Horse in Berlin.

If the Greeks default (and junk-bond status for their bonds would push interest rates so high that default would be more or less inevitable), then German banks (and others) are faced with ugly write-downs, and aren’t you glad to know that this alarming possibility has produced a booming market in credit default swaps!

Bets by some of the same banks that helped Greece shroud its mounting debts may actually now be pushing the nation closer to the brink of financial ruin, Nelson D. Schwartz and Eric Dash report in The New York Times.

Echoing the kind of trades that nearly toppled the American International Group, the increasingly popular insurance against the risk of a Greek default is making it harder for Athens to raise the money it needs to pay its bills, according to traders and money managers.

These contracts, known as credit-default swaps, effectively let banks and hedge funds wager on the financial equivalent of a four-alarm fire: a default by a company or, in the case of Greece, an entire country. If Greece reneges on its debts, traders who own these swaps stand to profit.

“It’s like buying fire insurance on your neighbor’s house — you create an incentive to burn down the house,” said Philip Gisdakis, head of credit strategy at UniCredit in Munich.

Now the Germans want the Greeks (and the rest of the PIIGS) to slash public salaries and services, raise taxes, and turn themselves into globally respectable poverty-zones, and Ireland’s neo-con government has already complied.

“I can’t even keep up with my own debts, never mind the nation’s,” Cullen said, shopping for cut-rate sausage at a discount supermarket he disdained to visit in better times. “I’ve got to spend 30 hours a week taxiing just to break even. Something else has got to give. I can’t give any more.”

Despite the pain its cutbacks are imposing on ordinary people, the conservative Irish government of Prime Minister Brian Cowen has won praise from the European Union and the bond markets for its efforts to cut debt, prices and salaries.

But Greece is resisting, mainly on the basis of a (slightly veiled) threat to default on all those bonds German banks have already swallowed, and it would probably be a very good thing for all of us if all the PIIGS refused to implement the draconian austerity program which the Germans (and their tools at the ECB) want to impose, and a very bad thing if Europe stymies its feeble recovery with a lethal combination of higher taxes and diminished spending.

Tax and don’t spend! What’s not to like? It worked for Hoover!

“This premature fiscal tightening is the route to the Second Great Depression” – or at the very least, a long period of economic stagnation, warned Simon Johnson, a professor at MIT’s Sloan School of Management and a former chief economist at the International Monetary Fund.

Behold, what courtly statecraft!

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Greece: “Oh, yeah?  What happened to our WWII reparations, Nazi gold thieves?”

Germany: “Fuck you, Greek deceivers, swindlers, beguilers, double-dealers, fraudsters, scammers, dupers, impostors, peculators, embezzlers, cheats.”

Thus, by first gently and graciously grooming one another’s perceived character flaws, without excessively slavish preening, the negotiations can grind directly into the brass tacks.

It’s called finesse.