We could be into the last 10 days of the Euro according to the Financial Times...

HellFireClub · 28-11-2011 11:16AM #1

Don't take my word for it, according to this article in the FT, the Euro as a currency has ten days to save itself or else face a violent break up of the currency and then whatever happens will happen...

http://businessetc.thejournal.ie/eurozone-has-ten-days-to-save-itself-or-collapse-analyst-290775-Nov2011/

MungBean · 28-11-2011 11:29AM

The EU’s sovereign bond market has “ceased to function” after the failure of a German auction last week – and the area now faces a ‘run’ whereby global investors withdraw their assets.The EU’s sovereign bond market has “ceased to function” after the failure of a German auction last week – and the area now faces a ‘run’ whereby global investors withdraw their assets.

I thought the reason the auction failed was because the projected inflation was 2% and the bonds were offered at 1.98%. Or something to that effect.

Surely there is little chance of a run because of that. Its not like other countries where the bonds have sky rocketed would it really make that much of a difference ?

beeftotheheels · 28-11-2011 11:35AM

MungBean wrote: »

I thought the reason the auction failed was because the projected inflation was 2% and the bonds were offered at 1.98%. Or something to that effect.

Surely there is little chance of a run because of that. Its not like other countries where the bonds have sky rocketed would it really make that much of a difference ?

If you look at German fundamentals they're not all that great. Their debt to GDP is higher than Frances. And they stand to lose the most from a euro break up in that the export led engine of their economy will struggle with a higher d'mark.

So yes, the German Government rationalization is the below inflation yields. But all explanations of movements in the financial markets are just that, rationalizations. The alternative rationalization being that the markets are pricing in a eurozone break-up.

shannon_tek · 28-11-2011 11:39AM

So basically were going to be back to 1990's if the euro breaks what will Ireland use. Will we develop a new currency.

I don't like this for the simple face its easier just to have euros in ur pocket when in Europe

irishh_bob · 28-11-2011 11:54AM

we,ve been hearing theese exact predictions for nearly a year now , i dont think we will be out of the woods in a year but i dont believe the euro will be gone either

beeftotheheels · 28-11-2011 11:58AM

irishh_bob wrote: »

we,ve been hearing theese exact predictions for nearly a year now , i dont think we will be out of the woods in a year but i dont believe the euro will be gone either

Nothing is ever certain until it happens, so the euro may yet survive. However, in relation to euro demise predictions one year ago you were hearing them from the fringes because there was very little evidence that we would end up where we are now.

The difference now is that you're not seeing the predictions in fringe newspapers, they're in the FT, and Bloomberg, and Reuters. Right now the serious academics who dismissed them a year ago are struggling to see how the demise of the eurozone can be avoided.

Italy is both too big to fail and too big to save, and unless they figure out a way to save Italy... The stakes went way up in the last month.

MungBean · 28-11-2011 12:03PM

I cant see the Eurozone collapsing, I think we are headed towards a new fiscal union and Eurobonds as Wolfgang reckons.

HellFireClub · 28-11-2011 12:05PM

beeftotheheels wrote: »

Nothing is ever certain until it happens, so the euro may yet survive. However, in relation to euro demise predictions one year ago you were hearing them from the fringes because there was very little evidence that we would end up where we are now.

The difference now is that you're not seeing the predictions in fringe newspapers, they're in the FT, and Bloomberg, and Reuters. Right now the serious academics who dismissed them a year ago are struggling to see how the demise of the eurozone can be avoided.

Italy is both too big to fail and too big to save, and unless they figure out a way to save Italy... The stakes went way up in the last month.

A year ago, this thread would likely have been locked and I'd probably have been handed a ban for stirring sh*t on the forum. Yet fast forward a year and there it is today in the FT, in the SBP yesterday, that the break up of the Euro is a probability at this stage, let alone a possibility.

And the same people who brought us to this place, reckon we should trust them to make the decisions for the future, the same people who are driving all this austerity that is literally killing people at this stage. You'd have to wonder...

beeftotheheels · 28-11-2011 12:14PM

HellFireClub wrote: »

A year ago, this thread would likely have been locked and I'd probably have been handed a ban for stirring sh*t on the forum. Yet fast forward a year and there it is today in the FT, in the SBP yesterday, that the break up of the Euro is a probability at this stage, let alone a possibility.

And the same people who brought us to this place, reckon we should trust them to make the decisions for the future, the same people who are driving all this austerity that is literally killing people at this stage. You'd have to wonder...

Hell, if you'd started this thread a year ago I'd probably have reported the post

And before the fringe who were shouting about it a year ago start claiming prescience, or before any one who dismissed them a year ago thinks they are now credible they should watch this clip from the west wing (which I cannot embed so if any mod feels like amending my post to do it properly...).

https://www.youtube.com/watch?v=

http://www.youtube.com/watch?v=HL_vHDjG5Wk

HellFireClub · 28-11-2011 12:30PM

At this stage the whole thing seems to be the ego pipe dream of a load of old farts over in Brussels. It doesn't work, one size clearly doesn't fit all, so why people won't face up to it and just accept that it isn't fit for purpose, it's completely beyond me.

beeftotheheels · 28-11-2011 12:40PM

HellFireClub wrote: »

At this stage the whole thing seems to be the ego pipe dream of a load of old farts over in Brussels. It doesn't work, one size clearly doesn't fit all, so why people won't face up to it and just accept that it isn't fit for purpose, it's completely beyond me.

Because it could have worked. Had the SGP been adhered to it could have worked. The fact it will probably fail does not mean it was doomed to failure, even up until this summer. The idea was both lofty, and incredibly successful, up until the point where it wasn't.

The idea that a Europe disintegrated is better than an integrated Europe is not borne out by the history of the EU, the longest period of peace and prosperity on most of the continent in its history.

And not only peace, but improvements in human rights, in environmental regulation, in employees rights... But without economic goals and integration none of these other improvements would have followed. The economic goals gave legitimacy to the rest.

HellFireClub · 28-11-2011 12:47PM

beeftotheheels wrote: »

Because it could have worked. Had the SGP been adhered to it could have worked. The fact it will probably fail does not mean it was doomed to failure, even up until this summer. The idea was both lofty, and incredibly successful, up until the point where it wasn't.

The idea that a Europe disintegrated is better than an integrated Europe is not borne out by the history of the EU, the longest period of peace and prosperity on most of the continent in its history.

And not only peace, but improvements in human rights, in environmental regulation, in employees rights... But without economic goals and integration none of these other improvements would have followed. The economic goals gave legitimacy to the rest.

I'm all for integration, but it seems to me that the EU project is now about everyone and everything being slowly assimilated into some kind of commonality, to the point where here we have something that clearly is not working, but yet the ideal of a common currency is still ruthlessly pursued, it's not unlike the kind of intransigence that is behind wars being continued for years, etc. Just like in wars, the people directing them and controlling them are never really out in the field doing the fighting, and the same is true for the austerity that is being pressed down on everyone, those who are directing this in the name of saving the Euro, they are not affected by the decisions that they are making...

djpbarry · 28-11-2011 12:55PM

HellFireClub wrote: »

Just like in wars, the people directing them and controlling them are never really out in the field doing the fighting, and the same is true for the austerity that is being pressed down on everyone...

You're comparing the "austere" existence of the current residents of Ireland with life in a war zone? Have people completely lost all sense of perspective?

HellFireClub · 28-11-2011 01:02PM

djpbarry wrote: »

You're comparing the "austere" existence of the current residents of Ireland with life in a war zone? Have people completely lost all sense of perspective?

No, what I'm saying is that this is an example of people up at the top making stupid, irrational and ideologically driven decisions, while living in a luxury that remains completely insulated from the decisions that they make that cause hardship on ordinary people. For some people trying to get through this austerity, there may as well be a war on, they experience what you could nearly call rationing but by a different means, being unable to put food on the table or struggling to exist.

This common currency is being held together because a handful of bullies are afraid to lose face.

beeftotheheels · 28-11-2011 01:15PM

HellFireClub wrote: »

No, what I'm saying is that this is an example of people up at the top making stupid, irrational and ideologically driven decisions, while living in a luxury that remains completely insulated from the decisions that they make that cause hardship on ordinary people. For some people trying to get through this austerity, there may as well be a war on, they experience what you could nearly call rationing but by a different means, being unable to put food on the table or struggling to exist.

This common currency is being held together because a handful of bullies are afraid to lose face.

As and when the euro fails our currency will fall. People will be unable to put fuel in their cars, to heat their houses if their heating is oil. Unless we can get the Corrib gas onshore the price of electricity will go through the roof.

Food prices will initially rise as the export demand will be there. This the Government can control because we at least produce enough food to feed ourselves. People can be shipped back out to the bogs to cut turf if you want a proper war time analogy.

This, right now, is not as bad as it gets, it is going to get a whole lot worse before it gets worse. That's not something to celebrate. The euro was and is well worth saving. It's just a shame that the politicians didn't realise how easily they could destroy it in the name of "strengthening" it.

HellFireClub · 28-11-2011 01:22PM

beeftotheheels wrote: »

As and when the euro fails our currency will fall. People will be unable to put fuel in their cars, to heat their houses if their heating is oil. Unless we can get the Corrib gas onshore the price of electricity will go through the roof.

Food prices will initially rise as the export demand will be there. This the Government can control because we at least produce enough food to feed ourselves. People can be shipped back out to the bogs to cut turf if you want a proper war time analogy.

This, right now, is not as bad as it gets, it is going to get a whole lot worse before it gets worse. That's not something to celebrate. The euro was and is well worth saving. It's just a shame that the politicians didn't realise how easily they could destroy it in the name of "strengthening" it.

It seems to me that the whole financial system now is completely and utterly constipated with massive almost unimaginable debts that cannot be paid, yet the idealogical mantra is there again, "this debt must all be repaid, more austerity, we have to follow the program, good little Ireland"...

Meanwhile more people lose jobs, as people spend less, because the economy contracts, is this really what we signed up to when we said we wanted to be at the heart of the EU?!? I don't think so...

Scofflaw · 28-11-2011 01:24PM

HellFireClub wrote: »

I'm all for integration, but it seems to me that the EU project is now about everyone and everything being slowly assimilated into some kind of commonality, to the point where here we have something that clearly is not working, but yet the ideal of a common currency is still ruthlessly pursued, it's not unlike the kind of intransigence that is behind wars being continued for years, etc. Just like in wars, the people directing them and controlling them are never really out in the field doing the fighting, and the same is true for the austerity that is being pressed down on everyone, those who are directing this in the name of saving the Euro, they are not affected by the decisions that they are making...

The reason the Member States want to keep the euro is the same reason they liked it during the last decade - for the economically weaker states it provided much lower borrowing costs, because the markets treated it as implicitly backed by the economically stronger states, while for the economically stronger states the inclusion of the economically weaker states kept the strength of the currency from growing too great without them having to actually take responsibility for their debts. For both it allowed the growth of the internal market. For the markets it meant you could invest in high-return weak economies with the risk profile of low-return strong economies.

The problem is that everyone wants to keep the euro that they "had" for the last ten years - which didn't exist, because the stronger states were not actually promising to stand behind the debts of the weaker states - and what's happening currently can be boiled down to a fight between the markets and the strong economies as to whose version of the euro gets kept, the one the markets like with the strong economies really backing it, or the one the stronger economies like where they don't.

So the strong euro economies are trying to fight off the euro crisis without losing and giving the markets what they want, but if the euro implodes as a result of the fight, everybody loses.

cordially,
Scofflaw

Permabear · 28-11-2011 02:23PM

This post has been deleted.

djpbarry · 28-11-2011 03:12PM

Permabear wrote: »

This post had been deleted.

I'm still waiting for the Euro to collapse against Sterling so my Euro debts will be wiped out. I dare say I'll be waiting a while longer.

carveone · 28-11-2011 03:15PM

Nail biting stuff! The market action today shows the level of of oversold into fundamentals - ie: if you believe that Barclay's is worth $15 (which I do) then either it's a great buy at $10 (was at $9.25 two days ago) or you might as well build a bunker.

On Friday I found it a positive sign that Finland and the Netherlands were advocating greater ECB intervention. Their attitudes generally tend to be similar to the Germans so I find that significant.

Anyway. We have a set of imperfect solutions on offer:

- We head towards 7% borrowing rates for all countries as the reality of unsustainable debt loads bites. Global debt goes from $60 trillion to $120 trillion within a decade.

That assumes you can find some suckers to lend to. Ha! As the German bond auction showed it's already reaching end game on that front - everyone is tapped out. You are competing for money that someone else needs to borrow. All the bond interest rate rises in the world isn't going to help if you end up bankrupt.

Result: Crawl into bomb shelter.

Or:

- Plan B.

Realise that Plan A is just stupid and go print some damn money! The essential premise is that noone will let the World end and by printing money we hopefully kick start the economies.

Result: Buy some stocks. Crawl out of shelter.

Side effect: hyper inflation. Well, life is hard. It means debts get paid, the people get happy because they get raises and bonuses (which they better spend fast!). Velocity of money increases...

The US did this before in the 1970s. It's isn't a new concept. It isn't wonderful for those who have savings but at this point, we just can't pay down the debt....

GSF · 28-11-2011 03:30PM

The end of the euro wont mean the end of austerity. The same fundamental problems in the european economies remain. Too many unfunded entitlements in short.

bmaxi · 28-11-2011 04:27PM

I never really understood the world of high finance, as far as I could gather, this was all "virtual" money, i.e. no actual physical collateral.
What intrigues me is; who are the lenders, are they pension funds, merchant banks etc? They are hardly individuals. Do the lenders not also rely on the borrowers to borrow, if the money wasn't borrowed surely they couldn't profit from it, so is it not in their long term interest to keep the bond market functioning? If the Euro was to collapse, how would the value of Ireland's currency be decided, would it immediately go back to € 1.27 and be devalued next day? I can see those in the know making a killing if that were the case.

carveone · 28-11-2011 04:57PM

Well Japan is a major buyer of EU bonds but I'd imagine there are a lot of individual investors, pension and hedge funds who buy as well. Plus the ECB of course! 7% beats the hell out of buying US treasuries and its supposed to be risk free.

Italy is quite interesting because most of its debt is owned domestically.

I'd like to know where the 80 billion euro in Irish pension funds is invested.

murphaph · 28-11-2011 09:41PM

I don't think people appreciate the fuss that German voters will make about any printing press induced inflation.

Germans were saving while the Irish et al were spending. Merkel may not be able to convince them that it is indeed the best worst option for them and their jobs.

I think people will end up getting scared enough of the unknown that a new level of fiscal union will be accepted by them to prevent the perceived Armageddon from happening.

I also believe the Euro was a decent Idea badly managed by politicians like Bertie Ahern, who instead of harnessing the unprecedented low interest rates to build up our infrastructure, used it instead to buy elections and further his own interests in the process. The same happened in Greece and elsewhere.

If the Euro goes bang (and even if it doesn't) I expect greater fiscal union in at least a core of the more fiscally responsible nations.

gizmo555 · 28-11-2011 10:15PM

murphaph wrote: »

Germans were saving while the Irish et al were spending.

This kind of misses the points that

(a) The Irish et al were spending a significant amount on German goods, without which the Germans wouldn't have been able to do all that saving. The eurozone is by far the biggest German export market.

and

(b) The German banks where the German savers deposited their savings lent recklessly into, among others, the Irish property bubble.

murphaph · 28-11-2011 10:35PM

gizmo555 wrote: »

This kind of misses the points that

(a) The Irish et al were spending a significant amount on German goods, without which the Germans wouldn't have been able to do all that saving. The eurozone is by far the biggest German export market.

and

(b) The German banks where the German savers deposited their savings lent recklessly into, among others, the Irish property bubble.

I don't think I missed the point-I just didn't directly make it but do you think the average German voter/saver is thinking like that?

Merkel will have a very hard sell in Germany if she tries to sell the "inflation is the best option" line.

I have more debts than savings and my debts are in Ireland and my savings are in Germany so I am not overly concerned about inflation but I will understand the legitimate anger of savers in Ireland and Germany, should the printing presses be cranked up to reduce the effective debts of less responsible folks.

Don't be surprised if German voters do opt for a nuclear option: reintroduction of the D-Mark and hope for the best. I really can't call it and I don't think even Angie knows how things will pan out.

Scofflaw · 28-11-2011 10:44PM

gizmo555 wrote: »

This kind of misses the points that

(a) The Irish et al were spending a significant amount on German goods, without which the Germans wouldn't have been able to do all that saving. The eurozone is by far the biggest German export market.

And also one of ours.

gizmo555 wrote: »

and

(b) The German banks where the German savers deposited their savings lent recklessly into, among others, the Irish property bubble.

Everybody says it, but nobody proves it. Have you any proof?

cordially,
Scofflaw

jimmycrackcorm · 28-11-2011 10:48PM

murphaph wrote: »

Don't be surprised if German voters do opt for a nuclear option: reintroduction of the D-Mark and hope for the best. I really can't call it and I don't think even Angie knows how things will pan out.

Until they realize that no-one will be able to afford their BMWs and Mercs with a strong DMark and their own economy declines.

gizmo555 · 28-11-2011 11:05PM

Scofflaw wrote: »

Everybody says it, but nobody proves it. Have you any proof?

cordially,
Scofflaw

In March of last year, German banks' exposure to Ireland was $206bn, including $46bn lent to Irish banks, according to the Bank of International Settlements, reported in the WSJ. As you can see below, this was only exceeded by the UK's banks.

High%2BStakes.png

Mr.Micro · 28-11-2011 11:10PM

The Germans will ask themselves how much they got out of being in the Euro?
It appears that the smaller countries benefited the most with Germany being thrifty and wise but all for nothing as it still foots the bill. I cannot call what will happen to the Euro, I am not optimistic that it will survive. Even if we get through this patch I fear the big Euro experiment is over....at least in the format we are in now ie single tier.

Scofflaw · 28-11-2011 11:32PM

gizmo555 wrote: »

In March of last year, German banks' exposure to Ireland was $206bn, including $46bn lent to Irish banks, according to the Bank of International Settlements, reported in the WSJ. As you can see below, this was only exceeded by the UK's banks.

Uh-huh. See the bit at the bottom of the graph where it says "Bank of International Settlements"? That means the data includes the entire IFSC, which is roughly the same size as the Irish banking sector at its most bloated, and contains wall-to-wall eurozone money. In the Irish domestic banks, the ones lending into the Irish property bubble, and the ones we bailed out, on the other hand, there was next to sod-all.

Journalists pick the first set of data that makes a pretty picture - they're not about accuracy and correct use of applicable statistics.

cordially,
Scofflaw

We could be into the last 10 days of the Euro according to the Financial Times...

Comments