Euro "Creator" Robert Mundell: Greece Is Not Biggest Threat To Euro, Italy Is

Tyler Durden's picture

Nobel-winning Columbia professor Robert Mundell, considered the "father of the euro" provides some biased views on his creation, and how it is impacted by Greece (spoiler alert: this will only make the EMU stronger). To be sure, he sees no risks of Greece spillover into the broader eurozone, and in fact is calling for the adoption of the euro by Britain. Probably not worth holding your breath on that one. What he does highlights is that Greece is not the powderkeg - Italy is. This is inline with Bank of America and others' warning that the biggest concern in the eurozone crisis is indeed the Boot.

"I think it would be very difficult to bail Italy out. I think we have to make sure that whatever is being done to Greece, and possibly to Portugal and maybe Ireland has to also save Italy. Italy has got to be worried...Right now I think they should let the euro ever, for the next 10 years, rise above $1.40."

We are confidence Bernanke and Shirakawa will miss that particular memo.

Here are the policy recommendations from Mundell on Greece:

  • Europe must set discipline
  • Greece should "act like adults"
  • Long-term loan should be provided to Greece with strings attached

So in Greece all is contained, ignore the strikes and the bombings. Go back to buying stocks.

Soundbited Bloomberg Television interview below:

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truont's picture

"Right now I think they should NOT let the euro ever, for the next 10 years, rise above $1.40"

Is the father of the euro suggesting that the EU should essentially peg their currency to the dollar (by instituting a euro cap)?

Is he signalling that the euro will forever be weaker?  That competitive devaluations in currencies will continue for 10 years?

What's in your wallet?

nonclaim's picture

Even my cats can win a Nobel prize with that kind of reasoning: it will work under lab  controlled conditions, except it isn't a lab and you can only pretend to control.

Master Bates's picture

I don't have a wallet.  I burned all my dollars for heat and mortgaged my house to buy gold Maple leaf coins. 

Now I have a coin purse that I borrowed from my wife that I keep buried in the backyard next to my bomb shelter and canned hamz.

Anonymous's picture

The financial crisis has not ended, it has only been part a continuum exponentially worsening the fundamentals of the US economy since the 90s.

jmc8888's picture

1960's actually *manipulated out of gold standard which begat floating exchange rates, not to mention the fact this is when our physical investment slipped to negative...roads/bridges/rails/space/etc

*some would also say 1945/46 (return to imperialism and colonies instead of busting it up) and 1913 (Federal Reserve)*

Which of course set the stage for the derivatives games since 87, which of course fueled the above started in the 90's as most see it.

MarketTruth's picture

i remember buying €1 (Euro) at 80 cents to $1 (USD), so why not let Europe just totally commit suicide of the Euro and go for it with 80 cent Euro to the dollar.

4shzl's picture

"I think they should not let the euro ever, for the next 10 years, rise above $1.40."  FIFY

Why can't they have these guys wear their Nobel medals around their necks the way winners at the Olympics do?  Maybe it would add to their credibility; their comments certainly don't (see Stiglitz).


DonnieD's picture

Gore, Obama, Stiglitz, Mundell. The Nobel is becoming a dubious distinction.

Anonymous's picture

Krugman's was right-on though.

masterinchancery's picture

And by the way, who is they?  I thought Soros pretty well demolished the theory that a central bank can buck market forces in a currency.

Trader_Kos's picture

But there will be a spillover. 


Easy way to remove "DEBT" is to remove the FED's and other Central Banks' DEBT SYSTEMS and place the functions under government control.
The fed is destroying america!

Issue a "CREDIT" currency spent into the system and backed by the FULL FAITH of the US Government to payoff the DEBTS with NO INTEREST CREDIT CURRENCY!
Lincoln did it in 1860's and it worked to avoid the massive financing of the Civil War!
We could stop the DEBT SPIRAL that benefits only the FINANCIAL ARISTOCRACY with one law:
1. Remove the FED and put functions under Government Accounting Office
2. Issue a Credit Currency and pay off the Banks with 0% money!

That easy! But Bankers K1LL for that!”

TomB's picture

One interesting thing about Italy is that this country has the fourth largest (official) gold reserve, after the US, Germany and the IMF.

Master Bates's picture

Well then they'll be alright, won't they?

Woohoo!!  Think of how bullish selling all of their gold reserves will be for gold!!!!  Why, dumping the 4th largest reserves in the world can only make the price increase SIXFOLD!!!  Yeah boyee!!!

Anonymous's picture

Better than losing six hold by holding their reserves in cash

Anonymous's picture

Actually it was Hitler who was the father of the Euro, but that doesn't really impress in any headlines he :)

A Man without Qualities's picture

Idiotic comment.  


You could say that the Romans were the fathers of the Euro though...

Anonymous's picture

Any of the PIGS could go at any time, even the biggest pig of all, the criminal organization known as the Federal Reserve.

Steak's picture

One of the biggest problems with a bailout of Italy is the pervasive corruption.  If Italy recieves $1 billion then the Mafia will get $500 million and Berlusconi will get $250 million.  It isn't entirely fair to paint the country with a broad brush, but really...toxic Naples, flooded Florence, rapacious Rome.  And the country will need that hotline to god they got if their industrial sector is as sloppy as Eni.

So yes, I agree that a bailout of Italy could bring down the Euro, but primarily because EU citizens would be aghast to see how that country uses their money.

Bam_Man's picture

Italy has its problems, yes.

But you simply cannot beat a good Brunello or Barolo. And their pizza ain't bad either.

CONners's picture

...Right now I think they should let the euro
for the next 10 years, rise above $1.40."

Let the mafia and the church bail out Italy.

Anonymous's picture

A low Euro is a killer for the USD but will boost the EU export. And whats good for the EU is bad for the US.



Master Bates's picture

A low Euro is great for the dollar.

Anonymous's picture

A collapsed euro is even better as then reich would finally be able to rise dramatically versus the dollar

Anonymous's picture

Cheaper wine, cheaper cheese. It's not all bad.

Master Bates's picture

In six days, all the fiat currencies will die!  The sky will fall, and only those with Nostradamus' third quattrain and 75 ounces or more of physical bullion, along with brass, lead, and canned hamz will survive!  The rest of you will be lucky to be in the street throwing your poo at each other!

The United States will be Zimbabwe by April!!!  Gold to 16000, Dow to 16000, dollar to TOILET PAPER!!!  Woohoo!!!!  Canned Hamz bitchez!!!!!

Anonymous's picture

How have the establishment's "prophecies" been working out for your us treasuries by the way?

bugs_'s picture

Ah so its been Italy all along eh?  Way to go Italy!

Anonymous's picture

The dollar keeps falling in real terms, so if the Euro falls with it, how are they going to get resources (oil etc) that they don't have?
(when your currency weakens, then the imported resources increase in price).

And how are they going to establish the Euro as a "reserve currency" if it's connected to the dollar at an almost "fixed" rate?

A Man without Qualities's picture

The black swan event with Italy is that the regions may break apart (as the Northern League has proposed), so there will be no Republic of Italy to pay back on their debts.

three chord sloth's picture

Why should Greece act like adults? As long as they get to use the Euro, a real currency (well, as real as any fiat currency can be) they will continue to run their country like a banana republic. They get to keep on living far above their means and kicking the can down the road through deficit spending. Too many people gain from the current system for it to change.


If you want them to "act like adults', kick 'em out of the EU and make 'em use the drachma again. When its worth pennies, and no one outside of Greece will touch it, then they will change.

Segestan's picture

Mr Mundell , typical words of a Globalist...naive. The world has moved from empire to nation state in an attempt to enter the era of Independence and he says No what we need are super currencies. We've had that Super currency for 6,000 years... Gold.

Gimp's picture

Let the Euro drop. Last time I was in Rome the exchange rate sucked for Americans. Still had a great time, love Italy.

Anonymous's picture

The ECB and European nations can buy gold on the open market and drive it's price up until all debts are serviceable. Italy will be just fine and the Euro which marks their gold to market as a reserve will also survive.

The paper gold market and the $ will burn but our debts will also be destroyed. Gold's revaluation will be how the West gets itself out of the mess it created. A reserve currency will be a thing of the past but the global economy will be better balanced without one.

Anonymous's picture

The nail on the head !
ECB can now use their final tool as the FED has not.

Interesting times indeed.

no cnbc cretin's picture

Hmm, so everything is just great in Europe (apart from Italy),

like it is here. Yeah right, more PR bullsh*t. You can't have debt

levels, like the ones we have today, and not expect something

to break.


Leo Kolivakis's picture

All roads lead to Rome? Thanks, interesting analysis.

Anonymous's picture

may be the 4th world gold reserves arise the hunger of someone especially if this news is true

italy has one of the highest rate per capita of personal savings
According to Cnbc about the world biggest nations
Italy hold the 17 position of external debt 154.6%
1 Ireland 1352%
2 Great Britain 427.6%
3The Netherlands 395.6%

Give a glance to a very macroeconomics treasure book
This Time is Different: Eight Centuries of Financial Folly " by Carmen Reinhart e Kenneth Rogoff

BlackBeard's picture

mmmmm... good wank material...

carbonmutant's picture

Academics have a long history of trying to provide linear solutions to non linear problems.

Anonymous's picture

If they could think non-linearly, they'd have done something more worthwhile with their lives than to become academics.

Anonymous's picture

The Foot, not the Boot. If Sicily was the centre of the eurozone crisis...!

Anonymous's picture

I have a question: Where do all those econo experts and Nobel loreates get their numbers that they do analysis with from(assuming that they realy analyze and model,and not just pick the Waal St journale and repeat what it says)?. Don't they get it from the source,and in that case the goverments?. Then the next logical question becomes:what if these numbers are in deed false,as was the case with Greece?how many other goverments(let alone companies and banks)have supplied wrong numbers to the market?.Is Greece unique,or there are many others like Greece?. Of course,only GS keeps a tab,and in due time and for whatever reason,everybody's time will come.

Hephasteus's picture

Ze Pope. Heesa a killa da Euro.

BernankeCo's picture

Once the BS good news runs out it will

ONEY and I care NOT who writes the LAWS," Nat_han R0thschi1ds
Learn the truth behind the fake recovery!!FED does that for the Financial Aristocracy and D1CTAT0RSHIP!

“What to do:

1. Allow the Financial Dictatorship where Wall Street Banksters Owns Congress?

2. A State trying to serve its Communities' Needs on Main Street while maximizing productivity and employment?

Is this a Difficult Decision? If you are a Bankster you want #1! If you are everybody eles you want #2!”

“Yes and they are using REAL LOANS - NOT FAKE FRAUDULENT PAPER that is "SURE to FAIL!" so Massive Casino Bets can be ” PAID to CR00KS!

Grand Supercycle's picture


The impending dollar rally that I warned about from mid 2009 onwards has only just started.

USD Index daily and weekly charts remain bullish.

Vice versa for the EURO and DOW/SP00.

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