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Guest Post: Why The Eurozone And The Euro Are Both Doomed

Tyler Durden's picture




 

Submitted by Charles Hugh Smith from Of Two Minds

Why the Eurozone and the Euro Are Both Doomed  

Papering over the structural imbalances in the Eurozone with endless bailouts will not resolve the fundamental asymmetries.

Beneath the endless announcements of Greece's "rescue" lie fundamental asymmetries that doom the euro, the joint currency that has been the centerpiece of European unity since its introduction in 1999.

The key imbalance is between export powerhouse Germany, which generates huge trade surpluses, and its trading partners, which run large trade and budget deficits, particularly Portugal, Italy, Ireland, Greece and Spain.

Those outside of Europe may be surprised to learn that Germany's exports are roughly equal to those of China ($1.2 trillion), even though Germany's population of 82 million is a mere 6% of China's 1.3 billion. Germany and China are the world's top exporters, while the U.S. trails as a distant third.

Germany's emphasis on exports places it in the so-called mercantilist camp, countries that depend heavily on exports for their growth and profits. Other (nonoil-exporting) nations that routinely generate large trade surpluses include China, Japan, Germany, Taiwan and the Netherlands.

While Germany's exports rose an astonishing 65% from 2000 to 2008, its domestic demand flatlined near zero. Without strong export growth, Germany's economy would have been at a standstill. The Netherlands is also a big exporter (trade surplus of $33 billion) even though its population is relatively tiny, at only 16 million. The "consumer" countries, on the other hand, run large current-account (trade) deficits and large government deficits. Italy, for instance, has a $55 billion trade deficit and a budget deficit of about $110 billion. Total public debt is a whopping 115.2% of GDP.

Spain, with about half the population of Germany, has a $69 billion annual trade deficit and a staggering $151 billion budget deficit. Fully 23% of the government's budget is borrowed.

This chart illustrates the dynamic between mercantilist and consumer nations:

Although the euro was supposed to create efficiencies by removing the costs of multiple currencies, it has had a subtly pernicious disregard for the underlying efficiencies of each eurozone economy.

Though German wages are generous, the German government, industry and labor unions have kept a lid on production costs even as exports leaped. As a result, the cost of labor per unit of output -- the wages required to produce a widget -- rose a mere 5.8% in Germany in the 2000-09 period, while equivalent labor costs in Ireland, Greece, Spain and Italy rose by roughly 30%.

The consequences of these asymmetries in productivity, debt and deficit spending within the eurozone are subtle. In effect, the euro gave mercantilist, efficient Germany a structural competitive advantage by locking the importing nations into a currency that makes German goods cheaper than the importers' domestically produced goods.

Put another way: By holding down production costs and becoming more efficient than its eurozone neighbors, Germany engineered a de facto "devaluation" within the eurozone by lowering the labor-per-unit costs of its goods.

The euro has another deceptively harmful consequence: The currency's overall strength enables debtor nations to rapidly expand their borrowing at low rates of interest. In effect, the euro masks the internal weaknesses of debtor nations running unsustainable deficits and those whose economies had become precariously dependent on the housing bubble (Ireland and Spain) for growth and taxes.

Prior to the euro, whenever overconsumption and overborrowing began hindering an import-dependent "consumer" economy, the imbalance was corrected by an adjustment in the value of the nation's currency. This currency devaluation would restore the supply-demand and credit-debt balances between mercantilist and consumer nations.

Absent the euro today, the Greek drachma would fall in value versus the German mark, effectively raising the cost of German goods to Greeks, who would then buy fewer German products. Greece's trade deficit would shrink, and lenders would demand higher rates for Greek government bonds, effectively pressuring the government to reduce its borrowing and deficit spending.

But now, with all 16 nations locked into a single currency, devaluing currencies to enable a new equilibrium is impossible. And it leaves Germany facing with the unenviable task of bailing out its "customer nations" -- the same ones that exploited the euro's strength to overborrow and overconsume. On the other side, residents of Greece, Italy, Spain, Portugal and Ireland now face the unenviable effects of government benefit cuts aimed at realigning budgets with the productivity of the underlying national economy.

While the media has reported the Greek austerity plan and EU promises of assistance as a "fix," it's clear that the existing deep structural imbalances cannot be resolved with such Band-Aids.

Either Germany and its export-surplus neighbors continue bailing out the eurozone's importer/debtor consumer nations, or eventually the weaker nations will default or slide into insolvency.

Germany helped enable the overborrowing of its profligate neighbors by buying their government bonds. According to BusinessWeek, German banks are on the hook for almost $250 billion in the troubled eurozone nations' bonds.

Now an inescapable double-bind has emerged for Germany: If Germany lets its weaker neighbors default on their sovereign debt, the euro will be harmed, and German exports within Europe will slide. But if Germany becomes the "lender of last resort," then its taxpayers end up footing the bill.

If public and private debt in the troubled nations keeps rising at current rates, it's possible that even mighty Germany may be unable (or unwilling) to fund an essentially endless bailout. That would create pressure within both Germany and the debtor nations to jettison the single currency as a good idea in theory, but ultimately unworkable in a 16-nation bloc as diverse as the eurozone.

Be wary of the endless "fixes" to a structurally doomed system.

 

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Fri, 06/24/2011 - 12:31 | 1398804 FunkyMonkeyBoy
FunkyMonkeyBoy's picture

But the Euro notes look pretty!... the U.S. dollar looks worse than monopoly money, at least they have color.

Fri, 06/24/2011 - 12:39 | 1398825 SheepDog-One
SheepDog-One's picture

We can just get a new US dollar with a 3D pic of a tropical aquarium on it, blow all the other fiats away!

Fri, 06/24/2011 - 13:34 | 1399004 AcidRastaHead
AcidRastaHead's picture

Putting art on the dollar may be the only way to increase it's value.

Fri, 06/24/2011 - 17:11 | 1399765 tiger7905
tiger7905's picture

Highlights from Don Coxe on Spain and Greece. He spending 2 weeks in Spain currently.

http://goldandsilverlinings.com/?p=1316

Fri, 06/24/2011 - 12:41 | 1398851 Clueless Economist
Clueless Economist's picture

I advise Germany to print more fiat money and pay off all of the Greek debt.  This stimulus will lead to millions of shovel-ready government jobs throughout the Euro zone.

It would have worked in USA if only we had the willpower to stimulate more trillions of fiat currency.

Fri, 06/24/2011 - 13:03 | 1398913 SheepDog-One
SheepDog-One's picture

And who knows, all those Greek politician escape tunnel cleaning jobs may just unearth long forgotten fat sacks of gold!

Fri, 06/24/2011 - 13:21 | 1398961 Piranhanoia
Piranhanoia's picture

There are thousands of shovel ready jobs in every country. They will not require any investment whatsoever. It is simply a matter of arresting and trying those that have openly stated they committed crimes.  There are hundreds of thousands of economists and wall street players that can be fitted with shovels, orange jumpsuits and manacles. It has a two fold effect.  It will end the reliance on pretense regarding financial stability, and put those that caused it to work doing the jobs the people they raped and killed were doing.  Those people will be their leaders in prison. Their support network, their pimps.

Fri, 06/24/2011 - 12:44 | 1398867 Atomizer
Atomizer's picture

We were planning to release 1.1 billion new (eye candy) $100 bills into circulation but they contained flaws. Canada is presently printing new laundry-friendly plastic banknotes.

Fri, 06/24/2011 - 12:57 | 1398906 fonestar
fonestar's picture

I hate all of the modernist concepts of today's banknotes.  I actually like the traditional Greco-Roman inspired motifs with calligraphy of US/UK currency of decades ago.  Looked serious.  Everything else looks like monopoly money.

Then again, I hate everything else in the world today too.

Fri, 06/24/2011 - 15:19 | 1399452 tarsubil
tarsubil's picture

Made my day.

Fri, 06/24/2011 - 13:29 | 1399002 Reptil
Reptil's picture

Guilders were much prettier. And stronger.. (of course we took a hit when switched)

http://www.oudevalutas.com/Resources/50guldenres.jpg

Fri, 06/24/2011 - 14:25 | 1399246 KCMLO
KCMLO's picture

didn't they used to have a bar code on there as well?  I remember looking at a guilder note and thinking it looked like one hell of an acid trip!

Sat, 06/25/2011 - 13:11 | 1401155 Reptil
Reptil's picture

yeah the good old days.
the "nineties" were my "sixties" you know..
^__^

Fri, 06/24/2011 - 12:30 | 1398805 Eddyspain
Eddyspain's picture

With Italian bond spreads at (record) 214  the EFSF is dead on arrival.

Fri, 06/24/2011 - 12:34 | 1398819 Vergeltung
Vergeltung's picture

excellent read. very well explained for the novice (like me).

 

Fri, 06/24/2011 - 12:45 | 1398871 Vergeltung
Vergeltung's picture

how does what I typed above deserve a junk? this place is wierd....   :\

 

Fri, 06/24/2011 - 12:49 | 1398882 SheepDog-One
SheepDog-One's picture

Euro longs throwing a tantrum.

Fri, 06/24/2011 - 12:59 | 1398916 Dapper Dan
Dapper Dan's picture

someone 2-3 months ago said they junk to indicate comments that they have read. don't remember who.

Fri, 06/24/2011 - 13:01 | 1398923 Baron Robber
Baron Robber's picture

you made an honest comment, don't worry about being junked.

Fri, 06/24/2011 - 13:27 | 1398997 Piranhanoia
Piranhanoia's picture

There be free speech here,  fear not. 

Fri, 06/24/2011 - 13:43 | 1399035 Rocket-Man
Rocket-Man's picture

Ignore the junk... you are spot on.  This article provides a simple and clear explantion of some of the systemic European macro economic issues.  As you mentioned it is a good read for the novice and worthy of passing on.

Fri, 06/24/2011 - 17:11 | 1399719 Greyhat
Greyhat's picture

Not really. The commentators always forget that Germany IS already the "lender of last resort" by an abused TARGET2 crediting system.

http://www.bundesbank.de/statistik/statistik_zeitreihen.php?first=1&open...

The EU actually lives from bankruptcy fraud. They buy German goods, but the other EU central banks dont pay the bills to the Bundesbank, they just transfer "the finest EU collateral possible", unrated Irish and Greec paper trash.... Actually they owe us a third of a trillion Euros.

But the commission will slaughter the "imbalanced" German export cow, so this will not continue forever.

"When assessing imbalances, account should be taken of their severity, and of the potential
negative economic and financial spillovers which aggravate the vulnerability of the EU
economy and are a threat to smooth functioning of the monetary union.
Actions to address macroeconomic imbalances and divergences in competitiveness are
required in all Member States, particularly in the euro area.
"

http://register.consilium.europa.eu/pdf/en/11/st07/st07839.en11.pdf

Fri, 06/24/2011 - 12:49 | 1398829 RetiredSilverBug
RetiredSilverBug's picture

Euro will do fine. All media channels are stuffed with anti-euro junk news, but it holds 1.4 just fine. Europe should be more active in responding to the media attack (of US and UK). They should start with voiding US credit agency license in EU. And limit US hedge funds.

Fri, 06/24/2011 - 12:47 | 1398875 tim73
tim73's picture

In the speculation economy Euro is the one always "collapsing" but in the real economy level (hey Americans and Brits, you should try that sometimes!) it is working quite nicely.

In the old days a truck driver from Spain would have needed many different currencies in his journey to Germany and Netherlands, losing needlessly money in each currency exchange.

The current crisis is a banking crisis, not currency. Banks worldwide have been stupid, too greedy and loaned too much once again to insolvent customers. USA and UK is holding up mainly due to money printing keeping their banks solvent but once that goes away, it will all collapse eventually.

Sat, 06/25/2011 - 05:23 | 1400756 Ghordius
Ghordius's picture

+1
a lot of this media barrage originates from Australia, the Greek Expat community is worried and enraged - what easier quick scapegoat then Germany and the Euro...
If only things were so simple!
Greece could try to adress the issue of 7 times more civil servants then what other countries need, an issue which would bankrupt anybody, anytime...

Fri, 06/24/2011 - 12:38 | 1398836 SheepDog-One
SheepDog-One's picture

BIG haircuts must be taken by the central banksters, just that none of them want to be first in line for the barbers chair understandably...now what we'll see unfold is zombie world bankster battles to the death. Should be great.

Fri, 06/24/2011 - 13:55 | 1399102 john39
john39's picture

sure, but that is really not why the bankers push.  its only paper money anway.  They want to leverage the debt issue to get control over hard assets.  taking a haircut alone won' t get that done.  the whole point is to steal real assets in exchange for fiat debt.

Fri, 06/24/2011 - 12:39 | 1398839 tim73
tim73's picture

The same logic could be applied between Alabama and New York...or Scotland and England. USA states among themselves are as "incompatible" as Eurozone nations. 

Fri, 06/24/2011 - 12:41 | 1398852 SheepDog-One
SheepDog-One's picture

Yes, exactly. For all the Eurozone problems and bankruptcies and failures, its nothing compared to the staggering US default looming. Wait till it comes around to us in a month or so.

Fri, 06/24/2011 - 12:39 | 1398842 SheepDog-One
SheepDog-One's picture

Greeny, is that you junking? I know your 1.46 Euro quick trade got blown out of the water, but dont throw a tantrum its unbecoming.

Fri, 06/24/2011 - 12:44 | 1398845 RobotTrader
RobotTrader's picture

Crude and gasoline at LOD.

CRB Index just crashed to new lows for the year.

http://www.crbtrader.com/data.asp?page=chart&sym=CIY0

Uncle Gorilla has succesfully "whipped inflation" for now, using margin hikes, paper contract shorting, and unleashing the SPR.

Wow, no wonder XRT is $1 from 3-year highs.

Fri, 06/24/2011 - 12:43 | 1398866 SheepDog-One
SheepDog-One's picture

Meanwhile prices are still at record highs, and all your longs are underwater.

Fri, 06/24/2011 - 12:44 | 1398846 Greeny
Greeny's picture

I tell ya what, I trust Chinese, more than this article,

If Chinese are buying EUR bonds and EUR (unless you

think they are stupid), instead of $USD,

get a clue.

Fri, 06/24/2011 - 12:46 | 1398860 SheepDog-One
SheepDog-One's picture

And yet your 1.46 Euro long trade is more underwater. Dont fight it, be a real trader, admit you were wrong and move along, oh master trader.

Fri, 06/24/2011 - 12:49 | 1398869 Greeny
Greeny's picture

Dude, did I told you to hold for 1 year? I made 50 pips, that's

all it matter, was hoping for more though.. Next time, ones

Austerity plan passes, Next week?

Fri, 06/24/2011 - 12:56 | 1398874 SheepDog-One
SheepDog-One's picture

OH that was a 'buy n hold for 1 year trade' now I see. Well Im not a 'buy and hold' in anything thats the biggest bunch of nonsense in history.

Just 1 question though, why did you sell at a 50 pip when you said a 300 pip was in the bag? I guess youre just THAT good....

Fri, 06/24/2011 - 17:47 | 1399866 walküre
walküre's picture

+1 clue

you get it.

Fri, 06/24/2011 - 12:44 | 1398848 jointhewave
jointhewave's picture

Watch the YouTube video...


The Manchurian President - A story of war and deception

http://www.youtube.com/watch?v=PhOwfn4wA8k

 

Absolutely amazing, cunning and enlightening short film depicting the collapse of Empire America.

Fri, 06/24/2011 - 12:46 | 1398857 JimBobOMG
JimBobOMG's picture

Is this going to be in 3D?

Fri, 06/24/2011 - 12:48 | 1398878 Greeny
Greeny's picture

So, my cut is that, NO Currency would be allowed to collapse,

either whole System collapses at ones, or they all (currencies)

going to

be just overprinted and devaluated. If need it, Fed will print

enough to bailout entire Euro-zone, to save the system.

Fri, 06/24/2011 - 12:54 | 1398887 SheepDog-One
SheepDog-One's picture

Go print $100 trillion....nothing at all would be fixed. Your thesis is garbage.

Fri, 06/24/2011 - 12:51 | 1398885 Conor
Conor's picture

It seems to me that Germany's problem with Greece is more easily solved than say Texas's problem with California.

Germany can pick up it's marbles and go home, take a big hit upfront and recover.  Texas, or any other state for that matter, can't just run from the US contagion, e.g. terminally ill banks in New York and and dying states like Michigan and Illinois.

Or am I stupid?

Fri, 06/24/2011 - 13:26 | 1398978 NotApplicable
NotApplicable's picture

The elites have gutted Germany twice in the last century, and my guess is they'll do it again, as that ole coercive force known as 'collective guilt' will be applied heavily by the MSM painting Germans as once again unwilling to cooperate with the rest of the "civilized world." All while stirring up neo-neo-Nazi sentiments at home.

Treaty of Versailles, redux?

Fri, 06/24/2011 - 17:22 | 1399803 walküre
walküre's picture

Over my dead body, Freund.

And you can take that to the bank.

Fool me once, shame on me

Fool me twice, shame on you

Germans are a different breed today. Collective guilt is a thing of the past.

Fri, 06/24/2011 - 13:40 | 1399036 Pchelar
Pchelar's picture

Well they can, but....  The last time it was tried 150 years ago, it got messy in a hurry.

Fri, 06/24/2011 - 12:52 | 1398892 svendthrift
svendthrift's picture

A sovereign nation should have a sovereign currency. No, bank produced debt-notes don't count.

Fri, 06/24/2011 - 12:54 | 1398898 SheepDog-One
SheepDog-One's picture

Thats right, the 'one size fits all' New World Order plan is garbage, it will never work. And probably about 5 billion will have to die before the elites admit failure.

Fri, 06/24/2011 - 15:02 | 1399380 pops
pops's picture

Why do you assume that they would consider the deaths of 5 billion to be a failure?  Their agenda could very well be to thin the herd, and this currency squaredance is just a warmup.

Fri, 06/24/2011 - 12:59 | 1398902 kote
kote's picture

Well written, good argument, just technical enough.  I like this guy.

Fri, 06/24/2011 - 13:20 | 1398950 Atomizer
Atomizer's picture

Now that you understand the frame work, watch this to simplify it even more.

http://www.abc.net.au/news/video/2010/05/20/2905304.htm

Christine Lagarde is a bailout queen. Hence the push for IMF appointment.

 

Fri, 06/24/2011 - 12:58 | 1398909 RobotTrader
RobotTrader's picture

Holy cow check out Hansen's Natural (HANS).

Daytraders chugging down that Monster Energy have been making a killing trading the swings last week.

HANS up 6%, new world record high.

Who would have known that $14 trillion in deficits, 9.5% unemployment, and a collapsing Europe would cause a bubble in soft drink stocks?

Fri, 06/24/2011 - 13:03 | 1398930 SheepDog-One
SheepDog-One's picture

LOL, same ridiculous nonsense as before '08 crash. And too bad you dont own any of the stocks that flash dash up, just the crashers. You'd make a perfect CNBC reporter.

Fri, 06/24/2011 - 13:17 | 1398962 Greeny
Greeny's picture

People are making money on any doom scenarios and stories..

I remember 1999 Y2K bug, company I worked for, spend enormous

amount of money on waste Software updates.. Anybody thinking

THAT either USD or EUR would collapse now or next year, complete

moron. Simple as that. Theory overall maybe right, but timing

is OFF, way OFF. in 10 years, I still see this system is working

and USD still here, EUR? could break by parts, but the currency

will still exists. Some doom heads calling for 2008 scenario..

We not even in the Correction Yet.. Maybe mini-one..

And for those Idiots who claim that Stocks are worthless,

check DOW 60-980 year Chart. You want me to post it? Buffoons?

Check company like ABT, which paying div for almost 100 years..

Fri, 06/24/2011 - 13:05 | 1398925 HileTroy
HileTroy's picture

Wow! That makes perfect sense all currency made of paper just gets printed and life goes on!!

 One small problem even though the world is filled with sheeple there are a few wolves left over from "Productive Industries" that have had there asses handed to them by dudes looking at six computer screens and playing games with the "Wall Street Economy"

Long bullets short Bankers Politician/Lawyers

When the Sheeple cant get there free cheese us wolves will point them in the right directions to stampede.

 

What am i missing ???? There is a shit stome of baddness heading for the human race, I see it in the eyes of men less capable on the MSM every night. Natural selection me thinks will make a big come back.

What a intresting time to be alive.

 

 

 

 

Fri, 06/24/2011 - 13:20 | 1398973 Version 7
Version 7's picture

Add Peak Oil on top of that and the don't-bother-me-with-reallity mindless party-animal era is soon to end.

Fri, 06/24/2011 - 13:24 | 1398975 Popo
Popo's picture

Nice user name.  Glad to see the greatest books are not forgotten!  :)

Fri, 06/24/2011 - 13:02 | 1398929 fonestar
fonestar's picture

Greek gold-backed Drachma, now I would buy that for a dollar!

Fri, 06/24/2011 - 13:11 | 1398937 Stuck on Zero
Stuck on Zero's picture

The debt failures in the PIIGs are greatly to Germany's benefit.  Germany will maintain rumors of a Euro-collapse in the news indefinitely to hold down the value of the Euro.  If it weren't for the PIIGs the Euro would be about two to the dollar and Germany's exporters would be massively hurting. 

Fri, 06/24/2011 - 13:30 | 1398992 ike
ike's picture

Does anibody knows what is debth level for all western countries?

On some sources I read US is 45000 per capita, and on other 600000 per capita

What is debt of UK?

 

 

 

Fri, 06/24/2011 - 17:15 | 1399773 walküre
walküre's picture

http://www.brillig.com/debt_clock/

The estimated population of the United States is 310,813,527
so each citizen's share of this debt is $46,163.69.

The National Debt has continued to increase an average of
$3.91 billion per day since September 28, 2007!

Fri, 06/24/2011 - 13:30 | 1399005 kaiten
kaiten's picture

Southern countries have huge income from tourism. They dont need to have balanced trade. They need to cut back a bit, but that´s because they lived beyond their means. What´s wrong with that? They would have to do it even outside of eurozone.

Fri, 06/24/2011 - 17:16 | 1399776 walküre
walküre's picture

Greece's tourism operators and affiliated industries are notorious for charging taxes but not paying them forward.

The problem is symptomatic and it's cultural.

Fri, 06/24/2011 - 13:50 | 1399075 glenlloyd
glenlloyd's picture

in other words, the euro enabled Germany's wal-marting of the euro consumer economies temporarily. the financial benefit to Germany's overproduction and growth will be undone via bailouts. the difference though is that rather than the producers suffering the decline of exports the tax payers are being asked to absorb the unanticipated costs.

Fri, 06/24/2011 - 14:24 | 1399240 Herbert_guthrie
Herbert_guthrie's picture

Let me take a wild guess:

The Eurozone and Euro are both doomed due to the reliance upon a debt-backed currency being purposely watered down by power-greedy Central Bankers?

Fri, 06/24/2011 - 14:53 | 1399350 Out9922
Out9922's picture

http://video.cnbc.com/gallery/?video=3000029599   

Go to the 3 minute mark.  Kudlow may be losing it

Fri, 06/24/2011 - 15:09 | 1399423 Loco Vida
Loco Vida's picture

Shut up with the Euro shit...........every fucking story is about Europe........like listening to a Britney Spears CD............bla bla bla........do me

Fri, 06/24/2011 - 15:16 | 1399455 Loco Vida
Loco Vida's picture

Who the fuck cares anymore??????????????? bunch of numbnuts think they know how to solve the worlds problem by typing and sniping.............ZH is losing it..........I pray for the coming EMP to get rid of the Inter-pet( not mispelled) and all of the blathering...........bunch of idiots think they know how shit should go..........down the toilet with the rest of the turds

 

Its not "got gold?"...................its "got a clue?"..............bwhahahhahahahhahha

 

 

dumb shits...........all of ya

Fri, 06/24/2011 - 16:39 | 1399680 koperniuk666
koperniuk666's picture

'Although the euro was supposed to create efficiencies by removing the costs of multiple currencies,'

 

This was never ever a pupose of the single currency -(it is, however a purpose  often cited by the ignorant and uninformed, poor victims of the Euro)

Check out de Grauwe, The Economics of Monetary Unions  Oxford University Press (1999?)

Interestingly his study described the single currency as unworkable and doomed to failure more than 12 years ago.

Hopefully, the demise of the Euro currency will precipate the collapse of the evil anti-democratic empire - the European Union.

Fri, 06/24/2011 - 16:42 | 1399690 koperniuk666
koperniuk666's picture

Hey Loco Vida - try eating spinach - it could get your IQ up into double digits. Good luck amiga!

Fri, 06/24/2011 - 17:11 | 1399763 walküre
walküre's picture

Let me be very frank.

2011 is not 1913.

The US house of card is collapsing. The perceived US strength died with Lehman and subprime mortgages.

The US Dollar will be replaced as the reserve currency over time and gradually and without the reserve currency, the US federal, state and municipal balance sheets will simply implode.

This Greek hysteria is a fabrication, quite possibly a setup for Germans to potentially take to the streets and demand "war on Greece" or some such nonsense.

It is very obvious that the sphere of influence the US once had is waning. Those very criminal bankers that orchestrated 2 world wars are trying it again to save their own bacon and to keep their power.

Imagine a world where nobody traded in USD outside of the US.

How much of US GDP, the supposedly largest economy of the world is actually NOT based on currency and trade manipulation?

The free ride and the benefit of being a superpower are coming to an end.

August 2nd, 2011 - deal with it.

Fri, 06/24/2011 - 17:33 | 1399822 There is No Spoon
There is No Spoon's picture

"If Germany lets its weaker neighbors default on their sovereign debt, the euro will be harmed, and German exports within Europe will slide."

German exports within Europe will slide anyways due to austerity plans and general economic depression in the debtor nations. Germany's in a lose/lose/lose situation because if the debtors default, the German financial system will be chaotic; if the debtors default and withdraw from the euro, the euro will strengthen and hurt German exports; if the debtors don't default, Germany will suffer an extended drag from continuous bailouts and eventually the markets will impose defaults on the debtors anyway.

Fri, 06/24/2011 - 17:46 | 1399873 walküre
walküre's picture

Well, good thing more Chinese are buying German made cars.

Airbus banked more orders than Boeing - again.

Boeing? Boeing? Boeing? What Boeing?

Wondering if Boeing converts to building military aircraft soon to "save" the world and the $ - again.

Fri, 06/24/2011 - 18:10 | 1399938 midnight
midnight's picture

I don't understand why the British and USA sheeple don't see this kind of articles as just distractions from their own internal problems.

Sat, 06/25/2011 - 09:04 | 1400860 TheFourthStooge-ing
TheFourthStooge-ing's picture

I don't understand why the British and USA sheeple don't see this kind of articles as just distractions from their own internal problems.

That's what television, movies, video games, and other mass media are for.

 

Fri, 06/24/2011 - 18:56 | 1400020 Itsalie
Itsalie's picture

Germans and french taxpayers really have not forked out a single cent (directly from the 2 governments' coffers) so far to bail out PIIGS, and they do not plan to. So far the money has come from loans from the IMF (ie money printed in the US/Japan/China/BRICs) plus bond buying from the ECB. The ECB of course will be allowed to go bankrupt when the euro breaks up and that's what Trichet was fighting against Shauble about. A small amount has come from the ESM and later mostly from the EFSF, which are super huge CDOs managed by a non-sovereign entity under the ECB. The buyers of CDOs issued by the EFSF will be the bond market - at least those hungry for higher yields, of which the dumb money crowd in fixed income, also the SWF like the Norwegians who have promised to support the EFSF, most of the oil money, the Chinese and Russians who will buy to support their trading partners or to keep the euro afloat so their own currencies are suppressed, or in case of the Russians so they will have a seat at the receivers' round table when the implosion is taking place. All of the above will all buy the EFSF bonds. Sure the Germans and French "guarantee" the EFSF, just like the US Treasury "guarantees" Frandie Macs - no one really knows whether the Gremans or Frenchies will ever ponny up when PIIGS finally implode and a new order is established in a few years' time. Just like uncle Sam will default, the Germans and French will not foot the bill. The Russians will be the new master of Europe, their Chinese sometimes friend will also have a say. European Serfs, fall-in now !

Fri, 06/24/2011 - 21:53 | 1400349 Species8472
Species8472's picture

Let's not forget that Germany had a large under utilized workforce from East Germany, just like Chinese peasants. 

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