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JPMorgan Private Bank On The "Quixotic" End To Europe's Latest (Failed) Grand Experiment

Tyler Durden's picture




 

One of the more persuasive analyses on the fate of the EMU that we have read recently, comes, oddly enough, from JP Morgan, although not from the firm "proper" but from its somewhat more iconoclastic Private Bank division (which manages portfolios for the ultrawealthy). At the core of the argument, which is far more subtle and nuanced than any report by Ambrose-Evans Pritchard, yet which reaches the same conclusion on the viability of the Eurozone, is the now accepted schism between the core and the periphery, in virtually every aspect of their economies: "how can the European Central Bank simultaneously maintain the “right” monetary policy for inflation-phobic Germany and the weak periphery at the same time?" What many don't know, however, is that this very dichotomy was the reason for the collapse of the first attempt at a monetary union in Europe, the European Exchange Rate Mechanism, which ended with a loud thug back in 1992, "when the UK needed a much weaker monetary policy than Germany, which was overheating in the wake of Unification stimulus." Of course, instead of taking no for an answer, Europe merely upped the ante and layered monetary unification on top of an artificial political and customs union. The current state of affairs is all Europe has to show for it. So what happens next? Just as Dylan Grice suggested on Friday that China may have realized that its inflationary endgame has now entered its "out of control" phase, so too perhaps Europe, now accepts the realization that the same unsuccessful outcome as 1992 is inevitable and the premise of a European Union can finally be shelved. Yet in a world in which, as JPM claims, the need for an artificial European union to preserve the peace ended in 1954, and the far more critical peace-perpetuation mechanism - global corporatocracy - is far more important, perhaps Europe should instead focus on doing all it can to promote the interests of various multinational corporations, whose viability may be far more important to Europe's continued non-wartime status. Or perhaps that is the idea all along - with corporate viability more reliant on a healthy banking sector than anything else, are Europe's taxpayers now expected to pay for the 50+ years of peace and social welfare they have received by rescuing the various banks whose bad investments would not sustain one day without an explicit and implicit sovereign backstop. Is Europe essentially saying that should Europe's banks be impaired, that war will certainly follow? Or if the message is not too clear yet, perhaps it will be made soon enough...

From JPM Private Bank:

A Don Quixote Thanksgiving

The diverging economic conditions between Europe’s core and periphery are severe, but not insurmountable1. However, a flaw in Europe’s creation myth may lay at the heart of the inability of the European Monetary Union to survive over the long run. As Europe deals with its latest weak link (Ireland), I am reminded of Don Quixote, who among other things, went on a difficult journey for all the wrong reasons. For Europe, the EMU may turn out to be the same. First, the economics.

The Periphery and Pompeii

Peripheral Europe (Greece, Portugal, Ireland and Spain) is dealing with the aftermath of a consumption boom gone wrong. As we discussed in our “Sick Men of Europe” paper last February, a pattern of faster consumption, growing current account deficits and a loss of competitiveness began in the Periphery almost immediately following the adoption of the Euro.

In the wake of the global recession, like Pompeii, growth in the Periphery is frozen in time while Core Europe has revived. One reason: home prices actually rose more relative to income in Spain and Ireland than they did in the US (see below). Recall as well that while banks grew to be 100% of GDP in the US, in Spain they grew to 200% of GDP, and in Ireland, 400% of GDP (that’s why GDP measures may not be the best barometer of event risk). Irish banks essentially became European banks in the broadest sense of the word. But who pays the freight if something goes wrong? More on that later.

Another sign of Core Europe’s revival: Germany (15x the size of Ireland) is doing quite well, and represents a large part of the European equity holdings that we do have in portfolios (see post-script for more on European equities). As shown below, German unemployment is at a 20-year low, and there are increasing signs of labor shortages reported by German manufacturers. These are “good” problems to have at a time of low global growth, particularly across the developed world.

But this is part of the problem: how can the European Central Bank simultaneously maintain the “right” monetary policy for inflation-phobic Germany and the weak periphery at the same time? This conundrum lay behind the collapse of the prior monetary union in Europe, the European Exchange Rate Mechanism. This effort collapsed in 1992, when the UK needed a much weaker monetary policy than Germany, which was overheating in the wake of Unification stimulus.

As Maastricht orthodoxy is imposed on Greece and Ireland, we are reminded again of how infrequently belt-tightening has been attempted without an exchange rate devaluation to help cushion the blow. The chart above plots current fiscal adjustments in Europe (orange) compared to prior ones in Europe and Latin America (yellow). No one (other than Latvia) has tried this before: large fiscal adjustments in a low-growth, no-devaluation environment.

In Ireland, austerity measures have simply led to lower growth, lower tax revenue and more austerity. Pursuing this course of action to repay foreign bondholders is causing political and social pressure (as well as 8% real interest rates) which we do not believe can be withstood in the long run. As things stand now, the Irish bank bailout may cost 8-10x more than its US equivalent (TARP). The “Irish Bailout” is more a bailout for Ireland’s lenders (European banks and the ECB) than for Ireland itself, as Irish taxpayers are stuck with the bill.

Optimists concede problems in Ireland but point instead to improvements in Spain, which is 6x the size of Ireland. As shown, while Ireland has become more reliant on the ECB, market conditions for Spain improved after bank stress tests this summer, which allowed Spain to reduce its borrowing from the ECB. Improvements in Spanish credit markets unleashed an array of “Mission Accomplished” banners, mostly from strategist and economists that work at European banks.

However, let’s not get too excited about Spain just yet. In a world of US Fed bond purchases and Asian currency intervention driving down rates, the desperate thirst for yield is helping Spain sell its debt, and is a natural market stabilizer of sorts. But…Spain’s Q3 GDP growth was zero; the service sector (60%-70% of the economy) has rolled over; car sales are down 40% to their lowest level in 20 years after the expiration of an incentive program which ran out in June; the improvement in Spain’s trade deficit reflects a massive, unhealthy collapse in imports (see EoTM 6-7-2010); and unemployment remains over 20%, possibly a reflection of Spain’s limited labor mobility, one of the lowest in Europe.

One key thing to watch in Spain: the Achilles heel of the EMU, competitiveness gaps between countries. There are a lot of ways to measure this; below (left) we look at unit labor costs. While the difference between Spain and Germany is not rising anymore, the gap is still large. How big is this gap? For comparison’s sake, we show as well the widest labor cost differentials across US regions over the same time frame. While the Fed’s challenge is a large one, at least it is dealing with a more homogenous set of economic conditions.

This is not “new news”: such problems were highlighted within Europe well before the recession hit. The German Institute of Economic Research2 looked at labor cost divergence in 2007, and was concerned about what they found: permanently higher rates of labor cost increases in Portugal, Greece and to a lesser extent, Italy; labor-cost differences that were much greater in Europe than across US states or German Lander; and a loss of competitiveness, such that countries might experience excessive investment in housing, lower productivity and higher structural unemployment.

Their conclusion:

Prolonged boom-and-bust cycles as a result of divergences might actually endanger the political stability of the euro-area. A country which finds itself at the beginning of the bust leg of a business cycle amplified by the structure of EMU might find the idea of leaving monetary union increasingly attractive. Leaving the union would allow the country to depreciate sharply and forego the adjustment costs of relative wage deflation …..”

As we noted in our Sick Man of Europe article, UK stocks rallied sharply in 1992 after they left the ERM and were able to engineer their own monetary policy.

Flaws in the Creation Myth of Europe3

In the wake of the 1992 ERM collapse, why did Europe attempt another monetary union given large differences in language, labor mobility and productivity? It makes sense if seen as part of a broader effort to create a United Europe, both politically and economically. A few years ago, Swedish and Dutch politicians responsible for mobilizing support for the EU Constitution referred to “Yes” votes as necessary tribute to honor the dead from the Second World War, and more urgently, to avoid the pre-war divisions which led to it. Conflict between European empires existed for hundreds of years (1871-1914 was the only period of peace in European history until 1945), so the idea of a united Europe would have seemed appealing in 1945. However, conditions for securing a lasting peace within Western Europe were arguably already in place by 19544:

  • The Soviet threat rendered any lingering grievances moot, as did the large presence of US and British troops
  • Unlike reparations imposed on losers in the wake of WWI, vanquished countries received aid after WWII (Marshall Plan)
  • By 1954, Germany had become a stable, liberal, democratic society, one of the most amazing transformations in history given what preceded it. Just ten years earlier, rather than surrender after Allied victories in Africa, Russia and Italy and the Normandy invasion, Germany kept on fighting, losing 1.8 mm soldiers in 1944 and another 1.6 mm in 1945

To summarize, Europe seems to be on a Quixotic quest for mechanisms to support a peace that had already been obtained by
1954, or shortly thereafter. As a result, the European creation myth of the 1990’s (“Europe must accept supranational
political and economic structures to prevent future conflict”) may be flawed
. Such a flaw, to the extent that Europeans no
longer believe it, may explain a lot of things, from public referendums rejecting the EU constitution; to the lack of widespread
support for regional transfers; and the reluctance of countries like Ireland to yield sovereignty over their fiscal affairs5. Taken
to its logical conclusion, the European Monetary Union may continue to struggle under both the strain of its economic
inconsistencies, and the weakness of its political roots.

The author of the 1992 German Constitutional Court opinion on Maastricht described this issue in plain terms. The treaty…

“…is not able to support its own premise: the common ground of a European Staatsvolk which belongs together: a minimum of homogeneity in basic constitutional attitudes, a legal language accessible to all, economic and cultural similarities or at least some forces of approximation, the possibility of political exchange through media, which reach the whole of Europe, a leadership known in Europe and parties active across Europe. A Europeanisation without a prior European consciousness and therefore without a European people with a  oncrete capability and readiness for common statehood would be, in terms of the history of thought, un-European.”

Support amongst EU countries for EU membership is close to its lowest levels since the surveys began in 1973 (see chart). To be clear, this paper is about the durability of the current European Monetary Union and the risk of bondholder losses, not the viability of the EU as a political entity. But as support for the latter wanes, steps that need to be taken to support the former may be more difficult to achieve.

The European Financial Stability Facility does suggest that Europe understands the need for fiscal transfers to get through this crisis. Ireland may now draw upon it, and its creators see it as a bridge to a more secure monetary union. It is designed to allow member countries to straighten out their finances, refrain from having to issue in the debt markets for 3 years, and then come back to the debt markets once they run Germanic fiscal policy, but with debt/GDP ratios well over 100% and stuck in a rut of low growth. It’s a great vision and makes total sense on paper. I think I see a windmill in the distance…

Michael Cembalest

Chief Investment Officer

Postscript: on investments in Europe

Ten-year Irish debt is currently pricing in an 80% probability of a default (55% for Spain). Some hedge funds and high yield funds we invest with may find value here, as a lot of bad news is priced in. However, our managed fixed income funds aim for steady income and capital preservation, so they generally do not hold much Ireland, Portugal, Spain or Greece debt. We have been investing in bank non-performing loans and distressed corporate debt in Europe, opportunities we expect to continue as the European banking system continues to shrink. Given the current reliance on the ECB, this process has a long way to go.

On European equities, we have highlighted before the large degree of non-European revenue earned by European companies. That explains why European equities have over long  periods of time kept pace with other markets despite low nominal growth. This year and since January 2008, however, European equities have  trailed the S&P 500 in local currency terms (“European equities” include countries like the UK, Denmark and Sweden; EMU equities trailed the S&P by even more). Our European equity holdings have been tilted towards German mid-cap exporters, which have outperformed the rest of Europe and the US as well.

In terms of valuation, European equities trade somewhere around 10-12x earnings, so like the peripheral European bond markets, there’s a lot of pessimism priced in. We have a regional equity preference for the U.S. and Asia in our portfolios at the current time, but it cannot be said that European equity markets are unaware of the challenges facing the EMU.

 

1 The regions of the United States, for example, experienced tremendously divergent economic conditions during the depressions of the 19th century and the Great Depression of the 20th. Throughout these periods, monetary and labor conditions converged and a system of fiscal transfers was put in place to endure them. In prior “Eye on the Market” notes, we covered the convergence of labor costs in the Northeast and Midwest from 1820 to 1900, and the fiscal transfers which took place from the Northeast to the Midwest during the Great Depression, when farm prices fell by 40%.

2 “Does the Dispersion of Unit Labor Cost Dynamics in the EMU Imply Long-run Divergence?”, Dullien and Fritsche, Deutsches Institut für
Wirtschaftsforschung, Berlin, March 2007.
3 This section draws heavily on an article by Bernard Connolly, now CEO of Connolly Global Macro Advisors, “Monetary Union: a political impossibility theorem”, Banque AIG Market Intelligence Update, May 2005.
4 This view is supported as well by Stanford University’s James Sheehan in “Where have all the soldiers gone”, which describes the turning point for Europe as 1945, rather than 1968 or 1989.
5 While Ireland may accept bilateral EU and IMF money, it has so far resisted giving in on the greatest thorn in the side of Continental
Europe: its 12.5% corporate tax rate.

 

 

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Sun, 11/21/2010 - 00:11 | 743855 snowball777
Sun, 11/21/2010 - 08:41 | 744167 More Critical T...
More Critical Thinking Wanted's picture

The “Irish Bailout” is more a bailout for Ireland’s lenders (European banks and the ECB) than for Ireland itself, as Irish taxpayers are stuck with the bill.

*Cough*

So the theory here is that the Irish have borrowed a lot of money but have not spent that money and it went up *poof* in thin air?

Wow! :-)

Really, ring-wing ideologists need to come to terms with reality: the 'Celtic Tiger', the state with super-low tax rates and sparse government regulations, the austerity musterchild who implemented the quickest and most savage austerity measures after the financial crisis is one big walking failure.

Here are a few simple questions:

  • If 'austerity' reduces productivity as much as it did in Ireland, how are 'austere' nations supposed to pay back their debts?
  • If the shrinking Irish economy is having such a knock-on effect on housing prices and on bank assets, why is it good to have austerity to begin with?
  • Where exactly was the advantage of their super-low tax rate, if they are in such a big mess now? Should they have taxed higher, to build a sizable sovereign fund in the 'good times', which would act as a cushion for the 'bad times'?
  • How come that high-tax, active government, no-austerity keynesian stimulus countries like Germany are growing and are expected to pay the bill now? How come they have the money ... while the conservative economic model wunderkind Ireland is on the brink of the biggest bank run in history?

Enquiring minds want to know.

Sun, 11/21/2010 - 11:04 | 744253 Arthur Two Shed...
Arthur Two Sheds Jackson's picture

You need a baby bottle to go along with your pedantic blanket statements.

 

 

 

Sun, 11/21/2010 - 11:56 | 744294 trav7777
trav7777's picture

this is easy...the "core" EU members used their superior banking system clout to run mercantilist policies within the EU to the peripheral lower-clout nations.

I mean, it's German and French banks on the hook for all this bad debt all over the EU

Sun, 11/21/2010 - 12:18 | 744345 Ricky Bobby
Ricky Bobby's picture

+1

Sun, 11/21/2010 - 12:38 | 744386 hardcleareye
hardcleareye's picture

Trav I don't think your abbreviated answer covers all the questions posted above, give us a little more detail.... please ;)

Sun, 11/21/2010 - 13:44 | 744460 More Critical T...
More Critical Thinking Wanted's picture

[...] the "core" EU members used their superior banking system clout to run mercantilist policies within the EU to the peripheral lower-clout nations.

Oh, that's new - so you need 'clout' to implement a low-tax regime and to implement savage-austerity measures? I.e. the 'Celtic Tiger' was in fact clueless?

Had they instead implemented a fool-proof keynesian stimulus policy like Germany, saving up in prosperity and spending in times of need (instead of the wrong way around suggested by monetarists: spending in good times and saving in bad times), they'd be off just as good today as Germany?

That indeed answers my questions although I'm not sure you wanted to affirm them ;-)

Sun, 11/21/2010 - 14:29 | 744512 More Critical T...
More Critical Thinking Wanted's picture

 

[...] the "core" EU members used their superior banking system clout to run mercantilist policies within the EU to the peripheral lower-clout nations.

Btw., this statement is funny in itself. Do you realize that mercantilism mainly works by restricting imports while encouraging exports. Do you also realize that the EU implements a shared (no restrictions) marketplace for goods and for banking? That makes mercantilism towards other eurozone countries rather ... hard ;-)

Mercantilism is certainly done by most economic zones, such as China and the EU - towards external partners. The main tool of mercantilism in the case of China is to use government capital control to set the FX rate of the yuan artificially low - this keeps their trade surplus positive towards all developed nations and keeps their wages low - while suppressing imports as well. The EU engages in weakening their currency (and subsidizing EU-internal production) as well - but in a less state-controlled manner than China does it. (To a lesser extent import tariffs are used for mercantilism as well.)

Considering that there are no import tariffs allowed between EU states, and that the FX rate between Germany and Ireland is fixed at 1:1 (both are using the Euro as a currency), how do you fancy is Germany able to effect 'mercantilism' against Ireland? :-) [1]

Inquiring minds want to know.

Unless you can offer a good description of the 'mercantilistic' conspiracy of 'core Europe', I'll offer another, much simpler explanation: Ireland was stupid by using low taxes to attract economic players and not saving enough to cushion future shocks in a keynesian manner - like Germany did it. They also did not build up enough high quality domestic production with qualified domestic workforce - a big portion of their 'growth' was in fact mobile foreign players like Microsoft or Google who used Ireland as a jump point in the 'Double Irish' and 'Dutch Sandwich' accounting schemes to evade US (and 'core Europe') corporate taxes. The Irish financial sector also grew disproportionately as a result of this - a malinvestment. Then in 2008 Ireland got caught with pants down (no sovereign funds) by a big financial crisis, and implemented a second stupid policy: 'savage austerity now'. That really killed their ability to pay down debt - and further depressed asset prices in Ireland, squeezing their banks.

Germany and France will bail them out of course, at the cost of Ireland having to eliminate their corporate tax loopholes (which siphoon funds away from Germany/France) - while this is a windfall for the Irish who spent on stupid things in prosperity and did not save, the hands of Germany and France are forced as their own banking systems have too much Irish exposure. So the german and french taxpayer will pay the costs of these bailouts - not the Irish taxpayer, as this article posits.

So it is kind of ironic that a keynesian countries are bailing out austrian economics countries ... again.

[1] Arguably when weak economies like Estonia join the eurozone then the initial phase can be considered advantageous to 'core' EU countries - and can hence be indeed mercantilistic: as the strong Euro (and integration laws) forces wage rises in the periphery country while hurting exports of these less established players in the eurozone. Countries that join the eurozone still generally consider the benefits to far outweigh the costs. There's also a reverse process: german and french production flows to lower-wage peripheral countries - and does so without resistence and without Germany or France being able to enact protectionarist measures. In the case of Ireland this initial phase of eurozone integration, if it ever existed, is long over.

Sun, 11/21/2010 - 15:25 | 744761 Freewheelin Franklin
Freewheelin Franklin's picture

So it is kind of ironic that a keynesian countries are bailing out austrian economics countries ... again.

 

Austrian economies? Where? The core of Austrian economics is "honest money, and sound banking", or "sound money, and honest banking". What country has that?

Sun, 11/21/2010 - 16:27 | 744861 More Critical T...
More Critical Thinking Wanted's picture

Austerity is a fundamentally austrian concept (as you imply it via 'sound money' - supposely referring to a fixed monetary base), and Ireland has gone for it lock, stock and barrel.

Or are you claiming that an austrian approach would be for the Irish government to grow the monetary base and enact big stimulus spending? :-)

Sun, 11/21/2010 - 15:30 | 744770 Freewheelin Franklin
Freewheelin Franklin's picture

It seems, in my experience, the biggest critics of Austrian economics, and libertarianism, in general, are those that do not know what it is. But that's just my personal experience FWIW.

Sun, 11/21/2010 - 13:59 | 744588 doolittlegeorge
doolittlegeorge's picture

for me the answer is simple to these actually..."very well thought out questions."  it is "a blanket gurantee of all bank deposits no matter the limit."  So just who are the "euro-landers" bailing out?  apparently "it's the depositors and not Ireland."  Needless to say "those depositors are overhwhelmingly from outside Ireland" and "they're pulling they're money out of the banks" and "Bringin' it on Home." In the USA "they did raise the insured limit" although I believe the failure on Indy-Mac did result in massive and immediate losses for some very wealthy families and institutions.  I will say "since they refuse to allow actual bank failures in the US" where depositors actually lose their savings above the insured amount "how is what the USA doing any different"...save for "it save's the State" whereas in Ireland Euro-land is throwing the Irish State and by extension its Government under the bus." 

Sun, 11/21/2010 - 14:42 | 744676 More Critical T...
More Critical Thinking Wanted's picture

So just who are the "euro-landers" bailing out?  apparently "it's the depositors and not Ireland. [...]

Certainly - but you have to consider that Ireland has borrowed those funds and has spent them (i.e. it owes them), and that a large part of the debt is also internal to Ireland and a bail-out will help both external and internal creditors.

So by bailing them out (see my other posts above) the german and french taxpayers are bailing out Ireland. Clearly out of self interest (they'd let Ireland default otherwise): partly because their own institutions are affected, but in larger part because bank runs are contagious and they dont want them to spread to Portugal, Spain or (the big elephant in the room) Italy. (They also figure that right now the bailout is cheaper than the reintroduction of the Deutschmark, the Frank, the Peseta, the Lira, etc.)

So to suppose that the only beneficiaries of the bailout are external creditors and that the Irish will 'pay for the bailout' is naive at best - of course they will pay, they borrowed the funds (and most of them at very low rates) to begin with ...

Sun, 11/21/2010 - 15:09 | 744729 Kayman
Kayman's picture

MCT

When you boil it all down, it is the "something for nothing" syndrome. The one European currency dream resulted in small, non-competitive countries eating more candy than they could afford otherwise, and now they have one hell of a belly ache.

The solution, naturally, is let them have more candy.  The same process is happening in the U.S.

Central Bankers and their Puppet Masters created this mess, and these very same schemers (by default) are "fixing" the mess. The solution to central bank created asset bubbles is more asset bubbles.  Inflation is rampant, exceeded only by the propaganda that we are in disinflation.

Blame not the Irish, blame the academics and dreamers in Brussels.

Rather than helping to ensure a " peaceful "
Europe, the one-currency Euro policy has doomed Europe. Thatcher was right all along.

Sun, 11/21/2010 - 15:24 | 744760 More Critical T...
More Critical Thinking Wanted's picture

The solution, naturally, is let them have more candy.  The same process is happening in the U.S.

If you look at unemployment in Spain (well in excess of 20%(!), and for youth (who have no prior debt 'sin' at all) it's in excess of 40%(!!)) they are certainly not having any candies there.

See the unemployment stats comparison (source: Eurostat):

http://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&ctype=l&stra...

It's an absolutely non-funny situation and certainly not a 'lets continue with eating candy as we did before' situation.

Sun, 11/21/2010 - 16:37 | 744877 bugs_
bugs_'s picture

"Where exactly was the advantage of their super-low tax rate?"

This was implemented to expand an export based (mercantilist) economy.  It worked well initially as long as the target market was doing  well.

Once the target market ran into trouble - ooops it doesn't matter how much they subsidize their mercantilist operations they are dead in the water.

Sun, 11/21/2010 - 16:49 | 744886 More Critical T...
More Critical Thinking Wanted's picture

Well, there are certainly examples of export oriented countries that are doing well: Germany for example.

It was hurting when demand was drying up, but it cushioned it with big 'automatic stimulus' spending for a year until the worst of the storm was over, and then it was able to produce cars, machines etc. for China with a fully working and fully employed industrial sector - while the US and other developed nations let those sectors go bankrups, downsize, etc.

It's very risky if a demand slump is permanent - but it works very well for temporary shocks such as this one. Check how well Germany did wrt. unemployment, compared to other EU countries:

http://www.google.com/publicdata/explore?ds=z8o7pt6rd5uqa6_&ctype=l&stra...

That difference was mainly due to automatic stabilizers and due to strong labor laws and organized labor (90% of the german workforce is in unions).

The US might have managed to pull this off as well - except that the US stimulus was not automatic (built-in to scale to the industry in question) and was undersized.

(China might be another example of an export oriented country doing well after the 2008 crisis - albeit it's hard to tell how well they did because all the data out of China is controlled so heavily.)

Sun, 11/21/2010 - 00:16 | 743862 Aristarchan
Aristarchan's picture

The Germans have a problem of being the economic engine of the EU, and being a people universally hated in the EU. Ultimately, though, Germany will decide the fate of the EU.

Sun, 11/21/2010 - 00:18 | 743864 snowball777
snowball777's picture

They also have banks which are knee-deep in peripheral doo-doo, leaving them rather conflicted about the current state of affairs.

Sun, 11/21/2010 - 00:25 | 743874 Aristarchan
Aristarchan's picture

You are right....but as the 800 pound gorilla in the room, they can dictate their own terms as to how that doo-doo is ultimately dealt with. Remember, they are all under one currency, but a currency the germans can devaulate if they so desire by purchasing Dollars. A currency devalue in the EU drives their debt down.

Sun, 11/21/2010 - 01:56 | 743996 scaleindependent
scaleindependent's picture

Gold, Silver bullish, I deduce.

Sun, 11/21/2010 - 06:33 | 744119 Azannoth
Azannoth's picture

Funny enough German unemployment is at a 18 year low, things in Germany could not be going better now

Sun, 11/21/2010 - 10:59 | 744251 BurningFuld
BurningFuld's picture

I'm going to bet they actually have rules in Germany regarding bank lending to it's citizens.

Sun, 11/21/2010 - 12:22 | 744352 masterinchancery
masterinchancery's picture

Could well be--Germany had NO real estate bubble, almost alone in the world.

Sun, 11/21/2010 - 19:34 | 745103 Herd Redirectio...
Herd Redirection Committee's picture

The bankers from Germany helped inflate the bubbles everywhere else.  Regulation too effective in Germany for them to try it there,  I guess.

I found the one comment in the report interesting, they  JP Morgan Private Bank, are purchasing NON-performing corporate loans.  Hmmm, like the ones backed by collateral which you are looking to seize?  This whole crisis has conveniently resulted in the banking industry getting their hands on A LOT of collateral, in exchange for digital 1s and 0s, created out of nothing, at the moment the 'loan' was agreed.

We need to come up with a new word.  'Loan' sounds like you are giving something YOU ALREADY HAVE.  Bankers don't ALREADY HAVE the money they lend you, it is created out of nothing!

http://psychonews.site90.net

Exposing the Oligarchy, one Psycho at a time.

Sun, 11/21/2010 - 00:21 | 743868 apberusdisvet
apberusdisvet's picture

History has shown that when delusional and/or corrupt politicians and banks fail to find remedies for their delusion and corruption, they start wars.  Now all we have to figure out is who is going to war with whom, or do they just let Pakistan enable Iran to Nuke the Saudis; now that would get everyone's mind off the global economic chaos.

Sun, 11/21/2010 - 00:36 | 743884 beastie
beastie's picture

Paging Dork of Cork!

 

Paging Dork of Cork!

It really is time for the Irish people to say fuck it! Let the banks pay their own bills. If the French, German and UK banks don't like well that's too bad. It's not Ireland defaulting it's failed businesses defaulting. Only the idiot politicians turned it into sovereign debt. A change of govt. can change that policy. 

Ireland stood on it's own hind legs before the EU. They can do it again. It cannot be any worse than what's on offer right now. Ireland will default on it's current trajectory.

 

http://dailybail.com/home/instant-classic-irish-parliament-bailout-video...

 

http://dailybail.com/home/there-are-no-words-to-describe-the-following-p...

 

Sun, 11/21/2010 - 12:23 | 744359 masterinchancery
masterinchancery's picture

Too bad the Irish people are such sheep, but they are.

Sun, 11/21/2010 - 15:15 | 744746 Kayman
Kayman's picture

Master

I bet you would pee your panties if you stood on your hind legs and shouted that out on any street in Dublin.

Sun, 11/21/2010 - 19:38 | 745113 Herd Redirectio...
Herd Redirection Committee's picture

Not to be cheeky, but maybe it is time someone took  a megaphone onto a street in Dublin.

Probably better if they are Irish, IMO.

Sun, 11/21/2010 - 00:43 | 743902 Oh regional Indian
Oh regional Indian's picture

If one thinks about it, the canary in the coal-mine for the EU has always been the strange position of the UK.

They got all the supposed "benefits" but got to keep their own currency?

To me, that makes it obvious that the EU is just another game, played by the play-book of THE CITY OF LONDON.

Like all experiments coming out of that cess-pit, the EU came with a use-by date, which is clearly fast approaching. And Germany, the other great Empire pretending to be a democracy, is as much a part of the planned de-construction of the EU.

Nothing changes. UK/Germany/France and possibly the bumbling Italianos, still at the heart of the scrouge currently ravaging us all.

Throw in the Dutch Bilderbergers, The Vatican, hoe of the Pon-stiff (y) and "neutral" switzerland (should be called Swindlerland) and you have the recipe for a mass deception of staggering proportions.

ORI

http://aadivaahan.wordpress.com 

Sun, 11/21/2010 - 00:51 | 743914 desgust
desgust's picture

You are sooo right!

I can't sleep when thinking of our future (continental EU)....

Sun, 11/21/2010 - 01:58 | 743998 Oh regional Indian
Oh regional Indian's picture

Desgust, If you're not being sarcastic, it is quite frightening. 

Just the Islamic/immigrant issue, with deep, deep colonial roots is such a tinderbox for the EU.

Like most COL experiments, it will not end well.

But then again, well is relative and we're all in it together.

ORI

http://aadivaahan.wordpress.com

Sun, 11/21/2010 - 02:25 | 744024 Alienated Serf
Alienated Serf's picture

yup, economic depression and non-integrated muslim immigrants (many of whom depend on the state) are not a good combo.

Sun, 11/21/2010 - 03:24 | 744055 desgust
desgust's picture

I was VERY serious!

I spend hours and hours reading, trying to learn more about the system and what my understanding makes me sick, sick, sick! I became another person in the last years.

Sun, 11/21/2010 - 02:26 | 744026 Alienated Serf
Alienated Serf's picture

your future is the past

Sun, 11/21/2010 - 01:15 | 743945 Hook Line and S...
Hook Line and Sphincter's picture

A flexible and fluid NWO must be. Experiment after experiment, realigning, scheming, finding the snake winding way to achieve a particular goal. A planned and purposeful deconstruction of their EuroShack must be frustrating. But for what reason? A single paper or gold fiat currency to replace the euro and FRN?

I can hear J Lennon singing;

"Imagine all the people, exchanging debt notes in the EU and NAU... yoohoo oooo... you may say, I'm a dreamer...

but the nightmares just begun...

i hope someday you can join us

and not be 1 of the 100 million that will see the gun"

Hey ZH'r, this was a sing along, come on, get into it!

Sun, 11/21/2010 - 19:51 | 745135 Herd Redirectio...
Herd Redirection Committee's picture

I sincerely doubt the Globalists are planning a return to sound money (not by free will, any way).  Obviously their hand will be forced if people lose all faith in their fiat currencies and start using precious metals.  So they will probably try to keep PM markets quite volatile, even if they can't possibly depress the price forever.

 

So that means a global fiat would be the 'ideal solution'.  You would want all the benefits (printing money, bitches) of the current system, with more global control, and LESS national sovereignty (the global currency would answer to no one, but pretend to be doing what is best for everyone, naturally)

Personally, I think they want these fiats (Euro, USD, Pound, Yuan, Yen) to all be on the deathbed at the same time, and all of those countries in severe economic difficulty.  Best way to do that would be collective currency devaluation, the slow road to hyperinflation = loss of faith in fiat. 

But obviously you (Oligarchy controlling Mainstream Media) would want to misdirect people all the way, and not making it about replacing fiat currency, just about 'global economic co-ordination' or new 'global tools', or ending the global recession, etc.  This would provide the ideal platform to implement a new reserve currency.  Of course a(nother) war would help, too.

http://psychonews.site90.net

PsychoNews: Exposing the Oligarchy, one Psycho at a time.

Sun, 11/21/2010 - 02:32 | 744033 ZackLo
ZackLo's picture

I don't know about that one, the brits I don't think care much about they're membership for the eu well at least their eu election results show it...

for instance...Nigel Farage laying the smack down on rompoy...

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

Sun, 11/21/2010 - 13:46 | 744530 Non Passaran
Non Passaran's picture

First, the UK is not the only one that kept their currency and even if they didn't, why would that be bad for the City? The elite would surely be capable of getting what they want anyway. As for the benefits, taxpayers of the UK send money to the EU at a rate of about $50 million per day, IIRC (according to Farage). And the conspiracy rant about Germany, Switzerland and others is insulting and unworthy of discussion.

The EU may not last long, but the first half of your post is totally wrong.

Sun, 11/21/2010 - 23:54 | 745497 Oh regional Indian
Oh regional Indian's picture

NP, if you were a sovereign nation, would you rather keep your currency or join a group of other nations and lose said sovereignty? Rothschild said, and i paraphrase... give me the power to control money and laws can be damned, etc. The UK retained it's sovereignty. For whatever is coming. The 50 mill is the price to pay for all the other benefits that accrue from being a part of the EU (and there are some, bad as they may be in reality).

 

As for the rant, you might want to read up some real history and differentiate truth from conspiracy. Plus, if what I said counted as a rant, well, you clearly ain't read a rant yet.

How much do you know about the Vatican and the role of Jesuits in world history, just for starters? Or of Swindlerlands role, their purported neutrality, the Red Cross...

You probably believe Lee Harvey Oswald assassinated Kennedy too.

ORI

http://aadivaahan.wordpress.com

Sun, 11/21/2010 - 00:58 | 743911 Atomizer
Atomizer's picture

JPMorgan meets Don Quijote aka Don Quixote

http://www.youtube.com/watch?v=1VX139bWGfQ

Sun, 11/21/2010 - 01:07 | 743935 RobotTrader
RobotTrader's picture

Why do you guys even trust any research report that comes out of JP Morgan or Goldman Sachs?

Especially proprietary reports distributed to Zero Hedge?

This must mean that an explosion of positive economic news out of Europe is imminent.

Let's see....

Europe not looking too bad right now.....

 

Sun, 11/21/2010 - 01:18 | 743952 AccreditedEYE
AccreditedEYE's picture

I wouldn't bet a small fortune on that chart Robo...

Sun, 11/21/2010 - 09:10 | 744181 ZeroPower
ZeroPower's picture

Robo wtf?

The research areas of most banks (im not talking sell side equity reports) are usually half decent. This one comes from the PB group of JPM which is less bullshit then elsewhere - after all they manage rich people's money. If they do poorly, the rich people walk away and go to any other Swiss private banker..

And this wasn't especially distributed to ZH, these are widely available if you are a client of the firm or have access to firm research.

Sun, 11/21/2010 - 01:19 | 743953 beastie
beastie's picture

I think most people on this site don't even trust their grandmothers. 

But you are right Ireland will take some sort of bailout. Everyone will go back to sleep for a few months and we will start the hysteria all over again. 

It doesn't matter Ireland is fucked no matter what way you look at it.

Bail out / no bail out.

Really fucked/ fucked.

Sun, 11/21/2010 - 03:02 | 744047 Spitzer
Spitzer's picture

The Euro will out-live the dollar. Its a fact.

The Euro is the first non nation state currency and it marks its gold holdings to market every quarter. The paper Euro has risen 60% against the dollar since its inception and we all know what the gold side of the Euros balance sheet has done since its inception.

The EU has more gold then the US and it is China's largest trading partner.

I just laugh when I see somebody write that the Euro is a failed experiment.

 

 

 

Sun, 11/21/2010 - 04:51 | 744080 chrisina
chrisina's picture

The Euro will out-live the dollar. Its a fact.

Not a fact but a prediction. Facts and predictions are two different things.

NB: I don't disagree with your prediction  :-)

Sun, 11/21/2010 - 09:12 | 744183 ZeroPower
ZeroPower's picture

Spitzer,

Let me know when the EUR becomes the reserve currency. Then we'll talk.

I suppose you believe in the Amero for America?

Sun, 11/21/2010 - 05:25 | 744091 i-dog
i-dog's picture

"somebody write that the Euro is a failed experiment"

That depends on what the experiment was trying to prove!

It has certainly been a success in proving to the central planners that a single currency managed under the spending patterns of a variety of governments is doomed to failure. Who coulda known that German manufacturers and taxpayers would ever get upset with having to subside French farmers and English hospital patients?!

They won't make that mistake again! "Single Central Government, or Bust!" will be their campaign slogan next time around.

That's also why they now won't introduce an 'Amero' to a North American Union. It's also why they will definitely shoot for a single world government when/if they succeed in implementing a single global currency.

Sun, 11/21/2010 - 06:26 | 744113 Byte Me
Byte Me's picture

i-dog

Could you explain pls how Deutch taxpayers sub UK hosp patients, bearing in mind that the UK is in the EU but not the €urozone.

Sun, 11/21/2010 - 06:55 | 744126 i-dog
i-dog's picture

I was anticipating a bailout of the UK by the ECB in the not-too-distant future. When this happens, it will effectively be the Germans who will be bailing out the Brits.

Sun, 11/21/2010 - 07:52 | 744152 Byte Me
Byte Me's picture

I see.

But that's a bit like having the Fed or the BoJ or the SNB bail the UK out. None of which will fly.

The ECB won't be doing this any time soon because Britain uses the £ £terling not the €uro which IS the ECB's baliwick. The UK does have a strong (and disproportionate) interest in Ireland due to bank exposure, so the converse (Britain helping Eire through enlightened self-interest) seems more likely and this may be happening already if recent price action on EUR/GBP is any indicator.

But ECB (and German) assistance for the UK? After 1992 and the ERM?

That, friend, is one for the birds.

Sun, 11/21/2010 - 08:03 | 744154 i-dog
i-dog's picture

I should shut up when I'm not thinking straight. Thanks for the correction ... it's nice to know that someone on ZH thinks about what is written.

Sun, 11/21/2010 - 09:22 | 744190 Byte Me
Byte Me's picture

Relax bub!

EVERYONE at ZH thinks about what is written, but at varying levels - which is understood. Just as everyone knows that the whole Kondratieff winter  / Credit Crunch / Depression futzup will be easily written off as a rounding error by Kyle Broflovski.

Margaritas all round!!!

(Imaginationland of course..)

Mon, 11/22/2010 - 07:56 | 745904 BigJim
BigJim's picture

I agree the ECB probably won't be helping out the UK. But the Fed?

I strongly suspect one of the jobs of the Fed is to help prop up the bond auctions of the US' military allies. If the the UK's situation becomes desperate, it won't be able to 'contribute' to Afghanistan and the various other adventures (Iran, Yemen, etc, etc) our 'leaders' have planned for us.

So the Fed won't let that happen.

Sun, 11/21/2010 - 08:54 | 744178 Quinvarius
Quinvarius's picture

I agree with Spitzer.  The Euro will reign.  The idea that just because some parts of the EU are screwed up and need a different monetary policy so the whole thing must collapse is ridiculous.  You could make the same argument about any currency system anywhere.  The US is pretty big, yet has one system.  You could even infinitely reduce the system to a country as small as a a US state and say that the different cities have dfferent needs, so the currency of that small country must fail.  The dollar is in far worse shape than the Euro, no matter what the TV tells you.  Look at a long term chart of EUR/USD.  No one ran to the dollar for safety during the crash.  The tiny tick up in the dollar was barely a blip in the long term decline.  It was just a mechanical reflex to the banking system liquidating dollar denominated assets.

Sun, 11/21/2010 - 15:34 | 744776 Kayman
Kayman's picture

Quin

You cannot seriously suggest that all the divergent nations of broader Europe can be parallelled to the states of the U.S. Europe is a hodge-podge of separate countries purporting to be "one for all, and all for one". The U.S. individual states will always rally around when a common enemy presents itself.

And Spitz may well be right that the Euro survives, but this will entail Germany financing all the deficits of Greater Europe. Not impossible but not probable.

As for Europe's so-called trade relationship with China, the "great sucking sound" is European jobs getting flushed down the toilet as cheap Chinese inferior crap grows like a cancer on the European consumer. Not on. Period.

 

 

Sun, 11/21/2010 - 22:33 | 745323 Spitzer
Spitzer's picture

What about Texas bailing out  Calerfornia ? I don't think ron paul will like that.

Mon, 11/22/2010 - 08:02 | 745908 BigJim
BigJim's picture

When it comes to bailing out their fellow currencyholders, there's a much stronger sense of being an 'American' across the United States than there is of being a 'European' across Europe.

Does Texas dislike bailing out California? Sure. But not to the same degree that Germans are pissed off about Greece.

The glue binding Europe together is a lot newer and more superficial than the US' federation. The German populace (and some politicians) are already making it clear they're unhappy with the bailouts so far... I don't think there's comparable sentiment in the US.

Sun, 11/21/2010 - 13:43 | 744548 snowball777
snowball777's picture

US + IMF gold reserves > EU gold reserves.

Do you really think the IMF wants to end dollar hegemony?

C'mon Spitz. You can do better.

Sun, 11/21/2010 - 22:35 | 745326 Spitzer
Spitzer's picture

I never said it did.

The BIS/ECB wouldn't mind though, especially if Russia and Germany get in bed.

Sun, 11/21/2010 - 10:32 | 744231 The Real Fake E...
The Real Fake Economy's picture

you have to sort of trust the research coming out of JPM private bank for the most part, as their views will stray away from Investment Bank views when appropriate.  Check out the views of the PB on oil prices and speculation back in 2008 and how it differs from what the Commodity Trading unit/Blythe Masters thought on the same exact day actually!

 

http://www.washingtonpost.com/wp-dyn/content/article/2008/09/17/AR200809...

Sun, 11/21/2010 - 01:08 | 743937 e_goldstein
e_goldstein's picture

i think banzai needs to make more silver bullets.

Sun, 11/21/2010 - 01:24 | 743956 Hook Line and S...
Hook Line and Sphincter's picture

Although I considered spoofing Banzai in real time, I instead told this quite lusty and well dressed (until later when she wasn't) woman at a financial seminar that I was Tyler Durden of Zero Hedge. Suffice it to say, I got some!

Thanks Tyler!

Not only do I get educated here, but there's fringe benefits of turning fight club in to fellatio club.

Sun, 11/21/2010 - 03:34 | 744057 merehuman
merehuman's picture

Hook, admitted liar and pretender. Shame on you!

Sun, 11/21/2010 - 05:13 | 744087 i-dog
i-dog's picture

Fraud: The stock in trade of the financial community. I'll bet you left her feeling short-changed, too.

Sun, 11/21/2010 - 14:05 | 744594 hardcleareye
hardcleareye's picture

HLS you are such a pig-dog... you would have gotten it weather or not you said you were Tyler Durden.... 

Sun, 11/21/2010 - 01:16 | 743948 AccreditedEYE
AccreditedEYE's picture

Now I see why so many UCITS funds of been coming out left and right... (let's hope the framework holds up...lol)

Sun, 11/21/2010 - 01:31 | 743967 Atomizer
Atomizer's picture

The fragile system is in defense mode. Can you hear the wahmbulance?

Minor Threat - In My Eyes

http://www.youtube.com/watch?v=0Lv6RC3RhyI

You tell me you like the taste
You just need an excuse
You tell me it calms your nerves
You just think it looks cool
You tell me you want to be different
You just change for the same
You tell me it's only natural
You just need the proof
Did you fucking get it?

It's in my eyes
And it doesn't look that way to me
In my eyes

You tell me that nothing matters
You're just fucking scared
You tell me that I'm better
You just hate yourself
You tell me that you like her
You just wish you did
You tell me that I make no difference
At least I'm fuckin' trying
What the fuck have you done?

It's in my eyes
And it doesn't look that way to me
In my eyes

Sun, 11/21/2010 - 02:03 | 744003 tom a taxpayer
tom a taxpayer's picture

By DANIEL McCONNELL Chief Reporter

Sunday November 21 2010

"The Government was warned yesterday that Ireland is on the brink of widespread civil unrest -- "the like of which has not been seen for decades".

Eamon Devoy, general secretary of the Technical Engineering and Electrical Union (TEEU), told a conference in Galway yesterday that the €6bn of cuts in the Budget were "unbearable" to most people.

TEEU delegates voted in favour of launching a campaign of civil disobedience if the Government does not call a general election."

http://www.independent.ie/national-news/state-faces-civil-unrest-as-budg...

Sun, 11/21/2010 - 02:49 | 744042 Oracle of Kypseli
Oracle of Kypseli's picture

Here is what Ireland should do. Default! Roll out the Punt and start over.

Let the loaning banks die.

Have the courage to say: "Let's accept less pain now, than eternal pain later."

The only fear is banksters' wrath and revenge. Stay strong Ireland. Keep your identity and your pride.

Sun, 11/21/2010 - 06:57 | 744127 Eally Ucked
Eally Ucked's picture

You are right, it's only way from that shit. They won't be able to repay all those bailouts of the banks ever. In aftermath goverment will have to cut spending anyway but without feeding intl. banksters. Failure of Irish banks will cause chain reaction of bank failures in other countries and this way we'll achieve reset of the system, which anyway is doomed. Faster the better.

Who said that keeping those failed banks alive is so important to well being of taxpayers? And why?

Banks created money fromthin air and if that money turns back into thin air again shouldn't be so painfull.

For now they want to borrow something like 80 billion, and do 5 billion in spending cuts so not counting interest it will take 16 years to pay it back. After all those cuts their revenues will drop like a rock in which case 16 years looks like very optimistic, meanwhile they will be borrowing more of funny money. Is that the way out of it.

If the banks are so important to the economic life of the country, they will have new ones, organized and controlled according to new and much better  rules. And then maybe Ireland will be first to get out of that pile of shit procured by their bankers. 

Sun, 11/21/2010 - 09:14 | 744185 ZeroPower
ZeroPower's picture

Most of Ireland's troubles are actually with their creditors, not Ireland itself. Ireland can indeed simply 'call it quits', but this leaves the UK, Germany, the ECB, and any other entity with significant exposure, fucked.

Sun, 11/21/2010 - 11:30 | 744270 snowball777
snowball777's picture

I'd say those aren't Ireland's troubles, then, eh what?

 

Sun, 11/21/2010 - 14:29 | 744635 chrisina
chrisina's picture

Because you think Ireland isn't fucked, whatever they do?

Ireland isn't a resource rich country that can wiggle its way through after a default. Ireland's economy depended on two main pilars : a property boom and a hub for foreign investment thanks to the lowest corporate tax rate in Europe. The former is gone and the latter will not last long if Ireland defaults and is ostracized by the international investment cartels.

Obviously a bailout isn't a solution either: it's just buying time and getting fucked more gradually instead of suddenly.

The Irish are damned whatever they do. Now (default) or later (bailout), they'll have to get back to potato farming and drinking lots and lots of Guiness.

 

The Irish thought they could become one of the wealthiest nation in Europe by investing in Real Estate and being a centre of this parasitic spiderweb that is international finance and capital by having the lowest corporate tax rate. That was all fake prosperity, now reality strikes in.

Sun, 11/21/2010 - 15:52 | 744800 Kayman
Kayman's picture

Oracle

You are precisely right.  The only thing that central bankers and their puppet masters do, is create the illusion of wealth through asset inflation. Then people start chasing their tails.

It is time to reset this Central Bank created debt monster back to zero.

Sun, 11/21/2010 - 05:34 | 744095 i-dog
i-dog's picture

Ho hum ... another union attempting to incite the people to riot and thereby force the government to NOT cut spending.

The objective is simply to force the European governments into a faster bankruptcy, so that the IMF and UN can more quickly step in to control the world under a single central committee ... "in the interests of social order, world peace and prosperity". Cnuts!

Sun, 11/21/2010 - 14:05 | 744600 doolittlegeorge
doolittlegeorge's picture

stop reporting on the "alacrurate accurate."  We don't need yet another ZH'er on the watch list...

Sun, 11/21/2010 - 02:27 | 744021 Alienated Serf
Alienated Serf's picture

the EU is the most insanely undemocratic "democratic" entity in existence.  we in the US (rightfully) complain about the Fed and the federal government overstepping their mandate, but we have nothing on the EU.  The original EU CONsitution was rejected in a popular referendum by France and the Netherlands, then was reincarnated as the Lisbon Treaty and passed by their parliaments, negating the need for the eurosheeple vote in those countries.  The Irish were the only country to hold a referendum on the Lisbon Treaty, which of course was rejected, only to be placed for up for vote again with various bribes and threats made to coerce the Irish into voting for it in a second referendum.

The Lisbon Treaty is 270 pages of nonsense addressing minutia which does not even mean the same thing according to the various translations.  it is a supranational joke with no chance of survival, just like the  EMU.  Each nation has various opt outs, sections that are not binding on all and all other manner of garbage.  It kind of reminds me of the Spain, with different rights for different regions, different languages and lots of distrust and hate. Watch a Barcelona game, the stands are full of burning Spanish flags.

The EU as we know it will soon implode, it was all fine and dandy in good times, but now, not so much.  These are countries that have warred for millenia, speak different languages, have vastly different customs and histories.  Hell, half these countries are barely viable as nation states on their own.

Of course by far the biggest impediment to Euroland is the fact that the Euro had a slim chance of impeding the US exorbitant privilege and thus must be destroyed by the Fed and Treasury.

I didn't even get to talk about massive non-assimilated hordes of angry, disenfranchised immigrants.  Another time.

Enjoy the show.

 

 

Sun, 11/21/2010 - 03:06 | 744049 Spitzer
Spitzer's picture

The Euro is holding the Fed hostage right now dumb ass.

We know there are swap lines and the ECB seems really down with QE2 despite Germany screaming about it. Also the IMF is bailing out Europe, money which largely comes from the US. Now why would the $IMFS bailout out the Euro? The Euro could take the hit and bail it out themselves, but they don't.

The ECB could at any point pull the trigger on the $IMFS and bring in Freegold. The scenario I described above with bidding gold in Euros and letting a state fail would kill the $IMFS. The reason it would kill them is it's big enough to force gold into hiding and break the COMEX and LBMA. So the world would go into a panic, but after gold trading in physical kicks up the ECB and member states hit the ground running. The events would even look totally natural. Panic in EU country, gold is bought and goes into hiding. ECB uses system to revalue gold, and EU comes out swinging.

So the $IMFS don't want this to happen, it ends their game when paper gold dies. The game is extend and pretend. So to save the $IMFS system they must play the ECBs game. The ECB is basically blackmailing the $IMFS. The EU banks get access to swap lines from the Fed and bailouts from the IMF. It's a no lose situation for the ECB. Either the $IMFS play ball and bail out EU institutions or they scream "No Mas!" and the ECB takes down a member state and ushers in Freegold.

The best thing about taking down a low end member state is it does absolve them of any guilt in the eyes of the public. People are not going to think they did it on purpose, they won't think that deep. And what is the $IMFS going to come out and talk about the blackmail? There is so much blood on their hands they will be to busy running or hiding, not standing tall and calling the ECB out. Because the ECB will catch blame for not figuring out this plan sooner, they'll be called incompetent. But the $IMFS will be seen as the bad guys.

 

 

Sun, 11/21/2010 - 03:34 | 744058 desgust
desgust's picture

Nice and logical. I read FOFOA, too.

But HOW LONG can they kick the can down the road ?

And what if the EMU breaks down in riots?

People in Europe are getting nervous, they educate themselves more than ever, the comments for MSM online get more incisive. I think we won't take it forever!

 

 

Sun, 11/21/2010 - 04:09 | 744065 Shameful
Shameful's picture

lol I thought this comment sounded familiar! Glad someone thought my ramblings were of value and worth noting :)

It does presuppose that the EU planners actually had this in mind. I have seen no documents to that effect specifically. It kinda presupposes that Another/FOA were right about what was going to happen. It just fits the pieces together in that paradigm. I just think the Trichet response was interesting and how much the US is involved over there. Especially when not all that much talk on the muni side over here. Seems like would be in the US's best interest to pop the Euro to get that panic money into the Dollar. So it would seem like there is another game being played that we are not a party to.

Sun, 11/21/2010 - 05:36 | 744097 i-dog
i-dog's picture

"there is another game being played that we are not a party to"

+500,000,000

Indeed.

Sun, 11/21/2010 - 10:48 | 744242 Alienated Serf
Alienated Serf's picture

"Seems like would be in the US's best interest to pop the Euro to get that panic money into the Dollar"

Ding Ding Ding!!!

Sun, 11/21/2010 - 09:55 | 744210 fuu
fuu's picture

Preach it brotha'.

Sun, 11/21/2010 - 10:46 | 744239 Alienated Serf
Alienated Serf's picture

"We know there are swap lines and the ECB seems really down with QE2 despite Germany screaming about it."  Really, seems likes it has been nothing but bitching if you ask me, but I guess you have a unique ability to decode the truth.

Now, are you seriously insinuating the the ECB/EU wants to revive some type of gold standard?  Why would a heavily socialized, highly taxed regime want to institute a constraint of any kind on fiat?  How will they keep the natives sated?  

Also, unless I am mistaken, a very large proportion of the worlds monetary gold is sitting in the basement of 33 Liberty.  I found this blurb to be informative: "The gold is owned by many foreign nations, central banks and international organizations. The Federal Reserve Bank does not own the gold but serves as guardian of the precious metal, which it protects at no charge as a gesture of goodwill to other nations."

Haven't the Germans asked for that gold back and were given a firm no?  You seem to know more about gold then me, so tell me, what percentage of EU gold is at the FBRNY? Because if the EU wants to go gold and destroy the dollar, I don't think there will be a very good chance we will ship it over there.

Didn't tricky Dick close the gold window b/c France and the A-rabs were taking too much of it?  But this time we will just hand it over?  SO hasn't this been attempted before?

Furthermore, you make gold so valuable once again, you fan the flames for another world war, which would not auger well for the EU.  Did not Germany do this after having every ounce of gold squeezed from the after the treaty of Versailles?  From gold fillings to central bank reserves to antiquities, the Germans grabbed it all. After we won, we took it ourselves.

Gold would become the object of a resource war in which the EU would be decimated, not a good choice for them.

You have framed this as being in the interest of states, states need fiat now more then ever.  Fiat may well blow itself to hell and gold is king again, but I don't think the EU, the IMF, the Fed want that.  

The US desperately needs the dollar to maintain reserve status, any threat to this will defended with force.  Watch what happens if too many nations try to price oil in EUR or RMB.  The ability to print/borrow money at a low price is the only thing the US has left, otherwise it is game over.  

Also, don't call me a bumb ass, bitch ass.

 

 

 

 

 

 



 


Sun, 11/21/2010 - 11:46 | 744286 Eally Ucked
Eally Ucked's picture

"Gold would become the object of a resource war in which the EU would be decimated, not a good choice for them."

Decimated by who or what?

Is this your answer: "The US desperately needs the dollar to maintain reserve status, any threat to this will defended with force.  Watch what happens if too many nations try to price oil in EUR or RMB."

If so, I think you have overblown image of US power, I would say. Any way after all those statements you, yourself nicely sumarize american power:

" The ability to print/borrow money at a low price is the only thing the US has left, otherwise it is game over. "

Sun, 11/21/2010 - 12:27 | 744366 Alienated Serf
Alienated Serf's picture

"Decimated by who or what?"- our threat is implied, we still have bases there...

but what about china and russia? the EU will need our protection no?

 

"Any way after all those statements you, yourself nicely sumarize american power: " The ability to print/borrow money at a low price is the only thing the US has left, otherwise it is game over. "

Exactly! that is all we have, and for right now, a massive military funded by that printing power.  We are getting desperate and will use any means possible to maintain the status quo.

Desperate empires do desperate things.......



Sun, 11/21/2010 - 13:20 | 744484 Eally Ucked
Eally Ucked's picture

If something happens your bases would be liquidated in 24 hr or less. Just be realistic!

Sun, 11/21/2010 - 14:58 | 744706 Non Passaran
Non Passaran's picture

In that case it would make sense for the EU to align with Russia (and even China).

Obama won't start new wars and the next president will more likely than not cut defense spending, so the EU and others just need to be patient few more years.

Sun, 11/21/2010 - 22:51 | 745365 Spitzer
Spitzer's picture

I called you a dumb ass to get your attention, my apologies.

Now, are you seriously insinuating the the ECB/EU wants to revive some type of gold standard?

 

You forgot about the BIS. Its not a gold standard, they just want to float the price of gold to capture the collapse of the dollar.

what percentage of EU gold is at the FBRNY?

what are you implying ? A gold war, litterally ?

Because if the EU wants to go gold and destroy the dollar,

 

Its not a matter of it wanting to go gold, it did since inception.

you fan the flames for another world war

 

No you do, you dont think the FBRNY will release any gold.

defended with force.

Go get em Obama !

 

 

 

 

Sun, 11/21/2010 - 22:53 | 745373 Spitzer
Spitzer's picture

I called you a dumb ass to get your attention, my apologies.

Now, are you seriously insinuating the the ECB/EU wants to revive some type of gold standard?

 

You forgot about the BIS. Its not a gold standard, they just want to float the price of gold to capture the collapse of the dollar.

what percentage of EU gold is at the FBRNY?

what are you implying ? A gold war, literally ?

Because if the EU wants to go gold and destroy the dollar,

 

Its not a matter of it wanting to go gold, it did since inception.

you fan the flames for another world war

 

No you do, you don't think the FBRNY will release any gold.

defended with force.

Go get em Obama !

 

 

 

 

Sun, 11/21/2010 - 14:06 | 744604 doolittlegeorge
doolittlegeorge's picture

so BB's "evil twin" should arrive and "blow up Europe and save the USA."  Hmmm...interesting...

Sun, 11/21/2010 - 09:21 | 744189 ZeroPower
ZeroPower's picture

I didn't even get to talk about massive non-assimilated hordes of angry, disenfranchised immigrants.  Another time.

That's their fucking problem. They don't want to assimilate. Honestly it looks like Little Algeria here in southern France. All of them catch the first boat up here and make their ways to wherever their friends went. And they fucking argue they can't have every single same facet of their culture here as they do back home. Hey idiots, you want your own culture? Stay the fuck home. But no, Africa & ME is shit so you come into a developed nation and free-ride of other people's shit while bitching you can't have everything your way.


Sun, 11/21/2010 - 09:52 | 744209 Alienated Serf
Alienated Serf's picture

i don't really care whos fault it is, though yes, the various "they" in europe have little to no inclination to assimilate.  though the euro govs really took lack of interest to a new level, tolerating honor killings and generally treating the ghettos as no go zones.

regardless, my comment was more about instability then a social critique.  if the austerity hits the wall and the gov. cheese is cut off, it will get very ugly, very quickly.  

Sun, 11/21/2010 - 11:35 | 744276 ZeroPower
ZeroPower's picture

Yes, in terms of instability it is already quite evident. Especially with 'their' outrage how Sarkozy is calling for a more closed French society.

Even know as gov funds aren't cut off, things are starting to get ugly. So one can only imagine what happens later on in the cycle of fiscal austerity. 

Sun, 11/21/2010 - 13:00 | 744443 twotraps
twotraps's picture

really interesting comments, totally agree.  the whole Euro was a 'political' idea that was driven to reality by the idea that a Euro Block would dominate the US economic block and sold with promised steps toward eventual political union.  Wow, ever lived in Europe?  You think a french guy wants a guy in brussels deciding anything for him??  Look no further than france holding the final Euro ribbon-cutting ceremony hostage until the other countries agreed to put a French guy into the Non-political position of ECB Head!!!  Shockingly, Wim D resigned early and we have Monsieur Trichet.  Love it.

Sun, 11/21/2010 - 02:39 | 744035 Lothar the Rott...
Lothar the Rottweiler's picture

I can't get into chat?  Maintenance or another reboot needed?

Sun, 11/21/2010 - 05:21 | 744090 bluemaster
bluemaster's picture

Robo I agree again with you  I prefer United states of Europe ,USA empire gone for good . I live in Australia  if I have to move prefer Europe , USA not fucken way . Plus made nice profit going long on DAX and closing each session just in case :-)

 

Sun, 11/21/2010 - 05:32 | 744094 Misthos
Misthos's picture

ANOTHER/FOA's analysis on the  Euro misses one HUGE fact.  Much of that European gold is in New York.  It's called "custodial gold."  During the dollar/gold redemptions of Bretton Woods, much of that gold ownership transpired on balance sheets, not in physical delivery,

Possession is 9/10ths of the law.

See my post:

Don't Discount the US or the Dollar Just Yet

http://fiatcollapse.blogspot.com/2010/11/dont-discount-us-or-dollar-just...

The US will take that gold - just before "Freegold" materializes.  You know why?  Because it can, and that's what Superpowers do.

Sun, 11/21/2010 - 09:39 | 744200 Byte Me
Byte Me's picture

There's probably a fair chunk of it lurking in the Alps too.

Might the "time to worry" be precipitated if the various €urozone contributor CBs requested phys delivery of such custodial holdings to another (non-US) location?

 

Sun, 11/21/2010 - 12:08 | 744321 Misthos
Misthos's picture

Think of it this way - if they ask for their gold, they trigger their own demise, as the US obvious response will be "hell no."  Who has the gold then?

The EU can't possibly want freegold.  C'mon folks.  Isn't physical better than paper?  What's good enough for the investor also applies to sovereigns.

And don't forget, the US never wanted Germany to re-arm after WWII - and when France and Germany asked for dollar redemptions for gold - the US still mostly "held onto it for them."  Don't underestimate the US.  By the way - that doesn't mean the US middle class will be better off.  That's another issue.

So with what army is Europe going to get this gold?

I have also written about the meeting between France, Russia, and Germany last month - the US was not invited.

If you ask me, Germany is in a pickle.  They don't physically have gold, and they own paper debts from the PIIGS.  The PIIGS have the last laugh - they consumed Germany's economic output, and in return gave Germany worthless pieces of paper - IOUs.

China, are you listening?   Because that's the Chinese-US relationship.  That's why China is accumulating gold - they have what I call a "by any means get gold within our borders and we'll worry about how to make it 'official reserves' later."

fiatcollapse.blogspot.com

 

Sun, 11/21/2010 - 13:07 | 744455 twotraps
twotraps's picture

Russia France and Germany meeting....gotta love that.  At the end of the day, Russia does not negotiate.  Each country will come out of that meeing (the very same meeting) thinking they killed it!   France talks them to death, germany would come out ok, Russia eventually gets pissed and a few key people are later found in their trunks, game over .

Sun, 11/21/2010 - 13:15 | 744473 Byte Me
Byte Me's picture

Likely,

"Hell no" loses the US any remaining credibility as a trustworthy trading or custodial partner and the ROW beats a hasty retreat to the nearest exit.

All for the sake of a few tons of the yellow stuff.

Not very likely to happen. The US need for what the ROW provides, far outstrips the rest of the world's need for American arrogance.

Sun, 11/21/2010 - 13:37 | 744524 Misthos
Misthos's picture

Relationships amongst countries, unlike most healthy human relationships, work with leverage and self interest.  Arrogance is a part of that.

I'm no fan of it, but let's be realistic and grown up about it.  Either you have power, or you don't. 

I think it is equally arrogant and naive of some people to think that Europe will partake in some Freegold gold-backed Euro experiment that will crush the US Dollar - all the while much of that EU gold is in New York City.  

Arrogance beats naivete everytime.  I'm no jingoist neocon - but I am realistic.  I was no fan of the Iraq War - but I have to give George Bush his due - the guy got things done, even if I and most of the rest of the world didn't agree with it.  And don't think for a minute that Obama is much different than W was.

Sun, 11/21/2010 - 10:32 | 744230 Spitzer
Spitzer's picture

Who has bigger balls ? Obama or the Italian PM ? Sarkozy ? Merkel is German, we know what they do when they are pissed off.

Sun, 11/21/2010 - 10:58 | 744250 Alienated Serf
Alienated Serf's picture

are you being serious?  you have too much emotionally invested in the freegold theory. france and italy are surrender artists extrordinaire.  the germans may fight, but that didn't work out for them twice already.  

this is really a non-starter anyway, our threat alone is enough to shut them up.

all chips are off the table if they are creating a black hole death ray at CERN, otherwise forget it.

Sun, 11/21/2010 - 23:00 | 745398 Spitzer
Spitzer's picture

hahaha

You are the one with all the emotion, you are basing your whole premise on the idea that the EU will not get its gold out of New York.

Who is the goldbug here ?

Wed, 11/24/2010 - 02:33 | 751727 qussl3
qussl3's picture

Gold for better or worse is at the very least a powerful symbolic store of value, and by extension possession of it denotes power.

There is absolutely NO way that the US will willingly relinquish the gold held in its vaults.

Beliveing otherwise would suggest that the US empire with the world's largest and best funded military by CHOICE, not necessity, would be willing to go into the sunset with a whimper.

 

Sun, 11/21/2010 - 11:39 | 744277 ZeroPower
ZeroPower's picture

Sarkozy, hands down.

Merkel attempts to look assertive but hell, her country is doing great, lowest unemployment in years coupled with low labor unit costs - she can still give a lot up before really putting her (nation's) foot down.

Sun, 11/21/2010 - 12:46 | 744418 snowball777
snowball777's picture

Burly-scones FTW.

Sun, 11/21/2010 - 18:32 | 745013 Sun Tsu
Sun Tsu's picture

The Germans first, and then the Indonesians, last year transferred tons of gold from NYC to Berlin and Jakarta banks where it belonged. Why risk FED Alchemy in the present case..

Sun, 11/21/2010 - 05:58 | 744102 BigDuke6
BigDuke6's picture

i'll quote Turd Ferguson when he mentioned on another thread that the timing of all this ireland news is interesting.  its been hanging around for a while.

the dollar gets stronger and commodities (inc silver)  drop.

Someone is doing ok out of that.

But its not going to stop the longer term weakness of the US$.

Sun, 11/21/2010 - 15:07 | 744727 RockyRacoon
RockyRacoon's picture

If you look at every gambit being a move to make bankers win, you have a complete picture.  One could supposedly act on that in investing, but some actual push-back is taking place.  Could the citizenry actually put a stop to this looting?  Time will tell.

Sun, 11/21/2010 - 07:48 | 744151 AnAnonymous
AnAnonymous's picture

Funny. I support the fact that the Euro will disappear. On the ground that all currencies so far have disappeared (minus those waiting in the death corridor)

 

Still the Euro end is certainly not for tomorrow.

The guy underlined one point: europeanisation, social engineering of a european people.

My bet is that is going to be the way followed by the Europeans, a forced march toward a European people.

European national peoples know that they have no other exit than relinquishing their current identity to craft a new one.

So wait for a lot on pressure on minorities as it is the common case anytime a majority faces such a situation.

My bet on no euro demise but a forced march towards a European people. Which is going to be extremelly severe on minorities. 

Sun, 11/21/2010 - 09:23 | 744192 ZeroPower
ZeroPower's picture

TD,

If only all research reports were as concise and didn't smell of bullshit like sell-side stuff!

Great posting man.

Sun, 11/21/2010 - 09:34 | 744199 Temporalist
Temporalist's picture
Widespread Silver Bar Shortages

By Patrick A. Heller on November 18th, 2010

"As of today, there are no longer any regular wholesale supplies of the 1 ounce through 100 ounce silver rounds and bars available for immediate delivery.  It may be possible to locate incidental quantities of some product, but most wholesalers are now promising two to four weeks delivery to allow time for the silver to be fabricated.

As a result of the shortages, premiums have started to rise.  So far, the increases have been modest, on the order of 0.5-2%.  However, if the shortage grows, expect to see further and larger premium increases in the coming weeks.  We could see a repeat of the late 2008 gold and silver buying frenzy, where product availability got as slow as 1-4 months after payment."

http://news.coinupdate.com/widespread-silver-bar-shortages-0542/

Sun, 11/21/2010 - 10:16 | 744215 DavidC
DavidC's picture

So why does it take the likes of ZeroHedge and the far less subtle and nuanced reports by Ambrose-Evans Pritchard for the sophisticated and PhD led JPM to come out with this conclusion after the horse has bolted?

Gold at $300 per ounce - "Don't touch it, it's a barbarous relic' (etc). Gold at $1400 per ounce 'We think gold is a good buy'. Euro at $1.18 'Sell the Euro for parity'. Euro at $1.34 'Buy the Euro'. And so it goes on, these very, oh so very, clever people...

Do I think Europe's Grand Experiment will survive? Well, given all the risks of default, and having recently seen a programme on UK's Channel 4 about the milking of the system by Euro MPs (so what's new?), I think it will collapse (link for those who are able to view it);

http://www.channel4.com/programmes/dispatches/4od#3139895

But I also think the US will collapse if it doesn't do something responsible soon (the actions of the TSA are just another symptom of a system in decline).

I wish I was as clever as that.

DavidC

Sun, 11/21/2010 - 11:41 | 744279 Atomizer
Atomizer's picture

ERIC CANTONA "KILL THE BANKS" (A MUST SEE)!

http://www.youtube.com/watch?v=-Uop5R7E314

Sun, 11/21/2010 - 14:08 | 744554 Atomizer
Atomizer's picture

Thanks. Was in Chicago on Thursday. Missed the ZH post. Attended the Greenbuild conference that day.

Lots of great technology out there, but not feasible. Everyone wants their hand in the cookie jar.

If the guy at the Eaton booth reads this site, he will know I'm the pick in the audience that created laughter during his presentation.

  • Charging sites will not sell energy, but a fee to recharge battery.
  • AC fill station costs $25,000 for 4-6 hour recharge time.
  • DC fill station will cost $50,000 for 40 minute quick charge.
  • Owners of battery operated cars are encourage to use government tax credit for purchase of AC or DC charging systems.
  • PUCO hasn't developed the US interstate laws for use of this systems. The only law, electricity cannot be resold.

At the question & answer session of the presentation. I told him that the best business  vision is to start a towing company by assisting a distressed motorist to the nearest service recharging station.

Team America - Eaton Upchuck Scene

http://www.youtube.com/watch?v=U68s4JI22Zk

Sun, 11/21/2010 - 14:09 | 744612 doolittlegeorge
doolittlegeorge's picture

you're "the pick" alright "you bubble bursting, ego busting, asdf;lkjdsing Atomizer you!"

Sun, 11/21/2010 - 16:56 | 744892 snowball777
snowball777's picture

Not economically feasible...yet. The problem being that, by the time it is, we'll be post-screwed.

Sun, 11/21/2010 - 13:06 | 744433 Atomizer
Atomizer's picture

Albert Bartlett on Arithmetic

http://www.youtube.com/view_play_list?p=6A1FD147A45EF50D

Everyday I wake & decide on driving one of 4 cars. (2) 5.4L, (1) 6.0L or (1) 3.6L

Oh. how I try to contribute to exponential growth.

 

Sun, 11/21/2010 - 14:23 | 744638 doolittlegeorge
doolittlegeorge's picture

Actually I still prefer a good old fashion 5.4 liter Ford Triton "with pedal to the metal and 10 mpg" and "arm over girl, hand on beer, hand on boob and third hand on wheel" while passing EVERYONE of course, especially "the coppers."  You got nothin' on me Badger! NOTHIN!  Now insofar as "European Monetary Policy" is concerned...it strikes me that "they don't have a banking sytem Continent wide" and "as such have a default setting to a King Euro."  Clearly "this is not to the benefit of those on the periphery" and leads to the inevitble outcome of "bailouts that result in massively higher interest rates for them but not the Center."  In other words "throw the periphery nations under the bus so as to protect the center's banks" seems to be the patently obvious "choice" by the ECB here. And of course "the German economy seems to be doing just fine."  I find this policy while HIGHLY destabilizing to have the potential to be "highly effective" provided "the Spanish don't decide to invade France."  Of course the "delployment of The Financial Weapon of Mass Destruction against Spain" seems more than just "an act of war" to me--more of "an act of annihilation."  Perhaps that is the intent...Needless to say if what is being reported here is true..."good bye Ireland."

Sun, 11/21/2010 - 14:30 | 744657 Atomizer
Atomizer's picture

5.4 liter Ford Triton

 

Actually, two Lincolns. Mark LT & Navigator

Sun, 11/21/2010 - 16:59 | 744900 snowball777
snowball777's picture

Sound, fury...

Triton: 0 - 60...5.7 secs

Tesla: 0 - 60...3.7 secs (oh look, there's a truck in my rearview attempting to get up to 80mph, how quaint)

Sun, 11/21/2010 - 21:44 | 745266 loub215
loub215's picture

Perhaps the answer, and criticism, is not what kind of liberal/conservative policies are in place, but rather what idiots 1) are borrowing the money, 2) are spending the money, and 3) are benefiting from the lax standards.

Government is NEVER the answer to the problem. Free markets are ALWAYS the answer (though it sounds like some folks don't like the answer) be cause eventually they reach a consensus not reachable by government fiat, and that consensus clears up the market. some countries should NEVER be allowed to run up debt, simply because they have  a track record of avoiding responsibility, and hence they distort the market for others of that demographic (i submit Greece as an example). what I see, and this is worth what you pay for it, is a generation of morons across the world, at all levels of the socio-economic spectrum, that acted like irresponsible children with their money, and the money of others. More or less government is not the answer. Bringing severe and certain consequences to bear on these individuals, governments, and corporations is the only way to teach this generation to act responsibly. You cannot legislate morality or intelligence. Darwin must work to correct this ignorant and fraudulent behavior. Fuck them all!!!

As we will all bear the consequences eventually, let's get it over with so those of us with common sense can get on with our lives.....

BTW, don't give too much credit to the high tax regimes...The Germans (can you say reparations?) and the French (can I borrow some dough to rebuild that which I could/would not defend...)have been here before. They understand the necessity for responsible borrowing. BUT, their banks saw no problem lending to these idiots. Why? Because it is an easy way to make a bonus while conquering a foreign government that may threaten your economic power... Just a thought.

WTF

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