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Nigel Farage On Whether Italy Is Next
As we have been highlighting for quite a while, the 5th member of the PIIGS, Italy, has emerged very much unscathed so far from the European sovereign debt fiasco. Is that merited? Not according to famous euroskeptic Nigel Farage, who gives another unvarnished, and uncensored interview with RT, in which he lays out his reasons for why a plunge in Italy bonds has at best been delayed.
As a reminder, here is the exquisite summary of Italian prospects laid out by Citi's Willem Buiter last Friday.
Italy
Until recently, Italy had been largely
shielded from the sovereign debt turmoil, despite its adverse starting
position — it entered the crisis with the highest general government
(gross and net) debt-to-GDP ratio in the EA — and its historically poor
performance during past episodes of heightened risk aversion.
In
our view, relatively tight fiscal policy through the crisis (Italy
hardly engaged in any fiscal stimulus) and relatively favourable private
sector gross debt, net debt and financial net worth positions make for a
much lower degree of overall (public plus private) gross and net
indebtedness than in the rest of the EA periphery. Indeed, private plus
public gross debt as a percentage of GDP ratios are similar to the
levels in France or Germany. A high private saving rate and small
general government deficit supported a smaller current account deficit
than in the rest of the EA periphery and Italy has a comparatively sound
domestic banking system, despite rather low capital ratios. A fairly
large domestic investor base, reflecting large levels of private
financial wealth, is also likely to make the total investor base
somewhat more stable than in countries with high levels of foreign
ownership of sovereign debt, such as Portugal and Greece.
However,
like Portugal and Greece, Italy suffers from some longstanding
structural weaknesses that depress its potential growth. Poor
productivity growth and adverse demographic trends will continue to
weigh on its trend growth rate, which we estimate to be just below 1%
per annum. Moreover, the gross general government debt-to-GDP ratio
should remain the second largest in the eurozone (after Greece) for the
next few years, and it will most likely continue to edge up in the near
term, likely exceeding 120% of GDP in 2011.
Gross refinancing
needs should thus stay high and increase the vulnerability of Italy both
to funding and liquidity crises and to self-justifying solvency crises
should sovereign risk premia rise substantially.
A continuation
of the fairly conservative fiscal stance of the Italian government
should provide some reassurance to markets about the long-term
sustainability of the Italian debt. A major political crisis, however,
would constitute a downside risk and could provoke tensions in the
market for Italian sovereign debt. In any case, general government debt
ratios anywhere near the current Italian level would constitute a source
of vulnerability to roll-over crises and ‘sudden stops’.
At this
stage, we consider it unlikely that Italy will require access to the EU
facilities. Should it do so, it is clear that the current size of the
EFSF would be insufficient to satisfy Italy’s funding needs. It would
then once again be the ECB that would need to be called upon to stave
off sovereign default.
h/t Mike
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What you need to know about Nigel Farage is that he is a passionate europhile ;p
You can listen to "An Evening with Nigel Farage" a speech he gave to university students in late 2010.
http://www.youtube.com/watch?v=goLWDAyZ5Nc
My guess is IMF and ecb will buy bonds like they did with portugal today. Keep it going.
Just a billion buy today rallies all of Europe and us. Cheap way of extend and Pretend.
Exactly! Why even speculate, or for that matter, care "who's next?" The money will continue to bail everyone out. Not even worth the bandwidth to post this stuff any longer.
yes Mr Wanker..and pass the bill on to us from money they print..it is assholes like yourself that allows this to happen....let us know what trailor park you will be living in so we can send you a post card when the shtf in a big way..man are you an ignoramasss or what..
I am still wondering whether he is a troll or an extreme idiot.
Either way, it is noise.
Whether HW is a troll, extreme idiot or other manner of incorrectly spelled jibe, the truth remains that just because he fails to take a doomsday view of things does not make "people like him" responsible for the world's current state of affairs. That is preposterous.
For the record I do not share Harry's views but things are degenerating here into a polar-opposite groupthink akin to what the sheeple are enjoying.
Please, something new for once people....
"let us know what trailor park you will be living in so we can send you a post card when the shtf in a big way..."
How many times can you people possibly post "when the shit hits the fan". I'd bet I've heard that 1,000+ times on this site in the past year. It's easy to say "when the shit hits the fan" because some day it will. Some day the sun will explode too. Am I supposed to sit back and wait for that too??
Well, Harry to be fair: even you must acknowledge that the normal historic trend for markets is to rise on 90% of days, and fall seldomly -- except every few years when the fall is catastrophic.
Saying that the bears are wrong, or are somehow off schedule is silly if you recognize how markets normally move. The bullish case is easy to make on a day to day basis, and timing a crash is probably the most difficult thing for any investor to do.
You're taking the easy side of the argument and using granular, daily data to refute a rare event which is notoriously hard to predict.
Not exactly a position that deserves an equal platform.
If you want to argue an equally difficult bullish case -- argue your case for the next top the market will make before it crashes.
Go on. I dare you.
+1
Are you serious???
When you read daily that a "crash is imminent" or some ridiculous event on the other side of the world will crash the market, how is it even remotely possible to argue with someone who has taken the other side of that and been correct??
Your logic is completely flawed here. Not a personal attack, just bewildered that in the face of everything posted here on a daily basis, usually consisting of something negative or doomsday, that you could possibly argue with those who have been spot on.
In a true "free market" most of what the posters on this site have predicted, and possibly even yearned for would have come about years ago. But as you so correctly point out, we do not have a free market. Rather we have Central Banks who will do their damndest to support the status quo. And they have a formidable weapon in the shape of the printing press to assist them.
But there will come a point where the universal laws will prevail. People who have no money, lending to people who have no money for the benefit of people who have no money is not, in all conscience, the best way of managing our affairs, and I think we all know that at some point it will all go tits up.
But in the meantime, life has to go on, and bills have to be paid, and maybe the lesson we must learn is that waiting for the apocalypse lets a lot of opportunities slip by.But just make sure that when the earthquake comes, as it inevitably will, you are not in the building.
Just as every mode of transport has a load bearing weight limit, so does every system have a limit of tolerance before it reaches a point of instability or chaos. What you see on this blog of "doom and gloom" posts is, in essence, some very astute observers who are watching a cart being filled over its limit and pointing out the fact that at some point, that instability will be reached.
No one really knows when, just as no one knows the exact tolerance of this experimental system we are in, but you can be sure there is a limit, and we are close if not already in freefall.
Oh please. Spot on? All you've said is "I think there won't be an earthquake tomorrow". And you're patting yourself on the back for being so precise.
Harry, you're proudly predicting the probabilistic outcome. It's silly.
I think that many around here, including myself, hold a certain resentment of those among us who would fight to protect the status quo, as long as they're able to maintain their slice of the pie. Many of us are unwilling to tolerate the sick joke that has been made of our free market system. Is it so hard to understand why those of us who feel that way take issue with the point of view that we should just live with the system and all of its corruption because it will never be changed?
Downrodeo,
Well said. The fact is the only way to root out the corruption is likely for the system to fall apart first, causing participants to seek economic vengeance upon those who have polluted the system.
You will not hear from Harry on your thoughts because, of course, his bullish case for the market depends upon an interventionist Federal Reserve that is at the heart of our problem [currently] causing most of us to consider our once free market to now be nothing short of a travesty. Today's bulls require the cake and to eat it too.
On the day Ben pulls the plug on his insanity, do you think he will email Harry to tell him to sell his shares of Apple? Will Ben let any of us know ahead of time?
There is no investable thesis for the current equity market. As well, capital cannot form, nor can this nation's economy heal, while the current crop of criminal syndicate Wall Street bankers are still in their various seats of power.
I'm with you, rodeo
+1
+1 you said that better than I ever could.
Everybody, including wangman, must realize that the system is hurting us, even if we might be profiting off of it [at the moment]. Eventually, with enough thought and observation, it will become apparent that total and utter collapse is probably the best option for us, given the current circumstances. From that premise, it is easy to understand that a dismantling of the system would be more beneficial sooner rather than later.
Or the Iceland Option.
IMF: "Here is money. You are now slaves."
Iceland: "Fuck you and the jackass you rode in on. Get the fuck out."
I don't think so - we have become too globalised to be independent - Ireland has always been controlled by outside forces - the Republic was a sham since its inception - Rome and London ran this gaff , now we just have another layer of overlords.
What he said.
Also, while I will not profess to having a crystal ball, I say things can only get so bad. Should a certain threshold be crossed, the carefully crafted illusion collapses. Having a low credit score ranks rather low when true hunger sets in. Just my.02
Ok, BTFD bitch, and bugger off, leave us with the SHTF syndrome alone.
Are others losing patience with people who are smugly taking glee in this destruction of our economy and country for a quick buck?
Anyone?
If you are informed and see the inevitable, why not profit from it?
These politicians seem to not give a damn, and they wont until it is too late.
I would rather things be great and 'normal', but that is not in the cards.
The floor will fall out any time. Its hard not to have some compunction profiting off the greatest fraud in history.
Riding metals up and shorting is more my style.
Exactly! Just try to do as little damage to your fellow man as possible. Don't support the fraud if you can help it.
Until the printing press dies, none of these countries will default...PERIOD!
"Until the printing press dies, none of these countries will default...PERIOD!"
Actually, countries with externally funded debt are at the mercy of the bond markets. Any attempt to print their way out would be met with the brutal reality of rising interest rates. It is a hobson's choice that will inevitably lead to defaults.
"Until the printing press dies, none of these countries will default...PERIOD!"
Actually, countries with externally funded debt are at the mercy of the bond markets. Any attempt to print their way out would be met with the brutal reality of rising interest rates. It is a hobson's choice that will inevitably lead to defaults.
Externally funded by who? ECB, IMF? Where is their "extra" money coming from to buy these countries bonds? Where is the money coming from in Japan to purchase Port debt? I'm not necessarily talking about the actual country printing it's own money.
Wow, they allowed him 10 minutes of meaningful dialogue. This would never happen in the US.
+1. I knew there was something that seemed odd about the interview - that's it, it's not in 30 second chunks.
Sad to say but the content is better, the presentation more balanced, and the reporting better informed from outfits like RT and Aljazeera than from our Megalo-Media Propagandists who do little other than yell, scream, lie and misdirect.
True, though you'd probably find that when reporting on Russia, RT would be just as panglossian as our MSM are about the West.
And the same for Al Jazeera when reporting on Qatar...
bailouts just happen now without notice or public accounting secretively.
bailouts just happen now without notice or public accounting secretively.
The citizens of Europe are far more vocal and likely to make their points heard than we are here in the US. Germans, and possibly the French, will make a very big deal about these continued outliers being bailed out and anyone would be silly to think that austerity won't contract economies that are already constrained. Europe has a good history of enacting change through protest and demonstration and that's what needs to happen in all likelihood.
The Euro as a monetary system seems doomed. The dollar is as well but the Euro doom chart seems to be picking up speed and it's unlikely that the citizens of Portugal, Spain, Ireland, Germany, France, and Italy will allow the show to continue in the same manner without causing some major problems.
Buy gold and silver; it's like popcorn at an economic horror show.
Where the hell are the Germans? I have to assume they know these checks will be written in their name. Didn't hear as much outcry on this side of the pond from them about Ireland. Would love to believe that at least one nation will stand up against getting pillaged, but I'm still waiting. Seems to this American that the German leadership will sink Germany to keep the EU deam alive a little longer.
As we learned after WWI don't stick the Germans with the bill to rebuild other countries.
They tend to go, well a little funny in head.
Can't make that comparison. The Germans of the 1920s-1940s are not the same Germans of today. Much like the Americans of the 1920s-1940s are not the same as today. Cultures move on and change. So I don't know if we can use that type of historical thinking as a guide. If anything there is leverage on them, look at Greece and demanding money as war reparations even still.
However when anyone is forced at gunpoint to pay for anther's mistakes or pleasure, and has their noses rubbed in it they tend to get bitter. Stirs of very powerful emotions.
Just wish the Germans say screw it, we want our own currency. We produce, they don't, we are getting tired of bailouts, debt and exchange loses.
From what I heard they want that. But like most 'democratic' nations the politicians do the will of the oligarchy not the people. Every new face brings no change except a new line of rhetoric with a new face, the policies remain the same. So I'm not optimistic about Germany bailing till after they are ruined by being forced to secure all EU debt with their credit line.
You have to understand that the Germans have been huge winners from the Euro project. A captive Eurozone audience paying for German goods in Euros, and with cheap rates to borrow to buy as much as they can, while their competitiveness is destroyed. Now its gone pear shaped, they can't just run away immediately. Instead, they will grudgingly keep the currency weak in exchange for determining other nation's fiscal policy, and keep exporting to Asia hand over fist. The Germans are laughing, the French are terrified. Happy days for Frau Merkel, Europe finally conquered and not a single shot fired...
Ok lets play.
Where does Germany get their electric power? Where does Germany get their raw materials to build those exports? That's right, from other nations. So it has to buy them. If their currency is strong those components for the manufacturing is cheap, if currency is weak then they must pay more. Guess what paying more for resources to use to use in manufacturing does? It brings the price of the good up.
The only conceivable advantage of a weak currency is to fool the locals into accepting less for wages. Problem is Germany has been a high wage nation for a while, even before the Euro. I was a small child but I still remember reading an article comparing autoworkers wages in dollar terms around the word back when they had the DM, and they were the best paid.
As far as captive audience, they would have had that without the Euro. As long as the borders were open they would have had that advantage because the Germans make better products. Would you rather drive a French car or a German one given the choice?
Germany is not the winner here. The one signing checks to give away money is usually not the winner. Personally I would love a system where I got to live outside my means and then get bailed out by someone else if all it took was calling them "the winner".
Jolly good. German utility companies are huge, and multi national. They generate a lot of electricity domestically, and the nuclear lifetime extension plan will keep that a reality for a while. Gas is a different matter, of course.
German manufacturing companies are more price setters than price takers, due to the value added nature of what they produce. The more Asian currencies revalue upwards, the more translation gains those companies will make back into Euros, and therefore profits. No reason to cut jobs in such a scenario.
Not sure I made my point clear on the captive audience thing. Sure, the periphery would buy products from Germany under any scenario, but not as much as they have done given an inappropriately loose monetary policy for too long. And they paid in Euros, so no translation losses, since the Dmark would undoubtedly have been far more expensive by now if it had remained.
Germany is now in a position, having squeezed the periphery for years, to determine fiscal policy for the rest of Europe. Thats control, and its what the politicos want. As for the people, they don't care too much at the moment, as their pockets are full. I think you need to live over here to get it properly, its not black and white. The end game was always about control, not purely relative economic strength.
Back to you, sir...
Yes, and where do those companies import power from? I'm no expert but a simply look tells me they import power from France and Russia respectively? Now I'm most certain that Germans don't own Russian gas lines. But if you would provide a link to a document to refute that I would love to see it. I would love to see how they get cheaper imports from weakening their currency.
Wait, so they are price setters, but they must have a low currency to compete? Would you care to settle on one or the other?
Perhaps, but the world has treated the Euro as the DM, not the Lira. Now again you say they can set their own price because of quality, so if that is the case why would a strong DM matter? They would buy their iron ore, coal, oil, ect much cheaper, and then pay their higher German wages because of their superior German product. The only reason to have a weak currency is to artificially keep wages low. Even Keynes talked about this, it's pretty much common knowledge. The people hate pay cuts, but if you cut the unit of measure they are less likely to notice. It makes their work cheaper, but kills their buying power and their ability to import goods.
As to transaction costs, please! This not a significant barrier to trade at all. It makes book keeping easier, but you point to multinationals and then assume that these companies cannot handle simple import/export arrangements because of the costs of moving to different currencies. Sure the situation would have boiled out differently because the Franc would have gotten weaker as would have the Lira, because history tells us this. So they would constantly lose ground, by having a united currency Germany in effect gave the DM rep to the Euro. Clearly the EU was not ready for using the DM, so it will by necessity become the Lira. And if a weak currency is always good, then why didn't Italy dominate trade before the Euro? Correct me if I'm wrong but the Lira was devalued all the time.
So they will determine fiscal policy of Europe, so how will that work? They will cut checks to everyone and then try to enforce their will? I'm telling you the nations will not just hand over their votes for a German bailout, at least not Italy or probably Spain. They will want money but still voting rights, what then? After all not even Germany is abiding by the Maastricht agreement, no one is.
I don't live there but I know a German prof who still has friends and family there. We talk often and they are not happy. Then follows news storied about Germans getting worried and Merkel losing control, so how does that jive with them being happy? Germany has terrible stats when compare debt and demographics, pray tell how will they shoulder the burden of all the PIIGS and perhaps France and not pop themselves? Even if what you said about gaining a trade advantage was true, wouldn't it behoove them to cut and run when the market turned. If these nations are insolvent seems like they will not be able to buy German goods, unless those goods come down in price significantly.
I agreed with you on gas, but not so much electricity, thats domestic. Anyway. My main point remains its about control, not trade. The Germans (and the French) want a Federalist conclusion, with the other nations as more vassal states over time. You can 'tell me' all you want that other nations will not stand for it, but the price of not ceding some fiscal control to the core will be a roasting in a deflationary oven the likes of which these countries have never seen. Their populations will not stomach it for a second, as we have seen already.
As for your German prof, he is of course representative of the liberal intellectual elite, and therefore sees things theoretically reasonably. He is not happy, but I do not think he speaks for the man on the street. The Germans are nationalistic, and don't see why they should pay for other's profligacy, but they're more concerned about whether they themselves have jobs first, and right now they do. I think the average German on the street also understands that its better to lend a hand and have the other nations continue to buy your stuff, than cut and run and suffer the economic fallout that would undoubtedly accompany such an action. Do not forget the extent to which German (and French) banks are leveraged to the periphery, cutting and running would kill them and therefore the German economy with it.
You want to see things in black and white, from an economic theory perspective. Europe does not work like that and never will, its about compromise and political influence above all else. When you understand that, you will see why the Germans have played their hand well in a European context.
Final point: the Dmark prior to the Euro had already taken a beating from 10 years of reunification costs. Its just that the basket cases of the periphery were even worse. What the other nations got was Dmark lite, not the real thing. So German goods were cheaper than they should have been on the world stage, and they had value added goods to offer. Happy days.
How is electricity made? It doesn't spring from the earth, some commodity is transformed into energy. If the currency weakens the cost of teat commodity in that currency goes up there fore energy prices go up. If you have found a way to make energy without using commodities let me know. Let's get some financing and take over the world with your new invention.
Ah but here is the real trick. France is also insolvent, so is Germany. Just the most healthy leper. None of them can fund their obligations. So what happens when Italy goes down? Will they get a bailout? If so will that not by necessity further weaken the Euro. Now if the member states of the Euro will accept a junk currency and not complain then you are correct. I daresay German savers might not like their savings being destroyed, but if they will take a Euro/Lira then everything more or less moves on.
So do the Germans let out a cheer and run eagerly to support the bailout? "The Greeks need our help! Quick everyone pitch in to send them some money so they can buy our stuff!" Is the unhappiness not with the bailouts but because they are not large enough in the German's minds? I would gladly buy German products if they gave me the money to buy them :) When can we expect protests that they should shoulder all the costs of the Euro project to protect their jobs?
And buy their stuff, how? If the Germans will take command of their finances then it seems they would be austere. Will the Germans take hold and institute a policy of loose and easy credit in the periphery to keep lender financing German goods? If the Periphery tightens they will not be buying goods, and are worthless to Germany and would be better cut loose. If they keep buying they will eternally need more money and it's not much different the US lender financing via China.
The economics are quite clear. If Germany does not extract themselves they will be brought down with the rest of the Euro project. I have no skin in the game, but Germany will get killed by staying in. In the coming years Germany will go bankrupt bailing out these nations and not be the conquering heroes and rulers of Europe. There simply is not enough money without a massive inflation of the currency, which historically the Germans have been against. Do you also think China can forever vendor finance the US?
As to the banks, evey bank is interconnected. Odds are no one will collapse and then the system will explode overnight. So interconnected the slightest problem going off requires massive intervention or the system explodes. The problem has not been fixed only gets worse. Debts that cannot be repaid will nto be repaid.
The reunification was horribly done, 1 for 1 was a joke. And in the end the West supported the East. Now you bring up the analogy it will be Germany supporting the EU. I simply don't think Germany is strong enough to shoulder the burden without imploding.
What are you talking about? What weak currency? Euro was introduced with exchange rate 1.18, and now, with all these bailouts and talks about, supposed, collapse is at 1.3, still 10% stronger than its initial rate. Also, are you familiar with the real numbers(statistics) about eurozone? Eurozone runs smaller deficits and have smaller government debt than the US. Morever, eurozone, not China or US, is the biggest manufacturer in the world, and the biggest exoporter. Eurozone has a ballanced trade and is a net creditor. Did I mention that eurozone has the most companies in Global 500 list? What Dismal Scientist is saying that this crisis is not about bailouts and debts or austerity, but about eurozone getting (finally) a leadership. We were way too long without real leadership. I live in a small eurozone country(Slovakia), and have no problem with ceding some powers and responsibilities to Franco-German leadership. The sooner, the better.
Here's where I say goodnight. The point of my original comment, if you go back up to the top, was that Germany has been (note the use of past tense) the winner of the Euro project so far. I stand by that comment, you have said nothing to dissuade me.
The second point was that the exercise of control was the end game that we are moving towards, and that the Germans are best placed to win that too. It is irrelevant to me that the whole European system is broken (as is the US, Japan etc).
I admire your grasp of theory and your desire to flog an argument into submission. But I fear you have missed the point of my original post completely, and have disappeared into a hellhole of economic 'facts'. The real world doesn't work like that.
Thats enough for me, I have other things to do, many people to see. Some of them are German. Real ones.
Something tells me that little Miss Euro is entirely plastered on mojitos at the present time. She just ordered a Shooting Star to put down on top of all those drinks, and odds favor queasiness, leaning into the railing, and the upchucking of today's Theatre of the Absurd from Lisbon.
A railing induced liquidity crisis would seem to be at hand. I'm sure one of you blokes will hold her hair. As for me, and considering the little Bernanke she is carrying, I'll have nothing to do her.
And as people all over the world commence rioting over rising food costs, just remember this intraday currency chart and understand that L. Blankfein and crew really need folks to be understanding and more patient as they submarine the stud man USD, ramp the lie that is little Miss Euro...so that the lights can stay on at L. Blankfein Wildest Dreams Park [oil futures] for another day. Make no mistake...that is what it is about today...because I don't know anyone who thinks this is about Portuguese debt.
A shooting star? Cdad, I like your posts but no way. There are now exactly 3 computers trading this market, keeping it at a nice .9% gain for the remainder of the day. A big, fat white candle that will compel every bulltard to buy, buy, buy.
17 parts yag to 15 parts Schlitz
poured in a 5 oz glass
Euros upchucked over the railing under 1.3093 will confirm my recipe...but what do I know? I do not trade currencies. Rather I sell lies....and I prefer extra dry Vodka martinis.
We shall see...
Speaking of upchucking, did you notice the burritos are on sale again today?
Indeed,
That sale will likely be going on through March. Profit margin destruction at the hands of the CRB and ghost malls. Sell those lies when they rise...
This is how the EU debt crisis will unfold...
iceland- ireland-portugal-spain-greece....to be continued. I'm talking outright default.
italy's turn is very late in the game. Don't forget the bank of the vatican.
Italy is two nations posing as one.
ORI
http://aadivaahan.wordpress.com/2010/07/27/evolution-devolution-involution/
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The citizens of Europe are far more vocal and likely to make their points heard than we are here in the US. Germans, and possibly the French, will make a very big deal about these continued outliers being bailed out and anyone would be silly to think that austerity won't contract economies that are already constrained. Europe has a good history of enacting change through protest and demonstration and that's what needs to happen in all likelihood.
The Euro as a monetary system seems doomed. The dollar is as well but the Euro doom chart seems to be picking up speed and it's unlikely that the citizens of Portugal, Spain, Ireland, Germany, France, and Italy will allow the show to continue in the same manner without causing some major problems.
Buy gold and silver; it's like popcorn at an economic horror show.
Let's see. Half the world could burn before the 12 million people playing wow start smelling smoke and log out to investigate.
2/3rds of the world could burn before the 50 million people hooked on drugs finally run outof drugs and peek outside to go find more drugs.
This is how the EU debt crisis will unfold...
iceland- ireland-portugal-spain-greece....to be continued. I'm talking outright default.
italy's turn is very late in the game. Don't forget the bank of the vatican.
Italy is two nations posing as one.
ORI
http://aadivaahan.wordpress.com/2010/07/27/evolution-devolution-involution/
Nigel is the shit. No other at Europarl speaks the truth to Barroso and Van Rompuy.
This guy is spot on.
The EU is done for. It is a failed,flawed system. I mena seriously there debt monetization is not going to work. There is only scenarios that can come from this debt crisis: a . A breakup of the Eurozone in 2012-2013
b. An agreement on debt restructuring, bank haircuts and fiscal consolidation. New rules will be drawn out and fiscal union will be the final outcome. EU states will realize that in order to be part of a currency union, fiscal sovereignty will have to be sacrificed. To some extent, Federalization may be the route that the EU takes in its evolution to become an economically and politically linked union.
The latter is the ideal outcome for EU, but it is also most difficult to achieve. It requires nations to set aside their sovereignty and their cultural differences. Politically, I see an attempt by EU-philes to push for some sort of fiscal consolidation of the Eurozone with autonomy in Brussels. However, I can also see Euro-skeptics and nationalists push back citing sovereignty and democracy. This will be further hampered by historical animosity, and ethnic diversity. As such, I view the probability of this outcome as extremely LOW. So unless the EU goes from a confederacy to a Federation and massive reform takes place they can solve it. However far right nationalist groups and radical leftist are growing in Britiain,Spain,France,Germany,Italy. So an EU federation will not happen. The EU will collapse in two-three years time. It is over the euro is dead.
WBB you may be right on the Euro zone but the politico's goal is an EU Federal system like the USA. The bureaucrats don't give a rats ass about culture or ethnic diversity, only interested in control
If they do this it will lead to nationalist revolutions around Europe. In the US it is different we have been together for (now) because we share a common history,language. In Europe it is different,they have had years of wars and distrust for each other. Nationalism is not dead look at the soccer hooligans. Nationalism is on the rise in Europe and it is not pretty. History has shown control freaks lose power very quickly. Neve runderestimate the will of the european people. A german does not want to follow a Constituion from Brussels. If they attempt to federalize the EU it will end will bloody revolutions. It would be like a North America Union was federalized and a Canadian had to pay taxes to a governement in Washington. It wont happen.
Actually, the European national people are on the same path as the US 250 years ago. They have this little amount of minorities that will allow themselves to feel as brothers as they consider each other much more separated from the minorities.
Just like the US social engineered at the exclusion of the negro, the European national people will get social engineered at the exclusion of the muslim. Same pattern.
All the nationalistic parties in Europe are playing that tune by the way: european people should unite to give the boot to the Muslim.
It will happen. US liking it or not.
"what are they left with?"
its a bit of a dog's dinner isn't it!
It appears that the Euros are heading down the path of austerity/deflation, where countries are forced to get their own economic house in order since they can't print their way out of their own mess, while the US, custodians of the world's reserve currency are printing like mad, devaluaing their currency in an insane attempt to keep a hollowed out shell of an economy floating.
I read somewhere that this was destined to happen based on the histories of the two continents - the hyperinflation in Weimar Germany and the deflation in the US in the 20's & 30's has biased their thinking going forward to avoid a repeat of those errors at all costs...
So what the world then ends up with is a failed reserve currency in the $US once hyperinflation kicks in to destroy it (along with what is left of the US economy), while the euros manage to "survive" by imposing "discipline" on (aka sacrificing) their populations in order to save the euro currency, which replaces the $US as global reserve currency almost by default (and its reported gold reserves).
One by one, nations across the world relinquish their sovereignty by adopting the euro as their own currency...
European political class are simply trying to adopt their version of the Golden Rule...whoever has the gold, makes the rules...
Perfect word to describe foreseeable order of bailouts/bankruptcies isn't PIIGS.
Instead you should use GIPSY
Greece, Ireland, Portugal, Spain, ItalY
Angela did not do the Irish any favours with her bondholder haircut jibe - She said not until 2013.
This has the effect of rising interest on new bonds issued that mature after this date due to the default risk and yet Ireland continues to keep bonds whole that are already on the book.
In a country with a declining money supply these bonds exponential interest payments are devastating and yet we cannot raise any more money.
Ireland may be able to handle a static money supply for a few more years if it has reduced interest from defaulted private bonds (which was something like half the deposit base ) but it cannot take two holes below the waterline.
This is very simple economic stuff - a child could understand the money supply vs exponential debt repayments chart.
If this continues for any length of time they will extract all debt wealth out of the country via deposit extraction until collapse and then buy up physical assets for a song - perhaps that is the plan of our European partners ?
Nigel Farage doesn't mince words. Me Like.
Iceland is the model for what needs to be done.
Let's do it and get it over with.
Indeed, F the Germans. They sold product to their Euro neighbors and now can't be paid back. The only reason to continue this game is to support German and French banks over extended in Eurozone bad debt. Walk away Irish, Greeks, et al.
Italy should go long NFLX.
We said a balanced view but when the commentator accuses Nigel of a forthright view when to any normal person it is a reasonable view, up for discussion yes, just shows which pockets these leftie commentators are in