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Euro Schizophrenia in Germany
Wolf Richter www.testosteronepit.com
My German contacts want to keep the euro. They’ve gotten used to it. They like it in their wallets. Cross-border travel and commerce have become routine activities for which the euro is just so convenient. The euro has been strong despite the upheavals. But now that the European bailout fund, the EFSF, is descending into irrelevance, they fret about the euro’s future. They want it saved. Meanwhile, they're wondering whether to buy Norwegian kroner, Swiss francs, or Australian dollars—but end up buying US treasuries, ironically.
And they’re increasingly willing to pay a price as they grapple with a litany of plans to save the euro.
Plan A: An integrated and centralized Eurozone. To accomplish this, the 17 member states would have to redo their treaties and abdicate some of their sovereignty. José Manuel Barroso, president of the European Commission, the executive body of the EU, keeps proposing that plan. Angela Merkel has made comments in a similar direction. Instead of the toothless Stability Pact, a new treaty could allow Brussels to impose budgetary discipline on Eurozone members.
“The way into bondage,” declared Frank Schäffler, finance guru of Merkel’s coalition partner, the FDP. “He wants to create a super-state without asking the citizens.” Other members of Merkel’s government were also vociferously opposed to this power-grab, calling it an attack on the sovereignty of member states. This will be a tough sell.
Plan B: Eurobonds. Barroso will refloat the idea on Wednesday in reconfigured form named “Stability Bonds,” according to the Handelsblatt, which has a copy of the 41-page discussion document. The Eurozone would issue or guarantee bonds with its combined credit strength. Risk would be transferred from weak nations to strong nations, particularly to Germany, while allowing weak nations to run up budget deficits. Opposition in Germany has been instant and fierce.
Plan C: Allow the European Central Bank to print unlimited amounts of money to monetize the sovereign debt of whatever country needs it. Though the ECB doesn't have the legal power to monetize debt, it monetized €194.5 billion ($262 billion) of debt from the likes of Greece, Italy, and Spain. Compared to the US whose gross national debt is 100% of GDP, or Japan whose debt is 230% of GDP, the Eurozone isn’t all that badly off. Its main “disadvantage” is the ECB’s lack of printing power, the argument goes, though printing trillions of euros would instantly resolve the debt crisis.
The cost would be inflation and devaluation. As in the US, inflation would fluctuate between 2-5% a year, or 30-50% every decade. As in the US over the last twelve years, it would entail the gradual impoverishment of the middle class whose wages would rise more slowly than inflation. So that governments could fund their deficits with free money, the ECB, just like the Fed, would force yields below the rate of inflation. This form of financial repression would devastate fixed-income investors, pension funds, and savers. By taking control of the credit markets through printing money, the ECB would shield Eurozone governments from the harsh discipline that markets can impose. Unrestrained, deficits would skyrocket.
But.... As the turmoil of the debt crisis progresses from proposal to proposal—the EFSF, the enlarged EFSF, the enlarged and leveraged EFSF, Eurobonds, Stability Bonds, Eurozone bank guarantees, a strong central government, or whatever—little by little, with lots of hand-wringing, German resistance to allowing the ECB to crank up the printing press is fading—a sea change for the German soul. Inflationspolitik used to be a cussword, not a solution.
Now all eyes are on the spokesman of the German soul. Brushed off as obsolete since the establishment of the ECB, the Bundesbank has risen from the ashes during the crisis. And Jens Weidmann, its president, is holding his ground.
"I'm convinced that the economic costs of monetizing government debt or deficits are significantly greater than the benefits, and that it won't contribute to solving the current problem over the long term," he said (Spiegel). His solution is political: budget discipline and implementation of the EFSF. The debt debacle "doesn't justify stretching the mandate of the ECB and making it responsible for solving the crisis," he said.
Finance minister Wolfgang Schäuble supported him vaguely. If the ECB were to start printing, "financial markets would quiet down for a few months, but then they would recognize that the euro isn't a stable currency," he said. A far cry from the categorical no of yore.
The new boss of the ECB, Mario Draghi, is also paying lip service to Weidmann—while purchasing Italian and Spanish debt hand over fist.
Merkel's government is under immense worldwide pressure, and fewer of its members are speaking out against Inflationspolitik. Countries like Spain are practically begging for help from the ECB. France is applying hefty pressure. And the US has been leaning on Germany from day one.
In the media, resistance to printing money is being replaced by neutrality or even sympathy. It’s about how to prevent “the worst.” And my German contacts? To keep the euro alive, they’re considering the steep costs of printing money. They may not want to bail out Greece, but they do want to save the euro.
Germany has a plan D, however: exit the Eurozone and start a mini-Eurozone of like-minded states who believe in the exotic concept that a currency shouldn’t lose its value. The ECB could monetize the debt of the 12 or so remaining members. The mini-Eurozone with Germany at its center would issue its own currency. The 27-member European Union would remain in tact, trade would continue, and life would go on after some tumultuous times in the markets. But that solution doesn’t have any support among my German contacts, who dread the unknown and don’t want to switch currencies again.
The euro schizophrenia deepens. German exporters, all along the cornerstone of support for the euro, just cracked: "We need a common market, not one currency”.... The Next Step Towards The End Of The Euro.
Wolf Richter www.testosteronepit.com
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And what evidence do you have that Germany is printing Deutschmarks?
It is not only about Germany - although Germany is the most important member of EZ. There are many other smaller players there who will vehemently oppose printing, like Holland, Luxembourg, Denmark, etc.
How about non-EZ but EU members like: UK, Sweden and Poland? They also care about it, and do not like the bailout idea. The EU can easily break up because of it, even if Germans still like to use their hard earned Euros to vacation in Greece.
We need to stop this Merkozy madness. The EU is 27 countries and they do carry voting power.
Didn't Denmark keep the krona or kroner? Holland will probably not go along but the Roth****d Khazar klan has a lot of influence.
How about if they just "rocked the Casbah" instead?
They just did: Libya.
In this case (Denmark) I stand corrected. Thanks for pointing it out.
The idea that Germans are warming to being Europe's Fed is incredible.
---incredibl(e)y stupid. Fixed it for ya. Milestones
the fight is on between Merkel and GS. The US oligarchs want ECB to print to infinity; Merkel won't inspite of shills like Cameron and Sarkozy pushing her as spokesmen for the US lobby, and to save their own economies for a few more years of can kicking; they are politicians after all.
If she stands firm like Bismarck's daughter, she will force the ponzi to collapse both sides of the pond as the banks will burn INSPITE OF FED PRINTING. EVEN THE FED WONT BE ABLE TO CONTROL THE DEFLATION CYCLE AS THE RUSH TO USD WILL KILL WS AND HYPERINFLATION STRATEGY OF FED TO WRITE OFF US MEGA DEBT.
So what option does US oligarchy have if Merkel says "I won't let the ECB budge"?
Ben will have to print fast to save Euro banks and thus world wide contagion spill over to Japan/USA. We are now in final stages of GS pulling all plugs in Euro zone to get her to buckle under and take part of the pain; not leave it all on US through FED printing to save the world Pax americana in current form. Dangerous times, as the US may be tempted by plan B : military clout if financial clout dies; watch US moves in Far East and Oil patch...2012 being election year its gonna get rough.
What Europe needs ist ein PAKT und BUNDES SCHATZ BRIEFE! Many, many BUNDS!
DER PLAN:
Im Osten und im Westen, im Norden und im Süden UEBERSCHWEMMEN WIRRR DIE MAERKTE MITTTT BUNDS!!!!!!!!!!!!!
BLITZ BUNDS!
Dann KAUFEN wirrrrrrrr die Griechen, die Italiener, die Spanier, die Franzosen und alle anderen und lassen die für uns arbeiten!
DEUTSCHLAND FULL CIRCLE!!!! DEUTSCHLAND IST DAS REICH DER BANKEN!
Das VIERTE REICH! Deutsche Banken über alles!
Banken statt Gaskammern!
Oder so...??
/satire
""""Ex-Solyndra Staff To Get $13,000 Each In TAA Federal Aid
By Sean Higgins
Mon., Nov. 21, 2011 5:45 PM ET
Tags: Solyndra - Jobs - Environment - Trade
The Labor Department today announced that it had approved Trade Adjustment Assistance for the former employees of the bankrupt solar panel maker Solyndra.
That means all of the firm’s 1,100 ex-employees are eligible for federal aid packages, including job retraining and income assistance. The department has valued packages at about $13,000 a head.
Taxpayers will have to cough up yet another $14.3 million as a result of Solyndra’s bankruptcy. They are already on the hook for $528 million in federal loan guarantees to the company that are unlikely to ever be paid back.""
Perfect!
Hope, hope and change!!
max2205
Ex-Solyndra Staff To Get $13,000 Each In TAA Federal Aid
By Sean Higgins
Oh my wunnerful BHO, how is it you always walk away without any shit sticking to you?.
They called Clinton the Teflon POTUS, shit, you have him beat by LIGHT years.
Germans will not want to bail out the free spending southern states. The southern states will not accept the austerity and control that Germans will demand. Germany and a few countries can create the super Euro while the remaining can have their printing and their old Euro and their smaller, manageable debts. Their exports will increase due to the devaluation caused by printing and balance may be restored.
Everyone will be happy except the German banks who will lose a fortune and will need to be bailed out. US and French banks will also take a haircut. If debt owed to banks by the southern states can de denominated half in Euros and half in super Euros, we may have a solution that most can live with.
IF the German banks can be bailed out! Apparently they were "suppose to have stopped that lending thing" but were given "two years to do so." Needless to say it was "hog wild time" before that came to an end. Unfortunately...the markets they went hog wild into (Iceland, Ireland, Spain, Greece) are now a who's who of total collapse!
Banks don't get haircuts, taxpayers and savers do.
It looks like Germans and their neighbors are going to have to play Let's Make a Deal. Nobody's going to be 100% satisfied. If everyone's at least 50% satisfied, that will be a miracle. It's still cheaper than war. Just about anything is.
Even Germans realize that after twice last century thinking they'd found great bargains on wars.
Actually this sounds pretty plausible or one of the few ideas that sounds workable. Kyle Bass was talking about the BS that Greece was pulling. They agreed to hire one new govt employee for every 10 that retired or something close to that. The Greeks then had about 20,000 govt workers retire with pensions and hired 20,000 new ones. Total BS. They should have let Greece fail when this first started going down.
What the Germans need to do is say enough is enough and kick Greece out of the Eurozone and the EU. It will even be good for Greece in the long run, as they will learn the hard way that you cannot bullshit for ever.
This is another great lie being foisted upon the ants that work and save so that the dancing grasshoppers may be rescued! No more, no less.
Evil. I am sure the path of printing will only lead to greater pain later. To inflate will result in nothing meaningful but to guarantee that I am made rich. Since I know that the value of all my non-money gold is in a bubble then how could it possibly go up more? Therefore, this money printing can't work. It will make holders of gold the masters and most folks aren't holding gold.
Der Hitler makkenstop fuck der speigel Merkel cunt Berlin blah blah
(German)
Alles wieder in Butter = everything again in butter, everything hunky-dory as yore
(French)
Le beurre et l'argent du beurre = the butter and the money for the butter
(English)
Bread and butter = everyday livelihood
(Late 20th century Americanskii)
Guns and butter -- Party time boys and girls!
hmm yes we like euros too, there's however four questions that need to be asked
1. is it even possible to print your way out of a crisis like this? devaluing the savings of households and small to medium business, for nothing? Banks wouldn't mind.
2. what about the ridiculous attitude of the european bureaucracy? They've behaved like a royal court, while not delivering the results people want. They've shown they don't care one bit about democratic principles. They're carreer politicians and have, up till now, an abominable track record, as far as "crisis management" is concerned. Why on earth would I trust them?
3. There's a court, now who's supposed to be king? The Merkozy? French-German relations? And what happens to the smaller countries? This is an old fear of many neighbours of those two core countries. To become a perifery of no importance. Part of a bigger "germanic" or "french" or "iberic" zone?
4. What do these people want with all that power? Large scale planning, Soviet Union style? And what's up with declaring themselves above the law? All kinds of warning bells go off here, when I read their (full) treaties. If they'd build in mechanisms for positive or negative feedback to be incorporated into their power structures, I'd take it a little more serious.
Yes. It's possible to print their way out of their debt dilemma. After all printing is just another way of defaulting on the debt and that's what needs to happen. The unpayable debt must be defaulted on. There is no other way besides recognizing that it's not worth as much as they thought or advertised. This is just a tax on the savers.
Of course, printing is much like heroin addiction. It's very difficult to stop. It just feels too good (to the ones getting the cash or the heroin).
the USA printed MASSIVELY during the Great Depression. I'm sorry...was there some type of "great inflation" then, too? How 'bout during World War II when we monetized to an extent no one thought humanly possible? And the price of gold while we did it? 35 bucks and ounce! FDR used to set the price from his bedside with his Treasury Secretary! GOODBYE GERMANY! GOODBYE!
Except that printing has huge side effects, like wiping out the middle class.
The middle class has always been the cannon fodder in the class wars. The middle class needs to be wiped out every century or so, otherwise they begin to compete with the upper classes for the good stuff. The Power Elites don't give a shit about the middle class.
The middle class is being wiped out as we speak. Most of them/us won't know what hit them.
The proper word here should be "hock", NOT "hawk".
The two words are not even pronounced the same (except by linguistically-challenged and vowel-slaughtering West Coasters and Canadians).
How embarrassing for whomever wrote the synopsis of this article --- you "should of" done some basic linguistic checking first. Unless of course what was meant was the use of the noun "hawk" as a verb, as in "feeding one's soul to a ravenous and insatiable (unelected, unaccountable, power-hungry, super-national, elitist, fascist) predator" --- then the use of the word "hawk" here may have been appropriate.
My understanding is that Wolf Richter is not a native English speaker, what with being a German and all.
And he may not have written the byline, of course. Or was your criticism more aimed at the Tyler who wrote it? Who may not have been a native English speaker either...
I tried giving you a greenie but it would not register. I appreciated your due diligence Milestones
as in "hawk vs dove" ala Fed chairs bent( leanings lingo) --
Aside from being WRONG, do you always get caught up in meaningless drivel? Rhetorical question, don't bother to reply.
Funny how those who mispronounce and misuse the language are always ready to assert that the PROPER use of language (especially when they are the ones who were caught or corrected when misusing it) constitutes mere "drivel".
The proper use of language is never drivel.
You are no exception to that rule.
Come on guys, really? A language is used to communicate an idea. Let's not lose sight of the goal here.. How petty..
Oh, and while I'm about it.
Do you understand Dick Head?
Get back to me when you get an education.
To "hawk" is to sell (aggressively).
To "hock" goods is to pledge them as in pawnbroker.
Do you understand now?
hock = to pawn
hawk = to peddle or offer for sale by calling aloud in public., to advertise or offer for sale: to hawk soap on television.
Check the dictionary, my friend, before you make moronic comments like that!
Since the implied meaning was "pawn" rather than "publicly offer for sale", I think it is you who look rather foolish here, my friend.
you r so trivial, quite pathetic from my view point
How embarrassing for whomever wrote
"Whoever?"
whoever hocks a hawk to a gawker, smart false money talker, needs a lesson from the Maltese falcon; never tease a Sam Spade with your feminine drivel or you end up in the sin bin, the pig sty, the hen pen, the Alcatraz, the Papillon devil's island.
No place to bunga bunga in, just a cot in a dirty spot called Sing Sing.
Maybe Michael Jackson said it best of all : I'm bad, whose bad?
...They call me Mr Pitiful, that's my name, that's how I got my fame...Shades of Otis...not the elevator pease! But the Red herring, Redding. To whom...sitting on the dock of the bay, was the way to see the wave unfurl.
You don't have any friends, implied or otherwise.
Go and crawl back to your basement.
A great deal of intelligence, can be invested in ignorance, when the need for illusion is great.
Saul Bellow
Germany isn't "selling their soul" ... they are "getting a clue"
Germany, Germany, Germany, why does everybody think they are sticking to some principles?
You can't produce high quality products without a hard price calculation, otherwise your costs explode.
That's all, folks, it's that easy. Several countries just forgot what is needed to produce anything in a rational way.
Germany is applying the principles of "RealPolitik", i.e. they know what the probable outcomes are but also know that giving in everywhere is just as foolish...
It just does not pay to lose the "blame game".
The paw folk are sticking to only one principle: the Darwinian Principle of the ideal parasite never killing the host.
NO ONE IS LEAVIN'.
"Jus' keep on givin' me euros and I'll pay u back ten a month to show good faith."
You can't produce high quality products without hard price caculation, but there is no point in producing them if you can't generate revenue at the point of sales to cover those costs. Without credit, there is no way to alter production to reduce costs. You have to shut down production lines.
This is about unserviceable levels of debt. Monetization doesn't necessarily imply hyperinflation. Look around and see this is true.
This is about preventing a binary outcome--default--that will damage everyone, including Germany, far more than they realize.
Interesting, as this article from ZH paints the opposite picture (not ZH's fault though):
http://www.zerohedge.com/news/rosenberg-debunks-stupidity-masses