To understand why this is so, we have to start with two forms of discipline: the market and the state. The market disciplines its participants by discovering the price of not just goods and services but of currencies and the potential risks generated by fiscal and trade imbalances.
When nations issue their own sovereign currencies, the global foreign exchange (FX) market enforces an iron discipline on all participants. If a nation prints excessive quantities of its currency without boosting its production of goods and services by an equivalent amount, the FX market punishes this nation by devaluing its currency.
The market provides unwelcome feedback to the imbalances of interest rates, credit and currency: imports become prohibitive, nobody wants to buy the nation's bonds unless the interest rate compensates for the higher risk, and so on.
The political and financial leadership of the nation would eliminate this feedback if they could. Unfortunately for the domestic leadership, the FX market is too big to manipulate for long. Domestic governments and central banks can try all sorts of fancy footwork (pegging their currency to stronger currencies, etc.) but in the end, the market will sniff out the fundamental imbalance between the rigged price of the nation's currency and its market value.
The domestic political and financial leadership/Elites are powerless to stop or evade the discipline of the FX market. They can complain and protest and claim an international conspiracy brought down their financial fantasies, but the reality is the market is made up of many participants, all of whom want to make money, not lose it by accepting a bunch of political BS as the actual truth.
The other form of structural discipline is imposed by the state (government in all its forms, including central banks). A typical example is the state legislature imposes a cap on state borrowing, i.e. the state is not allowed to borrow more than 3% of expenses annually.
We all know what happens to these kinds of state-imposed discipline: they are ignored, bypassed, watered down or gutted. Why is this so? The reason is that all political systems, regardless of their ideology, are influenced by powerful elites and vested interests.
When some political cap stands in the way of enriching or protecting a politically powerful elite or vested interest, the cap is quickly reduced to a PR play.
This is the fundamental flaw in state fiscal discipline: it is always a political construct and thus contingent on what benefits powerful elites and constituencies.
The disciplinary foundation of the euro is wholly political. In agreeing to join a monetary union of one currency, the EU nations eliminated the market's ability to provide feedback on the imbalances building up in their economies.
In effect, they replaced the discipline of a market that cannot be manipulated for a political discipline that can be manipulated as a matter of course.
Canny domestic politicos are well-versed in ways to hide fiscal and credit imbalances. Masking financial realities is their bread and butter.
So what happens when you impose a super-state (the EU) on the member nations? the super-state becomes the cozy home for canny politicos who play the same old hide-and-seek financial games on a larger stage.
The official response to this intrinsic lack of discipline is for the central banks to print money and issue more credit. Does issuing more money and credit provide any fiscal discipline? Of course not--it does the opposite, freeing the canny politicos (yes, the ones supposedly in charge of imposing discipline on the system) to escape any consequences from their fraud and profligacy.
The idea that the political leadership of a state or super-state could impose a discipline equivalent to that imposed by a market was always a fantasy. As a result, the idea that political discipline could impose painful and difficult reforms on politically powerful elites and vested interests was also a fantasy.
This is why Greece has no choice but to exit the euro. The politicos in the EU will "do whatever it takes" to extend the fantasy their discipline is equal to the discipline of the FX market, but everyone knows it's all PR and lies.
There is no substitute for the discipline of a market that cannot be manipulated by political elites, and as a result there can be no real reforms until the euro is dissolved and the FX market forces the true cost of systemic imbalances on the domestic participants who created and maintained the imbalances.
Reform cannot be triggered by borrowing more money--it can only be triggered by defaulting on existing debts that cannot be paid. Bailouts are never about enabling reform--they're about preserving the Status Quo Elites' and vested interests' share of the swag.
Live by the fraud, Die by the fraud.
Narrative today is markets cheer Greek exit and macro data fails. Send stocks to new record.
Long live the central bank bubble.
More brief:
The only reason for centralization is reducing competition.
Huh, what?
http://finance.yahoo.com/news/greece-poised-request-six-month-175736925.html
What part of all fiat will die, especially when fraud is the status quo, don't people understand?
it's the hopium, it's very addictive you know. elites just cannot remove themselves from the nipple and continue to invite anyone wishing to suckle on the hopium.
The entire world economy is like this, Greece is merely an obvious focal point since the competition is going to be who prints themselves to death first, though it doesn't really matter since all the major economies will go down with it.
Fundamentally different cultures cannot share a currency.
See Ferguson, Missouri.
you are saying blacks who are 2nd population in your country cannot share same fiat with spanishs who are the 1st population, and you with your mates who are as whites the only 3rd rank population ?
you wanna split fiat for spanish, blacks and yourself ? ....
man, clean front door 1st, it's not forgeign ppl who elected twice a nigger in white house, act accordingly.
regards, and fuck you. you can spit on frogs, but there we never ever gonna elect a fucking nigger in the home. you fucking nut.
Define 1st, 2nd, and 3d ranks? Rankings per what? Population? Not true. US population is 73% white, 14% hispanic, 13% black per the 2010 census. The 'projected' 'minoritization' of the whites is defined as the white population dropping below 50%. Of course when they make that statement they are assuming that all the 'minorities' are united against the whites. Plainly not so.
Blah blah blah....
Before discussing "Grexit" ask Ukraine about "Ukrexit".
There is no exit, the EU is a roach motel, you give up (like virginity) your sovereignty upon entry, Greek sovereignty was liquidated and spent on free shit for immigrants.
You cant get your money back after you eat.
https://www.youtube.com/watch?feature=player_detailpage&v=2-BtquTKw78
as if economic concerns were just a side issue, they deferred all decisions to an unelected central board, then, too late realized that all issues were economic in nature.
Europeans need MOAR holidays!!
I'm hoping when the Euro starts to come apart at the seams that all the extend and pretend gets called into question and debt and equity markets finally start to adequately price in their inherent risk.
"If a nation prints excessive quantities of its currency without boosting its production of goods and services by an equivalent amount, the FX market punishes this nation by devaluing its currency."
Unless you print the reserve currency... And the PetroDollar, etc. Etc. Etc.
FIAT == FAKE
FIAT == FRAUD
FIAT == FANTASY
FIAT == Fix It Again Tony
Fixed it for you.
Really F ed them good!
As regarding the so-called failure of the euro, did a bunch of banksters, pols, and crats, enrich themselves, and seize more power over the people, from the scam that is the euro? If yes, then the euro did not fail, but succeeded.
The euro scam will live on, either under the "euro" brand name, or another, but the scam will go on.
The banksters need to repay us.
Only gold and guillotines can bring an end to what the banksters have wrought.
Base money on something of value rather then political whim and a lot of problems go away.
"There must be some kind of way out of here, "
Said the joker to the thief,
"There's too much confusion, I can't get no relief.
Business men – they drink my wine
Plowmen dig my earth
None will level on the line
Nobody of it is worth."
"No reason to get excited, "
The thief – he kindly spoke,
"There are many here among us
Who feel that life is but a joke
But you and I we've been through that
And this is not our fate
So let us not talk falsely now
The hour's getting late."
what market discipline are we talking about charles?
the same market that has the sp 500 above 2100? the same market that has the 10 yr Treasury near all time high prices?
what am i missing here?
its all "front run central banks" at all times. there is no more discipline, ONLY collusion with CB's.
Here in the good ol' USofA, our illustrious leaders are working tirelessly to merge the markets and state into one. Now that they have a majority in both the House and Senate, notice there has not been so much as a peep from the repuklicans about repealing Obummercare? There is a reason why. it is part of their platform too, even though they talk out of the other side of their mouth when discussing it. FUCKIN' TRAITORS.
If they get the POTUS in 2016 they will start talking about it again.
Right now it is too large a component of GDP and there have been many promises to the health insurers to get record profits for a while before a real broad based coverage plan can be proposed by Repubs. or Dems. It does not matter. It is an illusion to keep the electorate divided. It works very effectively for one very clear and obvious reason.
This is why we are long UNH, HUM, MOH, etc Spot on. It really is just another way to make money. So much of our society is structured around dissecting and taking advantage of the regulatory landscape. There is a new, booming class of businesses that are devoted to deciphering and profiting from the ACA.
If you thought a simple Republican majority could repeal Obamacare, either you're an idiot or you were lied to.
Any repeal will be vetoed. To override a veto takes 67 Senators; Republicans have 54. Which 13 Democratic Senators will be eager to repeal Obamacare, do you think?
The Republicans aren't talking about it because there's no point getting the base riled up when nothing can be done. Repeal will have to wait until 2017, and then only if there's a Republican president.
They don't have to repeal it. They can simply defund it.
Who's the idiot now?
"the market is made up of many participants, all of whom want to make money, not lose it"
This is why they gamble other peoples money, get paid bonuses on profits with no downside on losses.
You can only make money and never lose any.
Probably why markets are not working, game theory does not apply.
That's why the one nation one currency US of A is doing so well with it's iron discipline ;)
It should be consigned to the dustbin of history...
.http://youtu.be/b3OCCXWUqPk
Charles is being crazy. Failure of the Euro would be to let it be debauched like the lira and the drachma. Currency-devaluation is the lubricant that allows socialist politics to function, but don't expect socialists to ever admit that.
"Reform cannot be triggered by borrowing more money--it can only be triggered by defaulting on existing debts that cannot be paid. Bailouts are never about enabling reform--they're about preserving the Status Quo Elites' and vested interests' share of the swag."
B-R-A-V-O
"Reform cannot be triggered by borrowing more money--it can only be triggered by defaulting on existing debts that cannot be paid. Bailouts are never about enabling reform--they're about preserving the Status Quo Elites' and vested interests' share of the swag."
B-R-A-V-O
If the EU of the unelected leaders cannot manage Greece with a very little economy and only 11 million people , how can , those jockers , handle much bigger economies such as Italy , Spain and others ?
From the evidence of current debts , in the future , the Greek story , will repeat itself with different actors , and then it will get interesting .
The EU leaders can offer to the countries in difficulties more debt as the cure for their indebtness . It is obvious , even to blind Freddie , that this cure doesn't work . The cure is worse than the desease , it is an acceleration of it to make the desease terminal .
So if it is not Greece that exit the EU , it will certainly be somebody else that will do it .That will be the end of the dream called European Union , a dream hijacked by the Zionists ,the banksters , the Multinational interests , the Lobby groups , Uncle Sam and just everybody that had interests in extracting money and favors from political correct politicians . The citizens have no say at all in this European Union of the bought off politicians ,even the Parliament doesn't legislate , the laws are made by non elected commissars .
Grexit
1. Drachma
2. German and French banks take losses as they should for being stupid enough to lend to any Greek government.
3. Drachma drops in value by 1/2 or more
4. English and Germans discover new affordable place to holiday.
5. Northern Europe, Russia etc find great new place to buy food.
6. Greeks achieve some level of sustainability.
No Grexit
1. Stay with Euro
2. Get hosed by bankers who should have known better than to lend 10 cents to any Greek government.
3. Greek people starved
4. Greek assets bought by speculators.
5. Greek people starve some more.
6. Greek people die.
Which would you choose?
Greeks will still starve. It is their elites in the Greek government that are spending their money. The sale of bonds is just the MEANS of the fraud, because they know they could never tax that high...
So...once out of the Euro, what's to stop the Greek politico's from impoverishing their own through money-printing? Each drachma they print makes the one printed before it less valuable...
It is not Europe (or at least not ONLY or even PRIMARILY Europe) that is robbing the Greeks. It is their own elites, same as in every other country. People covet most the things within their reach...
I agree with you on the Greek corrupt politico's. But that is something the Greek have to sort out themselves and the rest of Europe should not pay for them.
Indeed that is what Greece should do:
- Leave the monetary union
- Default on the debts to European banks (Blowing up 3.4 to 4 trillion of derivatives on Greece and interest rates on Greek bonds etc)
- Support the Russian pipeline trough Turkey and Greece
- Give Russia a port
- Make a free tax haven with full anonymity to everyone and every company on the globe
But I think that unfortunately the EU will come to a last minute settlement with Greece because they have to regarding the derrivatives.
"There is no substitute for the discipline of a market that cannot be manipulated by political elites..."
This is a good point.
Several times now we have had live tests of the EU's political discipline vs the market's discipline. Each time the politico's have caved, while the market raised rates on the deadbeats.
Real live test.
Repeated multiple times in just the last 5 years. Always with the same result.
Political discipline will always compromise with deadbeats. Investors, who invest their OWN wealth, will often err, but will not compromise once a deadbeat is known.
The Euro will not fail and is here to stay.
However Greece and the not so United Kingdom are looking to exit.
This will make the Euro stronger and the UK and Greece weaker.
Most of the UK's trade is with Europe, although they act like the 51st state of the US.
If the UK leaves Europe, Scottland might be forced into leaving the EU as well,
which might finish off what's left of the UK.
I don't see the demise of the Euro - but I see a weakening of the british pound and the USD
due to their endless QE policy and wasteful debt- financed spending year after year.
WR;)
1) I'm English and could swear I just spent a tenner? I'm sure we're not in the Euro.......
2) Scotland has one t.
3) Research the difference between the euro and the eu.
A New Gold Standard In The Making – Willem Middelkoop
http://thenewsdoctors.com/?p=285034
The ClubMed just cannot handle money responsibly!