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It Will Take Trillions Of Euros To Save The European Union
Submitted by John Mauldin via MauldinEconomics.com,
The EU’s political leaders and other elites are committed to holding the European Union together. To them, united Europe is an article of faith. They hold the idea with as much ferocity and fervor as any religious belief. But while the European Union is a wonderful political idea, it’s economically terrible. And the EU nations will have to face up to bearing enormous costs to save the Europe we wished for.
Why the Euro Doesn’t Work
Many of us take our national currencies for granted and we assume there have always been dollars, pounds, or yen. In fact, for a long time, individual banks issued notes promising the holder to exchange the notes for gold upon demand. The concept of a national currency is actually one that came about very late in history.
Before the euro was created, the economist Robert Mundell wrote about what made for an optimal currency area. His work was so important that he won a Nobel Prize for it. He wrote that a currency area is “optimal” when it has:
- Mobility of capital and labor,
- Flexibility of wages and prices,
- Similar business cycles, and
- Fiscal transfers to cushion the blows of recession to any region.
Europe has almost none of these. Very bluntly, that means it is not a good currency area.
The Price of a United Europe
The True Believers, however, will do almost anything to realize their vision of a united Europe. I believe that, to hold their union together, the core nations will ultimately absorb the debt of other member nations.
They will do this through the European Central Bank’s balance sheet, nationalizing all the debt. In exchange for this bailout, the debtor nations will sacrifice their fiscal autonomy on the European Union’s political altar.
The cost of this could be many trillions of euros. The longer Europe delays, the bigger the bill will be.
Whatever the bill is, the euros to pay it will not exist. The union will need to manufacture them. This will reduce the euro’s value considerably, just as Japan’s yen manufacturing diminished that currency’s value.
If you are a True Believer, you are probably willing to pay that price.
How Much Loss Are the Big Nations Willing to Take?
The European story can end only two ways. Either member nations will reforge the Eurozone as a true political union, or it will break up. There is really no middle ground.
Yes, Mario Draghi and his ECB successors can print and monetize for another decade, but not without the euro suffering a huge devaluation. Absent major reforms, the euro will continue to “adjust.”
Right now, European leaders seem quite comfortable with the euro eventually falling to US dollar parity. But what happens when the euro is at $.80 to the dollar? Does Europe want to go down that rabbit hole another 25%?
This process was already underway before the Paris attacks. Now the volatile mix of politics and economics includes terrorism, immigration, and the refugee crisis.
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Get out that checkbook Herr Schäuble.
While Merkel gives the orders, German cheques will be written.
She's not stupid.
But she did grow up under Communist guilt-indoctrination for WW2.
Watson
Meh, not a problem
Euro boyz just gotta call the Ronco Yellin Company, and get one of them there Made In USA FED-erated Ponzi Printers.
Them machines print Benjamins faster than a supermodel projectile barfing a 5 course dinner on Friday night.
It's the greatest threat global security has ever faced.
All the weapons in the world won't matter once ISIS army kick into gear!
http://motivationdose.com/electromagnetic-pulse-attack-emp-blackout-usa-...
About the EU... Not a good idea to talk poorly of your customers, Tyler.
They will come back to bite you in the behind.
You probably didn't learn that studying economics in Russia.
But no one dared to tell you
http://www.relay-of-life.org/main.html
Brilliant, very eloquent.
Frankfurters. There is a middle ground between abandoning the Euro and fiscal union. It's simple and obvious and looks like this:
Eurozone countries effectively forbid their commercial banks or any insured entity from buying sovereign debt if the sovereign is above some very conservative limit like 30% debt to GDP. Hedge funds and shadow banks that buy sovereign debt would be regulated with the assumption that the debt will default. Lend money to politicians and you get what you deserve, which is to lose it; but tough luck for you, no bailouts, because the financial system is protected from fools who lend their money to politicians.
The net effect is -- the Euro is a hard-assed hard currency and Eurozone countries have very limited ability to borrow or run deficits even if Keynsian theory demands that they should. That sounds like crazy heresy to orthodox economists, but it should sound like crazy common sense to most of the ZH crowd. We have been there and done that with perpetual Keynsian fiscal deficits as an economic policy. It doesn't work. To stop doing what doesn't work isn't such a hare-brained idea.
Eurozone countries and their populations will have a choice: hard currrency or confetti money. (No more fake choice of pseudo-hard currency plus permanent spendng above your means.) It's like the choice between cleaning your gutters vs. shooting heroin -- confetti money is much more pleasant in the short run. But European populations have experience with the confetti money long run, so don't be so sure how they would choose if faced with a stark no-bullshit choice between hard currency and confetti money.
Net Present Value of government has to reach zero before reform is possible.
Until then, the forces of kleptocracy make more money trashing the economy than they could possibly do running it in ways that favor stable, long-term, sustainable growth, and pensions and gov spending keeps enough voters in their pocket, buys enough political support.
https://thinkpatriot.wordpress.com/2015/11/11/dynamics-of-national-colla...
We bought the Israeli-neocon deep state BS about enemies and they got power. Now, lead by very dishonest people, deep corruption pervades the society, nobody's $ is safe in any financial institution. No politician can talk sense because doing so opposes the chaos that protects the 9/11 criminals and their kleptocracy.
They do not want intelligent behavior. Criminals lie because fuzzing reality is in their interest. Politicians also. Everyone politically aware in the entire world understands that 9/11 was a false flag operation done by the US and probably Israel. They base their decisions on that knowledge. Trusting institutions of any kind in 2015 is for fools, and people who do will be caught by unexpected events.
https://thinkpatriot.wordpress.com/2015/11/30/the-next-false-flag/
This is the kind of time in economic history when great fortunes are lost.
https://thinkpatriot.wordpress.com/2015/11/10/a-measure-of-propagandas-p...
>>>
But European populations have experience with the confetti money long run, so don't be so sure how they would choose if faced with a stark no-bullshit choice between hard currency and confetti money
<<<
We already know, from 1980's, two groups:
One group Germany, Austria, Netherlands believes in hard currency with electorate prepared to suffer pain to achieve it.
Electorate in these countries tends to save rather than borrow, generally live within its means.
Another group (Everybody else) Inflates steadily, borrrows like crazy to support living beyond their means.
Watson
http://beforeitsnews.com/conspiracy-theories/2015/12/lindsey-williams-la...
The US has been having an "immigration crisis" for years now, with our open southern borders..
Get use to "diversity" bitzches!
No problem, it's not like there is any real work/collateral involved in creating all that fiat!!!
If the people of the EU were smart, they'd bail on the whole idea. However the cheesepope elite and coconspirators are milking the EU dry, all the while destroying it so they don't have to pay for their crimes when it all goes to hell.
The people of the EU have about as much to say about their judeo-government as you do, schmuck.
Notice I said people, not person. Ultimately the people DO have the power. Sadly you fail at logic 101, which makes you the schmuck. You should rename yourself to ghostofintelligence. Because that's about all you have left.
Haha you say I use a logical fallacy without any proof or evidence, then to try to ram the lie further, you use a logical fallacy against me, which makes you a judenpath in my book.
I look forward to giving you your hubris back.
History is my proof.
They proclaimed a trade currency, but created an absolute one. History and economics in Europe was ignored and now they are left with a monetary sinkhole that no amount of money can plug, but reality has a way of rearing its ugly head.... http://www.poetryloverspage.com/poets/kipling/gods_of_copybook_headings....
This is like saying 'It will take tons of steel to save the Titianic'. Or maybe the Lusitania. Whatever.
The Fourth Reich lives...a little longer...
No worries, once the invasion from the Middle East is complete there will be no national identities left to oppose a Euro super currency.
GTFO!
Well, the moderately intelligent should already be gone anyway, so...
Au revoir, encules!
It will take hundred of trillions to save the American union
" We impoverished some folks " Viv La NWO!
In the whole universe planet Earth is the zoo.
A Euro wide bail in. Because it worked so well before.
This is what the bankster utopia is all about.
http://quod.lib.umich.edu/cgi/t/text/text-idx?c=acls;idno=heb00963
"But while the European Union is a wonderful political idea, it’s economically terrible."
Very true except the political part.
Why is it that something that exist only on faith and credit controls our very destiny, it's not real? Has money been carefully crafted, like religion, as our earthly god to worship and depend upon? Seems mankind was surviving before its arrival? But here we find ourselves unable to live without it? Something ain't right? Who did this? Where on Jekyll Island did this happen?
Best we all start getting the hang of bartering for as much as we can. Stop playing with their worth less everyday paper. As I see it there are a few dozen monopolies that go up in smoke without the magic of fiat.
I think we all knew and know that debts must be joined togther into one common obligation of the Brussels based EU dictatorship. Greek debt becomes everyone's debt. And all further rights of nations to run up debt are taken away as the price. This is in effect consolidating the EU dictatorship under Brussels. :"We pay off you debts, and you pass all your fiscal and debt issuance rights to us in Brussels from here on it. Done deal."
Instead of guns to consolidate the realm of Brussels, use debt.
Soon to be followed by shared individual debt.
Read Federick C Lanes account of medieval venice to understand why the elite are desperate to keep the extraction mechanism known as the EU together
They (sadly Rightly) see each euro country as jurisdictions from which they can extract at leisure.
They also owned the previous nation states but democracy can be messy although rarely effective.
What kind of idiot thinks that "the European Union is a wonderful political idea"? A bloated union instigated from above against the will of the people is a wonderful idea? Support for a "United States of Europe" is almost non-existent outside the political class.
The idea of a common Euro currency may possibly be a good one, since the popular belief that a functioning currency zone requires a common economic policy and a fiscal union is obviously false. (All that is required is some store of value completely separate from the currency with which to settle imbalances between nations – some store of value that isn't debt! Any time a nation starts to run out of the SoV, this will naturally prevent further profligacy, well before imbalances get out of hand.) Though whether the Euro will prove to be beneficial in practice, once the distortion that is the current, dollar-based international system falls, remains to be seen. In the next system, the currency won't really be that important, but the Euro may prove very useful in the transition period.
But the EU as a supernational political construct is hideous, evil, undemocratic, unmanageable, and destined to fail. Hopefully, it will fail without bloodshed.
Another giant clusterfuck created by poorly qualified know-it-all politicians suffering from outdated thinking and inadequate listening skills. And now they expect US to pay for it? How about 'fuck you, I told you so'.
The Euro was never going to do anything but generate problems when member nations have such disparate economic needs - even Facebook users would be able to grasp this point with less then 20 minutes of explanation.
My personal projections (whatever they might be worth) see the Euro a shade below parity pretty soon (hopefully on its way to zero).
Nothing is more dangerous than desperate Zealots clinging to power.
Europe is fkd. Euro is fine.
When this shitstorm concludes, many countries, renamed as counties, will be learning German
Du musst lernen Deutsch!!!
“The putative “father of the Euro”, economist Robert Mundell is reported to have explained to one of his university of Chicago students, Greg Palast: “the Euro is the easy way in which Congresses and Parliaments can be stripped of all power over monetary and fiscal policy. Bothersome democracy is removed from the economic system” Michael Hudson “Killing the Host”
“Let me issue and control a nation’s money and I care not who writes the laws.” Mayer Amschel Rothschild (1744-1812), founder of the House of Rothschild.
That is what the NATO policy has been in the middle-east, Africa and South America since the "Arab-Spring" (& before); we remove the democracies and install bribed puppets and support or overthrow the current dictators. Everything is moving to dictators by design. Agenda21 folks.
I looked up Michael Hudson's book from your quote and it looks interesting. A 100% correct comment from one of the reviewers of the book:
As Hudson notes, that ‘miracle of compound interest’ serves ultimately to insure financial crises as the big fish get bigger by eating the little fish (you) until the whole system collapses under the weight of a mathematical impossibility, i.e. the perpetual operation of the exponential function on which it is based.
The book is excellent, well worth reading.
The Euro can never work in its current form.
https://professorwerner.wordpress.com/2015/07/10/hallo-welt/
It is bringing back the tensions the EU was designed to remove.
Germany is throwing its weight about and forcing the ECB to use policies that work for Germany and punishing the Club Med nations.
Germany took ownership of Greece in the Second World War and is doing so again in buying up its assets to pay off its debts.
The Euro-zone is the Fourth Reich.
I have a huge amount of respect for Werner, thanks for posting a link to his blog, I didn't know he had one.
Someone else pointed me to this link and it rather good.
Trillions of € won't do anything but paper over a terrible debt situation, by adding more debt. Nothing will ever be paid back and why should it, its all digital 0 and 1's anyways. Just a way for the owners of all the central banks to control everyone.
Why not just "print" $50 trillion, €60 trillion, 200 trillion yuan, ¥10 gazillion and £20 trillion. Hand it out to people and watch them spend it. That will fix everything for another 10 years. Like I said its all digital 0 and 1's.
You're in luck. I happen to know someone who can print trillions of Euros.
It doesn't matter the profession; man doesn't like to admit when he is wrong and will always throw good after bad as long as it is not his $$$ he is throwing. Doesn't have to be money; it can be ideologies or reputations. Man, born to trouble as the sparks fly upward and we ain't seen nothing yet.
The Book of Revelation is going from generalities into clarity, for the time is approaching.
"It will take trillions of Euros to save the European Union"
Maybe the trillions will help and maybe they won't. It doesn't matter because all of those trillions will be needed to subsidize the lifestyle of millions of ME refugees.
Ooh ... look ... the Americans also want you to spend more trillions to fight their new imperial wars in the ME so they can continue to manufacture more refugees. Better hurry up EU, the US is counting on you. That's it, Good Dog!
Karma
Not only the Euro is a problem , the system is corrupt to the core because lobby groups are more important than the citizens the EU is supposed to serve .
Human rights abuses are widespread in the EU . It seem that many if not all the Eu members countries that have signed the " Universal Declaration of Human Rights " do not apply it . A lot of people are gang stalked by the secret police and there is no
way to complain to the police who will absolutely deny anything . The so called lawyers do not want to help the person whose Right are abused , the lawyers are too scared to tangle with the State Criminals .
The European Court of Human Rights is a dead loss . They expect a person harassed by the secret police to have proof of the crime ! The person must have exhausted all the legal avenues of complaint in his country . How is this possible when the legal system is rigged and letters of the citizens are put in the garbage bin unopened ? Sending a letter to the Chief of Police might results in a request from the Health department to undergo a mental health examination .
This is the EU in the year 2015 . I hope this malefic organization gets destroyed ASAP . The idea is great but the EU has been taken over by outside forces ( The Zionist International Crime Syndicate )
Just keep trading it short.The refugee flow is just starting.Millions to be served courtesy of the United States and NATO.Control,with ISIS serving their CIA masters.
Devaluation of the euro doesn't seem so terrible when you consider that the world is embroiled in currency wars to export deflation.
The notion that the EU was a politically sound idea is untrue. The UK was conned into agreeing to sign up with a promise that it was merely an entry in the Common Market. This was a deliberate lie. At the heart of the EU ideology was the goal of federalism. Right now there are calls for an EU police force, an EU army, EU miltary sharing (see UK/France), a dissolution of the British Constitution, and the removal ultimately of Parliament. The TTIP agreement demonstrates the underhand dealings of the EU Commissioners who are negotiating away citizens rights and freedoms by allowing corporatist lobbyists to draft the framework of the agreement. Then there is the treatment meted out to Greece.
The EU is a dangerous institution devised to allow a one world government to develop globally. This will be resisted at all costs.
optimal currency area my ass
there is no such thing
This is a silly fantasy idea (from Maudlin) -- no attachment to reality.
The EU lacks democratic legitimacy. As soon as Europeans are asked to pay the costs of the bureaucrats' fantasy fest, the EU will collapse.
Germany already set a limit to what they will pay (EUR160 billion). Anything beyond that will get Merkel impeached, as already decided by Germany's highest court.
Maudlin and other central planners can wish all they want, but its not going to happen. Draghi will be lucky to avoid a treason charge.
Stopped reading at "the European Union is a wonderful political idea", fuck off.
The EU was a horrible political idea. In fact, by their nature, ALL political ideas and decisions are terrible, unethical and inherently destructive, just as human predators desire.