The European Union Has A Currency Problem

Tyler Durden's picture

Authored by Milton Ezrati via NationalInterest.org,

Donald Trump, for all his rhetorical clumsiness and intellectual limitations, still sometimes makes a valid point. He does when he says that Germany is “very bad on trade.” However much Berlin claims innocence and good intentions, the fact remains that the euro heavily stacks the deck in favor of German exporters and against others, in Europe and further afield. It is surely no coincidence that the country’s trade has gone from about balance when the euro was created to a huge surplus amounting at last measure to over 8 percent of the economy—while at the same time every other major EU economy has fallen into deficit. Nor could an honest observer deny that the bias distorts economic structures in Europe and beyond, perhaps most especially in Germany, a point Berlin also seems to have missed.

The euro was supposed to help all who joined it. When it was introduced at the very end of the last century, the EU provided the world with white papers and policy briefings itemizing the common currency’s universal benefits. Politically, Europe, as a single entity with a single currency, could, they argued, at last stand as a peer to other powerful economies, such as the United States, Japan and China. The euro would also share the benefits of seigniorage more equally throughout the union. Because business holds currency, issuing nations get the benefit of acquiring real goods and services in return for the paper that the sellers hold. But since business prefers to hold the currencies of larger, stronger economies, it is these countries that tend to get the greatest benefit. The euro, its creators argued, would give seigniorage advantages to the union as a whole and not just its strongest members.

All, the EU argued further, would benefit from the increase in trade that would develop as people worried less over currency fluctuations. With little risk of a currency loss, interest rates would fall, giving especially smaller, weaker members the advantage of cheaper credit and encouraging more investment and economic development than would otherwise occur. Greater trade would also deepen economic integration, allow residents of the union to choose from a greater diversity of goods and services, and offer the more unified European economy greater resilience in the face of economic cycles, whether they had their origins internally or from abroad.

It was a pretty picture, but it did not quite work as planned. Instead of giving all greater general advantages, the common currency, it is now clear, locked in distorting and inequitable currency mispricings. These began with the enthusiasm in the run up to the currency union. High hopes for countries such as Greece, Spain, Portugal, and to a lesser extent Italy, had bid up the prices of their individual national currencies. In time, reality would have adjusted such overpricing back to levels better suited to each economy’s fundamental strengths and weaknesses. But the euro froze them in place, making permanent what otherwise would have been a temporary pressure. At the same time, Germany, which at the time was still suffering from the economic difficulties of its reunification, joined the common currency with a weak deutsche mark, locking in a rate, International Monetary Fund (IMF) data suggests, some 6 percent below levels consistent with German economic fundamentals.

Right from the start, then, the currency union divided the Eurozone into two classes of economies. Greece, Spain Portugal, Italy, and others became the consumers. Because the euro had locked in their overpriced currencies, populations in these countries had the sense that they had more global purchasing power than their economic fundamentals could support and consumed accordingly. At the same time, the currency overpricing put producers in these countries at a competitive disadvantage. Germany, having locked in a cheap currency position, faced the opposite mix. It became the producer for all Europe even as its own consumers, feeling a little poorer than they otherwise might have, remained cautious. Because Germans in this situation had every incentive to sustain production, while others did not, they made more productive investments, improving their economic fundamentals and so widening the gap between economic reality and the euro’s expression of it. Updated IMF data suggests that by 2016 Germany’s relative pricing edge had doubled to 12 percent.

These pricing biases have gone on to foster still more harm. The German economy has become increasingly export oriented, less responsive to its own consumers, more vulnerable to what happens abroad, and consequently more fragile. The distortions have also spilled outside Europe. By exacerbating the fiscal-financial problems of so many Eurozone members, they contributed to a general decline of the euro against the dollar, the yen, the yuan and other currencies. Accordingly, German industry’s pricing advantage has extended to the global marketplace, certainly compared to where matters would have stood if Germany had an independent currency that avoided the taint of Europe’s troubled economies. Japanese producers complain incessantly about how the strong yen has priced their products off global markets. American producers, which have seen the euro fall some 30 percent against the dollar during the past ten years, are hardly any better off. German industry makes no such complaints.

Berlin and the German media have pushed away any blame. They hotly deny that the country engineered matters in this way. This may be so. No one at the euro’s birth anticipated such a result, not even the Germans. But whether the advantage was planned or not, Berlin, it is clear, has certainly taken advantage of it and has taken steps to perpetuate it. Germany has, for instance, put some 671 billion euros ($752 billion) at risk, one quarter of its gross domestic product (GDP), to support Greece and other troubled nations on Europe’s periphery. It has also helped lasso the IMF into such lending. Berlin claims that all this money at risk reflects its commitment to the European experiment in union. That may indeed be so, but it is an awful lot of altruism. A more cynically inclined observer might suggest such extreme actions have an alternative motivation, that the Germans are desperate to prevent the unraveling of a structure that serves German industry well.

Whatever the truth of German motivations, Trump, it should be clear now, has a point. Germany is leveraging an unfair and distorting competitive advantage. More important everyone, except of course German industrialists, has an interest in unwinding this currency pricing bias. It is not apparent how Europe could do this. A harmonization of tax and spending policies might reduce some of the hardship imposed by these pricing biases but not remove the basic problem. A good first step might at least admit that such distortions exist and that an adjustment would provide relief. For non-German consumers, it might encourage restraint by demonstrating that the global purchasing power of their incomes is less than they had supposed. For German households, it would have the opposite effect. Finding a way to correct the imbalance would provide a lift to non-German production and in so doing lift the pressure of the fiscal-financial crisis under which Europe has labored now for almost ten years. In the process, it would save the German taxpayer from having to put so much money at risk to prop up a distorting system. If an adjustment would hurt German industry, it would also slow or perhaps reverse the underlying ill effects it is having on the structure of that important economy.

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BennyBoy's picture

 

 The euro is working as designed. And it was designed not to work.

Google the objections made to it when it was introduced by people who could do math.

D Nyle's picture

This guy is a propagandist, shows his bias in first sentence. If he was so smart, why isn't he richer than Trump

Lets_Eat_Ben's picture

Trump is so dumb he fumblefucked his way into billions of dollars, a beautiful wife, a big happy family and the Presidency. 

D Nyle's picture

So your a Billionaire, NOT. Typical liberal, full of shit, but a keyboard commando. Shouldn't you be Beating up a disable kid, or prepping to kill a bunch people at a gay night club/ baseball field

D Nyle's picture

Your Right , sorry Lets eat Ben, I will downvote myself for that misstake, thanks ..._ _ _...for enlighting me

. . . _ _ _ . . .'s picture

Good man. Chivalry ain't dead.

finametrics's picture

the orange monkey orangutan recieved half a billion from his father. that's a nice jumpstart on life. he then defaulted over and over again. true story.

. . . _ _ _ . . .'s picture

...including Jeremy Corbyn.

"No one at the euro’s birth anticipated such a result, not even the Germans."

Many predicted currency problems. In fact, many had predicted all the problems facing the EU today.

Ghordius's picture

define a bit that "currency problems". like what? like Soros trashing the Pound?

or like a huge financial/banking crisis that actually had nothing to do with the EUR?

europe's main "currency problem" is... resources

it does not matter if they, be them oil or natgas, come from Saudi Arabia or Russia or the US, we don't have them

and so, in order to get them, we have to produce something in exchange

that simple. it used to be the reason why we went along, for a while, to use the USD "as if it was gold", up to Nixon's Shock

which changed "the problem", and to which the EUR is the... response, and new solution

in this, the US is perhaps the only country of the world that could be 100% autarkic and self-sufficient

. . . _ _ _ . . .'s picture

Fuck, not you again. Ugh.

Briefly:

When the European Economic and Monetary Union adopted Maastricht, it followed the single market programme. Optimum currency area theory, at the time, did not have all the answers. They wanted to remove the risks of sudden changes in the exchange rate (amongst other things) which were disruptive to the monetary system. Some countries in 'the area' did not do well at all, most in fact. Do you remember the term 'Eurosclerosis'? Reforms under the Lisbon agenda had led policy since, and OCA theory has helped, and others have been proposed, but all these changes would not have been needed if the system had been rosy from the start, would they? Many predicted this, through all its stages.

Bandaids over bandaids over bandaids. Now what have you got? Cause and effect. You can't have an economic union without a state union. Giving up your currency to the union is a loss of sovereignty. All problems stem from this. If the UK had given up the pound, Brexit would have been harder to achieve, but would have happened sooner, IMO. This is half of the reason that the US is seen as an imperialistic force. The military is the other half.

Lots of countries could be self-sufficient. Lots and lots of them.

 

Ghordius's picture

"You can't have an economic union without a state union"

it's a mantra, repeated and repeated and repeated again, ad nauseam

nearly the whole 19th Century was, for most of the world, a huge "economic union" with a "monetary union", because...

... nearly everybody used gold

we can't? watch us

. . . _ _ _ . . .'s picture

There is usually a good reason cliches are cliches.

I expected a better response from you.

Gold and fiat are not the same thing. The issuing authority can control the value of a fiat currency. To control the value of gold, one needs to have a greater share than others, in which case others could join forces to prevent it. You might say that this is a union of sorts, but again, no sovereignty is lost unless a gold issuing authority is created.

Gold cannot be printed... yet.

 

Teja's picture

Seen from the likes of Greece, Portugal, Ireland, Italy, the Euro is kind of gold. They do not control it, same as they could not control the creation of gold. Credit creation through their local banks, in combination with buying government bonds, looks a bit like creating euros, but as we all know this works only for some time. It is like printing paper gold IOU's.

In that sense, the Euro, for those countries is more or less like a hidden gold standard. If it were an open gold standard (or based on any other hard limit), it would have been easier maybe as it would have been clear from the beginning that money borrowed to them has no good chance of being repaid.

The argument that you have to have a state union to have a successful currency union is only partly true. You must have a union where rich parts are willing to permanently subsidize poorer ones and/or where people are willing and able to move freely between the regions. And both factors are difficult for the EU - tell the German voters that they should permanently subsidize the Greek, and you will loose the next election. And to send the jobless from southern Italy to Sweden is also quite difficult on a sufficiently large scale, for both sides.

A state union or federation helps a bit in regards to the subsidizing - the EU budget would simply be 20% and not 2% (or less?) of GDP, and the Germans would not be the wiser about EU money spent in Portugal in the short run. In the long run, well, look at Yugoslavia, or now Spain/Catalonia.

WallHoo's picture

Its not a mantra dumb ass its how it is.

The state runs monetary and economic policy that are interlocked,the central bank watches over commercial banks and inspects the creation of credit.

There is a currency without anyone managing it.No monetary policy no state=economic problems.

 

The hole crisis was created in order to form a central state,fucking idiot...

 

Go fuck yourself troll,i dont want my country to be part of that euro mess...There is no WE.

OverTheHedge's picture

Are you suggesting that everything in the eurozone is peachy?

Seriously? Either you are an utterly blind eurocrat, or you are running a business that is making money hand over fist, precisely BECAUSE of imbalances in the eurozone.Given how much you post here,  can only assume that you are either paid to post, or your business does so well, you don't need to work.

Either way, you don't seem to want to take reality into account.

WallHoo's picture

"You can't have an economic union without a state union"

 

Finally common sense...

. . . _ _ _ . . .'s picture

FYI, and just so you know, as big a pain as he can be, Ghordius is no troll. I don't defend or agree with many of his positions, but he is usually polite and adds much to the discussion whenever the EU and the Euro are discussed.

He is long-winded, though. Ugh!  :)

CNONC's picture

That is all a bit of nonsense.  Soros, as much as I may dislike his politics, did not trash the pound.  The BoE did that.  Soros simply took advantage of the inevitable.  The recent crisis may have had nothing to do with the Euro, but it had nothing to do with the Dollar either.  It was, of course, a rather typical liquidity crisis fueled by uncertain collateral valuations. 

and so, in order to get them, we have to produce something in exchange

What does that mean?  Are you suggesting that the US does not have to produce something in exchange for its imports?  The petrodollar system is not as critical to the world system as most people think.  Its principal effect is to provide a value reference to the dollar, and, by extension, to the other major currencies.  It does not allow the US to consume beyond its total, past and present, productive capabilities.  The US capital account still balances.  Foreign producers can, and do, recycle their dollars into US based assets.  I don't discount the potential distortions in the system caused by the growing sovereign debt of the US, but the risks arise from potential mispricing of those US based assets.  Crises arise, just like last time, with doubts about the value or liquidity of the investments.  CDOs and such last time, maybe municipal bonds next time.  It has nothing to do with resource availibility.

I remember the run up to the introduction of the Euro.  I was in grad school (wasting my time studying economics)  I wrote several papers proposing that the Euro would lock in overvalued peripheral curreny values.  I watched while the Lira and other currencies rose in value versus the Mark as the Euro introduction neared, as the currency market ceased to discount future currency risk.  The general consensus amongst the people I communicated with at the time, was that the Euro would result in a permanent German trade surplus, and permanent peripheral trade deficits.  We were correct.  Where I was wrong was in failing to understand how the capital account would balance.  I assumed that, over time, German firms and people would begin to buy peripheral assets, such as businesses, vacation homes, etc., and that would produce a feeling of being "colonized" by periphery citizens. (Much like the fears in the US during the 80s that the Japanese were going to own everything.)  I didn't realize, then, that the Target 2 system would be abused to balance the capital account without a market mechanism.   Florida runs a permanent trade deficit with the rest of the country.  This is to be expected because of the large population of retirees in Florida.  The trade deficit is offset by the retirees' transfer of wealth to Florida, partially by purchasing Florida based assets.  This process provides a market based value reference for the ongoing trade, preventing it from becoming too unbalanced.  This pricing reference is far more important to the US economy than most people realize.  It is why softness in the Florida real estate market, especially condo pre-sales, so frequently precedes US recessions.  The GFC was, in fact, signalled by a collapse in the condo pre-sale market.

In the Euro zone, the Target 2 system allows the capital accounts to balance without a continual reference to underlying values in the countries running trade deficits.  Over time, without this reference, the relative value of the inputs derived from the surplus versus the deficit countries can become distorted.  In particular, labor in the deficit countries becomes overvalued,  resulting in permanently high unemployment.  If, instead of sequestering a portion of the capital account imbalance in the banking system, the surplus countries (Germany) were instead, as in a normal system, investing the full capital surplus in the deficit country, asset prices in the deficit country would adjust downward, reflecting the true value of trade, and reducing the incentive to run a trade surplus with that country.

In short, I suspect that without Target 2, and the peripheral bond purchases by the ECB, (which is another method of balancing the capital accounts without a true market mechanism) the Euro zone would be unsustainable.

 

troubadourcapital's picture

The eu is going to break one day. You cannot have a monetary union without a fiscal union

BandGap's picture

Math is hard. Ask any global warming alarmist.

I see a pattern here.

MEFOBILLS's picture

The Euro is a crap system.  

Fiscal Policy is the flip side of monetary policy.  Fiscal Policy is taxation by government.  

In South Africa, to get the natives to mine for gold, they simply introduced a "head tax."  That means that the native negroes were induced to work in the mines to then acquire Rand, to then pay the tax.  So, the RAND came into being to pay taxes.  I use this point to show that money is creature of the law, and that taxation is force behind the law.  If this force is moral or not is another story.  (Gold is not money unless it gets the "kings" stamp.)

There is no co-ordinated fiscal policy by governments in Europe.  There is coercion by Brussels, who are unelected bureaucrats.

Monetary policy is the money issuing component.  In a debt money world, the bulk of the money supply is issued by private banks upon hypothecation.  That is 97% or more of money we use, is bank credit.  This is when YOU take out a loan.  Then others use your bank credit.

Your credit is taken up in taxes and then re-spent.  So, a Greek taking out a loan to buy a BMW, soon sees his credit leave the Country and not benefit his fellow Greek.  A greek person's debt instrument may also be on-sold to a German bond holder.  Now, both the former credit as money, and the debt instrument are both in Germany, yet the obligations for Greek people remain.  The monetary tool needed for economy has been stripped from Greece by the malformed Euro.

The debt money system, like all systems, predicate its output.  If humans insist of using debt money (bank credit) then there are definate things you must do, and which are not done with the Euro.  For example, if you are a mutual fund manager, and want to buy bonds, then where you buy said bonds (debt instruments) represents a path for money.  If a Greek mutual fund buys German bonds, that strips Greece of badly needed Euros.  

When the Euro system was formed, they didn't get Fiscal Policy correct (taxation) and they didn't get monetary policy correct (especially the bond component), and they didn't allow by law, to have counterspending.

Here is Richard Koo, using a consolidated balance sheet for Japan, and he also builds a CBS  for the Euro Zone.  It uses a sectoral balance approach, and shows how Japan Businesss has repaired their balance sheets.  The money for this repair came through cash flow due to deficit spending by Japanese government.  The Euro system cannot do this.  

https://www.youtube.com/watch?v=8YTyJzmiHGk&t=25s

Pay attention also to the discussion on bond markets.  

Those who regularly read my posts, know that I would flush the debt money system down the crapper, where it belongs.  But, if you are going to talk about the EURO, it is a debt money corporate bank product, therefore it needs to follow debt money rules - and it doesn't.  

 

 

 

Moose Chop's picture

The first thing the EU did in Portugual was to buy all the farmers livestock then give them huge pensions. They never taught their kids how to farm so they became spoiled little brats who didnt want to work for a living. Then when the reality of the Euro hit the people they went back to farming and accumulating livestock. As a result the EU or Portugese government made it illegal to slaughter your own livestock, they mandated that you bring them to a special facility to be slaughtered. Right, just how is one who cannot afford to eat going to bring a pig 100 miles to be slaughtered. Also, if your car is over five years old your government insurance triples or quadruples forcing you to sell your car for basically peanuts. Did i mention the average salary in portugal is 11000 euros a year. Guess what a car costs. I love visiting portugal, the food is excellent the weather is great and it is a beautiful country but i would not want to live there.

Yars Revenge's picture

Euro is the White genocide currency.

Ghordius's picture

LOL. how so? because it sounds "good"? neither Sweden nor the UK use the EUR, btw. does your theory reflect that?

Ghordius's picture

meh. the euro is working as designed... and it is working

meanwhile, when I joined this blog's comment section, 6 years ago, nearly everybody was quite convinced that it would not last even months

and... the old commenters were mostly "goldbugs". whereas I ask them: if we, the eurozone 19 would go back to gold...

... where would be the difference? would that meme of "Germany exploiting the eur standard" become "Germany exploiting the gold standard"?

a huge.... MEH. to FX traders moaning that they miss 19 times 19 "FX crosses" to foreign megabanks moaning that they miss business in FX to anybody that has to jump on a horse that has already gallopped away, then the eur is looking stronger, for the next months, and so that "too weak, too good for exports" will look even dafter then now

all this noise is just politics. in this case, politics from outside the 19, i.e. foreign politics

meh

Joe A's picture

Do you mean to say that it was designed to give Germany the economic upperhand? That it was designed to have a flow of money from South to North in the exchange for goods from North to South? I don't see how that can be beneficially to everybody since it makes one the debt slave of the other while losing productivity and therefore independency.

Ghordius's picture

I see more "debt slaves" in the country where you live, Joe A, then in the Southern

that "debt slave" thing might be a handy meme in the US, but I don't see it's application in the european context

do you realize that the average Greek, Cypriot, Italian, Spaniard is... richer then the average Dutch or German?

Southerners have a bit of a thing with state debt, Northerners have a bit of a thing with private debt

and no, check again on that "productivity" assumption. what kind of numbers do you use for that?

Doom and Dust's picture

Indeed. Italy has much higher homeownership than any northern European country, and only a small part of it is mortgaged.

Same with familiy homes in Greece, Spain etc.

Ghordius's picture

leading to the amazing number, for some, of 60% of Germans living in rent, btw. and not finding this strange in any way

and that's only part of the picture. German companies... produce the "end-product" "made in Germany" with pieces produced all over the eurozone, including let's say brakes for BMWs made in Slovenia, where Mrs. Trump comes from

meanwhile, those same "German" companies have stocks. and those stocks have owners... with a lot of Southern europeans being very keen holders of them

that's the whole point of "economic integration", btw. a fair environment for production among 19 countries, and so exploiting the "return on scale" that otherwise would be the privilege of bigger countries

Joe A's picture

It seems to me that the average German worker is at the wrong end of that bargain compared to German industry that gets the biggest piece of that "fair environment for production". I don't see a fair environment where other countries economies are at a disadvantage compared to Germany's industry which profited the most from the Euro, achieving a competitive edge. Pile on top of that Merkel's and Schauble's pressure to impose austerity everywhere and Germany buying up things up left and right in Southern Europe's fire sale. You call it economic integration and a fair enviroment of production. It sounds to me like a continenral takeover by German industry and banks (who also get a bail out when things go wrong). Was it all planned that way, is my question again?

Aw Yeah's picture

My understanding is that the point of the article, is whether the volatility and weakness of nations like Spain, Italy, Greece, et al. within the Euro create an overall weaker currency, which benefits German exports and the Germans in general.

Sure, German products are perceived as being of a high quality (despite almost all diesel cars produced by Germany failing the the environmental standards set by the EU, and lying about it, but that is OT), but could it be that the currency advantage and resulting surplus enables investment and continuous improvement?

Re: Germans renting homes - Germany is one of the few European countries which has rent regulations, and so people aren't living in fear of being priced out of their homes. This also had the advantage that Germany had limited exposure to a housing bubble and collapse. This to me at least sounds like a good thing, as Germany did not suffer as much as it's southern European counterparts in 2008, and could benefit from exporting to EMs to tide it over while the rest of the world "recovered" i.e. gained access to cheap money again to buy luxury German sedans. But it's all pretty uneven within Europe re- homeownership because of differing historical national attitudes to homeownership. Germany has on balance again benefited from its approach, whether by design or it's virtuousnes is the question.

 

OverTheHedge's picture

It's astonishing! The entire eu economy is firing on all cylinders, there are no deficits, and every little piig is eating roast beef. WTF!!!

If I look out of my window, I see a country whose GDP contracted by 25%. Why? Because they are all lazy? They were on the beach all day?

If life was so rosy, why have ALL the youngsters (who want to get on, and make a life), left to work in Germany etc? There's no need to leave; life is peachy and warm and snuggly in the eurozone, isn't it?

If there were so many opportunities in this tremendous, fabulous, wonderful eurozone, why am I not a billionaire? I'm a hardworking northern European, which tons of ideas, and I am surrounded by southern European, lazy idiots. Why can't I just leverage my abilities and make hay in the endless sunshine? Because it's pissing down, that's why. And it's Germany that is doing the pissing.

I strongly advise you to give your dead horse a break today - it's looking rather chaffed.

Joe A's picture

Again, you respond selectively. What about me responding to you that the Euro is there to give Germany the economic upperhand. Was it designed to do this? Is that what you meant?

I wouldn't say the average Greek, Cypriot, etc. is richer than the every Dutch or German. Home ownership is higher in the former than in the latter, at least fully paid off. There is of course a lot of hidden money in these countries as well but the poverty rate is higher in these countries. Yes, Northerners have something with private debt versus the South that has something with public debt. It is private debt in the North that keeps the financial institutions there going and which fuels the consumer society. The public debt in the South compensates for the lack of productivity, to finance social and welfare programmes and to buy votes.

With Italy being an exception because it is productive, many of these countries are not or are not producing things that are of high value. Spain has three times the number of people of NL but only two times the GDP. So I would day Spain is not so productive as it could be.

I "blame" these discrepancies regarding the economy and society on the differences in European countries philosophies, ideologies and religious histories but that is a different story.

Ghordius's picture

it is designed to provide stability. an even, fair field. and it delivers exactly that

that's why, for example, production of components for those German export cars that everybody is obsessed about can be shifted to small countries like Slovania and many others

productivity... based on steady devaluation of a currency versus another? is that productivity or is that competition on the monetary plane only?

you "blame" discrepancies. I point to personal wealth discrepancies. how do you explain those?

further, check what economists account as productivity. see, for example, that the French... are more productive, using this kind of calculation, then the Brits. or the Germans

Joe A's picture

That is the thing: moving production of parts is expansion of German industry. Renault does the same in Romania, Fiat in Serbia. In the end, the revenue of these part making plants go to the mother ship. Car brands also take over car brands in other countries: VW acquired Seat, Skoda. And turned them around but it is brand expansion.

There are plenty of examples where Western European companies put companies in Eastern Europe that are brands out of business because these companies can't compete. Not because they are not healthy companies but simply they can't lower the prices that Western European companies can. The predator companies as I call them can undercut the prices because they are resilient enough to do that for a long time. Local brands go out of business or are taken over. But the profits goes to the holding and people need to work for peanuts. That is hardly a fair environment. It is a take over.

OverTheHedge's picture

Please tell me, Mr Ghordius, why Greek light engineering, which was built up in the 80s and 90s with much state encouragement, ground to a shuddering halt AS SOON AS THEY JOINED THE EURO?

And why do you keep banging on about wage arbitration being such a good thing? Exporting factories to peripheral areas acts as a drag on German wage rises, which just ensures that the imbalances remain. Just the way the central industrialists like them.

As far as I am concerned, 350 million people would be much better off without the eurozone, but a few hundred thousand eurocrats would have to find real work. That is the real imbalance no one is talking about

WallHoo's picture

The average greek is not richer than the average German you fucking troll,you have no clue.

 

By the way 60% of germans leave on rent because either the state owns the houses or the state has masively privetised the property to land lords.

 

Again go fuck yourself.

XAU XAG's picture

Ghordy

All your cash is in the € then??

Good luck

 

Will be back to 80 cents to the $ within 24/36 months

Ghordius's picture

why do you make such an assumption?

the EUR is a transactional, fiat currency. it has a role, it has a scope, "it does the job"

saving... is a completely different matter, and it depends on how long you want to keep those savings. the longer, the more gold is the appropriate medium, remember?

and I am an entrepreneur. as most, my very activity kind of makes me a "natural eur-.... shorter"

the same applies to the average US owner of a house. he has a mortgage, i.e. he has debt in USD, which is "a kind of" shorting the USD affair, meaning that if the USD goes down, down, down, his mortgage load dwindles, and so he is better off by a USD that goes down, "ceteris paribus"

XAU XAG's picture

So you are a Shorter of the €

So when peeps say the € is going to the dogs, why do you bark at them.

Every currency in it's home market is a short, Agreed on the Mortgage with one Caveat!

The west (and prob the rest of the world) is heading into a house price crash not seen since 1929

The fire will start in Japan or Europe

Place your bets

Ghordius's picture

nope, I do not short. I produce. by producing, I am exposed. and reflecting on how I am exposed, I have to note that the EUR going down is a big "meh", for me

that is not the point of view of a trader. who seeks exposure. as a producer, I am interested in a stable currency. and so I am not interested to listen to what traders like, which is opportunity... to bet upon

house price crashes, btw, hurt FIRE economies more. which are economies that put less emphasis on production, on stable product prices, and more on asset prices, either ever-rising or fluctuating

XAU XAG's picture

You are a frigin num nut

I used your term shorter, and not from a trading point of view, ie the mortgage

You bash those from 5-6 years ago re the €, well I have to laugh cause in another 5-6 years you will be eating your words.

 

AND HOUSE PRICE CRASHES HURT THE BANKS THAT HAVE LENT ON THOSE PROPERTIES, that then hurts the economy

It has nothing to do with fire economies or production it is the DEBT in the fractional nature of making money out of thin air and lending it on an asset that then falls below the amount of the loan and or the debter's can not or doe not pay the loan on MASIVE SCALES

Ghordius's picture

sorry, it has a lot to do with "FIRE economies"

you come with "The fire will start in Japan or Europe"

well, actually in Japan, that fire already ravaged the country, once. prices for RE in Japan went up so much that the joke was that the Imperial Compound in Tokyo was as much worth as the whole of California

yes, house price crashes hurt a lot of people. but more in "FIRE economies"

take Germany's 60% of the population that does not own real estate, and so is not exposed neither in houses nor in mortgages

nor... in DEBT, as you write it

Lordflin's picture

The EUR does its job... I suppose the USD does its job... yeah, you are right... they do their job...

I moved out from my parent's house in 1968... I was 18. I had a part time job at McDonalds working 30 hours a week. I was able to support myself and pay for college with the income the job provided.

I grew up in a pleasant residential neighborhood in the hills above the San Fernando Valley. All the households had children... the neighborhood was full of children. All the women were at home raising the kids while the dads were off earning a living. Jobs were typical middle class affairs... everyone had two cars and took family vacations.

You are correct... these fiat currencies have done their jobs. I hope you have yourself a nice little bunker on an island somewhere... you are going to need it...

Ghordius's picture

and how is the EUR in any way responsible for that?

which, if Nixon had not closed the "gold window" in 1971... would not even exist?

what exactly do you expect, in the US, from us europeans? to back our common currency or the 19 national currencies with gold?

even if we would do that... how would that help you, in the US?

Lordflin's picture

EUR is responsible for the same chaos in Europe... sorry... thought the logic was obvious. You are correct regarding Nixon... but that was always going to happen. And the EUR was always going to be pure fiat... same money interest on both sides of the pond... with all Western peoples caught in the middle. The more central the central bank the more easily the economy is fixed for a handful of criminals. Europeans have completely lost control of their money... with a handful of unelected officials call the shots and raking in the profits... not so easily accomplished when every little European nation was printing their own paper...

Ghordius's picture

"You are correct regarding Nixon... but that was always going to happen"

are you saying... that a gold standard can't be sustained?

Lordflin's picture

Yes... that is certainly one of my points. The king invariably calls for the money changers and down the path of fiat we go...

kellys_eye's picture

Seriously Ghordius....

you're beginning to be the Micheal Mann of EU support.  Unquestioning support of the meme (in Mann's case cAGW) despite all the evidence to the contrary.

This can lead to only one conclusion - you're the poster-boy for a failing cause and a paid-for response to open criticism levelled aginst the EU.  EXACTLY like MM.

No matter the subject, the cause, the effect, the result, you seem to have a belief bordering on religious mania.

But similarly, like MM, you'll refuse to reveal your true backers and their real agenda - although, like Mann, we can guess more than accurately at what and who they might be.