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Are The Europeans About To Start The Second Half Of Our Great Depression?
"Just when we think the worst is over - and let's face it we have been in this crisis for five years - we get the second half; are the Europeans about to start the second half our Great Depression with massive bank runs" are the Jaws-music-inspired words that recent media-favorite (yes, us too) Niall Ferguson uses in an interview with CBC. His main concern is that this kind of (bank-run) event can quickly spiral out of the control of even the ECB as he uncomfortably conjures the image of the initial US stabilization that occurred in 1930 to May 1931 only to be knocked back into a greater depression by the failure of Credit-Anstalt, which set off bank failures and eventually defaults in 1932 on many government debts. The deposit run potential is the single-biggest reason to care about Greek-exit - in itself it is not large enough economically to interfere with global growth but it is the message and contagion that it sends that is critical in bringing forth a pan-European banking crisis and implicitly spilling over to the US and Asia via global trade and banking transmission channels. An excellent brief interview that summarizes the exact fears that face Europe and implicitly the US, explains the rather simple solution of fiscal federalism and the fact that today's German politik is very different from 1989's Helmut Kohl-era with regard to their commitment to the Federal outcome. His conclusions are worrisome. Germany is the key - and there is not a good understanding of financial markets in Berlin.
Six minutes well-spent on a Saturday evening...
Europe is a part of North America's destiny because the financial systems are so intertwined - and remember even the all-knowing Fed massively under-estimated the second-order effects of Lehman.
"It's a total fantasy to think that the meltdown that I am discussing that could happen in a matter of weeks would not have a major impact on North America's prospects of sustained recovery."
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Crazy about Niall? Turd, not so much.
Typical British...what he doesn't mention and is the game stopper is control over the budgets (and the coming austerity) for the periferary countries. You cannot expect Germans to give up wealth for the sake of periferary spending.....it is the Maxist socialist state that he is arguing for.
by the failure of Credit-Anstalt
http://www.jstor.org/discover/10.2307/3133667?uid=3738032&uid=2129&uid=2...
Further, documents have come to light which show that France exacerbated the 1931 run on the Austrian schilling in order to force Austria to abandon the Austro-German customs union project of that year. This article considers the relationship between the collapse of the Creditanstalt and the abandonment of the Austro-German customs union, incorporating the new evidence to provide a novel interpretation of the financial diplomacy of that year.
http://www.thinkorbeeaten.com/ITGK4/notfun3.html
Matthew Sinclair 3:29pmhttp://www.spectator.co.uk/coffeehouse/6472853/the-british-taxpayer-shou...
TomTomNovember 17th, 2010 5:32pm
Must keep funding banks so they don't cross-default. The Spectre of 1931 haunts Europe...first the collapse of Kreditanstalt Wien, then the Danat in Germany and Dresdner Bank and Deutsche Bank...then the inability of the Fed, Bank of England and French Central Bank to stabilise the collapsing German banking system, leading to London having to devalue as gold exited London to Paris.
That is why they bail out French and German banks in Greece; UK and German banks in Ireland, and whatever else it takes to stave off cross-default on bonds held/issued by banks to each other.
This is the beginning of the liquidation of the financial system and household assets with sovereign states following Ireland into ruin as governments underwrite bank losses.
Ireland has simply done what London did - take bank debts onto public debt
"remember even the all-knowing Fed massively under-estimated the second-order effects of Lehman"
The Fed doesn't know squat to an even worse extent than the National Weather Service because they're trying to run the world with a simplistic economic model using approximations, unsophistcated math and garbage input data due to manipulation of that data for political reasons in an attempt to predict the performance of a hugely complex system, the world economy. The results of that effort are obvious.
Niall has some good perspectives, thanks for brining him to ZH.
Fergusen's lastest book, Civilization, sums it up. We have been abandoning those things that made us successful, while the rest of the world has adapted and is catching up. No surprises in there for ZHers: central planning, crony capitalism, lack of competition, and moving away from property rights are the culprits.
Our problems are perfectly symbolized by the creation of unelected, sclerotic, supranational beauraucratic institution such as the EU -- which is nothing but our round-eye version of Mandarins operating inside a digital Forbidden City.
Also, Fergie has some great graphs which show how truly wealthy and prosperous Asian powers used to be hundreds of years ago, before we screwed them over and it was transferred to the West. Ancient (est.) GDP of Asia was every bit as superior to our recent superiority gap over the East. The reversal back to Asia is now well underway and Western civilization is on suicide watch.
We have been abandoning those things that made us successful, while the rest of the world has adapted and is catching up. No surprises in there for ZHers: central planning, crony capitalism, lack of competition, and moving away from property rights are the culprits.
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Sure, sure.
Maybe, those culprits no longer yield enough to sustain US citizen middle class in their entitlements.
Because the US of A, the mecca of US citizenism, is a story of centralization from the beginning.
Crony capitalism? What is that? Been the same from the start of the US.
Lack of competition? Where?
Moving away from property rights? Must be a fan of this US citizen hockey player who boycotted a presidential invitation on the ground he felt the government has grown big enough to threaten property rights, after US citizens robbed an entire continent.
Yeah, keep up with the fantasy. It is indeed US citizen favourite.
Two comments he made, one about the flight of PIIGS bank deposits to Germany and another about Greece being no big deal as far as any default that will happen because it's the flight of money from the PIIGS banks that's the danger.
First, the flight of money to Germany is like going from the fire into the frying pan. Germany's banks won't be safe havens, either. Second, while the economy of Greece may be small in comparison to the other PIIGS, it's still one heck of a lot bigger than was Lehman Bros.
Except that the money will then be invesed as FOREIGN holdings of PIIGS Debt rather than Domestic which gives added political protection
Yes, as near-term protection from conversion from Euros to the domestic currency especially. My point was that in the long run, Germany isn't safe either.
The last currency to go down the tubes is the "winner." At some point more will wake up to the huge debt/demographic problem Japan is in and will flee to the last perceived safe haven, the US dollar. But just as low rates have thus far allowed the funding of huge deficits in the US instead of making the correct but painful choice of reducing fedgov expenditures to match revenues as must be done in the long run, that flight to the dollar will only result in more fedgov spending on credit until we, too, have an insane debt/GDP.
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Probably not the second half but the second part of many.
Ferguson speaks for his handlers, not for you. You must understand that his words are designed to manipulate your thought and actions to the benefit of the banker conspiracy. He is a SHILL and a serpent! The truth is between the lines.
Ferguson speaks for his handlers, not for you. You must understand that his words are designed to manipulate your thought and actions to the benefit of the banker conspiracy. He is a SHILL and a serpent! The truth is between the lines.
http://www.economicshelp.org/blog/4689/economics/uk-economy-2012-forecas...
Britain is outside the Euro has devalued 25% since 2007 and trebled its Money Supply under QE. The appetite for Audis and BMWs and Mercedes seems undimmed. The sector that has been least affected by Banking disaster is Banking and London. The sector that has been hammered is SME Manufacturing and Retail. So it all depends upon Price-Elasticity. If British companies ever need to re-equip they need Producer Goods from Germany at whatever price. Their elites will buy German cars and kitchens and German bathrooms. The income Inequality in Great Britain insulates against downturn by concentrating austerity on the lower income groups and the middle. Since most high-end German cars are leased by companies they will be relatively unaffected because the residual values will rise as prices increase making leasing economic. It is not immediately clear that returning to national currencies in Europe would leave Germany worse off. It might hurt profits of German corporates but it would increase real incomes of German consumers rebalancing the economy towards domestic demand. Those who know the German economy know the depth of innovation and capavility in basic areas which have been ceded to foreign imports elsewhere - such as cookware, hand tools like Knipex or Wiha or Elora or Felo and there we are talking of family businesses having survived two World Wars and Weimar and Currency Reform in 1949 and 1999. These companies are serving proper craftsmen not the kind of idiots buying cheap Chinese crap they throw away when it breaks when used. I do not believe a revaluation of Germany against the devaluation zone of Club Med would be too disastrous - if you look at Britain which has devalued systematically against the D-Mark since 1957 it is hard to avoid seeing German cars, tools, food, product in the UK. When ALDI came to the UK it had to pledge to buy a quota of UK produce to avoid becoming a German Supermarket yet its German products are cost-competitive. Even Haribo has UK factories; Mueller Dairies has bought Wiseman Dairies to boost its Uk presence. Vileda is a major brand as is Reckitt-Benckiser. German corporates have survived very well against British devaluation.
This is how truthful Niall Ferguson is, from wiki:
"historian Niall Ferguson wrote: "As we have seen, however, wars tended to hit the price of existing bonds by increasing the risk that a debtor state would fail to meet its interest payments in the event of defeat and losses of territory. By the middle of the 19th century, the Rothschilds had evolved from traders into fund managers, carefully tending to their own vast portfolio of government bonds. Now having made their money, they stood to lose more than they gained from conflict. The Rothschilds had decided the outcome of the Napoleonic Wars by putting their financial weight behind Britain. Now they would sit on the sidelines."[65]"
From wiki again:
"The Japanese government approached the London and Paris families for funding during the Russo-Japanese War. The London consortium's issue of Japanese war bonds would total £11.5 million (at 1907 currency rates; £902 million in 2012 currency terms).[21]"
"In 1917 Walter Rothschild, 2nd Baron Rothschild was the addressee of the Balfour Declaration to the Zionist Federation,[30] which committed the British government to the establishment in Palestine of a national home for the Jewish people".
Sidelined indeed Mr. Ferguson!
Ferguson is NWO BULLISH. never waste an opportunity they say.
NWO wants to cntrol all governments so they roll out Ferguson who says the solution is central EU control of all EM member country finances.
Well shame on me, I could have sworn the solution was gold backed currencies to compete with the Chinese and keep bankers and politicians honest
The 'Ottoman Empire' was the "Key Element" in funding WWI ?
Britain's new ships ran on oil -- oil from Persia. Likewise the Industrial Revolution ran on oil. (It still does.) The Rothschilds knew this (still do). The Royal Navy ruled the waves. The sun never sets on the British Empire. The Ottomans had to go and their wealth had to belong to the City. The Royal Navy has been replaced by the American Navy, but the Rothschilds are still the ones in charge.
"the duality of this sudsy man - hitherto, whom resides in but a glass village superimposed within his linear world - situated upon an archaic canary wharf in ole london`towne -- a cageless, 'flock-o-bee's-nest', where flighty birds of feathers moult their subtle hybrid plumage -- oh, the sum of quaintness dousing in the mooring sun -- nearby lies the shorn tide -- albeit this modest crystal dome called 'mind's' home on the port-side aft -- this humble kafkaesque harvardiana bail-hostel that 'niall the fucktard', foments with his pierced ear's to the 'conch shell so near', fostering a pitchless clarion call -- but, with naught a stone to be found to balance the hull -- nigh, but a frothy bubble-boy that lives in a bubble town where no point of discourse is ever to be honed?" jmo
Ps. Harvard and Yale --- you get it?
I live in Germany, coming from east European country. Already at the beginning of the Greek fiasco, I told to fellow traders that Greece has to be kicked out very fast. Also I stated that there are huge fundamental differences between the east/south EU. countries and the central/north once. The both parties do not match up!!!!
I would ask the professor, how come in the mids of this crisis Germany could manage to pull out good Econ. data!? And he claims that in Berlin,they do not understand from Economics!!!!!!!!
Anyway, Germany will not give more cash to Europe in any form! The German's cities are bankrupt. The government started to lay off people.
He is advocating greater centralization of power across all of Europe. He said that one beneficial "consequence of monetary union would be central control of national budgets - of national fiscal policy." He wants Eurobonds and Pan-European deposit insurance.
This is poor stuff from Ferguson. Does he really think France is prepared to relinquish sovereignty so that Germany can tell them what taxes they should have? Or Spain? or Italy?
Germany is the paymaster, along with the Dutch and Finns. What they say goes. The rest are debtors and their only real weapon is the threat to pull the house down with them Well, go to it and see who survives best. My money would be on Germany.
The FT reminds us that Credit Agricole bought Emporiki, the 5th largest by assets in 2006 as part of a Mediterranean expasnion drive. It also entered Italy, Spain and Portugal. Italy is its second largest domestic market after France. The BIS has recently said that French banks were in for Euro 39bn in Greece, half the European banks' total.
No wonder Hollandes wants a Eurobond.
The NWO of European People:
SELF Emancipated and Loving it!!
Sorry, but Dear Old Neil is a bit of a boob! Why the hell should Germany want to bailout the lot of lazy ass PIIGS? Issue Eurobonds so that Spain and Italy can continue spending like drunken sailors? It's ridiculous!!