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Biderman & Santschi On "Why Germany Should Leave The Euro"

Tyler Durden's picture





 

While some have discussed the game-theoretic dilemma that Germany faces relative to the 'rest' of Europe, David Santschi of TrimTabs (Biderman's balder buddy) digs into the details as a potential solution (hard as it may be) as Europe's fatal flaw (the currency unionization - but not fiscal or banking union -  of a group of nations with strong sovereign identities). The imbalances are so great right now that the only practical solution David sees is to breakup the Euro-zone, and simply put the best way to achieve a break up would be for Germany to leave voluntarily - establishing a strong currency and in turn saving itself financially. The clear implication is that if Germany continues down the path of printing and bailouts it will be dragged down along with the rest of Europe. The EVP does not minimize this as a 'good' or 'easy' solution - many people would lose their livelihoods and many would lose a lot of money -  but it is the only practical solution that he sees (as Eurobonds, banking unions, and fiscal unions are simply impractical in terms of both effect and timeliness).

Of course this would have painful implications as the Euro would fall sharply but given the yields on Spanish debt (and previously on Greek, Portuguese, and Irish), it would appear markets are pricing this in as a string possibility and as we have noted Germany's CDS are starting to rise (whether on risk-transfer or contagion concerns). Reflecting on the press (and in our view, the politicians), Santschi quotes W.C.Fields quite appropriately: "If you can't dazzle them with brilliance, baffle them with bullshit!" as he opines on the sheep-like reporting from the mainstream media of politicians 'lies'. Europe remains a solvency problem not a currency problem and it seems journalists do not understand the difference between a grant of money and a loan of money - as the latter needs to be paid back!

In one of the most sane discussions of the reality in Europe, Bidermantschi note that it appears investors have finally wised up to the fact that "bailout loans are nothing but a shell game replacing old debt with new debt" and the heretical proposition that central banks perhaps cannot solve all the world's problems.

Well worth the 6 minutes or so for a lot of food for thought on what is going through Merkel and Schaeuble's heads (especially at half-time in the Germany-Holland game)...

 

for the short-version (though we suggest listening to the entire piece), fast forward to 4:00 and understand the difference between solvency and liquidity and why central bank largesse has to fail.

 


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Wed, 06/13/2012 - 17:11 | Link to Comment Joebloinvestor
Joebloinvestor's picture

Sounds like the rest of the EU has a great plan.

Guilt trip Germany into picking up the dinner tab (forever).

Wed, 06/13/2012 - 17:16 | Link to Comment SourNStout
SourNStout's picture

Guilt into Blame

Wed, 06/13/2012 - 17:22 | Link to Comment Pladizow
Pladizow's picture

Perhaps it is this belief that has lead to negative yield on German Bonds - lets buy them for massive price appreciation as Germany exits!

Germany: Oh hey Europe, would you mind sewing these yellow stars to your clothes?

Wed, 06/13/2012 - 17:40 | Link to Comment idea_hamster
idea_hamster's picture

Germany leaving the Euro isn't new, and it's terrible idea.

The Euro would fall apart, creating a currency inefficiency-led recession in all Euro countries.  Further, Germany's new Duetschmark would strengthen sharply, doubly affecting Germany and causing a real depression.

That's a 1923 Munich Beerhall Putsch formula.

The country that SHOULD leave the Euro is Finland.  Not so big that it busts the whole thing, a currency that's actually balanced either way right now, and would open the idea of leaving and provide a model.

Wed, 06/13/2012 - 17:57 | Link to Comment NotApplicable
NotApplicable's picture

As I've said time and again, Lincoln proved conslusively that Western political unions are insoluable.

And they'll kill every last person who says otherwise.

The last thing that TPTB want is a decentralized West. This "collapse" scenario came into existence the instant the political-but-not-monetary union was formed. What they couldn't do at the ballot box, they'll do as a method of crisis management (broken eggs, omelets and all that).

If that doesn't work? Why there's always a war to fire up to win the hearts and minds.

Thu, 06/14/2012 - 00:21 | Link to Comment Harlequin001
Harlequin001's picture

'"bailout loans are nothing but a shell game replacing old debt with new debt"'- Now that's not strictly true is it?

The bailout loans are about replacing what was a pension fund asset with new bank loans.

Old investors get wiped so that banks can now claim the 'investment'...

Wed, 06/13/2012 - 17:57 | Link to Comment insanelysane
insanelysane's picture

The game is going to end whether or not Germany leaves or all the small countries are kicked out or they all go down together.

ZH needs to add a second line to the header, On a long enough timeline the survival rate for global credit ponzi drops to 0 value.

Wed, 06/13/2012 - 18:31 | Link to Comment lineskis
lineskis's picture

Santschi, please hold your iPhone/iPad in landscape, not portrait, so we don't get these awful black stripes on the sides! Gee! :)

Wed, 06/13/2012 - 19:33 | Link to Comment AGuy
AGuy's picture

"The Euro would fall apart, creating a currency inefficiency-led recession in all Euro countries."

The Euro already has fallen apart. Its just going to take some time for it to die. How long, depends on how long the bureacrats are able to kick the can. The longer they wait the more pain it will bring, more good money and resources is committed to prop up bad debt.

Consider a ponzi scheme, the quicker it ends the less wealth is destroyed. Wait until the very end, then all of the wealth is destroyed.

 

Wed, 06/13/2012 - 17:17 | Link to Comment Pinto Currency
Pinto Currency's picture

Back to an old fiat currency solves what?

You still have debt collapse coming in spades - and a run to real assets.

Wed, 06/13/2012 - 17:25 | Link to Comment Ghordius
Ghordius's picture

Sure, but think how banker's bonuses would grow!
And it would save JPM! For a year of bonuses more, everything makes sense.

Wed, 06/13/2012 - 23:53 | Link to Comment Pinto Currency
Pinto Currency's picture

 

That has been the approach until now.

Wed, 06/13/2012 - 17:41 | Link to Comment kito
kito's picture

it makes no sense for germany to abandon the euro. if they revert to mark, then austria goes, and everybody else abandons ship. germany will wind up with strongest currency (aside from swiss franc) in the eu, leaving them at a tremendous disadvantage for trade with almost all countries. if they stay in the euro, the other fiscally sound countries (finland, austria, belgium, estonia, slovenia, netherlands, etc) will also likely stay. this allows germany to maintain somewhat of a level playing field with countries that can actually afford their products, without having currency imbalances. better for the piigs to get the boot.

Wed, 06/13/2012 - 17:54 | Link to Comment Bunga Bunga
Bunga Bunga's picture

So what? If the new Deutschmark appreciates too much, they just go the Swiss way and peg.

Wed, 06/13/2012 - 18:25 | Link to Comment casey13
casey13's picture

If they peg they will have to print massive amounts of money to keep the peg. If they leave it will be to avoid having to print.

Thu, 06/14/2012 - 00:47 | Link to Comment Pinto Currency
Pinto Currency's picture

 

Or perhaps they go halfway and "back" the Euro partially with gold to try to save the Euro and to save and increase the large and centrally-controlled union.

In this scenario, the Euro would likely still not be redeemable into gold as the citizens would probably redeem their currency for gold.  And if the debt is not drastically reduced as a function of GDP, the economies will continue to collapse.

The Euro central banks currently hold ~ 15% of reserves in gold but there is no formal "backing" per se (partial gold standard) of the euro.

Wed, 06/13/2012 - 18:08 | Link to Comment Steaming_Wookie_Doo
Steaming_Wookie_Doo's picture

I was reading Dr Joseph Farrell (@ gizadeathstar.com) where (and I'm paraphrasing with faulty memory) he posits the EU bank bailouts are happening in part because "certain parties" don't want to see Germany independent and [free of the Euro] creating alliances with Russia and China, as this would create a massive block of know-how, resources and labor.

Thu, 06/14/2012 - 03:10 | Link to Comment potlatch
potlatch's picture

Both Russia and China are boat anchors

Wed, 06/13/2012 - 18:14 | Link to Comment ATM
ATM's picture

All the BS debt is flowing up to Germany right now. That debt is denominated in Euros. So when Germany leaves what is left of the Eurozone will simply print and pay the Germans in worthless paper, just as they have always done!

So either they bail out the debtors so that the germans can get paid or they allow the debtors to reneg. either way the germans are going to get screwed only if the Euro is still around they can try to maintain some control, and wasnt't that really the whole idea behind the Euro inthe first place?

Wed, 06/13/2012 - 18:25 | Link to Comment forexskin
forexskin's picture

imagine the venal sins commited in the name of empire...

you're probably right - but still, they must be tempted by the prospect of telling the leaches to f**k off.

Wed, 06/13/2012 - 18:19 | Link to Comment forexskin
forexskin's picture

so what?

if the new DM appreciates, Germany can invest in other assets degraded by mismanagement and put them to more productive use. if their currency is too strong, their ability to sell will be diminished, demanding they either improve productivity further, or simply blow it on hookers and coke...

if i see another argument against reform because it isn't compatible with the mercantilist ideal, i'll..., i swear i'll...

oh never mind, even some ZHers can't tell the difference between productivity and manipulation, since apparently it can't be the problem...

Wed, 06/13/2012 - 19:35 | Link to Comment Offthebeach
Offthebeach's picture

Any nation that can fight and lose horribly two world wars, and have half under Communists for fifty years can easily handle the closing time headache of a failed delusion.

Wed, 06/13/2012 - 18:40 | Link to Comment rockraider3
rockraider3's picture

The DM would allow Germany to control their own destiny.  They can strengthen or weaking their currency as needed. 

Also, don't forget that a significant problem in Europe is that Germany is so much more efficient than the other EU countries.  Even with a stronger currency, Germany's efficiency will allow them to compete in the market place.

Wed, 06/13/2012 - 21:48 | Link to Comment Offthebeach
Offthebeach's picture

What's the difference between Germany now backing the Euro vs a Europe backed by a strong, Democratic, free Germany freely backing enterprises? The first is by force, and central planning socialism, the latter more free enterprise by a free ( er ) people. Germans and Europe have not done well under forced, faux popular elite. Hindenburg, hitler.and the Communists. All driven by planning junkies, debts and destroying economic flexibility and national options. Europe has all it needs for beginning of success. But first it must clear mal-investments, remove incompetent leaders, take losses. If Poland, the Baltics, Nordics can flourish after dustbinning socialism, so to the rest of Europe. I don't see the euro now leading to a freer, more clear,politically Democratic Europe. However. It seems the elite are too invested in the financial trench warfare of the Euro to pull out. Politics is warfare by other means. Lots of little people are getting killed. They've worked and saved for nothing but yet another grand planning racket.

Wed, 06/13/2012 - 19:42 | Link to Comment akak
akak's picture

Kito vomited:

germany will wind up with strongest currency (aside from swiss franc) in the eu, leaving them at a tremendous disadvantage for trade with almost all countries.

Yes, a devalued fiat currency always leads to national prosperity --- just look at the wonders currency devaluation did for Weimar Germany, Zimbabwe, Yugoslavia, or the booming and robust economies of 1970s and 1980s Latin America.

Where did this idiotic and blinkered, neo-mercantalist notion that devaluing currencies somehow is "good" for ANY nation come from in the first place?  It is insanity of the first order!  With its absurd and limited focus on exports only, not only does it ignore how such devaluations impede IMPORTS, but how they destroy the savings and living standards of the entire national population, as well as how they hamstring an economy through malinvestments due to erratic and erroneous (rising) price inputs.

Please, enough with such Krugmanesque foolishness!

I bestow yet another downarrow upon the Keynesian idiot who is Kito, as well as upon the fallacious and insidiously destructive economic tripe that he loyally regurgitates in defense of our ruling sociopathic financial and political elites.

Wed, 06/13/2012 - 21:06 | Link to Comment AbelCatalyst
AbelCatalyst's picture

Kito: see my post/link below. This is the debt supercycle endgame - its all about survival at this point, and getting out of debt with the least amount of damage is the key. We are entering an entirely different game with different rules and goals. In the next few years success will be defined in a very different way than it is today...

Wed, 06/13/2012 - 18:49 | Link to Comment Alexandre Stavisky
Alexandre Stavisky's picture

For knowledge of money (as money is life) has made me wise and bitter and strong;

And I am rich in all that I have lost.  And gained subtlety in in seeing wrong.

Would that the world were honest, true, and honour-bound,

instead, the pit of intrigue and despair within which little redeem be found.

Broke and broken, bodies are, accountings too

First the paper, then flesh to pulpers ensue.

Inheritable bankruptcy's sons on war's bloody fields tear new wound,

Maim, screech, and die...to powder charge for new Usury's round.

 

Those who must pay the debt, never incurred it.

But insisting its authors bear consequence? Absurd.

 

Wed, 06/13/2012 - 17:27 | Link to Comment AbelCatalyst
AbelCatalyst's picture

Not sure this is a new idea.  I posted this in October of last year (back when Germany was printing Marks, then cancelled the order, and now has fired up the printing presses again):

http://www.zerohedge.com/news/ecb-back-market-prevent-sovereign-bond-rout

(It's the first post and was picked up by a number of other web sites around that time)

Yes, the Germans are going back to the Mark.  it's inevitable.  Read my post and you'll see clearly why this will happen eventually.

Wed, 06/13/2012 - 18:05 | Link to Comment Bunga Bunga
Bunga Bunga's picture

On German blogs this idea has been discussed for more than a year now. Did you see the Book with the fat letters G E R M A N Y and a Langenscheidt Dictionary next to in Santschi's book shelf?  And he got internet.

Wed, 06/13/2012 - 20:49 | Link to Comment Bay of Pigs
Bay of Pigs's picture

Jim Willie of the Golden Jackass has been saying this for a very long time as well. 

Biderman's a hack. Time to dump him ZH.

Wed, 06/13/2012 - 17:42 | Link to Comment lolmao500
lolmao500's picture

Well it worked for Germany and Israel... still working to this day, 67 years after the end of WW2...

Wed, 06/13/2012 - 20:31 | Link to Comment Will To Live
Will To Live's picture

Hard to listen.

The guy is probably $ loaded,

and his shirt sucks.

Distracting.

Just sayin.

Thu, 06/14/2012 - 03:05 | Link to Comment potlatch
potlatch's picture

The Germans will just sit there all night and put out half-smoked cigarettes in their strudel over and over

Wed, 06/13/2012 - 17:14 | Link to Comment Sudden Debt
Sudden Debt's picture

Today merkel was dressed in orange...

ORANGE!!!

THAT'S THE COLOUR OF HOLLAND!!!

During a WK WHERE THEY HAVE TO PLAY AGAINST HOLLAND!!
That's gonna cost her votes....
And that's how politics actually work these days...

Wed, 06/13/2012 - 17:36 | Link to Comment Motorhead
Motorhead's picture

Netherlands not looking good in the European Championship, particularly after their 2-1 defeat to Deutschland. It's 'good night, nurse' for the Dutch 11.

Merkel in orange?  Hmmm, is there ANY color that can help?

Wed, 06/13/2012 - 17:15 | Link to Comment ACP
ACP's picture

GERMANY IS THE EURO.

In which case, yes, they should leave.

Thu, 06/14/2012 - 03:01 | Link to Comment lunar
lunar's picture

..that's the wish of many Germans

Wed, 06/13/2012 - 17:15 | Link to Comment I am a Man I am...
I am a Man I am Forty's picture

Ooh ooh!  I know!  I know!  Pick me Pick me!     Because the other european countries are a giant fucking anchor wrapped around Germany's neck??

Wed, 06/13/2012 - 17:54 | Link to Comment aminorex
aminorex's picture

More like: Germany is an anchor tied around the sack of peripheral kittens.  Toss Germany, Finland, Netherlands, and the remainder would happily print their way to competitiveness, and in the process destroy most of their debt.  German deflationary policies are not suited to a fiat currency regime.  Germans want to pretend that they have a sound currency, but it's just not so.  Germany is down 700 tn in TARGET2 and sinking fast. That's as deadly a boat anchor as ever drowned a cuddly kitten. If Germany were outside the Euro, they could get something other than debts and promises in exchange for their products.  As it is, they get nothing of real or lasting value, just promises of more Euros, backed by the good will and firm intentions of Italy and Spain. 

The problem is too much debt and no will to destroy it.  If politics can't solve that problem, the forces of nature will do so.  This problem is an inevitable consequence of debt-based money.  Since sound currency was abolished, the only way money enters circulation is by loaning it.  Since the loans are at interest, the amount of debt always increases faster than the money supply.  Thus, printing money to pay debts just creates more debts. As long as you can export your debt, you can kick the can down the road, but eventually everybody who holds debts and promises gets wiped out, and only the holders of material and real property have anything. Unless fiat money is displaced, ultimately the same thng will happen to the U.S. and Japan, Australia, and - eventually - even China.  It's World War 4, and it's generational warfare, in which the central bank is I.G. Farben, pumping out the toxic war materials which leave a denuded landscape incapable of supporting the next generation.

The established global central banking system has made cash the ultimate "toxic asset".  Unless it is thoroughly reformed, the result may be delayed but it is no less inevitable for that:  Chaos, poverty, and warfare.

 

Thu, 06/14/2012 - 03:03 | Link to Comment potlatch
potlatch's picture

Can't the Kaiser declare a Jubilee?

Wed, 06/13/2012 - 17:16 | Link to Comment Snakeeyes
Snakeeyes's picture

UK was smart not to join. Germany should leave the loser's club.

Wed, 06/13/2012 - 17:20 | Link to Comment mendolover
mendolover's picture

That kid graduate high school yet?

Wed, 06/13/2012 - 17:23 | Link to Comment WhyDoesItHurtWh...
WhyDoesItHurtWhen iPee's picture

certainly not from the Hair Club for Men

Thu, 06/14/2012 - 03:01 | Link to Comment potlatch
potlatch's picture

dude, its total early Genesis

Wed, 06/13/2012 - 17:22 | Link to Comment Wood
Wood's picture

To facilitate the transition from euro to marks they will use gold. The German commercial banks will be recapitalized with gold at a much higher price than we have now. The chinese will be quick to jump on board as will the swiss. Very exciting to watch!!

Wed, 06/13/2012 - 17:39 | Link to Comment Merrekie
Merrekie's picture

Oops, their gold isn't in their possession. It's stored at different locations (NY, London and - I think - Geneva). Good chance it's been leased away, given away or stolen. The only gold left is aunt Gertrud's wedding ring and perhaps a forgotten relic in some church. Pegging the new Mark to this remaining gold would be über-bullish.

Wed, 06/13/2012 - 17:44 | Link to Comment Wood
Wood's picture

Yes, leased many times over, yet it never moved.

Wed, 06/13/2012 - 17:58 | Link to Comment TheGardener
TheGardener's picture

So this non-sovereign nation would finally do so with her American masters consent, the latter still claiming to hold her gold and thus being in full control. Sounds like
having a shoe shining boy for president you could always withdraw by producing his true birth certificate.

Wed, 06/13/2012 - 18:23 | Link to Comment bushboy
bushboy's picture

I dont think it will matter to the world where germanys gold is, as it hasnt worried them up until now. I do beleive the price of gold will reset to a higher level as they are saying though.

Wed, 06/13/2012 - 17:23 | Link to Comment Muppet Pimp
Muppet Pimp's picture

Sorry Purple shirt guy, but Germany leaving only buys more time and solves nothing.   The europeans will really scream when they collapse the euro via large scale printing operations and cannot afford gasoline anymore.

Wed, 06/13/2012 - 17:22 | Link to Comment trebuchet
trebuchet's picture

too fake, too superficial and nothing new from the "germany should leave the eurozone"  -- present3ed as a "new idea"  ... too much of a a "political" or "invest with us PR " piece not enough analysis

Wed, 06/13/2012 - 17:23 | Link to Comment q99x2
q99x2's picture

I like Biderman's videos. Wish he could get rid of that telephone pole. He looks a little funny with wires coming out of his head.

You know those two guys are short on Europe right now.

Thu, 06/14/2012 - 06:37 | Link to Comment Element
Element's picture

And what's with the maroon/violet shiny shirts?  Something the Pope would wear after mass?

Wed, 06/13/2012 - 17:26 | Link to Comment Dr. Engali
Dr. Engali's picture

Germany can not leave the Euro. If they did they would be eviscerated. With their history the rest of the world would be quick to put the blame on them for what happens. They are just as stuck as the rest of the Europeans.

Wed, 06/13/2012 - 17:41 | Link to Comment lolmao500
lolmao500's picture

That's what i said 2 years ago... that one of the plan would be for the crisis in Europe to get real bad, then Germany gets out... economies in Europe collapse, the propaganda blames it all on Germany... WW3 happens... repeat of history.

Hopefully they don't pull that crap and even if they do, the people don't buy it...

Wed, 06/13/2012 - 18:08 | Link to Comment TheGardener
TheGardener's picture

They will get blamed anyway and should have left 3 trillions earlier. Like Americans or Israelis they are not on this
earth to be loved, none of us will ever be so they should
just show the finger, invasion threatened as in the Morocco
crisis 1905 or not. Let the fighting commence, cowards...

Wed, 06/13/2012 - 17:29 | Link to Comment Manthong
Manthong's picture

Rough decision.. half a trillion or so down the tubes today or the whole shooting match in the toilet in a year or two.

They'll delay.. it the EU way.

(.. and we're no better)

Wed, 06/13/2012 - 17:28 | Link to Comment lolmao500
lolmao500's picture

why it won't happen : Germany is controlled by pro-EU, pro-big banks, pro-globalism shills. Simple as that. As long as these are in power, Germany will stay in that hell hole and fund it if necessary at the last minute.

Germans needs to revolt, otherwise they gonna get screwed way more than the Greek.

Wed, 06/13/2012 - 17:56 | Link to Comment Zaydac
Zaydac's picture

Bollox. At the moment Germany is run by a smart hard woman from East Germany who has frequent un-minuted private meetings with Putin.

Thu, 06/14/2012 - 02:58 | Link to Comment potlatch
potlatch's picture

Her mother played the prison warden in The Seven Beauties.  It's a scary family, overall.  I'm not seeing Angela as the type who cares much for safe words.

Thu, 06/14/2012 - 07:43 | Link to Comment Lebensphilosoph
Lebensphilosoph's picture

The BRD is controlled by Angela Merkel ... riiiiiiiiigt.

Wed, 06/13/2012 - 17:29 | Link to Comment fonzannoon
fonzannoon's picture

Anyone see Cramer before? Was he coked up or something?

Wed, 06/13/2012 - 17:45 | Link to Comment Strider52
Strider52's picture

Man, Cramer looked especially wiffed up this morning. He looked like he was gonna spurt blood out of his ears. He needs to go...but then so does CNBS.

Wed, 06/13/2012 - 17:35 | Link to Comment TWSceptic
TWSceptic's picture

Does it surprise anyone that the mainstream media does not recognize the real issue in Europe? They never recognized it in the US either. Then when TSHTF they will play along with those that claim "no one could have seen this one coming".

Wed, 06/13/2012 - 17:33 | Link to Comment PORTUGALIA
PORTUGALIA's picture

Biderman fat pig ... why dont you comment on USA DEBT... 16 trillion am i correct? focus your stupid american brain full of FAT on solving US debt problems and let the europeans take care of themselfs... heres a hint for you biderman, european debt crisis was built in order to destroy the USD as a world reserve currency... are you DANISH biderman?

Wed, 06/13/2012 - 17:46 | Link to Comment Stackers
Stackers's picture

Slow down there buckaroo. Biderman picks on the U.S. and our insane nonsense plenty. Europe is just the soup da jour. Next will be Japan and China. And then Uncle Sam. And the Euro debt problem was not built to destroy the USD. It was built to institute and fund socialist entitlement program ponzi schemes, like their "free" health care and "free" universities and pension systems.

Wed, 06/13/2012 - 20:20 | Link to Comment Quisat_Sadarak
Quisat_Sadarak's picture

The fat PIIGS have stolen Euro-ponzi credit card, and are running up as much debt on the card as they can until the card gets cancelled. The PIIGS have no intention of paying the charges -- it is a free for all rip-off.

Thu, 06/14/2012 - 02:54 | Link to Comment potlatch
potlatch's picture

"Biderman" is just some totally 8th-gen milspec AI TradeBot program, he runs perimeter duties using various avatars, generating heat for various counter-movements the agency needs running.  Hello, "TrimTabs"?  This has Langley written all over it.

 

Just zoom in on the vid.  See?  It's all pixels man

Wed, 06/13/2012 - 17:34 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

If Germany leaves the "euro" they leave the ECB.  If they leave the ECB, then they leave their gold.

Biderman sucks ass.

Wed, 06/13/2012 - 17:39 | Link to Comment Wood
Wood's picture

Their gold never moved. ECB holds a paper ticket.

Wed, 06/13/2012 - 18:57 | Link to Comment Mr Lennon Hendrix
Mr Lennon Hendrix's picture

Last one in the ECB gets dibs on the gold, paper or not.  A contract is a contract, and the gold will be sought for and fought over.

Speaking of gold on contract, has the Bundestag formally requested more than an inquiry into its gold holdings, per the custodian, the NYFRB?

Wed, 06/13/2012 - 19:15 | Link to Comment Wood
Wood's picture

A contract is what all the sov debt bondholders hold. Hehe.

The German gold at the NYFRB has been leased then traded for physical at "another" location. It will be available when needed. Believe it!

Wed, 06/13/2012 - 17:40 | Link to Comment soolebop
soolebop's picture

If this happens we got three words: Bonbs over Berlin..

The problem is the people who would have to take the biggest losses aren't the type of people you can just say "sorry, better luck next time" to. They are the people who make wars happen. Wars over sovereigns not being able to pay their debt is as old as sovereigns themselves. The answer is in more untiy not less. 55 million Europeans died in WWII, who wants to go back to that?

Wed, 06/13/2012 - 17:49 | Link to Comment Black Forest
Black Forest's picture

<deleted>

Wed, 06/13/2012 - 18:23 | Link to Comment TheGardener
TheGardener's picture

Berlin is dispensable these days , just bureaucrats and welfare leeches.

Wed, 06/13/2012 - 17:41 | Link to Comment Count de Money
Count de Money's picture

Germany is the second largest net exporter in the world after China. Reason: Euro is cheap relative to the fundamentals of Germany's economy.

What if Germany leaves the Euro and goes back to the DM? The DM soars and Germany goes into recession, if not depression.

Wed, 06/13/2012 - 19:15 | Link to Comment trebuchet
trebuchet's picture

lol , so some people come to the conclusion " let them kick out the weak countries!!!"

 

yeah what happens to the euro then?   it goes UP and STAYS UP        DUH............   same problem

 

Germany/MErkel HAS woken up to the problem, hence her rhetoric of POLITICAL UNION........    

Which is a prerequisite for Germany sitting everyone down and telling them what to do using a set of sticks and carrots. She knows that this will only work in Europe if Germany along with ALL states give up more power to the centre. 

BUT we have the EU problem which is a tragedy  in the Greek sense - on the one hand the EU politics means everyone (national govts/leaders) are smart so they say " if Germany Needs this, they need us...." and they will talk and talk and try to horsetrade their relative benefits for their votes in the EU Federation of Deutschland.

On the other hand, They have gone back to their voting publics and said " look at what benefits i got  from the Evil empire the EU for you folks - vote for me" so JOe public in the EU is thinking along nationalistic lines, and will keep encouraging their politicians to think and vote for nationalistic policies, not EU federal ones.  

NOW, and it is CRUNCH time in Europe and the politicans realise this,  EVERYWHERE in Europe , those same leaders have to go back and tell folks that if we dont back the EU Federation of Deutschland we are F**KD, and they also know that if they do that they themseleves re F**KD.

So they will CONTINUE to play the game some more- until the markets crash and savings fall out of peoples hands and the sheeple get so scared they say to their leaders "DO ANYTHING to save us..."     then, and only then will they hve a mandate for a new EU. 

What is left of it.

Coz not everyone nor every country is for this. People still think their glorious european nations drowning in debt can walk away...... this was foreseen by the architects of the euro who thought the transition would be smoother and their successors would have more foresight and vision to ensure political union before things blew up, especially in Germany but that didnt happen.

So bring on the chaos (starting tomorrow with the much anticipated Italian bond auction) 

 

 

 

Thu, 06/14/2012 - 07:50 | Link to Comment Lebensphilosoph
Lebensphilosoph's picture

Economics is a pseudoscience, fudnamentals are nonsense, and no nation in history has ever suffered a depression from having a strong currency.

Wed, 06/13/2012 - 17:43 | Link to Comment dingoj
dingoj's picture

Germany's in a deadlock. Further integration and solidarity with the club med crowd, with lower retirement age, shorter working hours and nasty spending habits? Suuuuure. On the other hand it can't afford to just drop out. Things have to get worse, including for them. Opting out will have to come from necessity. Greece will be das experiment. Their suffering before ours. As long as they can take, so can we.

Wed, 06/13/2012 - 17:47 | Link to Comment Fantasy Planet
Fantasy Planet's picture

Germany would leave but the anal is too good. 

Wed, 06/13/2012 - 17:50 | Link to Comment Bunga Bunga
Bunga Bunga's picture

Is today pajama day in Sausolito?

Wed, 06/13/2012 - 17:53 | Link to Comment insanelysane
insanelysane's picture

When you were a kid did you ever have a toy cash register and play with it.

Step 1. Empty cash register and give money to friend.

Step 2. Friend buys stuff from your store until he has no money.

Step 3. Empty cash register and give money to friend so game can continue.

Step 4. Continue cycling until game gets old; 10 cycles or in the case of the euro, 10 years.

Wed, 06/13/2012 - 17:55 | Link to Comment Stuck on Zero
Stuck on Zero's picture

If you think breaking up the EU will solve any problems you are crazy.  Every state in the EU is in a sorry state of financial affairs.  They're all indebted and socialist (same thing) and have made too many promises to their citizens.  They will hang together or hang separately.

 

Wed, 06/13/2012 - 17:59 | Link to Comment Black Forest
Black Forest's picture

<deleted>

Wed, 06/13/2012 - 18:02 | Link to Comment Bunga Bunga
Bunga Bunga's picture

So the US is not indebted and not socialist?

Wed, 06/13/2012 - 17:58 | Link to Comment edwardo1
edwardo1's picture

Before Germany "leaves the Euro" the ECB will push the "yellow button" that amounts to its NUCLEAR OPTION.  Understand a few key-to the nth degree-points.

1.) The Euro was designed to function as the planet's oil currency when the dollar died its inevitable death.

2.) The Euro was designed to succeed in this role by functioning as a pass through currency for gold-because gold passes through currency, not the other way around. As such, the ECB marks to market their gold holdings, and will, when there is no other choice, make a two way market in gold at vastly higher currency denominated prices. The viability of The Euro currency rests on its ability to mobilize physical gold which is, as we know unimpeachable collateral. No one wants to press the yellow button one second before they have to. The reasons for this should be fairly obvious. But, make no mistake, the capacity to do so is there.

3.) The Euro is meant, and was always meant, to function as nothing more than a transactional currency. All of the sovereign debt disasters were forseen by The Euro's architechts.  More to the point, their occurence was counted on as coming to pass. Saving in sovereign debt is, to put it mildly, if bluntly, a contradiction in terms. When saving in Sov debt is expunged for the system, the mechanism by which nation's put themselves in epic and untenable fiscal holes will cease to exist.

There must be a legitimate separation between mediums of exchange, i.e. currency, and stores of value. Sov debt is not a store of value as the world is fast learning. Physical gold-for a whole host of reasons is the sine qua non store of value. The Euro exists, in large part, to facilitate that (incipient) reality.

Wed, 06/13/2012 - 18:17 | Link to Comment Wood
Wood's picture

+1. (smile)

Wed, 06/13/2012 - 19:47 | Link to Comment Quisat_Sadarak
Quisat_Sadarak's picture

The worst thing any country with huge unpayable sovereign debts could do is to convert their curreny to a gold backed one. I suppose this would be welcomed by the creditors... because then would have loaned fiat funny money, and they would be getting paid back with real uninflatable yellow metal (or whatever) money. Then the Bankers win.

The odious sovereign debts should always first be wiped out, and then restore confidence in the currency with gold backing. Hopefully the new regime will be sane. But unfortunately history repeats.

Wed, 06/13/2012 - 22:17 | Link to Comment lasvegaspersona
lasvegaspersona's picture

Ed 1

FOFOA could not have said it better. You will not find much support here at ZH however. The prevailing view is that of conspriacy and NWO control of the entire world financial system. The idea of a somewhat benevolent plan to establish a pro liberty monetary system in which people save in gold they hold in a manner that can't be manipulated by the state just does not seem evil enough for these pages.

Wed, 06/13/2012 - 17:59 | Link to Comment disabledvet
disabledvet's picture

Hahahahaha! This is good one! Right up there with "euro's exchanged for zloty's as new reserve currency emerges." this is just total chaos being argued in a hilarious game of word smithing here. I smell a woman!

Wed, 06/13/2012 - 18:00 | Link to Comment veyron
veyron's picture

Biderman, how's your FB call doing?

Wed, 06/13/2012 - 18:00 | Link to Comment ilovefreedom
ilovefreedom's picture

It seems to me that far from getting ripped off Germany may end up owning all of the debtor countries' gold, assets and potentially financial sovereignty.

After all of those items are done then they might leave the Euro. But before all of that happens, why give up a chance to collect dirt cheap assets?

Wed, 06/13/2012 - 18:28 | Link to Comment jimmyjames
jimmyjames's picture

It seems to me that far from getting ripped off Germany may end up owning all of the debtor countries' gold, assets and potentially financial sovereignty.

*********

Good point-although i dont think it will be germany that gets it-more like the ECB and likely the IMF-

Spain borrowed 100 bil. EUR-

Spain holds 282 tons of gold–

At today's price-it is worth 11,731,200,000 EUR-

If Spain cannot payback the 100 billion-then with the "new" bailout agreement that the PIIGS put their gold reserves up as collateral-but there is a clause of a 20% penalty for default-

20% of the 100 billion is worth 20 billion (which is to be taken from the collateral “gold”)

So..if my figures are correct and if they cannot pay it back–they will lose all their gold and still owe 8 billion–

Next up-Italy-with 2,450 tons-

Wed, 06/13/2012 - 22:01 | Link to Comment kikkoman
kikkoman's picture

When push comes to shove the IMF is just a building with a bunch of clerks in it. So is the ECB.

 

Wed, 06/13/2012 - 23:01 | Link to Comment jimmyjames
jimmyjames's picture

When push comes to shove the IMF is just a building with a bunch of clerks in it. So is the ECB.

****************

Look deeper into the shadows-

Wed, 06/13/2012 - 18:03 | Link to Comment holdbuysell
holdbuysell's picture

it appears investors have finally wised up to the fact that "bailout loans are nothing but a shell game replacing old debt with new debt"

And in order to replace the old debt with new debt, you need new investors or old investors stupid enough to go another round. Which is a .....?

Add Ponzi to the list of words for 2012.

As in, the Ponzi Vaporized in 2012.

 

Wed, 06/13/2012 - 18:19 | Link to Comment Rip van Wrinkle
Rip van Wrinkle's picture

I'm an f'ing muppet (UK talk!) and I realised about 18 months ago that the only way out was for the Germans to take a hike.

 

How much will you pay me, Mr Biderman?

Wed, 06/13/2012 - 18:28 | Link to Comment Jolly.Roger
Jolly.Roger's picture

The St. Bernard dog speaks again.

Wed, 06/13/2012 - 18:28 | Link to Comment Muppet Pimp
Muppet Pimp's picture

overheard in another bar:

Something potentially brewing that involves German borrowing costs going up and piigs giving their gold as collateral.  I am a skeptic that they would pledge their gold, however, it strikes me as a viable solution. Anyone privy to insider details, please do tell.  This is the most viable option I have heard.  It is the hail mary for the piigs, and would either a> kick the can for a year or two only to end in failure and Germany gets zee gold or B> the piigs finally realize the gravity of the situation and make changes.  Thoughts?

Thu, 06/14/2012 - 02:46 | Link to Comment potlatch
potlatch's picture

A limiter here is that there is zero chance that NATO will allow its member states to become too unstable.  Just saying.  That's a player in all this, don't kid yourself.

Wed, 06/13/2012 - 18:32 | Link to Comment Bugsquasher
Bugsquasher's picture

Is That picture a tombstone or a birth announcement?

 

http://theeveningchronicle.blogspot.com/2012/06/derivatives-for-dummies-and-why.html

Wed, 06/13/2012 - 18:33 | Link to Comment rockraider3
rockraider3's picture

Pippa Malgren stated that she thought Germany would leave the Euro, probably about a year ago, and certainly last October.  There is a post on her blog about it.  So I don't know that this is anything new or shocking that Biderman and his colleague are discussing here.

Wed, 06/13/2012 - 18:46 | Link to Comment potlatch
potlatch's picture

Pippa Malgren stated that she thought Germany would leave the Euro, probably about a year ago, and certainly last October.  There is a post on her blog about it. So I don't know why I am bringing that fact up here.

Wed, 06/13/2012 - 18:43 | Link to Comment potlatch
potlatch's picture

I always have the same question about any kind of post like this, however: what exactly is the "purchase" as it were, of any analyst offering a policy preference or advisement?

 

Now, that's a debased currency....

 

I mean, until you are deploying your own gunships on the high seas, policy preferences by us observers, both pro and amateur, are just empty love-letters shared between lonely sailors.

 

And this guy definitely looks like a lonely sailor.

not that being a lonely sailor is a bad thing.  I seem to remember such a figure being the story teller in a fine and tragic novel...

Wed, 06/13/2012 - 18:43 | Link to Comment Piranhanoia
Piranhanoia's picture

Germany will fold up and print euro's.  Only way to follow the third one with a 4th version. 

Wed, 06/13/2012 - 18:48 | Link to Comment RobertMugabe
RobertMugabe's picture

Biderman seems extra stoned in this one. I like it!

Wed, 06/13/2012 - 19:27 | Link to Comment spinone
spinone's picture

Replacing old debt with new debt can go on a very long time,

Ask anyone who has ever gone bankrupt.

Wed, 06/13/2012 - 19:31 | Link to Comment ciccocicco
ciccocicco's picture

What a bunch of bollocks !!!!  Leaving the Euro will kill German bank, kill large german corporations, kill retirements account of Germans.  Why such a tragic path should be preferred over a simple haircut for all PIIGS (not even huge).  What makes you drool over the obvious future failing of all futures plans.  You are all loosers trying to get for an opportunity to start back?  Life goes on folks, and its not all dooms and destruction like it looks while reading this site.  You know, people still enjoy great sex, babys are still born, parents are happy, music still sounds good, great movies still get produced, cities (at least in Europe) are incredibly better places then they where 20 years ago.  Who gives a f..k about that number called spread.  Get a life.

Yours truly,

1%

Wed, 06/13/2012 - 19:37 | Link to Comment deflator
deflator's picture

"investors are not going to continue to go for this bullshit of kicking the can down the road"

 

 Who do you think these "investors" are? It is cold dead eyed central bankers chasing old debt with new debt.

 

 Who among you has the wisdom to answer the question?

Wed, 06/13/2012 - 20:42 | Link to Comment Billy Shears
Billy Shears's picture

What a nice man is Charles Bidermann. He starts-up his own worthy company employess young people to help understand and explain the nature of "The Crisis" and creates real value in the process. Thank you Mr. Bidermann. I agree with most of what was said. Germany has some financial miscalculation it will pay dearly for but getting out now may minimize the pain but there will be blood.

Why don't the pundits try this metaphor when (assuming it hasn't been already used) using the "kick the can down the road" pharse to explain the futlility of the delay tactics; "They" (Centaral banks, et.al.) have kicked the can into a blind alley and the only way out is the way they came in and standing at the top of that alley is one hell of an ass whoppin'.

Wed, 06/13/2012 - 20:50 | Link to Comment bahaar
bahaar's picture

So Germany leaves Euro.  Euro plummets.  Weak Eurozone countries are able to wipe off their debt without defaulting.  That's a good solution for PIIGS.  But is it a good solution for Germany?

Wed, 06/13/2012 - 20:51 | Link to Comment bahaar
bahaar's picture

So Germany leaves Euro.  Euro plummets.  Weak Eurozone countries are able to wipe off their debt without defaulting.  That's a good solution for PIIGS.  But is it a good solution for Germany?

Wed, 06/13/2012 - 21:39 | Link to Comment deflator
deflator's picture

Yes. Germany was happy with the PIIGS as long as they were keeping the EURO rangebound and German exports affordable. Now German exports are too affordable and a continuation of PIIGS bailouts will continue to deteriorate the value of German exporters. I don't think German exporters need to worry about a, "too strong Deutchmark" as German central bankers ae as capable as any other central banker at devaluing free floating currencies.

 

Wed, 06/13/2012 - 21:37 | Link to Comment blindman
blindman's picture

yup

Thu, 06/14/2012 - 01:37 | Link to Comment localpacific
localpacific's picture

It's important to understand when contemplating the Euro how it effects others like USD etc... Binary Options Daily Analysis: http://www.traddr.com/profiles/blogs/binary-options-daily-analysis-asian-stocks-advance-on-positive

Thu, 06/14/2012 - 06:05 | Link to Comment dumbengineer
dumbengineer's picture

Bidermann advocates a monetary solution to a solvency problem. Fail.

Here is mine :

Hard working germans need a break. They can't be the only ones  skipping siesta .

PIIGS need work . They want to show they can be hard workers too.

 

Let's give Germans  another week of paid vacations (ie pay raise). Make it mandatory to spend this week abroad in PIIGS countries.

Bottom line : Germans happy with their pay rise. PIIGS happy with huge tourism revenues

Thu, 06/14/2012 - 07:15 | Link to Comment ejgej
ejgej's picture

When they decided to build up the Euro, the were several issues in sovereignity to be transfered that they hope to postpone without real harm. They missed political boldness, binded to traditional historic ties of the Continent.
The problem with Euro is a political lack, not structural differences.
Even if it may seem odd to say, Europe is by far more coherent and omogeneous tha the USA. That is because the societies of central Europe, although different for languages and political systems, have deeply inflenced each other, and they live in the same biological, agricultural, industrial pattern.
Travelling from Nantes on the Atlantic through England and Netherlands up to Lublin at the Ucrainian borders, it's evident the way people work and live are just the same. A core 250 million people living the same pattern of life. The country, cultivated in similar ways, the industrial blocks, the road sytem, the historical and commercial centres, everything is shared in a way the US don't even know.
Central Europe seems made and designed to be one people, no real difference, no real border. The differences are mental and cultural, but these are going to change.
While Europe has a huge mainstream on what means life, the reality of differences between american states are much deeper, despite the same language and political pattern. In America, life differs significantly depending on the place, for agricolture, industry and commerce, as the sea lays only on two borders, as desert and mountains sit only in its western half, as the crop fields of midwest are a whole other story than New England, that is a world apart from tropical Florida, as humid tropyical Florida is completely different than New Mexico.
Europe is contiguous to Africa and Asia, and binded to Americas, while North America is a lot more isolated. If you think commerce, airplanes and internet have destroyed these differences, beware of it, it's not true at all, because in a structural and prolonged crisis like this one it will become evident that North America can stand up on its own, as it doesn't need real exchange of goods outside of the oceans to exist, while Europe has to commerce with Africa and Asia to get things she needs to survive (as it always happened in History).  Dollar is today widespread as an international currency because of the american political will since WW2, but an international dollar is not necessary to America to exist but to its financial elite, while a European coin will always be widespread, in order to commerce with Asia and Africa.
Europe will need to define herself from different worlds just some miles apart, across the mediterranean and indian ocean, as the Arab, the Turkish and Persians, the Russians and Indians...Usa live isolated between canadian woods and yucatan straits, nothing really harms its western identity. Europe cannot ever allow think herself to isolate culturally and economically from its african and asian neighbour, America may quietly decide to become isolationists without danger.

On the long run, because of geopolitical reasons, America is headed to internal division and external isolation and Europe to internal union and external connections. Any financial game of any elite may postpone the day, but it's just a matter of time.
And even in the medium term, all foundamentals of Economics in Europe are in a much better shape than the USA, lower state debt, lower household debt, lower corporate debt, more commerce, more production of goods, more exports. It's just a matter of time

Thu, 06/14/2012 - 07:20 | Link to Comment Ghordius
Ghordius's picture

hear, hear! you seem to have a very long view

poetic, true but very poetic this part "Travelling from Nantes on the Atlantic through England and Netherlands up to Lublin at the Ucrainian borders, it's evident the way people work and live are just the same. A core 250 million people living the same pattern of life. The country, cultivated in similar ways, the industrial blocks, the road sytem, the historical and commercial centres, everything is shared in a way the US don't even know."

Thu, 06/14/2012 - 07:31 | Link to Comment ejgej
ejgej's picture

it's a geopolitical reason that could only change as the man would change geopolitics, for example by the colonisation of outer space :-)

Thu, 06/14/2012 - 07:13 | Link to Comment ejgej
ejgej's picture

idem

 

Thu, 06/14/2012 - 07:15 | Link to Comment Peter K
Peter K's picture

This idea/solution that Germany needs to leave the Euro, and let the Euro revalue has been around since the advent of the Euro Crisis. But the MSM considers in the domain of the Eurosceptic press. As recently as last Wednesday, AEP at the Telegraph mentioned this solution during his online chat session. One could say that this is the Euroland's last TABOO, but a taboo to far for the MSM.


 


Thu, 06/14/2012 - 07:31 | Link to Comment Ghordius
Ghordius's picture

Peter, just explain to me why this euro-break up is so much on the top of the mind of the Britons. The Pound has been repeatedly devalued. You are fine! It's all hanky-dory on Dear Old Blighty!

Soon your voice will be heard and the British People will get a referendum on staying or leaving the EU. Of course, this is in the hand of the British Government, not the taboo-laden continentals.

Thu, 06/14/2012 - 07:40 | Link to Comment ejgej
ejgej's picture

I can't even consider what kind of a job would the Brits do, if they disconnect from EU and their financial industry would collapse.

Thet still have some oil in north sea and salmons to fish, but the Norvegian competitor is a hard one. Anyway they should reinvent a real industrial system, they almost dismantled in last 30 years. I feel many Britons euroskeptics as clueless with reality

Thu, 06/14/2012 - 07:40 | Link to Comment ejgej
ejgej's picture

...

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