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The Consequences Of The Unthinkable: Here Is What Happens When The Euro Breaks Up

Tyler Durden's picture





 

As the following image from Spiegel summarizes, three things will happen simultaneously when the unthinkable finally occurs: i) economic output plummets, ii) unemployment rate soars, and iii) consumer prices explode. Of course, this is nothing but merely deferred consequences for Europe partying for over a decade under an unsustainable regime that borrowed from the future (sound familiar?). And now the inevitable hangover. In other words: payback is a bitch.

Source: Spiegel

 


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Mon, 06/25/2012 - 11:18 | Link to Comment The Reich
The Reich's picture

Time is right to start the götterdämmerung.

Mon, 06/25/2012 - 11:21 | Link to Comment monopoly
monopoly's picture

I get so sick of hearing that our stock market falls because of the "problems in Europe". Where the hell is the commentary advising how are economy is slowly sinking down into the abyss. Kind of like a slow advance of hot lava after a major eruption. When is it our turn. Pathetic reporting.

Mon, 06/25/2012 - 11:35 | Link to Comment Vince Clortho
Vince Clortho's picture

America is in the on-deck circle.

Mon, 06/25/2012 - 18:34 | Link to Comment Weyland_Yutani
Weyland_Yutani's picture

And I wonder why the US of A is getting a temporary pass just because Europe is going down the toilet. The problems in the US dwarfs the problems in Europe by a factor of 10 but instead of hoarding gold and silver in these tough times, countries are hoarding f----g US dollars.

Mon, 06/25/2012 - 11:22 | Link to Comment tiger
tiger's picture

Oh they want you to be scared! Good German people listen to banksters propaganda! The fall of the euro will lead to a disaster... haha, banksters puppets forgot to put the infographic of the opposite scenario...

Mon, 06/25/2012 - 11:22 | Link to Comment gaoptimize
gaoptimize's picture

I think Spiegel underestimates the secondary effects of the economic consequences.  The break-up of the Eurozone will not change any of the debt-apetite political dynamics of the Eurozone countries, in fact it may magnify them.  The individual countries will face "print or don't print" decisions on their own, and lacking central discipline and with trade incentives, there will be a currency race to the bottom.  This will not end well and the Spiegel article lacks imagination to forsee the real consequences.

Mon, 06/25/2012 - 11:33 | Link to Comment Vince Clortho
Vince Clortho's picture

Agree that Der Spiegel is overly optimistic in their projections.  I do believe that individual countries will eventually return to some equilibrium point, some more than others, and some sooner, some later.

But in the short term, chaos.  And their will be printing and severe inflation.

Much grief before the equilibrium.  The longer the charade continues, the more severe the period of chaos.

Mon, 06/25/2012 - 11:22 | Link to Comment chinaboy
chinaboy's picture

Looks that the best thing to do is to print so much so that Euro has to be broken up.

Mon, 06/25/2012 - 11:22 | Link to Comment Caviar Emptor
Caviar Emptor's picture

Germany is export-dependant. So was Japan. 

Mon, 06/25/2012 - 11:23 | Link to Comment CatoRenasci
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The Europeans are all socialists of one degree or another. The difference is that the Germans (and the Scandinavians for the most part) work hard, live within their means, save, and keep the size of the state from getting completely out of control.  It only works with a 'virtuous' body politic. (or one which remembers the Weimar inflation and the aftermath of WWII....). The rest of the European socialists, now including the execrable French, are not hard working, spend continually beyond their means, and expect someone else's money to bail them out.

As dire as all the predictions of serious economic problems with a Euro break-up look, if the Germans were to go all in and bail out the other socialists who don't can't exercise personal or national fiscal discipline, it will only reinforce their tendencies to believe in the goose that laid the golden egg and continue their sprees, and the end result when it finally blows up will be much, much worse for everyone. And, there will be no sound economies on the continent from which rebuilding can begin.

Better the bitter, but life-saving, medicine now than a lingering and violent death in a few short years.

Mon, 06/25/2012 - 11:28 | Link to Comment gaoptimize
gaoptimize's picture

Good analysis,...about 3 years too late.

Mon, 06/25/2012 - 11:54 | Link to Comment mark7
mark7's picture

You managed to put almost every stupid stereotype about Europeans into your comment. Congratulations. You only forgot French women do not shave and are "easy"...

Mon, 06/25/2012 - 12:05 | Link to Comment CatoRenasci
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Stereotypes are often based in reality, as they are here. As for French women, the ones I've had did shave, but were easy (and thoroughly enjoyable). (Unfortunately, easy did not mean easy-going - rather they were all emotionally high-maintenance - another stereotype, perhaps, but also true in my experience)

Mon, 06/25/2012 - 16:47 | Link to Comment OpenThePodBayDoorHAL
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I do fondly recall a certain hirsute Parisian redhead with a rather musky aroma...I said "tu me fais une pipe?" and she said "avec plaisir"

Better days...

Mon, 06/25/2012 - 12:37 | Link to Comment C-B77
C-B77's picture

I'll be far more happy if they let the banks fail and then let the irresponislbe states fail as a consequence of that. This way all the guilty parties pay their share as they should. Your way lets the the big banks get away with it and start a new round of the same shit on some other poor buggers...

Mon, 06/25/2012 - 11:26 | Link to Comment Troy Ounce
Troy Ounce's picture

 

 

Individual countries will prosper; unemployment will remain the same; consumer prices will decrease and the few bankers left after the culling will go to work on a bicycle

Mon, 06/25/2012 - 11:30 | Link to Comment slackrabbit
slackrabbit's picture

Germany should accept that things are going to be bad. However they will be worse for others; and they won't be spending the next decade pouring their hard earned money down a blackhole before a default occurs anyway.

In short, cut the hand off at the wrist or lose the arm.

Both are crap, but one not so much..

Mon, 06/25/2012 - 11:30 | Link to Comment LeisureSmith
LeisureSmith's picture

Scandinavia better brace for impact, the "economy" has eaten some bad tacos.....and it looks like shit is gonna run up hill this time. Spain with youth unemployment of 50+ percent adding 27 percent more, soon we're talking real numbers. Then, they took our jobs!! interesting times for sure.

Mon, 06/25/2012 - 11:31 | Link to Comment slackrabbit
Mon, 06/25/2012 - 11:33 | Link to Comment LeisureSmith
LeisureSmith's picture

Exactly.

Mon, 06/25/2012 - 11:30 | Link to Comment dead hobo
dead hobo's picture

I disagree strongly.

If one country leaves, it is a catastrophe. If one, such as Greece, defaults on debt held by the ECB, then the ECB needs to be recapitalized by other EU members and all hell breaks loose economically.

If ALL countries exit the euro in favor of local currencies, then there is no longer a need for an ECB. There is no need to recapitalize a bank that nobody uses and everyone owes money to. Default is a free lunch, ignoring the scandal. It amounts to a continental bankruptcy and a continental Fresh Start.

Rather than an end of the world scenario, I think it might be the best and cleanest option to fix the problem.

 

 

Mon, 06/25/2012 - 11:40 | Link to Comment GeezerGeek
GeezerGeek's picture

Any fix must include turning the existing EU nomenklatura into Soylent Green. Don't give them another chance!

Mon, 06/25/2012 - 11:37 | Link to Comment slackrabbit
slackrabbit's picture

I got it!

Germany exports to Germany!

Hey if its good enough for bankers....

Mon, 06/25/2012 - 12:06 | Link to Comment supermaxedout
supermaxedout's picture

I agree,. Simple solutions are often the best. Make it simple and stupid then everybody can understand it. But where to store all that crap ?  I think that is the limiting factor somehow.

 

Mon, 06/25/2012 - 11:37 | Link to Comment PartysOver
PartysOver's picture

What a collosal crock of simmering cow crap.  Nobody knows what will happen.  Another possibility is that Europe can come out the otherside in much better shape while we Americans are so eger to trade away our freedoms for the illision of security.

 

 

Mon, 06/25/2012 - 11:44 | Link to Comment mark7
mark7's picture

"Europe partying for over a decade under an unsustainable regime that borrowed from the future (sound familiar?)."

Oh really?! Italy has the exact same debt level, 120 percent of GDP than back in 1991. They paid it back during last decade close to 100 percent of GDP. Spain actually paid back loans from 66.4 percent in 1996 to very low 36.3 percent of GDP in 2007. Now it is about 69 percent, due to financial crisis and high unemployment. USA is about 100 percent of GDP.

So your bullshit about Italy or Spain spending like drunken sailors is just that...BULLSHIT! Obviously, you work for some fucking vulture hedge fund and you talk from your book..."Spain is Greece! Spain is Greece!".

Mon, 06/25/2012 - 17:21 | Link to Comment Iwanttoknow
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Right,nobody talks about the great Brittania,with 950%.

Mon, 06/25/2012 - 11:38 | Link to Comment theTribster
theTribster's picture

Watch the Euro area come incerdibly close to a break up but then finally fix the problem, at least enough to support its continued functioning. There is way too much political capital invested and too much money being made (read stolen) for the Eurozone to break up, just isn't going to happen. All that said, they may force some out of the currency union like Greece but they will remain in the union just with zero voting rights (and voting rights in the EU is basically worthless anyway). The euro zone countries will do what has to be done to save the thing.

So, over the next 6-8 weeks we'll see things continue on the same path, one day good and the next bad with an overall trend of pushing up the dollar and the US markets while crushing the European markets and currency. Expect the euro to fall to around 1.10 by August before the Fed's Jackson Hole meeting then it should stabilize for a bit. By September we should start to see the contagion here as the world finally figures out that the US is in really bad shape - as bad as Europe.

They'll try to keep things going until after the elections, won't happen. The whole world will enter the chaos officially by October including Japan, China, Great Britain, etc. Between October and December we'll see PMs go vertical but between now and then we could see them go down another 20% before the move starts. It could start in August when we debate the debt ceiling and we have the Fed's big Jackson Hole gig.

By early 2013 things will be out of control and many countries will be looking for a war so they can get their massive unemployed young males out of the country and focused on killing somebody other then their local politicians and bankers. This is inevitable unfortunately, especially given the breadth and depth of the problems that exist pretty much everywhere. War is the answer for politicians, it always has been and there is no reason for that to change.

At some point the politicians and central bankers will lose control completely, we are close to that happening in Europe and once it happens there it will roll across the globe pretty quicky. At some point I think there will be a gang up on Germany and the tables will turn, remember that the Eurozone is where Germany sells most of its stuff - remember the subs sold to Greece right after the first bailout? (France sold them a bunch of Migs). It just seems that at some point people will get fed up with Germany acting like they are perfect and everyone has to follow their orders - maybe Germany gets kicked out and a couple countries (Finland, Netherlands, etc) follow them out. So, I guess a break up is possible at least under that scenario.

Definitely something to watch, this is better than any movie or television show - reality is so much better than fiction! Much of what is and has happened is almost (actually it is) unbelievable. The continued lying day after day after day will eventually catch up to the banksters and the technocrats in Europe just as it will here and everywhere else in the world - global financial meltdown followed by global revolution, at least that will be a war we fight for ourselves! War is coming, regardless of how we get there it will be global in scope and devestating for the current powers that be and systems they use to steal our wealth and manage our lives!

But I digress. The only way Europe breaks up is if Germany either leaves on its own or is forced out by the rest of Europe.

Mon, 06/25/2012 - 12:19 | Link to Comment NotApplicable
NotApplicable's picture

Also, while something may appear "broken up" for some time, well, that's just a short-term event to create the battle cry of "We Must Save the Union!"

You can bet that long-term, there'll be no escape from further centralization of power.

Mon, 06/25/2012 - 11:38 | Link to Comment Hellas
Hellas's picture

That means, that for Greece the Euro-Exit (or Breakup, even worse) is already priced in, i.e there. The numbers to be expected are the same - within or outside the Euro. So, go for it, Hellas!

Mon, 06/25/2012 - 11:46 | Link to Comment Colonel
Colonel's picture

The media never tires of hyping the financial crises the reason is because they've got a vested interest in scaring the crap out of people. Scare the people into saying yes to more austerity, and the same financial institutions who control the media will make a killing on the Greek,Spanish and Italian debt they've been picking up at a steep discount.

Mon, 06/25/2012 - 11:50 | Link to Comment FrozenOut
FrozenOut's picture

Here's the article translated by a human editor at Der Spiegel rather than some Machine Learning Algo at Google. Reads better.

http://www.spiegel.de/international/europe/fears-grow-of-consequences-of-potential-euro-collapse-a-840634.html

Mon, 06/25/2012 - 12:10 | Link to Comment Monedas
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Never in history was there a better time for a dollar Ponzi scheme .... it's been wildly successful .... no one else could have pulled it off .... nor had earned the right to .... Arab Spring, the Decline of the Soviet, the Capitalization of China, the Subjugation of Europe .... no one else could have pulled it off but the ESMC (English Speaking Master Culture) .... it's morphing and we now are ready for a return to a Gold standard .... now that the heathen world is becoming safe for democracy, capitalism and the American Way !    Well done, lads !   I wish I was as good an investor as our visionary leaders !  The joke's on you SSW (Stupid Socialist World) .... containment is working ! Onward Judeo/Christian drones !         Monedas      1929         Comedy Jihad On The Right Side Of History

Mon, 06/25/2012 - 11:59 | Link to Comment ebworthen
ebworthen's picture

I see no guillotines or gallows for bankers in that graphic (?).

Mon, 06/25/2012 - 13:35 | Link to Comment Carl Spackler
Carl Spackler's picture

I see a guillotine to the value of the equity holdings in the banks they operate, but otherwise their necks will continue to be around and sport Hermes products.

The Euro will remain but as a shadow of its former self.

Mon, 06/25/2012 - 12:00 | Link to Comment supermaxedout
supermaxedout's picture

You dont need to think long to find out  that an Euro crash would mean desaster for Europe. Everyone can calculate this at his fingers. What a waste of paper and time and energy the Spiegel initiated. Idiots.

I was a regular reader from the Spiegel since my late high school days.More than 40 years. But last year I quit subscription.

I really liked it when I was younger but from what I have learned over the last two years the Spiegel is no reliable source of information.

My doubts were raised for the first time long ago, when the Spiegel showed on one cover page (during 2000 I think it was), the so called: "Bush Krieger" (warriors) showing G.W. Bush, Condoleza Rice and Rumsfield in Rambo style having huge guns in their hands. And inside,   the Spiegel announced proudly (proudly was in this case a synomym for stupid), they announced how the Spiegel jouranlist were treated in Washington, that the Bush administration had rolled out in principle the red carpet for them. From then I knew that the image the Spiegel had in Germany was far away from  reality.

Further indications: Founded after WWII by a young man Rudolph Augstein who received from the British occupation forces the first licence in Hamburg to produce a news magazine. Augstein was of course their man.

The Speigel had a reputation as a magazine representing investigative journalism. Ha, Ha, this was all a lie.  Thinking now back, the Spiegel was indeed always at the fore front when it came to investigative stories. But this was simply to good to be true.

There is only one way how this was done. The Spiegel received from interested sides infos which were often gathered by the Secret Services of US or UK.The Spiegel was used as a politcal instrument in Germany preferably to kick the one or the other unwanted person or company or politician out of business.

And this did not change till today. News services, news agencies are always highly political and there is by nature always a thick wire from the secret services ending in the political papers. Simply for the fact to have a medium to start a campaign against or in favour of something or somebody.

And the Spiegel is a shining example of this. This is not an indpendent magazine. Its simply an important part of the worldwide CIA orchestrated Wurlitzer. Whenever its requested it is playing everywhere the same melody.

 

Mon, 06/25/2012 - 12:03 | Link to Comment mark7
mark7's picture

Here is a good link to check about governmebt debt:

http://www.google.com/publicdata/explore?ds=ds22a34krhq5p_&met_y=gd_pc_gdp&idim=country:es&dl=en&hl=en&q=spain+government+debt#!ctype=l&strail=false&bcs=d&nselm=h&met_y=gd_pc_gdp&scale_y=lin&ind_y=false&rdim=country_group&idim=country:es:it:fr:de:el:pt:uk&ifdim=country_group&tstart=804013200000&tend=1308934800000&hl=en_US&dl=en&ind=false

PIGS are all different stories, it is not all "Greek". Spain has less debt than Germany. Italy has more government debt but household debt is about half of that in UK or USA.

Mon, 06/25/2012 - 12:23 | Link to Comment supermaxedout
supermaxedout's picture

Thats all bull shit.

What is the reality. The figures showing government debt are under declared in many, many country of this wolrd. You dont find many "honest" countries.

Take Italy. If you are a supplier for the goverment or municipaility or public university, whatever entity but public funded, then my boy you have to wait in average 1.5 years till you get full payment. Of course the supplier is takiing this long payment period in consideration when calculating the prices for the goods and services he supplies to public entities.  The longer the time to wait the higher the price. In Greece its even longer. The last thing I heard something about three years ( but that was before the crisis)

So each country has its rotting bodies in the basement.

Compared to this Germany is paradise. Usually the pay within the agreed time, something between 30 and 90 days. Uk is also not that bad appx three to four months time according to what I heard last  (but this is not difficult because they just print some new money when needed, ha, ha, )   But in Belgium its easily a half year or more.

These numbers were never taken in consideration but this are facts. But dont worry, its all over the world the same. So its just badding up a bit, but who cares. Its anyhow to much.

 

 

 

 

Mon, 06/25/2012 - 12:07 | Link to Comment dbTX
dbTX's picture

Back to Europe on $5.00 a day.

Mon, 06/25/2012 - 12:10 | Link to Comment the grateful un...
the grateful unemployed's picture

inflation is the number one problem, recall when they rolled the EURO out they thought they would bring inflation down, because there were lots of pricing inefficiencies in the currency exchange system. (the biggest one being the carry trade between JPY/USD) so i'm not so sure the bankers are crying about the EURO breakup, because weaker nations have always been on the short end, its either hot money flowing in, a carry trade between the central banks, or raids on the nations currency ( i think i understand why China pegs) bottom line Greece takes it a lot harder if the EURO leaves them (as some suggest Germany is more likely to leave the EURO than Greece) but the EURO will muddle on like the UN, toothless, a great venue for the throd world banking nations to pound their shoe and make speeches, but the bankers will be back to their old feudal ways of extracting tribute from the lesser nations, with or without Greece. (and any nation which hosts the Olympics is soon to be a subnormal outlier to the EURO. (think GB? hey you're already there)

Mon, 06/25/2012 - 12:20 | Link to Comment Cupid Stunt
Cupid Stunt's picture

It's all OK guys, it's only a Bob Doll model.

Mon, 06/25/2012 - 12:23 | Link to Comment Snakeeyes
Snakeeyes's picture

You have an idea after Merkel said "Nein!" to EUFDIC and EUBONDs with Germany subsidizing Socialism in Europe.

http://confoundedinterest.wordpress.com/2012/06/25/the-new-siegfried-line-merkel-dismisses-eurobonds-and-eurofdic-while-spain-and-cyprus-seek-aid/

Mon, 06/25/2012 - 12:37 | Link to Comment localpacific
localpacific's picture

Markets are already anticipating this for the EUR/USD etc ... Short Term Technical Analysis 

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