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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Antifaschistische's picture

I don't think of it in terms of output...I think of it in terms of spending.   When people realize their wealth is really 1/2 what they thought it was, consumption contracts...everything else is just a downstream effect.

This will happen in the US when people realize they have no retirement, their debt based 401ks blow up, and their corporate pension plans implode and end up being forced to cut benefits to 1/3rd.  The US will experience a spending contraction tsunami.  (and then output falls)

i-dog's picture

Well, call me 'crazy' ... but what the whole western world needs right now is to reduce spending and increase production (ie: economic 'output') - preferably trading that production of what each is good at with somebody else who wants/needs it.

The globalist finance ponzi must be burned and buried for TWAWOKI (the world as we once knew it) to progress again.

Carl Spackler's picture

Economists call such behavior "Deflation."

Treasury Secretaries and Finance Ministers hate deflation, because fewer currency units will be available to roll forward sovereign debt, when government operating deficits continue to be negative (which holds for most of the world).

Ghordius's picture

+1, i-dog, pure propaganda - of that kind that is supposed to move German hearts: defend your currency.

note also that they just assume all partecipants would leave (this would be the globalist's complete euro-de-nationalization scenario I was writing about lately) and they don't mention how the EUR-debt would be treated, something that would be of enourmous importance in a crisis that is about debt and banks, not currency.

i-dog's picture

I agree with your other points, Ghordie, but this one is simply bizarre:

"all partecipants would leave (this would be the globalist's complete euro-de-nationalization scenario"

A return to [one or more] national currencies would be the exact opposite of "de-nationalization"!

The globalists wish to build ever larger de-nationalised unions (eg. EU, African Union, American Union, Trans-Pacific Union, Asian Union, etc), in order to finally merge them all into a single global union - with a single central global politburo controlling the global secretariats (IMF, WTO, WHO, etc).

I'm not sure whether you don't understand this, or whether I'm misunderstanding your use of the word 'de-nationalize'?

However, I don't see the currency itself as being the issue, but rather the demand for decreased sovereignty of the participants in favour of a central economic planning unit - whether in Brussels, or Berlin, or Bogota.

All that would be needed for me to also back the Euro is to set out the rules and for each of the contracting participants to actually follow what they agree/d to ... or leave! If the benefits of being in the joint currency were obvious, then none would run the risk of being asked to leave....

Inthemix96's picture

Dubya, at least if you're gonna criticise it.  Try and make it legible.

And yes, I may not be able to spell, but good fucking god, at least folk can understand what I am talking about.

Inthemix lesson 66 in ethics is now closed.

Hohum's picture

Germans don't learn English in school?  The Germans I've met speak English better than the majority of Americans.

marco1324's picture

And to top it off escalating tensions with Russia

Do we have a perfect storm heading in?

GeezerGeek's picture

How dare the Russians send attack helicopters to Syria! Don't they know that there might be some collateral damage and some civilians might get killed? That's totally different from the US drones causing collateral damage and killing civilians as well as Al Qaeda leaders, because Obama says it's okay to do that.

Jethro's picture

You can sign up for the "Do Not Kill List" registry here;


JustObserving's picture

What happens to $700 trillion in derivatives?  All major US and European banks will go under.  The Fed and ECB will have to print tens of trillions to save the too-big-to-fail banks.

insanelysane's picture

I don't get the too big to fail bs.  These banks have already failed.  Printing money only "works" if the money is but in and the debt is eliminated but the fix has always been the money goes in, bankers get bonuses and take more risks, and then need more money.  Fail the banks, eliminate the debt, restart.  The sun will come up.  People will need to live and the real economy will continue.

JustObserving's picture

The Fed is owned by the big banks.  It is unspoken charter of the Fed to not allow its owners to fail.

Bam_Man's picture

You're right!

From now on we should refer to them as "TBTAPTTF" banks.

That stands for "Too Big To Admit Publically That They've Failed".

N. B. Forrest's picture

It depend on who holds the derivatives and who the counter party risks are. 


$700 trillion is indeed a big number, but it means nothing if you hold both sides.  If I owe myself $100,000,000, then we have $200,000,000 in derivatives that just canceled itself out. 

GeezerGeek's picture

Except you'd have to pay yourself interest and that would probably be considered a taxable event.

JustObserving's picture

Derivatibes are bets.  Why would you hold both sides of a bet?  That is simply pointless.  

Clowns on Acid's picture

Forrst - What you say makes sense on paper (no pun intended). The actual result is the problems with settlement.

When one tries to "net" the assorted derivatives vs their actual pieces of paper (Int. Swaps, CDS, CMO, etc..) with their counterparties, the bid/ask spreads go very wide and liquidity becomes an issue. Chaos ensues (just like in 2008).

There is just too much interwoven chaos built into the "derivatives"markets....that is the real definition to TBTF...... Cash flows ultimately going to Mutual funds, IRA's, Pension funds, indeed Int'l trade settlements (letters of credit, etc) are all interwoven into the "derivatives" markets.

Settlement issues will create a crisis. Hank Paulson was correct in his assessment "Bread will not be on shelves in a weeK" if the TBTF banks fail.

It is a real mess...and one that is wayyy too scary for any real analysis of the potential outcome to be published to the sheeple. Bernanke and his minions know this, therefore their "hope and change" money printing policies.

It has too end badly...timing the ending is a very tricky proposition.



Sudden Debt's picture



mendolover's picture

As much as I HATE to quote Jeremiah Wright; "America's chickens are coming home to roost!"

GeezerGeek's picture

Is it time, yet, to start the grill and prepare the barbecue sauce?

potlatch's picture

most politics, are people segregating into petty tribal groups, and seeing the exact same atrocities in the world, but because of their pettiness, refusing to develop a shared, and therefore effective, language and perspective.


Funny, isn't it? 


I am fairly certain, except for some real loons, everyone is objecti8ng to the same things, but, due to pettiness, demanding it be called by certain names: eg, billions fo capital markets = "socialism" somehow.  Why?  Becau7se for those people, socialism is what they call the irresponsible vampire that is ruining our economy.  People on the Left call it "Wall St," :Globalism," etc.


It would be nice if you could all realize, we are all pointing at the same thing.



divide and conquer.  Gte nthe people to be bitterly divided about what exactly to call the vampire at their neck.

crawldaddy's picture

This bullshit sounds like the same bullshit we heard in 2008.  OH MY GOD if the bankers arent saved, all hell will break loose!!

send trillions to the bankers and the rich... stat


The short run may be painful, but on the other end of it, there is a new day, new hope.  God I only wished we let JP, CITI, Goldman and the lot go down in 2008.  By now we would be back on our feet, the cancer would of been removed, and our children would have a future.

  Instead.. we have banking overlords,

let it fail, its our only hope.

OpenThePodBayDoorHAL's picture

Totally agree, I'm sick of these suicide bankers. Like in the movies we need a hero to come along and notice their bundle of wires aren't connected to anything. Banks = Jim Jones, Us = Kool-aid drinkers.

Don't do it

slewie the pi-rat's picture

no, shithead!

the consequences would be that we would get new false dichotomies PDQ...

...well, maybe you were right...

slewie the pi-rat's picture

it only appears that way to one who is avoiding

The Consequences Of The Unthinkable
fuu's picture

I think my slewie to english translator has dead batteries today.

zelator's picture

hey slewie - do you always green arrow your own posts?

ebworthen's picture

Coffee, three aspirin, vitamin tablet, and a half-pound of bacon.

Catullus's picture

Bullshit propaganda from Speigel. Prices skyrocket in terms of what?

Scare piece.

N. B. Forrest's picture

No shit!  Prices may go up in Euro terms, but may go down in Deutchmarks.

Clowns on Acid's picture

Catullus, Commodity prices skyrocket because a loss of trust in trade (locally and Internationally), and therefore distribution costs go up.

End prices to the consumer are the addition of many stages - cost of distribution (oil, gas, electric), financing (letters of credit, etc), and storage at an end point (supermarket / store).

When socieatl trust breaks down...costs go up. Pretty simple. I do not think it is bs propaganda. 

czarangelus's picture

The mainstream retards have been wrong about every single economic forecast so far... based on their track record I predict Greek unemployment to be 6% two years after a Euro breakup

rqb1's picture

that is one great profile pic

Clowns on Acid's picture

Quite possibly czar, however 94% "employment" does not necessarily mean that inflation won't be 25%.

The USSR had a very low "unemployment" rate for decades. "We pretend to work and they pretend to pay us". Historically Greece has been prone to fascism, and one cannpt see any trend or developments that would prevent it's inexorable rise again. Or do you?

Just what do you envision the Greek population to be producing that their "Darkma" will have any value on an international basis?

Zola's picture

THe change in CPI for germany is way underestimated. I think the german savers would LOVE a return to the DM, there would be a huge windfall for them, much more than the petty 0.9pct stated there

Pairadimes's picture

Some of these numbers look like fair estimates, but I am betting that the post-breakup inflation estimates are low, especially for the PIIGS. The longer this charade continues before the rubber band breaks, the worse those results will be, when sovereign fiat backed by bankrupt governments takes the place of the euro and gets repriced by a market that wants nothing to do with these ersatz currencies. Club med countries are going to get fist-fucked by a currency transition under these circumstances. A multitude of Weimar republics.

crawldaddy's picture

Weimar had a foreign army on its soil asking for payment.  Thats the difference. Most people dont even know what happened to create that perfect storm in Germany.  Its wasnt just economic policy. It was retribution following a failed war, and basically an occupation.

Caviar Emptor's picture

it was also the old German elite, disenfranchised by democracy, restoring their ancient powers

crawldaddy's picture

so its they who marched the French army in to Ruhr in 1923 due to none payment?

Caviar Emptor's picture

They bankrolled Hitler from the very beginning. And benefitted from national socialism. They wanted short-lived  Weimar to collapse. 

vegas's picture

If the Euro breaks up, what will all the caterers do with no more summits? Ohhhhh the humanity.

crawldaddy's picture

time to short pastry puffs, and toothpicks.

Bam_Man's picture

And we will finally see the price of Grand Cru Burgundy and Bordeaux return to Earth from the stratosphere.