Something odd is happening. Germans are leaving the ECB. First Weber, then Stark. Why would senior German officials withdraw from the ECB just at a time when they should seek greater influence?
One explanation: to avoid having a conflict of interest once Germany re-instates the Bundesbank as the leading central bank of Europe.
Currently, Germany and Greece are engaged in a game of chicken; the Germans do not want the first “domino” of the Euro zone to fall, and the Greeks know that.
Each time Greece nears default, Germany agrees to a last-minute stick save without offering a far-reaching solution. Their aim is to limit the funds actually flowing to Greece.
This, of course, guarantees the crisis to simmer on indefinitely, preventing a recovery in Southern Europe. But, as with every game, this one will have to end one day. Especially as German and Dutch 5-year CDS approach 100 bps. France’s CDS rocket has long left the launch pad, reaching 190 bps recently.
Source: CMA
Assuming the Euro zone will eventually disintegrate (as default without Euro exit does not make much sense) there are two scenarios:
1. Germany watches as one “PIIGS” after another is being forced out, leading to bank runs in those countries (as savers try to escape devaluation by transferring their deposits into countries remaining in the zone)
2. Germany (together with the Netherlands) decides to leave the Euro zone. Germans would be happy to get their Deutschmark back. Savers in PIIGS would probably not want to “speculate” in a new, unproven currency and keep deposits in their banks. The Euro would devalue, improving competitiveness for troubled countries. The Germans would have to live with the inconvenience of a strong currency. Something they are used to from the days of the ERM (European Exchange Rate Mechanism).
Scenario (2) would overall be less damaging for Europe.
This is when I remembered an article in DER SPIEGEL http://einestages.spiegel.de/static/topicalbumbackground/16161/der_geheime_bunkerschatz_der_bundesbank.html).
During the cold war, billions worth of a new series of Deutschmark were kept in a secret bunker under a harmless-looking villa near Frankfurt. This was in case the Russians tried to destabilize the West-German economy by flooding it with counterfeit Deutschmarks. The Bundesbank could have replaced most notes in circulation over a short period of time.
Video grab from DER SPIEGEL movie on secret stash of series “BBK II” Deutschmark, showing the 5 Deutschmark note
The “original” 5-Deutschmark note
I would be surprised if Germany was not prepared for a scenario where the Euro disintegrates.
Finally, one odd detail: after meticulously hiding the secret stash for 25 years, Germany decided to send it to the shredder. In 1988. End of story.
Except: The Berlin Wall fell in 1989. Erich Honnecker was still in power in October of 1989. Who cannot remember the talk of Russian tanks possibly crushing those “Montags”-demonstrators. And the Bundesbank decided the risk of an escalation was so low they could dispose of the back-up currency for good?
DER SPIEGEL broke the story in 2010, 22 years after the back-up currency had allegedly been destroyed.
Either the gardener spilled the beans on his death bed, and the Germans needed to “prove” the back-up currency was gone (and not just moved behind “the door behind the door”) in order not to upset their Euro partners.
Or, someone “saw” new Deutschmarks being printed, and the Bundesbank had to come up with a good story on why that was the case.
First, bitches!
http://geraldcelente.proboards.com
Trend forecast for your post: down!
Name your site after Gerald Celente...
Be bearish on gold...
I think oobrien is missing something.
More importantly...
Of course Germany is ready to switch.
This is an amazing article with an outstanding observation by Alex Gloy. A+++
The EU is in its death throes, and while no one knows what the corpse will ultimately look like, it will in no way, form or shape resemble what it has or was intended to, and the EUR is going to lose much of its purchasing power and maybe be dislocated all together.
your green arrow is not working so +1
be ready to ride out the storm
http://covert3.wordpress.com
Deutschmarks would be... what? 1.80 to the USD at least? Good-bye exports.
Nope, those who buy a BMW 7-series don't look at the price tag.
...riiight. What about Siemens, Adidas, VW, SAP, Daimler, Audi etc etc?
Glad that BMW will be fine though.
Yeah, that's the point. Most of what's made domestically in Germany is well designed and well engineered. Even German designed products produced in the Far East are better than the usual crap coming out of there, since the Germans exercise some quality control.
Simple fact of the matter is that if you want the quality, you pay the price for it. A strong Mark will hurt some, obviously, but I don't think it'll be close to a crippling handicap to exports.
And they can always devalue the Mark a bit to keep it semi-competitive. They won't go too far with that, because Germans don't like inflation, but there's some leeway to keep the exchange rate vaguely close to, if still higher than, the value they'd ideally prefer.
Are you taking into account the models manufactured in upstate South Carolina?
Maybe so... but you are wrong nonetheless and the statement is silly. Germany's exports are not just cars. The bulk is machinery.. and there is competition for this machinery. I know.. I sell made in Germany. The world is certainly willing to pay extra for good German Machinery but not double or triple..
Germans would be wise to keep their currency within 30% to USD in Purchase Power Parity.. Even better would be 10-20%
Another pleasantly sober assessment. Are you the new guy?
I'm not the new guy.. Been on here for well over a year.. been reading for a couple.. Sorry if that was sarc and I missed it.. :)
Who needs to buy machinery in dollars? Not many US factories anymore.
I dont know if they look at the price tag or not... But what I do know is that BMW buyers usually wear their shirts unbuttoned down to about mid chest, they also sport gold plated chains around their necks, lots and lots of hair gel (if they still have any- hair that is), they spend most of their days locked up in tanning booths or listening to techno with their elbow out the window of their Bavarian Motor... favorite hobbys include: foam discoteks, family mall walking, parking their BMW in designated handicapped parking spaces and wife swapping parties.
But on a less dire note... I believe that even if the deutche mark would be high, germany has a big market of its own, and germans generally can afford alot (even the average factory worker)- take away the social state, bring back temporary work permits for foreigners, lower taxes and the germans will be able to consume alot more of their own product- witch could be some kind of fall back from a slimmer export income. So Germany can be saved...
But looking at the BMW x6... I dont think we can be that optimistic about the good taste, eyesight, or soul of anyone who buys it...
EDIT:
... wow look at that- I got junked... who has a BMW x6?? SHOW YOSELF!!
Following this reasoning any country which would ever use anything else than a "degradeble" fiat currency has no chance of ever producing something of value - which is the reason why there are exports in the first place.
As it stands, um, yeah absolutely. Fiat is the name of the game.
I lived in countries with "harder" money and in countries with "softer" money and I can tell this from personal experience:
In the short run, the "softer" money allows you to paper better over any (initial) mistakes.
In the long run, if you have to calculate HARD to capture the value, the "harder" money allows you to set up a better, longer-lasting business.
You see, Ghordius, we are in agreement for the most part. Unfortunately this has yet to dawn on the majority.
Wouldn't it depend on the value the Germans pitched it at and what measures they took to keep it there?
Pre Euro DM was about 3 dm to £1, I think ??
Doesn't really matter, German currency would be strong (but then exports are quality not cheese).
I still have Marks in my drawer from my childhood overseas travels. Bring it on!
Better pictures of BBk II: http://de.wikipedia.org/wiki/D-Mark#BBk_II_f.C3.BCr_Westdeutschland
Of course the Germans "prepare" for worst case scenarios, they have a living memory of what can happen if you don't prepare for catastrophes. The "stash" never had to be used, remember?
The Germans are a long way yet to seriously reconsider their committments. And the EuroZone is slightly bigger than the usual countries the media focuses on.
I wonder why this technical bashing of the EUR is not seen as what it is, a concerted effort to keep the dollar high for the near future.
the germans are leaving the ecb because some of them have integrity, unlike anyone we have around (exceptions being dissenters of Bernanke)
Bund printing, hiding new Marks? Gee, talk about "Mark to Market!" LOL!
And to think that France was trying to wave the finger at London...tut tut, silly frogs. Looks like they should have pulled the plank out of their own eye.
I find this German posturing even more laugh out loud funny. Enjoy bailing out DB from its self-made pit of hell...
Germany should just bomb London and NY. Wipe out the banking cartels.
Whole Greek bailout is topping 180 billion euro(promised)! How much did Greece received until today , only 8b. So Tyler might be righ!
what, the germans still have secrets, i thought that we cracked the enigma and know everything....we need to find this new machine
In a game of extortion, er chicken (which I think the PIGS are much better at playing, or at least more practiced at, given the inherent & accepted corruption in those countries), all I can say is Germany better be playing for keeps & not trying to bluff their way to a solution, or they will find they will ultimately pay more, much more, whatever the scenario that develops.
http://gata.org/node/10457/print
German currencies in occupied countries
-- many solutions out there .... I would think a two-tiered Euro would suit the Germans better ... all the chatter of a Bundesbank legacy ... GER banks had to be bailed with the rest of them ... myth and reality
I foresee the rebirth of the old Hanseatic Thaler.
Monetry Union for Germany, Holland, Denmark (the old Hanseatic League)
My question is why do the investors believe Germany is safe? History shows otherwise:
There are few countries in Europe that have a financial history as colourful as the German hyper- inflation of 1920- 1924. However, in 1933, as soon as the Nazi's gained power, Germany defaulted again, and let us not forget the currency reform of 1948 that wiped out all internal debt.
In fact, the historical record shows that since 1830, every single time Germany has had a credit crisis it has been solved by defaulting on the debt owed to investors.
http://www.scoinsandbullion.com/en/blog/307-does-history-provide-any-war...
Ok... well I just read this and the Der Spiegel article.. All base on reparation debts.. German reparation debts from the 20th century is bullshit., So this is pretty much propaganda piece... What's your beef with Germany? Do you feel they are unsafe to invest in (bunds) at this point in time?
I don't know the relative risk of different pieces of paper. So I buy physical.
Which can be traded for any type of paper at a relatively equal rate of exchange! Why limit your options, go phys!
No Beef with Germany, in fact lived there three times for several years, and not a thing about the place irritates me. The people are great, the beer outstanding, and the women awesome. Ditto Holland.
My problem is that conventional wisdom holds Bunds are some kind of sacrosanct asset immune from risk. History shows otherwise. According to the notes in The Lords of Finance, reparations were equal to around $9 Trillion in today’s money. Aside from that, there were other times as noted above.
Furthermore, the main cheerleader of private investors tasking haircuts on PIG debt is Germany. Bund are safe, yet they are suggesting others don’t honour their obligations.
It appears to me that Germany is deliberately forcing the crisis onward, and possibly casting itself in the role of bad guy of Europe. Again.
History will tell just how risk free German debt is.
1. According to the latest rumor, Berlin has no Plan B - other than wishful thinking. They fear contagion, and rightly so, as the German Banks are wobbly.
2. The notes shown were potentially scrapped, because they were replaced by newer ones around that time? Because there were too many counterfeits around?
And what about private contracts denominated in EUR within Germany or for international contracts?
Would they stay in old-EUR or new DM ?
This would be huge mess in any case.
I have soooo much trust in fiat right now!
After all else fails, do what you should have done in the first place. And for the Euro, it is to dismember it. The easy route would be for the Germans to leave the Euro. This would allow the F'N PIIGS to reprice and regain competitiveness. The price would be paid by the Germans who would lose their competetiveness. And the price would be the 250bEuro that it would cost to re- capitalize their banks.
And once this is washed and rinsed, the next candidate country will step up to the plate.
“Assuming the Euro zone will eventually disintegrate (as default without Euro exit does not make much sense) there are two scenarios:”
Assuming that things that make no sense do not happen does not explain why there is a euro…
I am Dutch, and have a hard time seeing my crazy gov pulling the plug on the euro before the euro is death and buried.
Here’s why…
Pulling the plug on the euro is like pulling the plug on the “Dutch dream” of a European union (EUSSR) and seeing that this is still a political sound idea (not saying it is a good idea) I have a hard time excepting the thought.. So it really does not amaze me that there is no talk about leaving the euro. Lehh, they seem to think claiming Greece is fine, is going to work out well for them… The people are up for it do, sure about that. So things might change when someone gives a good example, but it’s hard to think these kleptocrats have thought about leaving the euro already. The euro needs to die some more before it becomes a political no-no to further support this failed experiment.
Germany has the upper-hand. The nearest Greece Bonds to mature are 3 months away (december according to FT yesterday). Meaning that from a Bond perspective IMF/EU has "all" the time until December
This means the Greece government need to find money for salaries elswhere and/or take the full impact.
so ..no more TBTF bank bailouts...commonsense at last..defaults a plenty and the return of bright fresh unencumbered currencies...please explain why my nice stash of silver coins will not become cheap irrelevent relics....help have i been a bit silly believing dem silver bears cartoons
Great story, but I give it a 1% chance of occurring. The non-elected kleptoelites in Brussels and Frankfurt will preserve the Euro at all costs. If you think Murkle and Screwbli are dovish, then watch for the the winners of the next German national election in 2013 (SPD and Green coalition) take Eurosocialism to the to the next level, distributing German taxpayers money by the shedful to the comrades in the South, in order to ensure themselves lucrative jobs at the pinnacles of Europower in Strasburg and Brussels. This will be backed up by further tidal waves of digital money creation by the ECB to buy PIIGS bonds.
I'm more confident on US disintegrating before the EU...
I would not make that trade. Leverage ratios are not as high with the US banks as they are in Europe. Reggie has had some great research on ZH about this.
Reminds me of rumours I read almost a year ago, one claiming to have seen new DMs being printed, along with this article in The Street referring to an Operation Vollkreis
http://www.thestreet.com/story/10933330/1/germany-is-smart-to-plan-for-death-of-euro.html
Excellent article. This scenario has always made the most sense to me.