Guest Post: What's Lost With the Demise of the Euro? Only What Was Unsustainable

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

What's Lost With the Demise of the Euro? Only What Was Unsustainable

Scaremongering aside, the demise of the euro does not end European integration. It only means that which is unsustainable has been relinquished and a return to stability is finally possible.

So the euro is doomed. Toast. History. This will lead to:

1. the end of civilization

2. the end of European integration

3. the start of new Dark Ages

4. the return to a sustainable reality

The correct answer is 4. The euro was an unsustainable, self-destructing extension of the integration that has long simplified trade, travel and work throughout the EU (European Union).

At the risk of over-saturating you with more euro-related material, here are the basics we need to keep in mind as the third act plays out.

A common currency seemed like a good way to simplify trade and lower transaction costs. As I noted yesterday in Some Heretical Thoughts on the U.S. Dollar, such "folk" convictions rest on "sole-source causation": in this case, that a single currency would only offer more benefits of integration because it lowered complexity and transaction costs.

The euro supporters forgot or ignored the primary purpose of national currencies: to account for differences in transparency, productivity, trust, money creation and risk between nations' economies and their Central Banks/States.

If you remove this means of accounting for these fundamental differences, then you have removed a feedback loop from a dynamic system, and thus removed an absolutely essential flow of information and transparency.

What you're left with is a system of lies, officially sanctioned opacity, misinformation, disinformation, cooked books, artifice and propaganda, i.e. exactly what Europe has become. With the euro, there was no way for the system to account for thr vast differences in debt loads, credit risks, transparency, productivity and a dozen other fundamentals that are expressed in foreign exchange rates.

By all accounts, Greece and Italy have painfully dysfunctional national finances and political Elites resistant to admitting the dysfunction is unsustainable. Once those nations revert to national currencies, then their currencies will reflect the market's assessment of their economy and their national/Central Bank policies.

The same will hold true for all the other EU member states: the market will shift through the various metrics and feedback loops and reach an equilibrium around the value of each nation's currency.

Profligate, over-indebted nations with dysfunctional Elites and systems plagued by political corruption and gridlock will see their currencies devalued and the interest rates they must pay to borrow money raise to the point that borrowing will no longer be an option to escape the consequences of profligacy, and the devalued currency will preclude buying imports from strong-currency nations.

These feedback loops are essential to providing the citizenry and their economy with the transparency and information they need to adapt to reality. The euro has erased all that vital information, leaving only interest rates as the sole expression of differences between economies.

Interest rates are simply not a rich enough source of information and market feedback to express the differences between national economies; the global markets need the information and feedback loop provided by currencies.

As I attempted to describe yesterday, currencies are not explicable with "sole-source causality" or "folk" understandings; they are distillations of numerous information feeds and feedback loops that only a transparent market can generate.

I have little doubt the euro is being held aloft by cloaked Central Bank intervention; the Elites are desperately attempting to cloak the system's intrinsic dysfunction and stop the market from repricing the euro based on the inevitable return to national currencies.

Rather than fear this return to transparent feedback, we should welcome it and hurry it along. Systems which cut off feedback and choke transparency with artifice and lies are doomed to implode. If Europe ditches the failed "folk" experiment called the euro, then the process of recognizing and pricing dysfunction can begin, and the stability that only transparency and feedback can provide will soon return to the EU.

This may sound counter-intuitive, but it's the only way forward to a sustainable, stable reality. The immense hubris of Europe's dysfunctional Elites precludes their recognition that reality eventually trumps artifice and intervention. Their feeble, addled cries cannot turn back the tide, even if their bloated self-importance is infinite.

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BeerGoggles's picture

yeah yeah, euro will never collapse. this is a buy signal.

High Plains Drifter's picture

cramer said this morning that netflix was a bad stock..........

High Plains Drifter's picture

he was saying last night on his mad money show that it was not a good time to be in the markets....

hedgeless_horseman's picture



What's Lost With the Demise of the Euro?

I'll go with answer number 5 (and TurboTax Timmy FTMFW).

5.  most of the OPPORTUNITY RISK of investing in U.S. Treasuries and the USD



Ahmeexnal's picture

Merkel threatens war unless Germany is handed over taxation in Greece, Italy, Ireland (and all of europe to follow):

Historically, the order was reversed.  Countries went to war, and if they won, the defeated would then and only then pay tax to their new masters.  Time for Italy to stand up and fight!

hedgeless_horseman's picture



Time for Italy to stand up and fight!

I will bet Italians can remain passive longer that Europe can remain solvent.

Grandpa fought the Italians (on their own soil) and they weren't much trouble for him and his friends.  Frankly, the Italians haven't fought worth a damn since before the Vandals.

redpill's picture

Why don't they replace the Euro with gold and silver? Then we can stop playing Pretend Economics.

Hard1's picture

Has Angela received this post? She seems the one that would benefit the most from leaving and the least interested in doing so.

Manthong's picture

"a system of lies, officially sanctioned opacity, misinformation, disinformation, cooked books, artifice and propaganda,"

Anybody got a better way of describing the US Federal Reserve Banking System?

Hard1's picture

Has Angela received this post? She seems the one that would benefit the most from leaving and the least interested in doing so.

steve from virginia's picture

Europe is broke, the euro is a way for Europeans to fool themselves into believing they aren't.

Yes, stability is at the other end of the tunnel. What kind? Getting there is a bitch, retracing the usual 'hate and kill other Europeans for fun' territory the Europeans seem unable to escape.

CHS leaves out the euro as an energy hedge. He also leaves out the euro as a means to amplify German mercantilism, creating a captive market for German goods (automobiles).

The other energy hedges -- asset price bubbles, excess credit creation, inflation of finance sectors over manufacturing -- have all proven to be failures. Energy hedges are also ways for Europeans and the rest (Americans) to fool themselves into believing that infinite economic 'growth' and prosperity can be built on a foundation of capital exhaustion.

The outcome of Euro-collapse -- which appears inevitable -- is a car-free Europe. Add planes, skyscrapers, high-speed rail, 'modern' military: Germany's customers are already bankrupt and German trade is faltering. Exit the euro leaves the 'Peans' rooting around for dollars.

As the customers fail, the risk will seek Germany unraveling its economy. What the analysts miss is that there is no 'safe haven' anywhere in any euro-zone. The group of states missed the opportunity to federate. The light at the end of the tunnel is a reactor melting down.

Gold currency is a possibility, the problem is the waste, not the currency. Here is the stability of the graveyard: there is nothing left but the conservation, like it or not.

TruthInSunshine's picture

None of this is about the euro, dollar, yen, etc.

Debt is and has been the world's currency for two and a half centuries now, we're using debt as money because of fractional reserve banking, and it truly is as simple as that.

Fiat is one of the most powerful tools of economic, social and political control ever developed.

Allowing private entities to have a legal monopoly on producing the only recognized currency, conjured from thin air, at zero cost basis to the fractional reserve alchemists (but at great, great cost to alleged sovereign nations),  which can then be use to contol political, economic and social currents (currency is the way things get done and people/lawmakers/institutions get corrupted and purchased), and with which they can literally make infinite amounts of return and seize inherently valuable real assets (whether the loan made in the fiat conjured from thin air and leveraged up many dozens of times, or even if most of the loans default - what does it matter as the cost of creating the fiat and loaning it out was $0, and if even a fraction of loans are repaid, it's pure profit, not to mention that the securitized loans that go bad result in the harvest of REAL & INHERENTLY VALUABLE ASSETS - they want those loans to default), allows for the greatest and most prolific Ponzi Scam, all supported and backed by the alleged sovereigns that are aupposed to have a moral social contract with their citizins protecting them from such acts of rape and tyranny, of all time.

Anyone who thinks that my words are hyperbolic doesn't understand the gravity of how fractional reserve banking genuinely does put honest and capable men in positions of having to beg for food in order to ward off starvation due to the practices of the Money Masters.

Never go into debt unless you've decided to gamble it all and put your very life and that of your children in the hands of the Money Masters.

It's time Zero Hedge does a refresher course on the world's greatest legalized Ponzi Scam, to wit, Fractional Reserve Banking (aka Modern Money Mechanics), though Zero Hedge is among the few places online that frequently puts the ultimate scam that is frb front and center.

*p.s. Groupon bagholders are seeing their magnificent equity asset fall back towards the IPO price today - in normalized, non-Bernank'd markets, that equity would already be trading far closer to the its real, inherent value of $0 fiatskis.

JoeSexPack's picture

Excellent post.


Below video details the FED & fractional reserve banking scams:



This vid is a funny animated short on the same subjects:


Enjoy, & stack silver/gold.

eureka's picture

Amen, Truth! And CHS is a tool and US Empire is the biggest FRB fiat mafia in the history of the world, who depends on EUR destruction - to enable continued USD/Pentagon dominance.
One FRB FIAT uber alles: USD, USD, USD...
THAT was and is the plan.

Ahmeexnal's picture

It gets worse with every minute:

Berlin issues tax demands to Belgians deported to Germany in WWII to work as slaves for Nazis

Belgians deported to Nazi Germany in World War II to work as slaves for the Third Reich have now received tax demands from Berlin.

Belgium's finance minister Didier Reynders has vowed to confront Germany over the 'morally indefensible' tax demands which have been arriving in the mailboxes of elderly war survivors over the past few weeks.

'It is shocking that people who during World War II were forced to work by the Nazis have now received tax demands from the authorities related to the compensation eventually paid for that work,' he said.


And the eurosheeple are still asleep!


palmereldritch's picture

The Banksters will always take a piece of anything they can get their hands on.  They would tax the air we breathe if they could, er...wait

i-dog's picture

So, the UK and other EU presstitutes are ramping up the xenophobic pressure on Germany. Who wouldn't have expected it?

BTW, your other link is already a month old.

Ahmeexnal's picture

Or it could be 70 years old.

Or it could be one hundred years old.

"Uber Alles"

When you are carted away to a concentration camp, maybe... just maybe, will you regret not taking heed and rising up against them.



the tower's picture

What do the "Germans" in your trailer look like? How old are you actually?


You probably don't even have a passport, moron.

the tower's picture

give it up already, it's so obvious you hold on to any little piece of anti-europe propaganda...

whstlblwr's picture


High Plains Drifter's picture

oh poor baby. still got your panties in a wad over that yiddy conversation , yesterday morning.........harde har har har.........

whstlblwr's picture

Wipe the semen from the gun, pervert. The Yids know what you do, they watch you. You better hurry and hide.


whstlblwr's picture


the tower's picture

give it up already, it's so obvious you hold on to any little piece of anti-jew propaganda...


r u a religion? there is no god. period.


r u a race? then you should keep your race clean, i.e. inbreed like hell.

Robot Trader's brother's picture

If Cramer said this is not a good time to be in the markets, then there is no reason to watch him, right..??

Leonard the Wonder Monkey may eventually be the only one watching Cramer.  


FMR Bankster's picture

Yeah, tough call now. Facts indicate you should be out or short but with such a strong contrary indicator I'm not sure what to do.

Momauguin Joe's picture

As always, he's ahead of the curve.

The Big Ching-aso's picture



"the return to a sustainable reality" in context...............................

Is this anything like a sustainable nuclear reaction in your rectum?


SheepHerder's picture

Yeah what is "sustainable" mean?  When the markets level out there are going to be some resentful poor countries in a few of the former EU countries (i.e. Italy, Greece, etc.).  How long before old pre-WWII and pre-WWI resentments start cropping up and the nationalistic war drums start beating? 

Within a decade, I'd bet Europe is at war within along with many other countries across the globe.  I'd expect a Southeast Asia theater with our buildup in Austrailia being recently announced and a Middle East theater with the continued conflict in the Middle East given countries like Syria, Egypt, Israel and Iran. 

History has example after example of how monetary and economic woes turn into armed conflicts.  If by "sustainable reality" the author means WWIII, then sure.

New American Revolution's picture

Dude,   Look at the currencies.   The FED is already in there floating the euro in a kind of QE III and everyone is syncronized swimming in matched devaluation of their currencies that creates this stastasis of a narrow trading range in the FX.   That's why they had Corzine screw MFG and tie up a lot of speculators and run a bunch more out.   The MFG money is there, well, its over at JPM and Hymie Dimon is swimming in it.

They have a plan for the eventual break up, but it will be controlled and they'll call it a 'gold standard', but it won't be a classical and true gold standard.   It will be a phony gold standard and really doesn't mean shit.  It just means that they'll keep doing what they're doing but it will be tougher to own gold.  

So fuck all you peons, what are you going to do about it?    How about a New American Revolution?

SRSrocco's picture


People need to realize that in order for a system to allow "INTEREST" on money, the ECONOMY MUST BE ABLE TO GROW.  There is no interest in natural ecological all goes back into the environment.  Man with his short-term wisdom has created the ability for interest to occur due to this relationship:



As we head into RESOURCE SCARCITY and ENVIRONMENTAL COLLAPSE (such as only 10% of the biomass of the great oceans remains), the abilty to charge interest on money will disappear.

We will be entering into a new stage of BARTERING and LOCAL ECONOMIES.  The Dollar and the Euro is dead.  The Euro is located on the end of the Titanic that is now sinking... The Dollar is being pushed higher as the passengers on the Grand Fiat Ship are running towards it to keep from drowning.  This is a last ditch effort to stay alive in a rapidly sinking system.

So today we have to be patient while listening to inept politicians and leaders blunder through the worst collapse in human history by offering pathetic superficial solutions.  We are much closer to a complete collapse of civilization than most realize.

God Hath a Sense of Humor....


jomama's picture

actually, most of the biomass in the oceans are microbes.  are you telling us that only 10% of the microbe population remains?

i'm not sure if i buy that one...

SheepHerder's picture

+1  All the financial and economic problems are that simple.  In a closed finite system such as Earth, infinite economic production and growth models that rely on the planet's natural resources are foolish.  People can argue economic and monetary models until the cows come home, but at the end of the day there are limited economic inputs (i.e. oil, copper) supporting an economic mindframe of infinite output to service a debt based monetary system.  Zerohedge's frequent guest post author Chris Martenson goes in depth about this in his "Crash Course" lectures over at 

Peter K's picture

But the universe is infinate. I think your problem is that you are not thinking BIG:-)

azusgm's picture

Hmm...bartering and local economies...

Sounds good to me.

Popo's picture

I was sort of hoping for option 1.

pupton's picture

We already have option number one in most of our inner-cities, with roving mobs of "young people" looting and pillaging as if they were vikings.

Cathartes Aura's picture

isn't it admirable how the "young people" like to emulate their heroes, the "older people" at the top, looting & pillaging as if they were Gods.

of course, what is liberated by the young is a mere pittance when compared to their role models.

pupton's picture

So with the Euro gone, how will the USD index value the USDollar?  Seriously, will gold be the new measuring stick? 

agent default's picture

They can always readjust the basket of currencies.  But The Euro is to certain extent acting like an immediate benchmark for Dollar value.  But since most of the new currencies will probably be softer than the Euro, expect the Bernank to really go printing crazy.

HD's picture

With all due respect Tyler, you overlooked:

5. Dogs and cats living together...Mass hysteria!

...And when it happens - who you gonna call?

The Big Ching-aso's picture



I had a very disturbing dream recently.  

Janet Reno was undressing Janet Napolitano.........................