Guest Post: What's Lost With the Demise of the Euro? Only What Was Unsustainable
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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yeah yeah, euro will never collapse. this is a buy signal.
cramer said this morning that netflix was a bad stock..........
That's good, right?
he was saying last night on his mad money show that it was not a good time to be in the markets....
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
Merkel threatens war unless Germany is handed over taxation in Greece, Italy, Ireland (and all of europe to follow):
http://euobserver.com/19/114075
http://lemonlimemoon.blogspot.com/2011/10/merkel-threatens-war.html
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!
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.
Why don't they replace the Euro with gold and silver? Then we can stop playing Pretend Economics.
Has Angela received this post? She seems the one that would benefit the most from leaving and the least interested in doing so.
"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?
Has Angela received this post? She seems the one that would benefit the most from leaving and the least interested in doing so.
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.
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.
Excellent post.
Below video details the FED & fractional reserve banking scams:
http://www.youtube.com/watch?v=_dmPchuXIXQ
This vid is a funny animated short on the same subjects:
http://www.youtube.com/watch?v=ZPWH5TlbloU
Enjoy, & stack silver/gold.
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.
It gets worse with every minute:
Berlin issues tax demands to Belgians deported to Germany in WWII to work as slaves for Nazishttp://www.dailymail.co.uk/news/article-2064266/Berlin-issues-tax-demand...
And the eurosheeple are still asleep!
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
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.
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.
...*sigh*...
What do the "Germans" in your trailer look like? How old are you actually?
You probably don't even have a passport, moron.
give it up already, it's so obvious you hold on to any little piece of anti-europe propaganda...
THEY YIDS ARE COMING TO GET YOU!
oh poor baby. still got your panties in a wad over that yiddy conversation , yesterday morning.........harde har har har.........
Wipe the semen from the gun, pervert. The Yids know what you do, they watch you. You better hurry and hide.
THE YIDS ARE COMING TO GET YOU!
is that all you got?
THE SUPER YID IS COMING TO GET YOU!
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.
That would be a buy signal.
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.
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.
I love HPD
As always, he's ahead of the curve.
"the return to a sustainable reality" in context...............................
Is this anything like a sustainable nuclear reaction in your rectum?
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.
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?
I SAY ITS ALL 4 OF THOSE OUTCOMES
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 systems....it all goes back into the environment. Man with his short-term wisdom has created the ability for interest to occur due to this relationship:
MAN'S INTEREST ON MONEY = +1
NATURE = -1
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....
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...
+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 chrismartenson.com.
But the universe is infinate. I think your problem is that you are not thinking BIG:-)
Hmm...bartering and local economies...
Sounds good to me.
I was sort of hoping for option 1.
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.
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.
So with the Euro gone, how will the USD index value the USDollar? Seriously, will gold be the new measuring stick?
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.
With all due respect Tyler, you overlooked:
5. Dogs and cats living together...Mass hysteria!
...And when it happens - who you gonna call?
Janet Napolitano?
I had a very disturbing dream recently.
Janet Reno was undressing Janet Napolitano.........................
Ghostbusters!!!!
Georg Wilhelm Friedrich Hegel at work here. if the euro is lost, then it is lost by design and what is the reason for this? world currency?
Hegel was a ponce. Read Schopenhauer.
Ask people in Namibia if they are ready for a 'new world currency'?
World currency? As in world government? Like global domination?
Yeah Ok, Alexander the great failed, Napoleon failed, Hitler (epic) failed, global proletariat revolution was a flop. A bunch of wimpy suits will not succeed. If the the bankers/elites don't give it a rest and don't let go, all they will get is one world revolution and one Mad Max world. Good luck them surviving in that environment. To tell you the truth I would prefer a Hellraiser world though. I want to be Pinhead.
There is a world currency today: oil and gold. With either of these two, you are set, no matter where you are.
sex has been the oldest currency in the history of mankind.
And you don't get any without gold.
Gold and silver are the world currency. The world just forgot.
@ High Plains Drifter,
Hegel, a YID? He control all the world currency from past, it is his fault that you flunk from ACC. Because YID controls you, makes you idiot, but the stink is your own fault.
THE YIDS ARE COMING TO GET YOU!
Take your fight outside, you two. We don't want to hear it.
Cause and effect. The world has gone global since 1990. Under US aegis. Now the cycle is coming to maturity. Only corporations are global, not governments and people. So who calls the tune and who then dances?
Its the Corpocracy that calls the tune. Its not going to end. Far from it; we will be even more global as Internet and life styles mean we can eat, sleep and fukk at a drop of a hat from Montezuma to Hu flung dimsum land. As the global problems like ecological challenge and commodity/labour arbitrage world wide is beyond nation state governance, it has to be world government, as renewed people's power will require global solutions. It took three hundred years between Columbus's voyage starting American existence, subsequent suck-in into euro globalisation, before the USA became a nation and four hundred years before it could play ping pong as an equal to Britain, France and Germany. So politics always follows the commercial entrepreneur in the change process. We are there in the technology shift that has led to global integration of economies.
If the current corpocracy and globalisation dies in flames, we may be back to nation state toe scraping. But that is not the current corporate impetus and the politicians are following led by the money in their purses, paid slaves to gods of global change. I don't think once we have started this we will ever go back to nation state preeminence. Can't put the genie back into to the bottle. Athens led to Rome. ROme led to Europe...etc.
Abject nonsense. The Roman hegemony failed, as have all other attempts to merge nations: USSR disintegrated; Yugoslavia separated; Wales and Scotland would still like a divorce from England; BC and Ontario would like to be rid of Quebec; Texas and California have little in common; Tuscany doesn't really want to be sleeping with Sicily (and vice-versa);.........
There are many more nation states now in the UN than ever before ... all because natural human tendencies are toward tribal and local cultures. Only the unnatural constructs of the WTO and state-sanctioned corporations are keeping the globalist 'Unions' together at the point of a gun. There are numerous secessionist movements around the world, but only one globalist one (and that is being promoted by just one hidden hand).
Even the large multinational corporations would go the way of the dodo without the guns of the UN, NATO and the US protecting them. China certainly doesn't want to merge with anyone else ... they just want to trade as one autonomous and homogeneous culture with other autonomous and homogeneous cultures. So, in their hearts, do the Germans.
Diversity and specialisation are the natural order.
THat is the current trend. I do not adhere to it personally. But this is "where we are" as dictated by TPTB and where "they would like to take us". They have all the power and we know it.
The Jacques Attali thread above is basically saying the same thing. Its one thing saying your beliefs annd what you hope will happen, and another sayng "where the current power structures are taking us". The second is unemotional reasoning. Just saying.
The Roman Empire did fail, after five hundred years, the Soviet union also after seventy years. Etc. But you can't stop powerful people from doing what they want to do if they think they can get way with it. As they "bestride the world like a colossus". The US Oligarchical structure is now there. ALL IN. Try stopping them. Only their own failed impetus will stop them; if they end up like Madoff. But right now they will print to infinity to save the day. They OWN the money line and all the private profits. WE own the debts.
Bottom line for those who want to resist : know your enemy.
The US is not behind this globalist push. They are a pawn (the mercenary army) and the prominent US leaders that are pulling the strings in the US have an allegiance to a power that is antithetical to the US citizenry.
The globalists will fail this time [again]. The disintegration of the EU at this time was not in their plans. In fact, they were hoping to extend it to cover Eastern Europe and North Africa while simultaneously demolishing the US as a viable nation. Now they are scrabbling for a Plan B (including Putin now pushing for an Eastern Union to encompass those former Soviet states that were previously expected to join the EU).
They will, as you say, print to infinity ... but their dream is falling apart, even as we speak. And good riddance to it.
The US Oligarchs are the ones I refer to : the 1% or the 0.1% more likely. Not the citizens. You know that.
So Its US oligarchy that designed and built the global model. They own it. I don't see anyone capable of resisting to them. The current melt down is due to excessive greed and power going hand in hand.
But their ability to kick the can, privatising profit and socialising debt is unlimited, or nearly so, until it collapses. When will it collapse...maybe in five, maybe in ten maybe in twenty years.
We don't know the time line as we can't see a challenger to their power. China is part of it.
I don't understand why everybody is so terrified of the end of the Euro and the ECB. Europe was there before the Euro and Europe will be there after the Euro, and probably better off. And yes the US will also be better off without the FED.
True - when Nixon replaced the US dollar with monopoly money - no one even blinked.
They didn't realize or feel the consequences back then. Currency debasement can be nearly imperceptible in the first phase. The masses will only react to immediate events or fast/violent changes to their environment. Which tells me they are cold blooded, like frogs.
It's a whole lot easier to make a monetary decision than it is to extricate oneself from the downstream repercussions of that decision. (Leaving the gold standard is a great example.) People will feel the pain when the Euro fails. There's no easy way out of this.
Mainly because the NWO (U.N., IMF, NATO) was setting up shop in America (New York N.Y. to be precise) and the sheeple were under the impression that by having the capital of the world and the ARMY of the NWO, they would somehow benefit. To a certain extent, they have. Now that it is time to pay the piper, let's see how that goes. Same two choices that every single person born into this world has made throughout history. 1- accept that the promises made in your debt slavery will be delivered or 2- accept that no one can guarrantee your health and well except you. Unfortunately this also requires that you accept the responsibility for poor choices and recognize the true value of your labor such that you can provide for yourself, family, commmunity and company you keep in general.
But....but.....but....
....I was told that Iceland was struck by a massive meteor creating a mass casualty event when they defaulted!
Is this not the case?!!!
Along the Med, anyway.
And a lot of sweetheart deals for farmers and support of trade.
Isn't that just repeating the Civ prediction from above?
Are you new here? You know we're talking about humans, right?
And I thought growth was the goal, not sustainability.
growth is the goal to achieve entry in good status, as dictated by symbol; then when the kitchen gets steamed, she cries out, its hot but stay the distance if you want me to call you 'my man'. Sustainability then becomes the 'open sesame' to detente. You got part one right. That in itself is encouraging, given the state of things in the gender divide. Rinse and repeat please. We are talking about 'human reality'.
All system based on the loaning and borrowing at a rate of interest are doomed to collapse. Which is why they keep collapsing.
110+ million died last time, this time I am willing to wager 1-2 billion.
Chances are not the end of civilization just yet, unless nukes are used.
"The return to a sustainable reality"
Ha ha, whoever posted that must wear rose tinted glasses and have a unicorn in the back yard. I agree with GMadScientist on this one.
Nukes will be used, just hopefully not to knock down buildings and poison the environment. Electro Magnetic Pulse weapons were one of the most significant inventions of the last century and they went virtually unnoticed. Now that we live in an electronic society with our food stores hundreds of miles away from our people, EMPs will take care of those billions quite handily.
The end of civilization talk assumes we have ever had some sort of steady state civilization. However, if you examine history, civilization is anything but a steady state. We are lemmings. We build it up only to knock it down, over and over again. It's been a long run, but it's time to kick over the sand castle again.
so who's gonna maintain the 441 active nuclear reactors around the world and their spent fuel?
the surivivors? if not, then it's game over for all sentient beings on this planet in less than 100 years.
All possibilities my friends, we'll see how it turns out. Whoever wrote that article is going to find out first hand what a collapsed credit system will do.
less than 100 years?? so we never get to run out of oil?? woohooo!!! take that peak oilers!!
Just look at how many of them are on rivers and lakes. Minnesota has one right in the Mississippi River and another in a tributary. Wisconsin has two right on Lake Michigan and another on the Mississippi.
great article...if we could stop the bankers from convincing the politicians that it is worse than it is, we would all be happier
No need, bourbon works fine.
For those of you who invest in an IRA or for long term goals, theres a better approach than buy,hold,hope. Stocks follow the economy so analyzing the economy, specifically the factors that are "leading indicators" and having exposure to equities only when the economy is headed in the right direction and avoiding equities in favor of safe haven baskets is a much more logical approach. And missing the major drawdowns is the only way to help ensure meeting your goals. If you are interested in investing in a portfolio that tactically invests in equity and safe haven baskets via ETF's automatically, please email me at:
eclark@breakaway-partners.com
and I'll add you to the weekly market commentary & portfolio update distribution list. Its free to add you and you can follow along our model and our views. We have been RISK-OFF since 6/30 so have missed all this wicked volatility. Currently invested in short duration treasury baskets as flight to safety drives interest in our debt.
This is getting annoying.
Some sysadmin needs to shut this account down.
Tyler please revoke Saul's membership!!!
are you seriously calling for moderation on ZH?
why.
There is a difference between moderation of comments and filtering spam.. Do I really have to explain?
bring back the CAPTCHA!!
Here, here. Saul could become a contributor and prove himself, but he has chosen to annoy us with his unpaid for commercials. Boot em
His exact comment above is getting posted in robot like fashion all over ZH. That's spamming, plain and simple.
isn't this how MadHedgeFundTrader started his illustrious career ??