France and Greece Voters Reject Austerity for Money Printing Inflation Stealth Debt Default
Politics /
Global Debt Crisis 2012
May 08, 2012 - 02:10 AM GMT
By: Nadeem_Walayat
For the duration of the financial crisis a battle of economic ideas has been waged between governments implementing economic austerity in an attempt to shrink budget deficits as experienced by much of the Euro-zone and that of money printing inflation as experienced by the U.S. and UK. That battle is now coming to an end as the voters of first France and then Greece have rejected severe economic austerity that has seen economic depression in Greece and at best stagnation in France for the alternative solution of money printing inflation.
The weekend saw François Hollande win the French Election with a 51.9% share of the vote on promises to end economic austerity, which can only be achieved by printing money (debt) which will put him at war with the Bond markets, unless he can convince Angela Merkel to monetize French debt.
Meanwhile in Greece the mainstream parties were punished as many voters opted to blame immigrants for their own problems by electing far right extremists leaving no party or existing coalition in overall control. The crisis being that parties in favour of the bailout and accompanying austerity are now in a minority which threatens to delay the release of further scheduled bailout funds as Greece drifts towards another election in mid June.
UK and US Money Printing Inflation
Whilst the mainstream press in the US and UK have written much about economic austerity in these countries, the actual facts tell a completely different story. The facts show that there has been NO net economic austerity in these countries.
For instance the annual budget deficits remain little change to that of several years ago with the result that the debt mountains have continued to balloon ever higher and to finance these deficits countries such as the UK have been printing money on an unprecedented scale that will feed the Inflation Mega-trend for the whole of this decade, never mind that far more money printing is yet to come as I warned of over 2 years ago in the Inflation Mega-trend Ebook (FREE DOWNLOAD), that the only solution, THE ONLY SOLUTION the governments have is to PRINT MONEY in an attempt at inflating the debt away. This has created huge opportunities for those that have leveraged themselves to the Inflation Mega-trend as illustrated most aptly by the Stocks stealth bull market that began in March 2009 at Dow 6470. With far more opportunities that lie ahead as the flood of leveraged money cycles through markets such as the depressed housing markets.
The Inflationary Depression
Off course there is a price to pay for money printing inflation, and that price is being paid by everyone who is not leveraged the Inflation mega-trend which means those on fixed wages, who I forecast could experience a real terms loss of disposable incomes of as much as 25% by April 2013, and savers with money deposited in risky banks that could literally implode overnight as a consequence of the risk of Euro-zone collapse which this months elections increase the risks of. In such an event it would not matter that the depositors would probably get all of their money back because the price of rescuing the banking system from financial Armageddon would be such that those funds on deposits would have lost most of their value by the time they gained access to their funds.
Meanwhile, All UK politicians are continuing to play the bogus economic austerity card, with Labour beating the Conservatives with the Austerity hammer and the Conservatives using it as a banner in their defense that the UK would be where Greece and France are without austerity, when the reality is that there has been NO real economic austerity in the UK because government spending continues to INCREASE every year ! The UK government will spend £731 billion this financial year, which is set against last years £713 billion, £691 billion in 2011 and £669 billion in 2010. Every year has seen an INCREASE IN GOVERNMENT SPENDING ! That is a fact.
The Bank of England is monetizing UK government debt, to achieve this it has so far conjured £325 billion out of thin air. The effect of this is two fold, it floods the market with sterling bonds so makes the currency weaker whilst at the same time driving interest rates for government bonds lower hence lower financing costs.
Many readers may ask, if there is no economic austerity then why are we suffering?
As explained earlier, most people in Britain are suffering as a consequence of RAMPANT MONEY PRINTING INFLATION that is resulting in the loss of purchasing power of your earnings.
Whilst economic reality in the UK will be difficult for most today, however interest rate hikes are just around the corner as consequence of money printing Inflation that are likely to add to personal budgetary woes. Yes, I am surprised that the Bank of England has managed to resist raising the base rate for thus long, but they have not prevented retail market interest rates from steadily rising for the past 12 months as illustrated by Mortgage rates typically now at 4% and above. At some point it will dawn on the academics at the Bank of England that UK economy is not responding to near zero interest rates because it promotes an artificial anti-competitive market that is deterring investment and economic growth as a consequence of NEGATIVE REAL INTEREST RATE (base rate below the rate of inflation). When they realise this reality, they WILL raise interest rates. My long standing forecast for which remains for UK base interest rates to rise from 0.5% today to 4% by the end of 2014 (Interest Rate Mega-trend Ebook - March 2011).
The UK immersed in an long Inflationary depression as illustrated by the below graph which shows that despite the wide spread mantra of Deflation as regurgitated at length in the mainstream press for the past 4 years, the UK on the governments preferred CPI measure has experienced inflation of 15% over the past 4 years, (real inflation tends to be 1-2% per annum higher i.e. 25%), whilst the UK economy in terms of GDP remains 4% below its 2008 peak. That net economic pain of at least 20% is not being picked up by the bailed out bankster's, but being paid by ordinary workers and savers.
So when the coalition government politicians promote the crisis in France, Spain and even Greece as examples of where the UK could be, know this that we are already there and don't even know it as a consequence of the money printing smoke and mirrors inflation! In fact the truth is that the UK in terms of Debt to GDP (500%) is more indebted than either Spain (390%), Italy (320%) or France (360%) as a consequence of the bailout of the UK's bankrupt giant banking sector that remains an ever present ready to explode weapon of mass financial destruction.
It is clearly not sustainable to continue SPENDING money the country does not have, that inflates the debt mountain ever higher that pushes inflation ever higher because there is more money in circulation chasing the same goods and services. This IS how countries go bankrupt stealthily, well until the hyperinflation panic event. However, until that point in time all that the UK government is doing is to buy time. For what ? To get through to and win the next general election which is usually the primary objective of all governments.
And, It is this which euro-zone politicians are seeking to replicate - the economic illusion that an Inflationary Depression brings along with it, for it allows politicians to point to countless statistics that give the illusion of economic stability that the general population tends to swallow despite the fact that their own personal experience suggests otherwise.
Euro-zone States Great Escape from Germany?
Which means that countries such as Greece, Italy, Spain and even France will at some point decide to cut the noose that Germany has around their necks, where they have to beg, borrow and steal euros from Germany, and instead choose to engage in rampant money printing inflation that their electorates demand of them to play catch up to the UK and US which means that the Euro-zone as we know it today will cease to exist, even if somehow it still goes by the name of the Euro-zone. We can all speculate on what will replace the current single currency Euro-zone system, but at its core will be the ability for each country to PRINT MONEY. This means that countries such as Greece will return to the pre-euro levels of high inflation rates, possibly as high as 30% per annum. And countries such as France which in many aspects resemble the UK economy, will follow a similar inflationary path to the UK after an initial surge in inflation following the initial money printing run as Francoi Hollande dusts down and restarts the French money printing presses.
Contrary to what you hear in the mainstream press of German exasperation at countries such as Greece and Spain, the truth is they will fight tooth and nail to prevent these countries from escaping from the German stranglehold. For Germany the euro-zone has remained hugely beneficial as a consequence of a captured market that has German manufactured goods stuffed down their throats against which no other Euro-zone country can compete, as well as a weak Euro held in perpetual crisis by bankrupting states allowing Germany export to the world without suffering the consequences in terms of loss of exchange rate competitiveness that it would experience were it trading with the Deutschmark. So contrary to the politics, it is Germany that wants the Euro to continue in its present form more than any other Eurozone member.
However on the flip side Germany will never agree to the level of rampant money printing of Euro's that countries such as Greece and France are voting for, because of the Inflation consequences that Germans tend to fear more than economic stagnation, hence why I just cannot see how the Euro will survive. The Euro-zone is literally tearing itself apart which this months elections are just the latest milestone of.
When Will the Euro-zone Blow up?
I could speculate on when the Euro-zone will eventually blow up, but the truth is that there are now so many potential triggers that it could come at any time. We have the crisis in Greece, we have the Spanish Banks going bankrupt, we have socialist money printing France, and then we have Italy, Portugal and Belgium also at crisis point. My best guesstimate is that the trigger for Euro-collapse will come from Spain because it is too big to bail and is tottering right on the very edge as illustrated by a 24% unemployment rate that is higher than that of Greece's 22%! Spain IS the big story that is being drowned out by too much competing media Euro-zone noise.
My next series of article will look at the specifics of how the Inflation mega-trend will continue to play out, ensure you are subscribed to my always free analysis to get this analysis in your email in box.
Source and Comments: http://www.marketoracle.co.uk/Article34544.html
Your analyst.
By Nadeem Walayat
http://www.marketoracle.co.uk
Copyright © 2005-2012 Marketoracle.co.uk (Market Oracle Ltd). All rights reserved.
Nadeem Walayat has over 25 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis focuses on UK inflation, economy, interest rates and housing market. He is the author of three ebook's - The Inflation Mega-Trend; The Interest Rate Mega-Trend and The Stocks Stealth Bull Market Update 2011 that can be downloaded for Free.
Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication that presents in-depth analysis from over 600 experienced analysts on a range of views of the probable direction of the financial markets, thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any trading losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors before engaging in any trading activities.
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
Comments
Bill
08 May 12, 06:47
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Commodity stocks and the inflationary megatrend
How does this bode well for commodity stocks? Surely, one would think that with all this (international) money printing, commodities and commodity stocks would be leveraged to currency devaluations? However, many commodity stocks have been falling for the last few years. Is this because USD has been strengthening recently and/or because the euro makes up approximately 60% of the US dollar index and the markets are anticipating a massive euro fall? Even so, how can this justify the levels we see some commodity stocks today? Many of these commodity stocks are approaching pre panic levels which we saw in October 2008 (KAZ/VED etc.). Is this really justified considering the massive amounts of money printing going on? (p.s. I do not own any commodity stocks, but their decline does not seem to "fit" with your very reasonable and logical argument of the effects of massive monetary easing going on aroung the world.) I would personally really appreciate your attempt at an explanation regarding this oddity. Many thanks, Bill
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RB
08 May 12, 08:45
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Long Time
Hi Nadeem, Its nice to see your article after such a long time. Whats ur current view on China? Do you see its market bottoming out soon. Regards RB
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Nadeem_Walayat
08 May 12, 10:26
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Markets and Inflation
Hi Bill Ive periodically explained this many times. Inflation moves of 4-6% per annum do not equal market moves of as much as 50% per annum. The overall trend is Inflation around which you get market senitment driven trends. The market op, which my eye has been on for a good 6 months now is UK housing, whislt I habve been exiting stocks since late Jan. Each market needs to be analysed seperatly in terms of where it stands i.e. best time to sell is duirng the mania, and best to buy is during extreme pessisms when others are too scared to buy. Best NW
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Bill
08 May 12, 11:41
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M and I
Hi. Thank you for the repeated attempts at an explanation. Perhaps, I am missing something for which I apologise in advance. However, some of these stocks are below 2006 and 2007 levels (i.e. before the stock market panic) and subsequent massive monetary expansions (worldwide). You just have to look at a chart of a few commodity stocks over the last five years to see this. Therefore, your explanation that some of these stocks have gone up 50% and then fallen back a little (market sentiment) does not justify falling back to nearly the same levels as before/after (almost immediately after) the crash. It is as if there had been no monetary expansion over the last few years and don't forget during the panic, these stocks were beaten down to levels which were hugely distorted. Why would certain commodity stocks be revisiting these all time lows all of a sudden? Has the commodity BULL finished then? Some of these commodity stocks (e.g.VED) now indicate that we are again in a once in a lifetime stock and commodity panic AND there had been no huge quantities of monetary easing going on for the last few years. Does this make sense considering the massive amounts of money being printed by various central banks? Given the current price levels of some of these stocks, how can you say it is just market sentiment? If everything costs more now, surely the price of some of these stocks would be above pre inflation levels?....or am I missing something? (earnings have been robust, so why the massive falls to pre crash levels?) I would have thought such stocks (because of their nature) would have fallen relatively less than other types of stocks (e.g. Unilever or technology stocks) due to the inflation megatrend and the fact that commodities and commodity stocks are generally leveraged to inflation, therefore would fall less in this sentiment driven inflationary environment. People with less money would surely be spending more of it on necessities, not luxury or branded higher ticket items, yet stock market reflects the exact opposite. Can you give a clear explanation as to why this is the case? I would be interested to know. Many thanks, Bill
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John
08 May 12, 12:56
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UK Housing Op
Nadeem, I'd be very interested to read your thoughts on the UK housing opportunity. Where I am in prime central London it seems like a massive bubble driven by a shortage of property, an absence of distressed sales (due to low interest rates ?) and a good helping of foreign cash buyers. I do hear of price falls in the provinces. How are you investing : are you buying cheap houses or have you found a suitable fund / vehicle / IT ? Regards John
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Paul
08 May 12, 13:53
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Markets and Inflation - Housing
Nadeem More good analysis - scary stuff indeed. Housin g you leep toting this and yert have not produced the promised analysis. At present the house prices Ex SE England are still tumbling. What is needed is a strategy giving some pointers of when to buy. Would you guess this would be - as soon as interest rates rise?
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Nadeem_Walayat
08 May 12, 16:38
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stocks and housing.
Hi Bill Investing is based on focusing on the fundementals of individual stocks. However picking individual stocks is not how sectors or the stock market as a whole is analysed, analysis is performend on general stock market indices, else one's just playing pick and mix to support a pre-existing point of view rather than trying to determine probable trends. Everything is cyclical, even the impact of money printing, where as you are seeing in certain commodidty stocks its having the opposite effect, this is why one needs to keep eye on individual holdings and be ready to cycle out of stocks and sectors when the risks outweigh the potential rewards which is so far how I have consistently seen the stock market for the whole of 2012 since mid Dec 2011. Remember stock market investing is VERY HIGH RISK, one cannot just rely on simple general indicators but stay focused on how individual stocks are actually performing. UK HOUSING John Hi, I will look in it in depth, probably a month away, my impression from ongoing preliminary analysis is that probability favours rising house prices i.e. I would be surprised if house prices ended 2012 down on the year. Me ? I am buying premium properties, I don't want to be lumbered with a load of cheap properties that will suck up all of my time. Paul - When to buy ? One buys when the market is weak and you can underbid, and one sells in strong markets when you get competing bids. In my opinion today's weak market is good for buyers. I'll get around to constructing a forecast but it does require a lot of work to arrive at a high probability forecast, I estimate a good 80 hours of analysis on just this one topic would be needed. Best NW
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Bill
09 May 12, 03:18
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Stock Market / Housing
Hi Nadeem, Thank you for your response. Please could you do a quick analysis of the stock market (DOW/FTSE) for the rest of 2012 - only if you have time. My quick analysis of the FTSE shows that it is still in an uptrend... i.e. it hasn't broken key support yet - which would indicate a more serious downturn. The DOW supports this also and is the stronger of the two indices. Housing. My initial thoughts were that if interest rates were to rise significantly (4% by 2014, as you predict) there would be no housing boom, quite the opposite I would imagine...unless wages and employment increased significantly. However, what is interesting is what you write in your article above. If single european countries were to adopt our reckless money printing policies, then I could see quite significant house price increases in the club mediterranean countries. House prices in europe have been beaten down quite significantly during the enforced austerity of recent years, unlike the UK which printed from the beginning and (as usual) got a head start over europe through it's tried and tested currency debasement. Are you expecting further huge quantities of QE in the UK going forward? Anyway, just my thoughts....
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Nadeem_Walayat
09 May 12, 10:49
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housing boom?
Hi Bill I never said housing is going to boom, I said probability favours rising prices. A housing boom cannot come until AFTER house prices have already been rising for several years. QE is just words, they will keep printing money because they have no other choice, they may continue to call it QE or call it somethign else, because money printing akready takes many forms. I will elaborate in detail in my next article. Best NW
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SC
09 May 12, 12:27
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HOUSING BOOM
"they may continue to call it QE or call it somethign else" Print it and use it to lower corprate taxes and increase basic personal tax allowances and I'd call "Free money".
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SC
09 May 12, 12:35
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Europe
I beg to differ with you. The elections have not "increased the risk of" a European breakup.That's only your opinion and one that is very much shared by the media who love to feed the frenzy. France, Hollande will seek to hold Europe together and Germany will do the same.The only issue is how they actually arrive at a mutually agreeable way to do it,but do it they will (my opinion). Greece is still as terrified of Turkey coming along to screw them as they have always been hecne why they are in Europe and will stay there. They don't care about the Euro ,but they do care about their European comfort blanket. Again they won't leave it is simply how do they go about staying there (my opinion). To be frank after what seems like years of reading about Europe breaking up I'm tired of hearing it. Don't people realise Europeans are not going down that road no matter how many other people wish it upon them.
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Diane
10 May 12, 00:58
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Euro End
Hi Nadeem or whom it may concern, I'm confused, in your past writings you've stated that the Euro would continue to exists and that it would be Germany leaving you've now done a complete 180 and stated the opposite with out reference to past comments. Why?- such as I was wrong and people are using there vote to install governments that will eventually leave the Euro and inflate away their debts which appears to be what your saying now. Regards Dane.
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Nadeem_Walayat
10 May 12, 03:58
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End of the Euro 2012 is Probable
Hi Diane Yes, I have been correct to say that the Euro would not collapse for over 2 years now, as opposed to the blogosfear and much of the mainstream press that has been stating for TWO YEARS that a collapse the euro was IMMINENT. That trend of the Euro's continuing existance has run into the juncture of Governments being elected (This Month) that ensure it cannot continue. Look it is simple. The next government in Greece will be kicked out of the Euro because they want the Euro-zone to send them approx £100 billion Euros a year without doing anythign for it. I.e. not cutting their deficit. This is not going to happen. So, Yes things are changing on a fundmental basis that have a severe impact on future probabilities which now to me suggest that that euro will not continue. It is just not going to work. And Germany leaving the Euro-zone is not going to work now either, because of the fact that the Greeks now do not want to pay any price for the Euro 100 billion they want to recieve from Europe. Thus there is now a HIGH probability, of approx 80% that they will leave the Euro-zone this year with many other countries liekly to follow such as Spain, Portugal, Italy etc.. Euro 30 billion is due to be paid to Greece at the end of June, if Greece forms a government that says no to deficit cuts then that is not going to be paid, so Greece runs out of money in July. That is the real consquence of this months election in Greece, that the Euro-zone money tap gets turned off. Best NW
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Robert
10 May 12, 07:30
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House prices
Nadeem, surely house prices haven't collapsed because the Government has distorted the market with near-zero interest rates. Most people I know are heavily over-borrowed with "LIAR" mortgages bearing no relation to their income. If interest rates double, they are bust. And I suspect that many buy-to-let landlords would be, too. Once reality returns, I think there will be many new properties up for sale, and therefore distressed prices. I've seen this in the 1970's, 80's and 90's.
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Nadeem_Walayat
10 May 12, 11:46
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House prices
Hi Robert There are ALWAYS plenty of reasons why the existing trend should continue, which is why junctures are missed by a good 90% of traders / investors. Just as in 2007, I would tell everyone I met to sell, house prices are going to crash ! and they could not comprehende that house prices could fall in price, it was completely contrary to their experience of the past 15 years. Now increasingly it appears the opposite is true. When I get around to doing the housing market analysis it will be detailed with the focus on arriving at the most probable trend forecast for many years. Best NW
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Nadeem_Walayat
11 May 12, 04:45
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Euro breakup not EU
Hi SC I am saying that it is probable that the Euro will breakup - NOT the EU. And Greece WANTS to stay in the Euro, its just that they will instead be kicked out of the Euro-zone. Again, I never said that the EU would breakup, it won't it's the eurozone - the monetary union that is at risk. Best NW
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Nadeem_Walayat
11 May 12, 14:20
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Greece will leave the Euro-zone
Greece will leave the eurozone because of the fact that the Greek Economy has collapsed, they have not suffered a recession or even a depression but the economy has collapsed. A collapsed economy NEEDS a CRASHED currency to start rebuilding itself, the Euro is TOO STRONG for Greece and with it Greece will NEVER recover. It needs to leave the Euro. But the problem is if Greece leaves then probably the whole of the euro-zone will collapse which is why despite the fact it needs to leave it is not being allowed to leave, but it has to leave it has no choice and the same probably goes for the likes of Spain. Greece WILL leave the euro-zone THIS year, and when it does it will probably trigger a collapse of the Euro-zone (NOT EU). Best NW
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John Smyth
12 May 12, 13:07
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Greece
Greece, the lamprey eel of the EU.
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Shelby Moore
17 May 12, 16:16
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No country will exit the Eurozone
The (very old and in retirement) citizens of Europe fear the implications of a near-term contraction in social services and lifestyle, and are unable to see the positive implications of a quick implosion, devaluation, and rebuilding. Instead they will choose to print money via the ECB and stay together. I had explained this before: http://www.marketoracle.co.uk/Article31717.html http://www.coolpage.com/commentary/economic/shelby/Understand%20Everything%20Fundamentally.html Bruce Kasting is discovering what I already knew intuitively: http://www.financialsense.com/contributors/bruce-krasting/a-surprising-conversation-with-athens Europe is shifting to "print our way out, so we can stay together". Germany will now accede to 4% inflation.: http://www.financialsense.com/contributors/monty-guild/tony-danaher/germany-accept-inflation-save-eurozone http://finance.yahoo.com/blogs/breakout/fire-euro-printing-presses-only-way-save-euro-115951773.html Nadeem seems to think that the people of Europe are economists. No. People think in terms of their life priorities. For an old population that is heavily indoctrinated in the illusion that society can organize itself more rationally than free markets, their priority is simply that it costs more to allow free markets, than to abandon their philosophy of society.
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Nadeem_Walayat
17 May 12, 18:03
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Greece Exit
Well will find out... and sooner than most imagine. Greece does not want to the leave the Euro, no country does, instead Greece will be KICKED out of the Eurozone. So it is not a case of what people want, instead it is what is forced on them as a consquence of NO CHOICE. People should prepare them for the consquences on the financial system of a Greek exit. Best NW
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Shelby Moore
18 May 12, 00:16
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if ECB prints?
Am I missing something? From what I can see, Germany only has 2 choices: 1. Allow some countries to default/exit, and watch the global economy implode due to cascading derivatives defaults at 100x leverage (the banks all over Europe and the world hold these derivatives). 2. Print money and accept inflation. My understanding is no country can exit without the potential of setting off an uncontrollable derivative cascade, that no one understands how to manage. If they tinker with Germany exiting or Greece exiting with money printing to bailout the affected banks, they are risking a contagion that is uncontrollable. No one has the records to know where all these derivatives lurk. Have you see the photo of the financial records in Greece being stored in garbage bags? Derivatives are even more unregulated and untracked. It seems to me that Europe has no choice but to print via the ECB and stay huddled together. Of course this will fail in the end, and with higher debts loads and more derivatives. I have read that most of the $trillions from the prior global bailouts and QE was invested (by the banks) in derivatives. I think Europe will stay huddled together until the bitter end, when the entire Eurozone collapses under inflation. The final trigger will be when the central banks all over the world have to raise interest rates around 2014 to 2015, as inflation gets out of control. This will cause a stampede to the exits on the 3 decade bond bubble. Capital controls will ensue to keep people locked into bonds, while they plummet in value. This will be the giant reset of the financial system. And Europe will fail together and this will unify Europe into a political union with the rebuilding being a fiscal union that ends the nation-state in Europe. Btw, in my opinion, gold and silver are (triple) bottoming and going to double before 2014. Silver is in a bullish descending triangle (a continuation pattern). And silver has seen 3 triangle patterns before (2004, 2006, and 2009). I have written a private forum article with these charts but haven't taken the time to produce a public article. Don't forget my article here on Marketoracle in Oct 2010, where I predicted $45+ silver before summer 2011, and a bottom in silver after that $25 - $27. http://www.marketoracle.co.uk/UserInfo-Shelby_H_Moore.html I am very interested to read any counter logic. Hope you do have time to analyze gold now, before the bottom completes this summer. Disclaimer: I am only expressing my opinions for entertainment value, and I am not providing financial nor investing advice.
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Mike
18 May 12, 06:42
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One for all and all for one in the Euro
I have to agree with Shelby. There is more chance that all countries that are currently in the Euro will stay in the Euro (and despite the common chants of the media). It's not as though they have much of a choice. If one goes down they will all go down eventually anyway. Even the political leaders of Germany know there is no turning back on the Euro. Even though common-sense would hint that Germany should get the hell out of the Euro to save itself. Even Germany knows that they will have to accept the failure of multiple European nations to keep the Euro together. And yes, Quantitative Easing will likely be used as a tool to keep the Euro alive for longer.
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Marcin Strojny
18 May 12, 07:38
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Preplanned solution?
Euro and Greece are part of a bigger problem : globalisation. It would be insane to believe that it hasn’t been designed to screw all nations and governments of the world. The only winners in globalisation age are banks and international corporations. The most obvious conclusion is that Euro and USD are severely and artificially overvalued (don’t blame the Chinese, the banco-corpo mafia wants exactly this) so that these economies in Europe and outre-Atlantique are not healthy (based on production) they are diseased - based on debt. ECB and those behind ECB have obviously preplanned any action in case of any scenario. Don’t be fooled by opinions that greedy bankers are in a mess and worried. They know precisely what will happen. What may actually occur? 1. Euro stops to exist. Countries issue their own currencies. Probably the best solution, but not desirable for the G mafia. 2. Germany exits. This would not solve the crisis, it would create other crises. Unlikely. 3. Greece is kicked out. Greece exits and issues money, quasi-hyperinflation in Greece, problems in Euro zone not solved, but aggravated. Moderately possible. 4. Euro is devalued in Forex - joint action of all central banks. In some placed would be welcome, in some create problems and social unrest, problems pushed further down the road, putting pressure on USD and GBP. Likely. 5. ECB keeps bailing out countries and banks undermining the Euro and aggrevating problems. Likely.
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Shelby Moore
18 May 12, 13:50
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derivatives insure globalization
Afaics, the key is the derivatives are a gun held to the head of any western government that tries to exit the dying system. So far, afaik only Iceland managed to escape. The BRICs are apparently deciding that they want to detach from this fate. They have taken numerous actions over the past 3 months preparing to do business without the dollar. They comprise near 50% proportion of the world's population and industrial productive capital. I believe the plan is to inflate away the value of the western fiats to bring the developing world into a fair value, thus completing globalization on the bankers' terms. Derivatives are the insurance policy for that outcome. In my opinion, the next round of global QE will be the last one. It will set off inflationary trade and currency wars, that take us to the end game of bursting bond bubble (end of negative REAL interest rates). The developing world is nearing its saturation point, in terms of QE induced growth it can absorb. Read Michael Pettis. http://www.mpettis.com/ Although I think China will (is) opt(ing) to ease one more time (delaying rebalancing), before it debt collapses into Pettis's low growth scenario. Thus I am placing the Austrian crack boom end game to be circa 2014 - 2016. Martin Armstrong has pegged mid-2015. Note I think capital controls will ensue before then. I think trade wars will induce "trading with the enemy" controls very soon, e.g. USA just slapped a 30% tariff on Chinese solar panels. I think the confiscation of retirement investments by requiring investments in bonds as they die, will come nearer to the end game. Disclaimer: again this is just for entertainment, please be responsible for your own financial and investment decisions.
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Nadeem_Walayat
18 May 12, 17:52
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Greece Exit
Hi Shelby I think you have got this the wrong way around, its not Germany that needs to print money and inflate but the rest of the eurozone, what your advocatign will make matters worse. I think the mistake your making is that your forgetting that they have a single currency. So it is not possible for Germany to print money and inflate and have a significantly higher inflation than for instance Greece because they have the exact same currency, just as it is not possible for california to have a significantly higher inflation rate than for instance Nevada. The only logical answer is for the euro-zone to breakup, this is a conclusion I have been trending towards for the past 6 months as illustrated by my articles, and finally decided it is going to be so following the Greek and French elections. I am preparing for financial armageddon, my next article will try and quantify its exact consquences for Britian as it may not be as severe as I had previously contemplated, but still pretty bad. GOLD is a sideshow, Ive not analysed it but I know how markets work and I suspect that forced selling margin calls may lead to a spike LOWER - Which would be a great buying opp. MARCIN - I see No3 - Greece exit as most probable and the probability is increasing by the day!, Best NW
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MG
19 May 12, 05:26
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We will all be renters
Sorry, Just to follow on my previous post, I think that either a lot of people will loose their homes and/or their investment properties if the tax system I explained is introduced and if they do not have a high income to pay for an increase in taxes; OR rents will be much much higher in future for tenants (see for instance the policy of Affordable Housing; which is going to be as much as 80% of the market rental value); OR a combination of both. Land will be concentrated even more in a few 'hands'. Land will be one of the resources backing the new monetary system. I foresee troubles ahead for small BTL investors. The 99% of us will turn into 'renters' for all intents and purposes. What to do? Best,
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g kaiser
19 May 12, 11:02
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greek exit
While I agree that we are nearing the cliff, I do disagree about gold. As I see it, gold is the only thing that ultimately can't be faked, copied or devalued in your account. While there will be some volatility, gold will be the last man standing. That has been the way for thousands of years, it will be the case again. I don't trust politicians as far as I can throw them and I will not participate in their monopoly wealth game.
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any
19 May 12, 12:20
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what to do
Buy gold and take physical possession.
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