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Bond Market Set To Destroy Euro


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The euro was launched at $1.18 I think and then sunk to around $0.90 before climbing out again. The main problem is the rapid rate of decline, from $1.36 to $1.23 in 4 weeks, a very steep decline. Traders seem to me to be betting on a euro zone break up and will keep selling. Sterling will be sold off in tandem due to our trade links with the EU.

They have realized there is no other way out of the current southern European debt crisis and don't want to be caught of guard by a sudden French / German withdrawal which would obliterate the value of the currency.

In the long term the economic recovery of Europe will be much faster once the Eurozone gets itself restructured allowing southern europe to grow rather than be crushed by austerity and civil disorder.

Euro lanched as a hard currency 1/1/02 @ .88USD or 71% of todays value. If/when the Euro falls back to this level then I might agree, otherwise, any rapid decline is relative to the very high value that the Euro has been trading at until very recently. It's a bit like saying house prices have crashed when they have gone down from 8x average earnings to 7x average earnings when a real crash is when they revert to 3-4 times earnings.

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doubt it.

your gold price predictions have become a running forum joke. you couldn't have got it more wrong.

and there won't be deflation either. it should be fairly obvious now that the printing presses are going to be left running until joe 6 pack refuses to work for tenners.

you know what, you sound EXACTLY like another type of poster here.

swap the word GOLD for HOUSE, and printing presses for THEY wont let it happen, and I think you will see what I mean.

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Euro lanched as a hard currency 1/1/02 @ .88USD or 71% of todays value.

I'm a bit confused here, euro is currently at about 0.81USD.

No. You are reading the rate the wrong way round. Lots of people get confused when currencies go above and below 1:1

rate is 1.24 ish

It started at 1.17 at birth in 1999

then went down to 1.00

then on down to 0.88 ish

then back up to 1.00

up to 1.25

up to 1.50 +

and now back to 1.24

Still above launch rate and miles above worst rate against dollar,

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The Euro crisis is a bit more complicated than the debt problems facing the UK or US even if the scale is no bigger

Those fretting about the value of the Euro against the dollar are missing the core issue in the crisis..

For a start simple devaluation of the EURO will not really ameliorate the problem because the vast bulk of the debt owed by the likes of Greece, Ireland, Spain, Italy and Portugal is to other Euro zone states. Taking the EURO down to parity with the dollar will reduce the relative cost of debt payments to the likes of people like China who still run informal dollar pegs . However, it make no difference to the relative cost of Greeks servicing debt repayments to Germany and France as they are in the same currency zone. The bind that most of the debtor nations in Europe face is that at the very people they need to devalue against are their northern neighbours and they can not make that step all the time they are trapped in the currency union.

Basically the Greeks, Spaniards, Italians and Irish have signed up to a long term transfer of their future earnings to France and Germany.

In another age this would have been seen as simple imperialism.

Edited by realcrookswearsuits
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No. You are reading the rate the wrong way round. Lots of people get confused when currencies go above and below 1:1

rate is 1.24 ish

It started at 1.17 at birth in 1999

then went down to 1.00

then on down to 0.88 ish

then back up to 1.00

up to 1.25

up to 1.50 +

and now back to 1.24

Still above launch rate and miles above worst rate against dollar,

Yes thanks, I should have written current rate as 0.81 per USD and based on your data launch rate was 0.85 EUR/USD which is not a 30% differential; we are close to 5% of euro launch rate.

It would have been much simpler if I'd used the dollar/euro rate but got confused by the .88 number...

I'll get my coat.

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The Euro crisis is a bit more complicated than the debt problems facing the UK or US even if the scale is no bigger

Those fretting about the value of the Euro against the dollar are missing the core issue in the crisis..

For a start simple devaluation of the EURO will not really ameliorate the problem because the vast bulk of the debt owed by the likes of Greece, Ireland, Spain, Italy and Portugal is to other Euro zone states. Taking the EURO down to parity with the dollar will reduce the relative cost of debt payments to the likes of people like China who still run informal dollar pegs . However, it make no difference to the relative cost of Greeks servicing debt repayments to Germany and France as they are in the same currency zone. The bind that most of the debtor nations in Europe face is that at the very people they need to devalue against are their northern neighbours and they can not make that step all the time they are trapped in the currency union.

Basically the Greeks, Spaniards, Italians and Irish have signed up to a long term transfer of their future earnings to France and Germany.

In another age this would have been seen as simple imperialism.

IC, you mean that the debt is real.

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Are you still banging on about deflation? Deflation is impossible, the printers will print so quickly and so much money any deflation will last minutes.

The printers are the ONLY way out.

They have one choice and that is to hyperinflate their way out of it, helicopters will drop money from the sky etc etc.

Massive pay rises will occur for the public sector via printed money etc

Deflation destroys the economy as there is no incentive to invest.

Hyperinflation destroys the economy as there is no incentive to invest.

There is no way out.

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IC, you mean that the debt is real.

Yes and eventually the default will be 'real' one way or another ,because the burden of sustaining the payments will be too much for the Spanish, Irish, Portuguese, and Italians to bear. Eventually, it will become politically as well as economically unsustainable. It is this which is really causing the flight to 'safety' in US treasuries. The markets are essentially pricing in the fact that the banks in Germany and France may well not be able to recover their loans. When that happens the real fun will begin and it will spread a lot further than just the Eurozone

Edited by realcrookswearsuits
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Deflation destroys the economy as there is no incentive to invest.

Hyperinflation destroys the economy as there is no incentive to invest.

There is no way out.

ok....so why do governments agree that 2% inflation is good?

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it is not the bond market that is destroying the euro. The US treasury bond market is showing that there is a flight to perceived safety in US bonds. Safety from the problems in euro land.

However nothing new has come to light. Greece has been helped with billions, Spain & Portugal have been helped with 1 trillion. As soon as the latter was announced Spain & Portugal put in their austerity measures. I think we are seeing the decades of austerity and low interest rates. Europe and maybe the US soon realise there is no backstop for a large sovereign default. It will be belt tightening for years to come.

As with the price of Gold you are betting on a total collapse if you go long. If we do not get the collapse the price will go down like a ton of bricks due to deflationary forces.

It should be relabeled "flight to safety for now". Reminds me of the childrens game "pass the parcel" where the wrapper is a currency. You eventually end up with a crappy gift-probably the US dollar as last man standing. Problem is you have paid for the crappy gift as the bigger fool and in fact it explodes when you take off the last wrap.

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