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The Masked Tulip

Euro: Big Wednesday

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Just posted on Paul Mason's blog:

My report on Germany's role in the Euro crisis goes out in a few minutes on Newsnight. However there will be no big interview with Germany's finance minister German Wolfgang Schäuble off the back of it. Herr Schäuble blew us out, after much setting up, and did the same to at least one other major news organisation, because of urgent cabinet business.

There is tonight the beginnings of evidence of real contagion from Ireland. I won't grace this with over-emphasis in a TV report but it's worth pointing to (hat-tip to FT Alphaville):

-> Spreads on Spanish and Portugese debt rose

-> A rapid sell-off of the Euro followed Schäuble's remarks in the Bundestag

-> Mohamed El Erian went on Bloomberg to warn that Irish banks were "leaking deposits"

-> Plus a whole number of esoteric secondary indicators are reminding bondmarket insiders (eg on the Alphaville blog) of the pre-May 2010 situation.

We've heard tonight that the Irish government will take a major stake in Bank of Ireland (it already owns 36%); that must mean AIB as well as Anglo-Irish to be nationalised. We've heard from RTE the figure of E85bn as the size of the total bailout.

Market insiders are clear that whatever happens tomorrow (today if it's Wednesday already) has to be big, convincing and effective.

More at:

http://www.bbc.co.uk/blogs/newsnight/paulmason/2010/11/euro_big_wednesday.html

I think someone on here posted the Bloomberg info which was subsequently posted over on Mason's blog - this blogging stuff is fun.

Edited by The Masked Tulip

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The EU has been putting off resolving these problems. They know how to solve them, but some nations mainly Germany aren't willing to hand over the sovereignty to the EU to deal with it. So they keep coming up with these weak solutions like that idiotic debt guaruntees fund, that delay the crisis but don't solve it.

In the longer run to stabilize the Euro imo they are going to need large scale transfer payments. For example the US federal government spent 24.5% of GDP last year. And it spent that money quite broadly around the nation. From social security payments, to healthcare paymetns, to national defense to dozens of other programs.

Even in the depths of problems California could count on those transfer payments coming in, and when California's banks blew up, they also got a national bailout, and help from the federal reserve who is able to print, unlike the ECB.

So all in all, why would I hold Euros when I can hold Dollars?

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The EU has been putting off resolving these problems. They know how to solve them, but some nations mainly Germany aren't willing to hand over the sovereignty to the EU to deal with it. So they keep coming up with these weak solutions like that idiotic debt guaruntees fund, that delay the crisis but don't solve it.

In the longer run to stabilize the Euro imo they are going to need large scale transfer payments. For example the US federal government spent 24.5% of GDP last year. And it spent that money quite broadly around the nation. From social security payments, to healthcare paymetns, to national defense to dozens of other programs.

Even in the depths of problems California could count on those transfer payments coming in, and when California's banks blew up, they also got a national bailout, and help from the federal reserve who is able to print, unlike the ECB.

So all in all, why would I hold Euros when I can hold Dollars?

Why are the ECB not 'able to print'?

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Are you calling Black Wednesday?

Hmm, can I? I suppose I am - better pop out to the ATM before everyone wakes up. I think Paul Mason already called it before me.

Urgent German Cabinet meeting at this hour? Hope they ain't invading Poland.

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Market insiders are clear that whatever happens tomorrow (today if it's Wednesday already) has to be big, convincing and effective.

What can they announce exactly? More bailouts? A massive QE debt moneterisation program to print as many € as needed to fund Europe? The return of the DM and German withdrawal from the Euro?

None seems to likely to me.

I am struggling to see what other policy options they have available, things are not desperate enough for a real solution, yet.

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What can they announce exactly? More bailouts? A massive QE debt moneterisation program to print as many € as needed to fund Europe? The return of the DM and German withdrawal from the Euro?

None seems to likely to me.

I am struggling to see what other policy options they have available, things are not desperate enough for a real solution, yet.

Lord knows what they can do?

Perhaps the ecb could just write off the sovereign debt it has as collateral.

That would cause the euro to plunge, and probably force Germany and other strong nations out of the eurozone, but that might not be so bad.

Maybe we will see the mark return tomorrow.

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Euro falling through floor?

Compared to it's launch value the euro is around 30% overvalued at current levels. A bit of devaluation shouldn't be a problem to the Germans and would be a godsend to the piigs.

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Why are the ECB not 'able to print'?

I believe they cannot print under the terms of their charter. Germany doesn't want to see them printing money and bailing out other nations. Thats why Germany wants some control like through the debt guaruntees.

Now they must be able to provide some liquidity, but I think there is restraints on it. Having said that there is speculation the EU is providing funding to Ireland, Greece and Spanish banks through printing anyway. So its obviously in flux.

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Besides defaulting which I think could blow the Euro apart, and why at teh end of the day they always step in and bailout.. I think they could helicopter in enough money to stabilize the PIGS and friends, accept that it could cause some significant inflation. Then in the future set up some sort of central regulations for banks across the whole Eurozone.. with higher and stricter capital requirements. (which will cool off future inflation by limiting how much the banks can lend out).

The bankers don't want that either though as it would cut into their profit. Boring old banking with 10% reserve requirement and conservative lending standards like how downpayments is still a good business.. but it doesn't seem like one where bankers would make £10 million a year.

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Its the same old script they'll keep dishing out bailouts and the problems will keep bouncing back 6 months down the line... Until Germany reverts to the DM & Malta becomes the new mainstay of the EU! :P

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Why are the ECB not 'able to print'?

The biggest problem with printing is, who do you give the money to?

When you qe, you buy bonds. No problem when there is one nation to the central bank. But the ecb has many nations to the central bank, which nation's bonds does it purchase?

It could just buy all the Irish debt. That would be paying their bills by devaluing all existing holders of the euro. The Germans, who would be aware that they were the mugs in this ruse, wouldn't be happy. It would be moral hazard, almost as bad as smi. Using a central bank to rob from one set of nations might not be good for peace in Europe.

Mind you, there has been talk of war.

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The biggest problem with printing is, who do you give the money to?

When you qe, you buy bonds. No problem when there is one nation to the central bank. But the ecb has many nations to the central bank, which nation's bonds does it purchase?

It could just buy all the Irish debt. That would be paying their bills by devaluing all existing holders of the euro. The Germans, who would be aware that they were the mugs in this ruse, wouldn't be happy. It would be moral hazard, almost as bad as smi. Using a central bank to rob from one set of nations might not be good for peace in Europe.

Mind you, there has been talk of war.

Just buy bonds pro-rata from all euro countries. Germany would get the most enabling their banks to write off irish greek and portuguese bad debts and the others woukld get a welcome boost to exports through a lower euro.Job done.

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Guest spp

They could try "rescuing" the whole of Europe's "economy" with a big fat

LIAR LOAN!

:P

eric...please don't go giving them ideas :ph34r:

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I believe they cannot print under the terms of their charter. Germany doesn't want to see them printing money and bailing out other nations. Thats why Germany wants some control like through the debt guaruntees.

Now they must be able to provide some liquidity, but I think there is restraints on it. Having said that there is speculation the EU is providing funding to Ireland, Greece and Spanish banks through printing anyway. So its obviously in flux.

RU serious? You mean like 3% of GDP being maximum deficit and that sort of stuff?

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Hmm, can I? I suppose I am - better pop out to the ATM before everyone wakes up. I think Paul Mason already called it before me.

Urgent German Cabinet meeting at this hour? Hope they ain't invading Poland.

natwest would go down as well? is hsbc safe?

Edited by sharkbait

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German minister turns down interview with BBC = end of the world is nigh?

I think this is the BBCs self-importance bias creeping in.

I think we are worried about CDS spreads rising for some reason. Maybe the Irish bailout still won't be ratified because the government won't be there, or it won't be done before the banks finally collapse. At that point there would be massive contagion in the UK, Germany and elsewhere that would substantially exceed the size of the bailout. Then it would be the UK/German taxpayer that would be really fecked and not the Irish ...

Have I got this wrong? Someone please correct me if so.

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  • 261 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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