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Mounting Calls For 'nuclear Response' To Save Monetary Union

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http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8171403/Mounting-calls-for-nuclear-response-to-save-monetary-union.html

Spain's former leader Felipe Gonzalez warned that unless the European Central Bank steps into the market with mass bond purchases, the EMU system will lurch from one emergency to the next until it blows up.

Alluding to Portugal and Spain, he said a third country will need a rescue as soon as "January or February", and fourth soon after, at which point it will "contaminate the whole of Europe and get out of hand".

"If the ECB bought just a third as much public debt as the US Federal Reserve is doing, we could stop the speculation," he said.

Willem Buiter, chief economist at Citigroup, said Greece, Ireland and Portugal are all insolvent already, and Spain is close behind. The combined rescue needs of these countries is likely to exhaust the EU's €440bn (£368bn) bail-out fund, which in reality has just €250bn in usable money.

"Once Spain needs assistance, the support of the ECB will be critical. As the sole source of unlimited liquidity and as an institution that can take decisions without the need for political or popular approval, it is the only institution that can take actions of sufficient size and with sufficient speed to stave off major financial instability," he said.

Dr Buiter said the rescue packages for Greece and Ireland put off the day of reckoning. At some point creditors will have to take their punishment. While Europe is now the epicentre of the debt crisis, concerns may ultimately spread to Japan and the US. "There is no such thing as an absolutely safe sovereign," he said.

He said the ECB would have to continue propping up the banking systems of crippled eurozone states - whether it liked it or not.

So far, the ECB has purchased just €67bn of Greek, Irish, and Portuguese bonds after being instructed to intervene by EU leaders in May.

A German-led bloc of hawks on the board has recoiled from going further, fearing moral hazard and arguing that the ECB is being drawn into a role that properly belongs to fiscal authorities. It is unclear whether the policy is strictly legal under the Lisbon Treaty. It is already facing a challenge at the German constitutional court.

Unlimited printy printy.

This policy has never failed to work!

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I thought suicide bombing was A: illegal and B: bound to send you straight to HELL.

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I thought suicide bombing was A: illegal and B: bound to send you straight to HELL.

My thoughts on this are that printing money is part of the solution. You need to create money to fight deflation, and allow others to pay down their debts.

This will only work though if governments balance their budgets. If you have structural deficits, and put more money in, all that happens is that both taxation and expenditure jump up in step, the deficit just gets bigger in aggregate, and you are back where you started but with higher inflation, and perhaps hyper-inflation.

Given the lame attempts of the Irish and Greek governments to cut their deficits, printing money is just going to let the reckless off the hook for a while, and instead put all the risk on the currency. I might add that the UK government is also failing to deal with its issues, despite promising it would.

Inflation here we come.

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My thoughts on this are that printing money is part of the solution. You need to create money to fight deflation, and allow others to pay down their debts.

This will only work though if governments balance their budgets. If you have structural deficits, and put more money in, all that happens is that both taxation and expenditure jump up in step, the deficit just gets bigger in aggregate, and you are back where you started but with higher inflation, and perhaps hyper-inflation.

Given the lame attempts of the Irish and Greek governments to cut their deficits, printing money is just going to let the reckless off the hook for a while, and instead put all the risk on the currency. I might add that the UK government is also failing to deal with its issues, despite promising it would.

Inflation here we come.

With the likes of the Greeks you have the added problem that you might be very slow in collecting taxes, in a hyper inflationary environment this becomes catastrophic as expenditure accelerates faster than you can collect the taxes creating a massive deficit problem.

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With the likes of the Greeks you have the added problem that you might be very slow in collecting taxes, in a hyper inflationary environment this becomes catastrophic as expenditure accelerates faster than you can collect the taxes creating a massive deficit problem.

The Greeks are a perfect example of why you shouldnt print money. They need to have some consequences thrust upon them for their irresponsible actions. A currency whose total quantity is fixed, and which they cannot borrow, would be great for the Greeks, only they dont know it. They would be forced to balance their budget. If they dont want to collect tax properly, fine, they just cant spend what they dont collect.

Once they have understood that, preferably by operating under that sort of monetary discipline for many years, then perhaps they should be able to experiment with more advanced ideas like 'borrowing AND repaying', or even 'money printing'.

It seems though, that no salient lesson in the basics, has been forthcoming.

The current calls for monetary easing are desperate cries, rather than a well thought out policy of judicious stimulus.

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The Greeks are a perfect example of why you shouldnt print money. They need to have some consequences thrust upon them for their irresponsible actions. A currency whose total quantity is fixed, and which they cannot borrow, would be great for the Greeks, only they dont know it. They would be forced to balance their budget. If they dont want to collect tax properly, fine, they just cant spend what they dont collect.

Once they have understood that, preferably by operating under that sort of monetary discipline for many years, then perhaps they should be able to experiment with more advanced ideas like 'borrowing AND repaying', or even 'money printing'.

It seems though, that no salient lesson in the basics, has been forthcoming.

The current calls for monetary easing are desperate cries, rather than a well thought out policy of judicious stimulus.

Absolutely nothing wrong with printing money...as long as WEALTH is created to back it up.

I think we are singing from the same hymn sheet here.

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The Greeks are a perfect example of why you shouldnt print money. They need to have some consequences thrust upon them for their irresponsible actions. A currency whose total quantity is fixed, and which they cannot borrow, would be great for the Greeks, only they dont know it. They would be forced to balance their budget. If they dont want to collect tax properly, fine, they just cant spend what they dont collect.

Once they have understood that, preferably by operating under that sort of monetary discipline for many years, then perhaps they should be able to experiment with more advanced ideas like 'borrowing AND repaying', or even 'money printing'.

It seems though, that no salient lesson in the basics, has been forthcoming.

The current calls for monetary easing are desperate cries, rather than a well thought out policy of judicious stimulus.

So do the Irish, with their £15k personal allowance.

Stunning.

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The Greeks British are a perfect example of why you shouldnt print money. They need to have some consequences thrust upon them for their irresponsible actions. A currency whose total quantity is fixed, and which they cannot borrow, would be great for the Greeks British, only they dont know it. They would be forced to balance their budget. If they dont want to collect tax properly, fine, they just cant spend what they dont collect.

Once they have understood that, preferably by operating under that sort of monetary discipline for many years, then perhaps they should be able to experiment with more advanced ideas like 'borrowing AND repaying', or even 'money printing'.

It seems though, that no salient lesson in the basics, has been forthcoming.

The current calls for monetary easing are desperate cries, rather than a well thought out policy of judicious stimulus.

Corrected for you.

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A number of us right here on HPC forum have been saying this for awhile too. Like when that laughable bailout fund was established when Greece was going down, that included promises of loans from countries like Spain and Ireland.

The only way to solve the crisis before the system eventually comes down is to step in with the ECB. The Euro authorities would also be able to exercise fiscal control over unstable nations too, because the scale of the buying would depend on conditions being met.

Obviously Germany is afraid of giving this sovereignty to the EU, but if faced with over a trillion Euros in losses on its big banks with their loans to other European nations, Germany I believe will cave in eventually.

In the longer term the EU will need transfer payments and more fiscal spending to iron out these incredible imbalances.

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Corrected for you.

Well yes, we are pretty bad too.

IDS is the only one in the Government that has done anything meaningful to cut expenditure, which is out of control. Huge public salaries abound, and nothing is being done to reduce Public Sector pensions which are paid direct from taxes.

They have raised taxes more though!

When the OBR stated that the UK economy was growing faster than expected, and tax revenues were up, did the Con-Dems choose to use this money to cut the deficit? Nope, they decided to spend it. A bit like buying something on your credit card for £100 reduced from £200, which gives you £100 to spend right?

We are on our way to state default or hyper-inflation.

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A number of us right here on HPC forum have been saying this for awhile too. Like when that laughable bailout fund was established when Greece was going down, that included promises of loans from countries like Spain and Ireland.

The only way to solve the crisis before the system eventually comes down is to step in with the ECB. The Euro authorities would also be able to exercise fiscal control over unstable nations too, because the scale of the buying would depend on conditions being met.

Obviously Germany is afraid of giving this sovereignty to the EU, but if faced with over a trillion Euros in losses on its big banks with their loans to other European nations, Germany I believe will cave in eventually.

In the longer term the EU will need transfer payments and more fiscal spending to iron out these incredible imbalances.

what is the solution?

Please show workings, including examples from History, where printing (unbacked) money has EVER solved a debt crisis..

Im happy to send over the molecule sized paper on which to present your findings.

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what is the solution?

Please show workings, including examples from History, where printing (unbacked) money has EVER solved a debt crisis..

Im happy to send over the molecule sized paper on which to present your findings.

Its not unbacked though. The EU has incredible productive capacity. Eg.. ~100 car factories and surrounding parts manufacturers and suppliers.

Like if every piece of capital was running flat out, and still demand was higher so supply not keeping up.. then there would be big danger of inflation. But right now much capital is running at historical lows of capacity utilization.

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Its not unbacked though. The EU has incredible productive capacity. Eg.. ~100 car factories and surrounding parts manufacturers and suppliers.

Like if every piece of capital was running flat out, and still demand was higher so supply not keeping up.. then there would be big danger of inflation. But right now much capital is running at historical lows of capacity utilization.

you have to have the wealth FIRST....printing to create production creates inflation and false demand, which soon peters out...I cite the Fench Episode with Assignats, based on ceased church lands, then devalued very quickly indeed as more was needed, and the land backing it seemed to "run out".

AND, just for your consideration...if there is surplus already, then they could borrow against that....but they dont have it, so they cant.

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Euro crisis worries spread, U.S. to send envoy
10:21, Wednesday 1 December 2010
MADRID/ROME (
Reuters
) - Global (news) concern about the debt crisis rocking the euro zone mounted on Wednesday, with Washington sending a top U.S. Treasury envoy to Europe (news) and G20 officials discussing the turmoil in a conference call.

It is getting very heavy now with the Fed being called in to help maybe? Surprsing bouyancy in the Euro today with a slight rise against the majors. FOREX are seeing big trouble:

http://uk.finance.yahoo.com/news/Forex-focus-eurozone-afford-tele-2509257844.html?x=0

FOREX FOCUS
Liz "Lizzy" Phillips, 9:53, Wednesday 1 December 2010
Liz Phillips takes a look at the countries most likely to need a European bail-out - and the implications for the euro.
The relentless tide of troubles just won’t go away. No sooner is one sorted than another looms large.
Granted the Irish government still has to get its austerity measures through parliament next week on December 7, but everyone’s assuming it will go through.
So that leaves just Portugal, Spain, Italy and Belgium to worry about.
Suddenly the enormous €665 billion European Financial Stability Facility doesn’t look that huge. Who can the eurozone afford to bail out in future before it runs dry and who’s too big to fail?

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"Once Spain needs assistance, the support of the ECB will be critical. As the sole source of unlimited liquidity and as an institution that can take decisions without the need for political or popular approval, it is the only institution that can take actions of sufficient size and with sufficient speed to stave off major financial instability," he said.

I can't see why the Germans would have any problem with that. :lol:

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"Once Spain needs assistance, the support of the ECB will be critical. As the sole source of unlimited liquidity and as an institution that can take decisions without the need for political or popular approval, it is the only institution that can take actions of sufficient size and with sufficient speed to stave off major financial instability," he said.

I can't see why the Germans would have any problem with that. :lol:

Everyone goes on about Germany dominating Europe, looks to me though as if the lunapigs have taken over the ECB asylum.

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:lol::lol::lol:

Still deflationista?

As said its not IF they print money but WHEN, and how much..

I.e. will it be 1 trillion or 3 trillion?*

*per second.

Clearly, we will be having deflation.

fixing it by printing changes nothing...just the size of the Ultimate failure.

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A number of us right here on HPC forum have been saying this for awhile too. Like when that laughable bailout fund was established when Greece was going down, that included promises of loans from countries like Spain and Ireland.

<snip>

Yes but only you think its a good thing.

Its not unbacked though. The EU has incredible productive capacity. Eg.. ~100 car factories and surrounding parts manufacturers and suppliers.

Like if every piece of capital was running flat out, and still demand was higher so supply not keeping up.. then there would be big danger of inflation. But right now much capital is running at historical lows of capacity utilization.

Its not real capital. Its numbers capital which is not backed up in the real world.

You are seeing the divergance of the numbers from the reality as the boom ends and cracks can no longer be papered over with credit.

The only other explaination is that everyone has gone semi-Amish and decided they have enough sh1t. V unlikely.

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Clearly, we will be having deflation.

fixing it by printing changes nothing...just the size of the Ultimate failure.

Not true.

The market wants to deflate yes by destroying the credit/debt and so reducing the money supply.

This absoluely will not be allowed to happen, at any cost, even if the queen has to sit all day signing pictures of herself drawn by Andrew and Charles in crayon.

If you inflate you can hide the pain under general economic malaise as it gets shoveled over the whole popultion in the shape of a higher cost of living. If you deflate you have to:

- allow business to go bust which aren't profitable and face associated unrest

- accept a reduction in asset prices

-- houses

-- shares

-- rich people's land

- Pensions collapse

-etc...

The cowards way out is inflation nd they will take it.

I wonder if germany will be able to control the anger in its population and desire to leave das Euro if they do get shafted.

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Not true.

The market wants to deflate yes by destroying the credit/debt and so reducing the money supply.

This absoluely will not be allowed to happen, at any cost, even if the queen has to sit all day signing pictures of herself drawn by Andrew and Charles in crayon.

If you inflate you can hide the pain under general economic malaise as it gets shoveled over the whole popultion in the shape of a higher cost of living. If you deflate you have to:

- allow business to go bust which aren't profitable and face associated unrest

- accept a reduction in asset prices

-- houses

-- shares

-- rich people's land

- Pensions collapse

-etc..

The cowards way out is inflation nd they will take it.

I wonder if germany will be able to control the anger in its population and desire to leave das Euro if they do get shafted.

No you don't understand - Inflation is clear evidence of Deflation

So if you think about it the people who kept saying we were going to get deflation were right all along

:blink:

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No you don't understand - Inflation is clear evidence of Deflation

So if you think about it the people who kept saying we were going to get deflation were right all along

:blink:

you are missing the point.

We are having deflation..that is nature taking its course...its trying to fix the problem by rebalancing the situation, which is...too much credit..

if the pool of credit is being reduced, and the plug is pulled, pouring more money into the pool doesnt cure the problem. Wealth is still not being created, and when it is, it costs a lot more to create it. Things get even more expensive, and wealth creation is stifled.

In the end, with sufficient printing to hide the deflation, the currency collapses....as it would have anyway if deflation had been allowed to take its course, except...deflation has a bottom where the market recovers...Inflation has no end....so all is destroyed.

Edited by Bloo Loo

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you are missing the point.

We are having deflation..that is nature taking its course...its trying to fix the problem by rebalancing the situation, which is...too much credit..

if the pool of credit is being reduced, and the plug is pulled, pouring more money into the pool doesnt cure the problem. Wealth is still not being created, and when it is, it costs a lot more to create it. Things get even more expensive, and wealth creation is stifled.

In the end, with sufficient printing to hide the deflation, the currency collapses....as it would have anyway if deflation had been allowed to take its course, except...deflation has a bottom where the market recovers...Inflation has no end....so all is destroyed.

Actually I understood the point all along

The deflationistas here were predicting deflation - Japan was mentioned on many occasions.

The Inflationistas were predicting that this would never be allowed to happen

It seems to me that by your defenition, Zimbabwe and Weimar Germany were both destroyed by rampant deflation.

:blink:

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  • 284 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% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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