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The Solution To This Euro Piigs Crisis Is

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Or so said a bloke in the radio this morning. He also said that Europe would have to be led innto it kicking and screaming.

Would it work?

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Or so said a bloke in the radio this morning. He also said that Europe would have to be led innto it kicking and screaming.

Would it work?

Adding another layer of debt-interest without actually solving anything... how does that work?

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Adding another layer of debt-interest without actually solving anything... how does that work?

Like all of these fixing debt with more debt solutions, it should work perfectly...

... for a while.

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They'll be holding Europe together with chewing gum and bogies before much longer...

I hear the Chinese have now rushed in to hold it all together, say hello to Mr Wong, he owns your ass...

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They'll be holding Europe together with chewing gum and bogies before much longer...

I hear the Chinese have now rushed in to hold it all together, say hello to Mr Wong, he owns your ass...

I think the Chinese are partly hedging - getting rid of dollar assets to buy euro assets (as it might help a little depending how the chips fall) - and partly doing this to support their own export economy to Europe, thereby staving off the inevitable civil unrest that would follow from waves of factory closures and the inherent threat to the rule of the Communist Party that would bring.

Like you say, tall these actions are chewing gum and bogies and are bound to fail, as whatever is done, the economies of the West are still one big unstable stinking pile of manure and the Chinese economy is built atop it.

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Or so said a bloke in the radio this morning. He also said that Europe would have to be led innto it kicking and screaming.

Would it work?

I don't see how you can have cross Eurozone borrowing, when each country runs its own fiscal policy. I'm sure they would work fine if there was one central EU government, but I can't see much enthusiasm for that... not that it will stop TPTB from trying to force it through, mind.

It seems like a sort of 'double or quits' option. I'd go with 'quits', personally.

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I don't see how you can have cross Eurozone borrowing, when each country runs its own fiscal policy. I'm sure they would work fine if there was one central EU government, but I can't see much enthusiasm for that... not that it will stop TPTB from trying to force it through, mind.

It seems like a sort of 'double or quits' option. I'd go with 'quits', personally.

What we want, and what they'll do I suspect are two completely different things.

I suspect they will try and keep the plates spinning for a little longer, so they'll eventually have to go down this route.

How long will it keep them spinning for though? That's the trillion dollar question.

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I don't see how you can have cross Eurozone borrowing, when each country runs its own fiscal policy. I'm sure they would work fine if there was one central EU government, but I can't see much enthusiasm for that... not that it will stop TPTB from trying to force it through, mind.

It seems like a sort of 'double or quits' option. I'd go with 'quits', personally.

It's exactly that, double or quits....it's the choice that was always going to present itself since monetary union was adopted without fiscal union. I'd say that some kind of Eurobond has to be quite possible, even probable now, given where we are.

But....those that think it would solve the problem (ahem, Munchau) are making an automatic assumption that a eurobond would be issued at an economic rate. I can't see that this is necessarily a given. Let's say the equivalent US Treasury is 3%. The political risk premium for a Eurobond issued in emergency circumstances would be worth a couple of percentage points over the UST at least? And given that a Eurobond alone doesn't solve the core problem of too much debt and member states' inability to rebalance their economies to suit individual needs, the Eurobond would still essentially be an option on very strong economic growth (but with added complicating feature around the ability to manage the region's imbalances effectively within a growth cycle). That's surely worth another percent or two?

Just thoughts, but I think it's a dangerous assumption to think that simply by issuing a Eurobond, the problems disappear overnight and everyone goes back to funding themselves at reasonable rates. Just as likely, IMO, that it makes the strong weaker. And there aren't even many strong ones at the table in the first place.

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I don't see how you can have cross Eurozone borrowing, when each country runs its own fiscal policy. I'm sure they would work fine if there was one central EU government, but I can't see much enthusiasm for that... not that it will stop TPTB from trying to force it through, mind.

It seems like a sort of 'double or quits' option. I'd go with 'quits', personally.

We already have the European Parliament, a paragon of fiscal virtue, prudence and transparency (must.. keep... straight... face....).

But yes, that seems to be it now. Either complete union - same tax regime across Europe, one budget for Europe, etc - or no Euro.

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Eurobonds?

What on earth is in his pipe?

The important thing when lending money, is to know who is on the hook for repaying your money. And who is on the hook for Eurobonds?

Well I dont know the answer to that, so I guess it is me.

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The problem is that one can then borrow and spend as much as one wants whilst everyone else pays for it. Every country has an incentive to borrow more than the next guy to capture this advantage resulting in massive borrowing all round. If anyone objects you just shout "sovereignty". Of course someone has to do the lending too and since everyone wants to borrow, they will immediately demand more. This does not matter to those borrowing since they will not be paying it back.

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What would be the difference between buying a eurobond and a mixture of bonds of the individual countries as could be done at the moment ?

You wouldn't have the choice to avoid the "bad" bonds.

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B)

(it's in the plan - next stage of european development to occur in crisis conditions - they knew all this at the outset when they agreed to a flawed design and the technocrats would have known the solutions to put forward when the time is right. Maybe not 'one European government'...but certainly Euro bonds/joint liability and then fiscal transfers and legally binding budgetary constraints on nationals)

Oh, I'm sure it was the plan all along. I think someone better tell the people though.

rating-cut-puts-greece-in-debt-hall-of-shame-2011-06-02_l.jpg

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What would be the difference between buying a eurobond and a mixture of bonds of the individual countries as could be done at the moment ?

Would you buy any Greek bonds at the moment? ;)

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Would you buy any Greek bonds at the moment? ;)

Well, I'm in the FTSE and there's some dogs there at the moment.

The question stands. The answer is, either there is no difference. Or that the difference is that the Germans are on the hook for everything should anyone else choose not to cough.

If it's the former, I can't see the German public going for it personally.

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I hear the Chinese have now rushed in to hold it all together, say hello to Mr Wong, he owns your ass...

I read that too. But weren't they also supposed to have saved Portugal and Greece at various times over the last two years?

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What would be the difference between buying a eurobond and a mixture of bonds of the individual countries as could be done at the moment ?

No spread. And it's spread that's killing the PIIGS right now. Mind you Germany, Nederlands, France etc would have to pay a bigger coupon on their bonds too, which is effectively how the debt transfer would take place.

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No spread. And it's spread that's killing the PIIGS right now. Mind you Germany, Nederlands, France etc would have to pay a bigger coupon on their bonds too, which is effectively how the debt transfer would take place.

I imagine they would simply cap yields like the FED has threatened to do.

I arrange it such that the eurobond machine has three or four tiers like a CDO, senior, mezzanine and junior. The EZ members issue bonds which are bought up by the eurobond sausage machine, with the naughty piggies paying higher coupons to the ECB than the good aryans. Nevertheless, even the piggy rate is capped. The difference in rates is a bone to throw to the aryan domestic stakeholders, but all the rates would be sustainable.

Now as long as the FED/BoE/BoJ cap their rates too, fixed income investors will have to just suck it up, or alternatively invest in something else.

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Who'll carry the can for Eurobonds if the Eurozone disintegrates ? Alternatively bailout/default is moving up the EU foodchain. At some point it'll dawn on investors that even the Germans can't do all the heavy lifting. Either way I don't see anyone buying Eurobonds or even EZ bonds.

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I imagine they would simply cap yields like the FED has threatened to do.

I arrange it such that the eurobond machine has three or four tiers like a CDO, senior, mezzanine and junior. The EZ members issue bonds which are bought up by the eurobond sausage machine, with the naughty piggies paying higher coupons to the ECB than the good aryans. Nevertheless, even the piggy rate is capped. The difference in rates is a bone to throw to the aryan domestic stakeholders, but all the rates would be sustainable.

Now as long as the FED/BoE/BoJ cap their rates too, fixed income investors will have to just suck it up, or alternatively invest in something else.

Somehow I don't think digging up king canute is going to work.

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you see, FIAT is the monetising of wealth.

with these bonds schemes, they are monetising 30/40% of existing debt too.

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I imagine they would simply cap yields like the FED has threatened to do.

I arrange it such that the eurobond machine has three or four tiers like a CDO, senior, mezzanine and junior. The EZ members issue bonds which are bought up by the eurobond sausage machine, with the naughty piggies paying higher coupons to the ECB than the good aryans. Nevertheless, even the piggy rate is capped. The difference in rates is a bone to throw to the aryan domestic stakeholders, but all the rates would be sustainable.

Now as long as the FED/BoE/BoJ cap their rates too, fixed income investors will have to just suck it up, or alternatively invest in something else.

So, try to wrap the thing up in some fancy abstraction in the hope people won't notice. Of course, this has worked in the past, so why wouldn't it work again ..

Somehow I don't think digging up king canute is going to work.

... but this time, I think, for once, wot he says.

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Eurobonds?

And who is on the hook for Eurobonds?

Well I don't know the answer to that.

I suppose in theory, in the Eurofudge, it's everybody . . . none of whom can agree who specifically is going to take the hit. The Greek bailout plan (or lack of) is a case in point. They all spout about 'an overall concept' and 'a European solution', but when it gets down to any detail they are either poles apart or simply don't have the fuzziest.

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  • 312 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
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