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Euro Meltdown Would Pave The Way For Another Great Depression

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For much of the euro's life, the story has been much more about the generosity of lenders than the desperation of borrowers. Until the 2008 crisis, interest rates on peripheral debt fell lower and lower. In effect, Germany's export success was generating higher surplus savings which had to find a home. With the end of currency risk, these savings went south, forcing interest rates in Italy, Spain and elsewhere downwards. As rates fell, so southern European nations borrowed more.

Unfortunately, the crisis then intervened. Incomes ended up lower than expected and the ability of southern debtors to repay their northern creditors was seriously impaired. The creditors chose to blame those in the south for having borrowed too much. Yet, it was at least as much a story about the creditors having lent too much. Demanding austerity from the south was all very well but it was hardly the fairest way of sharing the burden.

Moreover, it hasn't worked. Many investors now believe that, in the absence of common cause between north and south, the euro will be torn apart. And they're making their own contribution to the process. They sell Italian bonds while buying their German counterparts, figuring that, in a post-euro world, a new Italian currency would fall against a new German currency. And they sell the institutions that own Italian bonds. In the absence of political unity, we end up with financial mayhem.

A good piece highlighting the importance of the German surplus recycling to the problem.

(One imagines HSBC would prefer an outcome that favours banks but that doesn't detract from his analysis of the problem imo)

http://www.independent.co.uk/news/business/comment/stephen-king/stephen-king-euro-meltdown-would-pave-the-way-for-another-great-depression-2371720.html

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I'd happily take a financial kicking to see the banks implode.

How will you feel when the government re-capitalises the banks using your money so they could continue operating?

Thats what happened in Iceland, the banks destroyed the economy, went bust, were nationalised and continue to operate to this day virtually unchanged.

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How will you feel when the government re-capitalises the banks using your money so they could continue operating?

What, again?

Thats what happened in Iceland, the banks destroyed the economy, went bust, were nationalised and continue to operate to this day virtually unchanged.

Apart from not paying all those people back and locking the premier up for being shit, yeah.

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How will you feel when the government re-capitalises the banks using your money so they could continue operating?

Thats what happened in Iceland, the banks destroyed the economy, went bust, were nationalised and continue to operate to this day virtually unchanged.

From what I remember, they banks in Iceland didnt get stuffed with the taxpayers money, not Icelandic taxpayers money at any rate. They simply went through a bankruptcy process until they became solvent again.

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It was always going to be a depression event. The form it would take was the only thing up for debate.

To quote Gozer: "Choose the form of your destroyer"

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Stephen King is the global chief economist at HSBC

So no possibility of a VI in preserving the status quo here then. But sooner or later the bankers will run out of other people's money to plunder.

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German Finance Minister Wolfgang Schaeuble (Merkel's right-hand man) today playing down expectations that a final deal will be thrashed out at an EU summit in Brussels on Sunday.

And the saga continues..

Edited by pl1

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  • 276 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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