Thursday, November 10, 2011

Crisis explained in plain English

Eurozone crisis: We're all dooomed! Here's why

We all thought that it was going to be Spain that would go this way next but no, Italy it is. Waffling about on the subject of austerity, of working back into competitiveness, this doesn't work because it won't work quickly enough. It would take years to rebalance the economy, years of job losses and riots and protests. So, what can we do? The one thing that would work and would work fast (within a week if it was actually done), the ECB printing money and buying bonds, is illegal under the treaties. I'm afraid we're all stuffed [unless the ECB pulls its finger out].

Posted by drewster @ 05:49 PM (1938 views)
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11 thoughts on “Crisis explained in plain English

  • Won’t it take months to change a EU law?

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  • It’s easier to ask for forgiveness than it is to get permission.

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  • general congreve says:

    This is the size of it, the ECB prints and trashes the value of the Euro (to where it should be), or there is default and the value of the new currency issued to replace the Euro in defaulting countries is worth feck all instead. You don’t get owt for nowt. Unless of course, you’re sitting on a massively under priced hard asset that will go batshit crazy when this thing finally blows.

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  • general congreve says:

    Some great quotes in the article!

    You expect me to default? No bonds, I expect you to die

    Note that this is nothing to do with short sales, speculation, CDS or even bankers being bastards. It’s very simply people saying: “I’m not buying that shit, they’re going to go bust.”

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  • Yes that is a great quote. The takeaway point is that the Euro itself, in bank accounts or cash, will crash in value. Either there is massive money printing, or Germany exits and the Euro devalues sharply. There’s no other option. What assets would perform well under either scenario? Gold (of course), and property in Germany. Tomorrow I shall look at how to get exposure to the German real estate sector; maybe a nice REIT or even shares in builders.

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  • GC – your assertion that there is a ‘massively under valued hard asset’, that will go ‘batshit’ is only true if the world imploded. In any normal environment your ‘ under valued hard asset’ is massively over valued at present. So you are just another example of the parasitic nature of the investor class. I hope you enjoy the visits from your three ghosts :@)

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  • bystander,
    It’s nigh impossible to put a value on gold, just as it’s impossible to put a value on dollars or pounds. Why is £1 worth $1.59 ? Why isn’t it worth $100 or $0.01? Much to the fury of philosophers, the basic answer is circular logic: it’s worth what it’s worth because that’s what it’s worth.

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  • Drewster, would be v interested to see how your investigations went into German property …

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  • The whole world it seems is poorer than it thought. Domestic balance sheets in the west are a disaster, and eastern balance sheets are predicated on the western balance sheets, money printing and gross malinvestment. The us$ viewed in isloation is an overvalued basket case but then so viewed in isolation are the Euro, the Yen, the RMB, the Canadian Dollar the Swiss France etc etc.

    The notion that any hard asset will rise in value relative to the us$ can only apply if there are other currencies that can truly outbid the dollar, as compared to current exchange rates. If this isn’t happening then any rise in hard assets relative to the us$ must be by definition speculative.

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  • general congreve says:

    @6 – My mistake, we are in a completely normal environment. That’s why our great leaders recently casually announced they’d need to rustle up another £75Bn out of the magic hat, you know, just to keep things ‘normal’. As for being a parasite, how? For wanting to maintain and grow my savings? When this whole sorry mess finally brings the economy to its knees and its time to rebuild, those who were wilfully ignorant enough to lose everything will be the parasites, begging for jobs and food, while I’ll be helping rebuild the economy and generate jobs by having wealth that I will spend into the economy in return for goods and services, rather than being another wiped out by the crash, down and out, who is competing with the next man for the few jobs going around. Parasite? Pah! I think Philanthropist is the word you’re looking for! 😉

    @9 – Completely flawed logic. Does a can of coke cost more in the US now than it did in 1970? The answer is yes, because of inflation, it didn’t stay the same price because the dollar is the world’s reserve currency. Just because the Euro and Sterling are trash it doesn’t follow that the Dollar can be abused with impunity. All fiat currencies are sinking against real assets, albeit at differing rates over time. You can make any ‘clever’ argument you wish to disagree with that, but a picture is worth a thousand words:

    Image and video hosting by TinyPic

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  • @10 Nice in-your-face illustration of the abject failure of fiat currencies to be a store of value for any decent time period i.e. not meet one of the requirements to be money.

    The graph says it all; governments and fractional reserve debt corporations are stealing from us via currency devaluation/inflation; this is an on-going wealth transfer from businesses, working people and savers to the elite and their cronies.

    Everyone who is not in the elite and suffering from this currency devaluation should be angry about this; I know I am, even with a sizeable PM holding because my wages buy less and less essentials etc. every year because I don’t get enough pay rises to keep ahead!

    It is quite insulting to call anyone who attempt to combat this theft by buying honest investments like physical precious metals, a parasite; it is those who benefit via devaluation of their debt, financial trickery and other Corporatist Socialism who are the real parasites!

    HPC is not happening much because of the causes of the charted currency devaluation, so maybe we need to aim for a financial system revamp like Positive Money, before we look at more dubious ideas like LVT.

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