Greece: a twofold problem...

 ... and a reset solving it, only!

 

Here is a link to watch a CNBC video with Michael Spence talking about Greece: he sees Greece's problem having two parts:

• sovereign debts
• lacking competitiveness

No surprise after discussing this for many months; he obviously wants to keep the logical rest of his analysis a secret; may be he wants to be invited back for coffee to be interviewed again; he should have added that certainly all the PIGS or GIPS (or into what ever you mix them) and many more of those in total 17 Eurozone countries face the same twofold burden; in fact Germany might be the only country being still competitive - however, the German sovereign debt problem is getting bigger with every cheque and guarantee signed and with every junk paper the ECB prints money against. In addition Germany's competitiveness will be hit hard, abruptly and brutally once its so-called European partners will be sick to the back teeth with austerity, cuts, unemployment, no-future chances, sell-offs and still more people demonstrating 24/7 against what more and more will be named "The rich Krauts' revenge!".

Michael Spence also mentions a possible sabbatical for Greece from the EURO; that wouldn't change a thing; only once the majority felt like taking one or two or more sabbaticals we might as well turn times back, press reset,  to 1979, the year when the very successful EMS was introduced.

I believe this reset is necessary; it is strongly advisable, I hope it will come soon! If it then takes us back to 1979, good! If the reset comes too late it might throw us back further; ante 1958 (Treaties of Rome); hopefully not beyond?

Carpe diem!

the biggest nonsens in monetary history

Last weekend a conference was held in Berlin: "The EURO ante collapse"; it was completely ignored by the German, the European media; "Russia Today" odd enough, was the only programme reporting about it; here are two videos which will tell you why mainstream was switched off. On the conference's website you find more details.

Here is Professor Wilhelm Hankel explaining the problem, again, only covered by "Russia Today":

No coverage avoids disruption; mainstream is under total control, any and everywhere; a modern and more sophisticated form of what needed a Ministry of Public Enlightenment and Propaganda in former times!

Carpe diem!

Oh Lord, won't you buy me ...

a Greek sack for free?

No, this bail-out package for Greece is not meant to heal Greek or any other nations' problems but is round two of the bank-bailout series where following the too-big-to-fail philosophy is the less worse of the bad choices - for the immediate moment and the financial system, the banks.

We all have to admit that the available options from sacking Greece to lending vast sums of third parties' new € debts to Greece seem of little attraction. Alone, whoever installed the EURO is responsible for these catastrophic choices we face today but were all warned off 10 and 12 years ago, already. So much for the competence of the politicians and the influence of the lobbies, then; and today?

Sacking Greece (and others) is the only way out; this path will also be hard, expensive and even disastrous, but at least it will be a decision with a defined reset date while trying to cover up the incompatibility of the EUROzone is not going to work at all; it will destroy the last remains of what once each were pretty strong European economies; the ongoing global fight for the weakest currency and the lowest costs is not going to help either.

"A long and hard disease causes certain death": I am sure this is also an old Chinese saying and very true.

Carpe diem.

and the EURO takes it all!

Telegraph Article: "EURO at $1.50 is 'disaster' for Europe"

Obviously the EURO is currently loosing the fight of the economies in trouble (which one is not?) of trying to import inflation (i.e. reducing debt) and export goods (i.e. economic growth); the easiest way to achieve both is weakening the own currency; by coincidence (?!) all major and not-so-majorcurrencies are on the same trip, some more successful like $ and RMB thanothers.

Not that it would make a big difference but setting the EURO rules did definitely not include a strategy out of a global economic disaster other than an automated destruction.

The result is going to beat 1929.

Carpe diem!

God sends crashes?

Telegraph article: "A sterling crash is a godsend"

Apart from who should send what kind of crashes I doubt that the idea of hoping for a weakening currency makes much sense.

A currency mirrors the state in which an economy is in; the weaker the currency the more fragile the economy becomes and – most important - vice versa. The Sterling is weakening ever since 1949 against the DM for example, now the EURO. What once was DM11.70 had become around DM3.00 when the DM was buried and now is almost par value with the EURO [i.e. DM1.95583].

On the long run, how will the Sterling win the race that all major currencies are competing in which is trying to support exports and breeding inflation, the obvious two only ways out of the absolute and disastrous figures?

Just to see the full picture: Pound versus Euro started off in 1999 at 0.65874 and yesterday was 0.9131; that has made all exports round about 40% more competitive for our export partners, so where is the export boom?

At the same time imports are inflated by 40%, that, under normal circumstances would trigger "imported inflation"; once the deflationary trend is over with such "normal circumstances" might strike back and in the mix with a weak and affluent currency lead to (hyper) inflation.

Of course, all equities and liabilities will be relative, then.

Carpe diem!

GBP versus DM between 1983 and 1997
source: Deutsche Bundesbank

EURO: a sleeper

Odd, the Euro is steadily losing ground against the Dollar. Even excessive printing, huge debts and lower interest rates make the greenback more attractive than the artificial youngster among the leading currencies.

Remember DM times? I remember the days when the DM became stronger and stronger; while Germany made exporting its number one priority the other EC currencies had to be devalued constantly to cope with the pressure in EC-land. That pressure relief valve was closed when EC-land was wiped out for EURO-land.

Where has the pressure gone since? It builds up steadily and is now reflected in hugely spread debts and inflation rates within the EURO zone, countries that have to pay premium interest in order to place bonds to keep afloat and the growing threat that some members will need to be bailed out rather sooner than later by the EURO community, who else? Adding up “some members” might soon represent the majority of all members – raising the pressure to where the EURO might implode. Who knows how big the exposure of tiny Austria in Eastern European countries really is; good old Schilling would not have allowed anything comparable.

The coup where by the artificial currency was put over totally different wonna-be-partners now takes revenge; while bailing out member countries was never part of the currency contract there will be no alternative but protect the EURO and keep DM, FF and Lira from being revitalized – most would love to go for it, however, with unimaginable consequences. On the other hand the bailing out will have an effect like cutting hedges: all plants will be cut down to the one smallest in size - a feeling rather like Socialism.

The pound might have to celebrate a come back, soon.

Carpe diem!