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Peter1469
03-25-2012, 07:59 AM
About a year ago I gave the Eurozone no more than 2 years to go before it collapsed.


I thought that a Greek default would break the camel's back. It did not. Greece defaulted and the markets barely noticed. But Greek only defaulted on private bond holders and not on central banks and governments. That is an interesting lesson for the US and our debt problem- I have said before that the US should default on the treasury bonds held by the Federal Reserve- I doubt that the rating agencies would even consider that a default, and it would erase a lot of our debt.


Back to the Eurozone: Greece is going to default again. The last deal traded (E)100B of bad debt for (E) 130B of new debt! So they added another (E)30B of debt.... In 2011 Greece received bailouts that amounted to over 150% of its GDP and still ended 2011 with a 6.8% loss in GDP. Keynesians explain that!


One should be struck by the size of the $ figures in this discussion. It is peanuts. That is perhaps another reason why the markets shrugged off Greek default. But next up are Spain and Italy. Those economies are too large to ignore and their debt problems are as bad as that of Greece. The Spanish government even came out and said that it would not meet the Eurozone required debt control spending for 2012. Not even try. Spain has very high unemployment and lots of public and private debt. The markets will not be silent when Spain defaults.


I still think that the Eurozone will collapse. Perhaps even sooner than my previous 2 year prediction. Germany has already started minting its own Deutsche Marks. So it is ready to jump.


It was interesting that German demands for Greek austerity measures were, IMO, designed to force Greece to ask to leave the Eurozone. It didn't work. The Greek government agreed to them. (I doubt that they will bother to enforce them). So this makes it more likely that Germany will bail from the Eurozone (not the EU). The German people are furious that they are paying for what they consider to be reckless debt spending of the PIIGS.


And once again I point you to Iceland- the model for the current economic collapse. They allowed a complete default and currency collapse and within 3 years are recovered and growing.


The rest of us are kicking the can down the road and are either stagnant or are in recession.

Captain Obvious
03-25-2012, 08:14 AM
I thought the European debt crisis was starting to stabilize.

Although my perception of coverage of this crisis is much like the health impact of eggs. One day they're fine, next day they will immediately kill you if you eat one.

Conley
03-25-2012, 10:30 AM
I think the usefulness of Iceland's example fails somewhat when considering the relative size difference between their economy and that of the United States. The repercussions of a partial default would be much larger. Besides, given the government's track record of deciding AIG, Citibank, etc. are "too large to fail" then I can't see them letting T-bonds fail.

Peter1469
03-25-2012, 10:55 AM
I think the usefulness of Iceland's example fails somewhat when considering the relative size difference between their economy and that of the United States. The repercussions of a partial default would be much larger. Besides, given the government's track record of deciding AIG, Citibank, etc. are "too large to fail" then I can't see them letting T-bonds fail.

My thesis would then say that the US economy will not recover because it will not rid itself of its unsustainable business models. We will look at a decade or more of no growth- just waiting for the debt bomb to explode. The crash will come at some point if no action is taken.

Peter1469
03-25-2012, 10:57 AM
I thought the European debt crisis was starting to stabilize.

Although my perception of coverage of this crisis is much like the health impact of eggs. One day they're fine, next day they will immediately kill you if you eat one.

The MSM doesn't understand the European debt crisis. The debt held by the PIIGS is unmanageable.

MMC
03-25-2012, 12:05 PM
Should the emphasis be on if there is an Orderly default? Shouldn't we sit back and watch the EU fail and fall apart?

RollingWave
03-25-2012, 12:05 PM
it's unmanagiable mostly due to the single currency, for the US they could theoretically just print their way out of any mess, if they inflate the dollar so much tomorrow's 1 million is only like today's 1 thousand, then obviously current debt becomes a non-issue, of course the inflation would be quite an issue :grin:

But relative monetary worth is part of the issue on hand when it comes to debt. or the global economy for that matter.

Peter1469
03-25-2012, 12:18 PM
Should the emphasis be on if there is an Orderly default? Shouldn't we sit back and watch the EU fail and fall apart?


I don't want to see the US or the Fed bailing out Europe. We are broke. But our banks are heavily exposed to Euro-debt. So a Euro-collapse will hurt us too. But on the plus side, if we we smart we would take over their markets during the chaos.

Peter1469
03-25-2012, 12:21 PM
it's unmanagiable mostly due to the single currency, for the US they could theoretically just print their way out of any mess, if they inflate the dollar so much tomorrow's 1 million is only like today's 1 thousand, then obviously current debt becomes a non-issue, of course the inflation would be quite an issue :grin:

But relative monetary worth is part of the issue on hand when it comes to debt. or the global economy for that matter.

Yes Eurozone nations have a disadvantage in that they don't have control over their currency. That is why I said 4 years ago that Greece should have left the Eurozone and started printing its own money to pay off their debt with inflated money. It would have been a great place to vacation once it left the Euro.

The US has the advantage of being able to print money. And the advantage of being a world currency. But that does not mean that it can print forever. We don't know where the tipping point is, but I guarantee you that there is one.

MMC
03-25-2012, 01:15 PM
I don't want to see the US or the Fed bailing out Europe. We are broke. But our banks are heavily exposed to Euro-debt. So a Euro-collapse will hurt us too. But on the plus side, if we we smart we would take over their markets during the chaos.

This is what I have thought, and why not put our competition out of buisness permanently. A Euro-Collapse according to all, would hurt that global economy. Yet not all countries are part of that Global Economy. So just how do they keep getting away with this lie? Plus wouldn't this mean that we would gain markets that we did not do so well in with comparison to the Europeans?

Peter1469
03-25-2012, 02:28 PM
If we tried to get those markets, yes.

MMC
03-25-2012, 03:24 PM
Do they consider Russia, Syria, Belarus, N. Korea, Vietnam, Veneuzuela, South Africa, Tanzania, Somalia, all part of that Global Economy?

Peter1469
03-25-2012, 04:50 PM
I would think so.

RollingWave
03-25-2012, 07:57 PM
Do they consider Russia, Syria, Belarus, N. Korea, Vietnam, Veneuzuela, South Africa, Tanzania, Somalia, all part of that Global Economy?
Most of those are fairly insignificant on their own, maybe besides Russia and to a lesser extend Veneuzuela due to their high oil production. Though Vietnam is climbing the ladder pretty fast these days.

But places like Somalia right now essentially have negative market value, you can't have an economy when your not exactly a functional state, and that's a very generous description for Somalia. I'd think the chances of North Korea being a considerable better place 50 years from now is wayyyy higher than Somalia, at least there the concept of a state is fairly firm and the basic infrastructure is actually there. (they're kinda like China before they began to reform.. just a bit crazier)

Conley
03-26-2012, 08:06 AM
Most of those are fairly insignificant on their own, maybe besides Russia

Putin doesn't like you putting the word 'insignificant' so close to Russia. :shocked: