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Thread: Euro collapse would be windfall for Germans

  1. #1 Euro collapse would be windfall for Germans 
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    The possibility of the Euro collapsing could result in a massive windfall for ordinary Germans. A 2 fold increase in Germany's currency value has been predicted if the Euro collapes and Germany are force to revert to the deutsche mark. This level would not be sustainable as it would destroy Germany's export industry. Because Germany depends so heavily on foreign exports one plan being put forward is quantitative easing (printing extra money) to bring down the countries currency value should the Euro fail.

    The level of quantitative easing that would be required to sustain Germany's current export prices could see enough extra money printed to give every adult the equivalent of $200,000.


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    Dear Chrisgorlitz, European Economies, while not cemented in place, have trade obligations with the Euro with Member Countries. If the Euro Economy breaks down all Member Economies would participate in a scramble of Trade Difficulties not experienced previously, so it would be unknown territory. As to a Member Country adjusting valuations of their fall back currencies would be subject to their International Reserves and Investments. I think their is too much at stake to let the Euro callapse, the reajustment cost would be prohibitive and probably send some Nations to the wall. This would be dangerous for World Financual Institutions, so much so that a world wide recession could eventuate. So lets hope the Euro stands up. westwind.


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    One of the real difficulties with the eurozone is the currency value. In germany for example the euro has been a godsend for keeping their export prices down. This is because normally when a countries economy is strong the price of it's currency against other currencies will go up meaning it will take more foreign currency to buy something priced in the strong economy countries currency. Germany has one of the strongest economies in the world, it is one of the top 3 exporting countries in the world and yet it's export prices have been kept low because of the weakness of the other european economies also using the euro as their currency.

    The adverse is also true, when a country's economy has problems usually that countries currency goes down in value meaning that the cost of their exports becomes cheaper and helps businesses in that country. Whilst germany is benefitting from having the cost of their exports kept low other european economies are finding the cost of their exports kept artifically high because their currency is not being devalued despite their economic problems.

    What this does mean is some countries with that economies are struggeling getting to more and more debt, they are having to borrow more to prop up their economies and finding the cost of their borrowing repayments rising constantly, this has led to the other EU countries and the IMF having to bail out Ireland, Portugal and Greece twice already.

    The thing is though there is no real way for the struggeling countries to pay back their borrowing because they can't devalue and get their economies back on track, this is because they are locked into using the euro as their currency.

    Eventually, and many think this is only a matter of time because large ecomonies like spain and italy are in trouble, the EU and IMF will just run out of money to keep bailing countries out. It would just not be affordable to bail out Italy and spain.

    So with many predicting that the euro will fail what will be the fall out?
    One can only speculate, but one things for sure it won't be pretty.
    Also we are to see serious devalution in the currency values for europes southern european economies whilst the many nothern european countries will suddenly find their currency values shooting up, purely based on the strength of their respective economies.

    Most people agree that on the whole this will be a very bad thing, but as yet there is no real idea on how to prevent it. Up until now the only steps taken have been containment,
    and have just delayed the inevitable, by giving countries money in the form of a bail out.
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    Quote Originally Posted by Chrisgorlitz View Post
    The possibility of the Euro collapsing could result in a massive windfall for ordinary Germans. A 2 fold increase in Germany's currency value has been predicted if the Euro collapes and Germany are force to revert to the deutsche mark. This level would not be sustainable as it would destroy Germany's export industry. Because Germany depends so heavily on foreign exports one plan being put forward is quantitative easing (printing extra money) to bring down the countries currency value should the Euro fail.

    The level of quantitative easing that would be required to sustain Germany's current export prices could see enough extra money printed to give every adult the equivalent of $200,000.
    If they revert, and their currency doubles in value, it will not hurt their production because their costs to build and produce these products would decline as well. Production would continue.

    Example:
    Manufacturing Cost Automobile (roughly)
    take a 100K (USD) Mercedes.
    50% (50k) Materials ---------> WOULD BECOME 25% (25k)
    6.5% (6.5k) Labor ---------> WOULD BECOME 13% (13k)
    7% (7k) Overhead / retirement / Health -----------> WOULD HOLD 7% (7k)
    23.5% (23.5k) Distribution / Marketing (23.5K) -----------> WOULD BECOME 12% (12k)
    7% (7k) R & D / engineering -------------> WOULD BECOME 14% (14k)

    That 100K (USD) Mercedes would still be 100K (USD)


    Devaluing ones currency is only done to cheat the people governments have borrowed from and/or to get more out of people for less.
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    Quote Originally Posted by gonzales56 View Post
    Quote Originally Posted by Chrisgorlitz View Post
    The possibility of the Euro collapsing could result in a massive windfall for ordinary Germans. A 2 fold increase in Germany's currency value has been predicted if the Euro collapes and Germany are force to revert to the deutsche mark. This level would not be sustainable as it would destroy Germany's export industry. Because Germany depends so heavily on foreign exports one plan being put forward is quantitative easing (printing extra money) to bring down the countries currency value should the Euro fail.

    The level of quantitative easing that would be required to sustain Germany's current export prices could see enough extra money printed to give every adult the equivalent of $200,000.
    If they revert, and their currency doubles in value, it will not hurt their production because their costs to build and produce these products would decline as well. Production would continue.

    Example:
    Manufacturing Cost Automobile (roughly)
    take a 100K (USD) Mercedes.
    50% (50k) Materials ---------> WOULD BECOME 25% (25k)
    6.5% (6.5k) Labor ---------> WOULD BECOME 13% (13k)
    7% (7k) Overhead / retirement / Health -----------> WOULD HOLD 7% (7k)
    23.5% (23.5k) Distribution / Marketing (23.5K) -----------> WOULD BECOME 12% (12k)
    7% (7k) R & D / engineering -------------> WOULD BECOME 14% (14k)

    That 100K (USD) Mercedes would still be 100K (USD)



    Devaluing ones currency is only done to cheat the people governments have borrowed from and/or to get more out of people for less.
    The thing is though what you are suggesting wouldn't really make much difference to them having a huge currency reserve of several 'Trillion'. This is because what you are suggesting is that export prices would stay the same but an equal amount of currency produced to replace the Euro. As I stated earlier this would have the effect of the new currency, probarbly the deutsche mark, of pushing the value up to about double what the Euro was. In whatever senario that happens after the Euro collapses germany's new currency would no longer be wayed down by other weaker economies sharing it.

    This means that Germany's total currency value 'will' be twice what it is currently, which would then give them a huge cash reserve equal to several trillion dollars.
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    It is comforting to see that amateur economists are just as inept as professional economists. It brings a warm glow to ones heart.
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    Also it is most likely that there would be a big scramble to buy german currency as it would be backed by one of the world's strongest economies and huge currency reservses. This would see the value of the german currency being pushed even higher giving them the opportunity to amass even larger currency reserves.
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    Quote Originally Posted by Chrisgorlitz View Post
    Quote Originally Posted by gonzales56 View Post
    Quote Originally Posted by Chrisgorlitz View Post
    The possibility of the Euro collapsing could result in a massive windfall for ordinary Germans. A 2 fold increase in Germany's currency value has been predicted if the Euro collapes and Germany are force to revert to the deutsche mark. This level would not be sustainable as it would destroy Germany's export industry. Because Germany depends so heavily on foreign exports one plan being put forward is quantitative easing (printing extra money) to bring down the countries currency value should the Euro fail.

    The level of quantitative easing that would be required to sustain Germany's current export prices could see enough extra money printed to give every adult the equivalent of $200,000.
    If they revert, and their currency doubles in value, it will not hurt their production because their costs to build and produce these products would decline as well. Production would continue.

    Example:
    Manufacturing Cost Automobile (roughly)
    take a 100K (USD) Mercedes.
    50% (50k) Materials ---------> WOULD BECOME 25% (25k)
    6.5% (6.5k) Labor ---------> WOULD BECOME 13% (13k)
    7% (7k) Overhead / retirement / Health -----------> WOULD HOLD 7% (7k)
    23.5% (23.5k) Distribution / Marketing (23.5K) -----------> WOULD BECOME 12% (12k)
    7% (7k) R & D / engineering -------------> WOULD BECOME 14% (14k)

    That 100K (USD) Mercedes would still be 100K (USD)



    Devaluing ones currency is only done to cheat the people governments have borrowed from and/or to get more out of people for less.
    The thing is though what you are suggesting wouldn't really make much difference to them having a huge currency reserve of several 'Trillion'. This is because what you are suggesting is that export prices would stay the same but an equal amount of currency produced to replace the Euro. As I stated earlier this would have the effect of the new currency, probarbly the deutsche mark, of pushing the value up to about double what the Euro was. In whatever senario that happens after the Euro collapses germany's new currency would no longer be wayed down by other weaker economies sharing it.

    This means that Germany's total currency value 'will' be twice what it is currently, which would then give them a huge cash reserve equal to several trillion dollars.
    Germans do not pay German wages to american or asain shippers, dealers, etc... It does not matter if the mark goes up 2 fold, the cost of materials and foreign labor declines, in marks, 2 fold as well. The only value/cost additions are that of german labor and german labor only.

    Industries that are highly labor intensive, which germany really does not count on their people to do for the bulk of their exports, will be hurt but, nothing else will.

    China has a very different economy. They have a very labor intensive economy and so they would be adversely effected by rising value in the yuan but, not Germany (at least not at those levels).

    Each nation is a bit different, right? A race to the bottom works for some and a push to the top for others will work as well.

    Italy can go back to making everything by hand for much cheaper so they can compete with labor intensive china, Spain can go back to farming, goats and bulls, and Germany can go back to being very powerful and bored while hatching new pinky and the brain schemes to dominate.
    Last edited by gonzales56; May 15th, 2012 at 07:50 AM.
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    Quote Originally Posted by Chrisgorlitz View Post
    Also it is most likely that there would be a big scramble to buy german currency as it would be backed by one of the world's strongest economies and huge currency reservses. This would see the value of the german currency being pushed even higher giving them the opportunity to amass even larger currency reserves.
    Can you even buy German currency now?

    Or could you buy a German etf (exchange traded fund) for German stocks?

    Would that work?
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    Dear gonzsales56, If Germany's economy would benefit greatly going off the Euro currency, why would they want to contribute to "" Bail Out "" options? Surely it would be in Germanys interests to see other Euro Economys fail? westwind.
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    Quote Originally Posted by dedo View Post
    Quote Originally Posted by Chrisgorlitz View Post
    Also it is most likely that there would be a big scramble to buy german currency as it would be backed by one of the world's strongest economies and huge currency reservses. This would see the value of the german currency being pushed even higher giving them the opportunity to amass even larger currency reserves.
    Can you even buy German currency now?

    Or could you buy a German etf (exchange traded fund) for German stocks?

    Would that work?

    No you can't buy 'German' currency at the moment, this because Germany uses the Euro along with 16 other countries. The Euro is a European currency and the state of each of the economies of each of the 17 countries using it effects it's tradeable value.

    Since Germany has by far the strongest of all the european economies, using the euro, it is benefitting by having a currency with an artifically lower value than if Germany were to be using a currency on it's own.

    Should the euro break up and the countries using it be forced into each using a different currency we would instantly see the value, and demand for, Germany's currency shoot up.
    We would also see the reverse happen if one of the weaker economy Euro using countries were force back into using a currency by itself, that currency value would drop fast and there would be a distinct lack of demand for that currency which would only help to push it's value lower.

    The current value of the euro is acheived by a average of the combined strength of all the eurozone economies.
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    Quote Originally Posted by westwind View Post
    Dear gonzsales56, If Germany's economy would benefit greatly going off the Euro currency, why would they want to contribute to "" Bail Out "" options? Surely it would be in Germanys interests to see other Euro Economys fail? westwind.
    Westwind is most indeed correct, it has been in Germany's economic interest from the very formation of the euro that other less strong economies also share this currency. Whilst the euro was billed as a political project to draw european countries together there have also been big winners and losers. The winners have seen their currency value kept low, which has been a huge boost to their economy and the losers have seen their currency value kept high which has really hurt their jobs and exports and in some cases totally ruined their economies.

    The only real way to redress this situation is for the eurozone countries to abandon the euro and each to use a currency that is allowed to find it's own natuaral value. Only then will the countries with ruined economies start to recover and only then will other countries with strong economies start to stop making a fortune at their expense.
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    Quote Originally Posted by westwind View Post
    Dear gonzsales56, If Germany's economy would benefit greatly going off the Euro currency, why would they want to contribute to "" Bail Out "" options? Surely it would be in Germanys interests to see other Euro Economys fail? westwind.
    It depends on who is going to help these failed nations out, to what extend/end goals, and how they are going to go about doing it. The political side is just as important, and in many cases more important for those who are the haves vs. those who are the have nots.

    Germany seems to be in control politically right now and they seem to be on the verge of having the leaders of these nations hand over even more of their peoples/nations sovereignty to them.

    The Greek people are playing, and have been playing, a very dangerous game of chicken, and unfortunately for them, one way or another, the Greek people are going to get ran over.
    Last edited by gonzales56; May 18th, 2012 at 07:03 AM.
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    Latest bond yeilds Germany = 1.36 (yearly % payments for 10 year government bonds)

    Spain = 6.45

    Greece = 29.39 (all figures correct at time of writing)


    And people really think this can continue?


    http://www.tradingeconomics.com/bonds-list-by-country
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    Greece is in debt 1/2 trillion euros to the imf, and eurozone central banks
    it is in the best interest of all members of the eurozone to keep the eurozone whole
    Greece, however, would be more likely to recover faster and with less pain if they default
    bankruptcy has a negative emotional stigma, but ofttimes is the wisest choice
    ...
    (wild guess) if Greece exits the euro, portugal, italy, and spain may follow
    -------
    which likely means the dollar will rise, and imports get cheaper, and the dollar's position as a default global currency will remain, stronger than ever
    it hasn't only been that gold and oil were going up in price, it is also that the dollar has been in a decline for over a decade

    how it effects us
    depends on what you want
    if you want cheaper imports, you win
    if you want more export volume, you lose
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    I am with you on that one scluptor, I think Greece has had it and the rest will follow like dominos.

    Without major intervention from the ECB it's pretty much a forgone conclusion of a Greek Euro exit.
    I would also expect Portugal to follow soon after, 12% bond payments are unsustainable by any strech of the imagination, over 7% is the generally accepted level at which it seems unlikely a country will be able to honour it's debts.

    Nobody really knows what the fallout is gonna be but UK companies and the government have already started making preparations.
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    Quote Originally Posted by Chrisgorlitz View Post
    The possibility of the Euro collapsing could result in a massive windfall for ordinary Germans. A 2 fold increase in Germany's currency value has been predicted if the Euro collapes and Germany are force to revert to the deutsche mark. This level would not be sustainable as it would destroy Germany's export industry. Because Germany depends so heavily on foreign exports one plan being put forward is quantitative easing (printing extra money) to bring down the countries currency value should the Euro fail.

    The level of quantitative easing that would be required to sustain Germany's current export prices could see enough extra money printed to give every adult the equivalent of $200,000.
    why only germany? what about the other european countries? don't they depend on the foreign exports either? and what about czech, I want to ask about czech, what do you think about its development that grows very rapidly? people are admire so much even idolizing the czech republic that so fantastic which its growth is so fantastic, breaking among the all records for the fastest in economic growth, my german colleague said that he is so wonder, even germany grew not so fast as czech at the same situation. is this because the manager is the best of the best or what else? do you have some opnions to share?
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    Quote Originally Posted by askid5 View Post
    Quote Originally Posted by Chrisgorlitz View Post
    The possibility of the Euro collapsing could result in a massive windfall for ordinary Germans. A 2 fold increase in Germany's currency value has been predicted if the Euro collapes and Germany are force to revert to the deutsche mark. This level would not be sustainable as it would destroy Germany's export industry. Because Germany depends so heavily on foreign exports one plan being put forward is quantitative easing (printing extra money) to bring down the countries currency value should the Euro fail.

    The level of quantitative easing that would be required to sustain Germany's current export prices could see enough extra money printed to give every adult the equivalent of $200,000.
    why only germany? what about the other european countries? don't they depend on the foreign exports either? and what about czech, I want to ask about czech, what do you think about its development that grows very rapidly? people are admire so much even idolizing the czech republic that so fantastic which its growth is so fantastic, breaking among the all records for the fastest in economic growth, my german colleague said that he is so wonder, even germany grew not so fast as czech at the same situation. is this because the manager is the best of the best or what else? do you have some opnions to share?
    Your point about other economies is well taken there are other economies that are in good shape unlike, Greece, Portugal, Spain and Ireland, but I wanted to use a clear example and not a mixed or confusing message. Germany has a huge economy one of the strongest in the world and is virtually propping up the Euro by it's self.

    Right now anyone and everyone in Greece is shipping their money out and trying to get rid of assets, we have also seen this happening in Spain, one of the reason the spanish banks are struggling, but to lesser extent and why?

    Well quite simply 'when', and I now believe it is to late to save the Euro, the Euro collapses and these countries re-introduce individual currencies their value is going to fall though the floor. This will be good for companies based in these countries as their products will seem much cheaper to foreigners.

    The point I was making though about Germany is the reverse is also true their currency will go through the roof and everything in Germany will seem hugely expensive to foreigners, to address this they will need to lower their currency value and I was suggesting one way would be to give every citizen a lot of extra printed money, if you increase the money supply you lower it's value.

    I would also say this right now, anyone in a position to do so should invest in Germany because when the Euro falls everything in Germany will be worth much more than it is now. Again think of what is happening in Spain and Greece and do the opposite in Germany.

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    Germany is the reverse is also true their currency will go through the roof and everything in Germany will seem hugely expensive to foreigners,
    my colleague is a czech people said to me that about the end of december 2011 up to now a hyperinflation occured and moving so rapidly and uncontrollable in czech, also he said to me germany with the lower inflation and a lot better than czech.and he said germany has power of buyer better than czech, why? because czech is in a hyperinflation. but according to the world bank calculations were disclosing that the banks in czech are the most stable and the strongest in EU. shows the leader has managed it with very clever to manage the economic recession particularly in czech.
    do you believe that?
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    finish
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    Quote Originally Posted by askid5 View Post
    Germany is the reverse is also true their currency will go through the roof and everything in Germany will seem hugely expensive to foreigners,
    my colleague is a czech people said to me that about the end of december 2011 up to now a hyperinflation occured and moving so rapidly and uncontrollable in czech, also he said to me germany with the lower inflation and a lot better than czech.and he said germany has power of buyer better than czech, why? because czech is in a hyperinflation. but according to the world bank calculations were disclosing that the banks in czech are the most stable and the strongest in EU. shows the leader has managed it with very clever to manage the economic recession particularly in czech.
    do you believe that?
    It would be unfair of me to comment on the Czech economy without extra research.
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    indeed, you're right, but for temporary I accept that theory, it's all based on research.
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    England keys itself in Europe like none other.

    Financially, the ball rolls from a court of importance Europe has yet to find ground with.

    When Europe falls financially and England does nothing, what a gross misplacement of responsibility.

    Now, another story.......the Roman Catholic Church sees the lack of responsibility of management of a system pent in its own worth.......
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    Quote Originally Posted by perseus View Post
    England keys itself in Europe like none other.

    Financially, the ball rolls from a court of importance Europe has yet to find ground with.

    When Europe falls financially and England does nothing, what a gross misplacement of responsibility.

    Now, another story.......the Roman Catholic Church sees the lack of responsibility of management of a system pent in its own worth.......
    The Euro is going to fall, there is certainly nothing that England or indeed the whole UK can do to change that fact. The UK's own economy is not in the best of health and it can't afford to support the Euro. The UK has to pay into the EU every year and make contributions to the IMF which is supporting Eurozone countries, also the UK has made large loans to Ireland to help support their economy.

    All this despite the fact that the UK is still in recession has a huge deficit and is having to make big cuts to public spending at home.
    For the UK to do more would put the UK at serious risk and would be wasting money on a Euro that won't last out the year.

    It really would be like going and buying shares in a company about to go into bankrupsy.

    The UK needs to prepare for the collapse and and aftermath and then stand ready to help it's European partners in their hour of need. It won't be able to do that if it bankrupts it's self trying to prop up a failing Euro when even the Germans are unwilling to introduce Eurobonds or bail out it's partners.
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    Quote Originally Posted by Chrisgorlitz View Post
    The UK has to pay into the EU every year and make contributions to the IMF which is supporting Eurozone countries, also the UK has made large loans to Ireland to help support their economy.
    It's kind of funny in a way-Uk didn't want the euro...Ireland got sucked into it...now the Uk is helping to bailout Irelands banks...
    Facts don't care if you believe in them or not...
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    Quote Originally Posted by Supervixen View Post
    Quote Originally Posted by Chrisgorlitz View Post
    The UK has to pay into the EU every year and make contributions to the IMF which is supporting Eurozone countries, also the UK has made large loans to Ireland to help support their economy.
    It's kind of funny in a way-Uk didn't want the euro...Ireland got sucked into it...now the Uk is helping to bailout Irelands banks...
    In fairness to Ireland, we being totally altruistic as our borrowing costs are much less than Ireland's. What this means is the UK is borrowing money and repaying it at one rate whilst then lending it to Ireland who are then having to pay back a higher rate, though that said if the tryed borrowing from other sources than the UK they would be repaying even greater interest rates.
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    Quote Originally Posted by Chrisgorlitz View Post
    In fairness to Ireland, we being totally altruistic as our borrowing costs are much less than Ireland's. What this means is the UK is borrowing money and repaying it at one rate whilst then lending it to Ireland who are then having to pay back a higher rate, though that said if the tryed borrowing from other sources than the UK they would be repaying even greater interest rates.
    I wasn't being serious-I just thought it was ironic... And we wouldn't really be in debt if we didn't have to bail the banks out it's a tad unfair...
    Facts don't care if you believe in them or not...
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    Quote Originally Posted by Supervixen View Post
    I wasn't being serious-I just thought it was ironic... And we wouldn't really be in debt if we didn't have to bail the banks out it's a tad unfair...
    I quite agree about the banks, the UK have just pumped in another 100 Billion. We seem to chuck money at our banks with absolutely nothing to show for it.

    I would imagine people in Ireland are not overly impressed with having to accept increasingly draconian cuts whilst there seems to be an unending supply of money for the banks.
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    Quote Originally Posted by Chrisgorlitz View Post
    Quote Originally Posted by Supervixen View Post
    I wasn't being serious-I just thought it was ironic... And we wouldn't really be in debt if we didn't have to bail the banks out it's a tad unfair...
    I quite agree about the banks, the UK have just pumped in another 100 Billion. We seem to chuck money at our banks with absolutely nothing to show for it.

    I would imagine people in Ireland are not overly impressed with having to accept increasingly draconian cuts whilst there seems to be an unending supply of money for the banks.
    uh EVERYONE is SO pissed off about it! Most people think it's incredibly unfair that there wasn't at least a vote. People don't like having to pay for everyone else's mistakes...but our government has been worse like that the past few years-you know "certain" referendems being brought out twice(even though it's illegal)
    Facts don't care if you believe in them or not...
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    So, is the lesson "don't unite countries under one currency" or "tariff free trade is a big waste of time"?

    Tariff free trade is the only reason it even matters for a country to have a low currency value. The sheer idiocy of setting up a system where every business in your country has a vested interest in ruining the local economy in hope of lowering the local currency value, so they can sell to foreign markets should begin to be obvious now. Germany is doing in Europe what any one business might do in the USA. Surrounding itself with poverty so its own production will stand out.

    Whatever country allows its currency to rise, will immediately lose access to its own consumer market and all other consumer markets world wide. If they used protective tariffs, they could keep their local consumer market, but they'd still lose all foreign consumer markets. Prosperity and rising currency value tend to go hand in hand. So aren't we just giving every country in the world an incentive to deliberately try as hard as it can not to prosper? ...... and we're so surprised that would result in a lasting recession?
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    Quote Originally Posted by Supervixen View Post
    Quote Originally Posted by Chrisgorlitz View Post
    Quote Originally Posted by Supervixen View Post
    I wasn't being serious-I just thought it was ironic... And we wouldn't really be in debt if we didn't have to bail the banks out it's a tad unfair...
    I quite agree about the banks, the UK have just pumped in another 100 Billion. We seem to chuck money at our banks with absolutely nothing to show for it.

    I would imagine people in Ireland are not overly impressed with having to accept increasingly draconian cuts whilst there seems to be an unending supply of money for the banks.
    uh EVERYONE is SO pissed off about it! Most people think it's incredibly unfair that there wasn't at least a vote. People don't like having to pay for everyone else's mistakes...but our government has been worse like that the past few years-you know "certain" referendems being brought out twice(even though it's illegal)
    Why are you making the banks out to be the bad guys? They are the ones who funded your irresponsible deficit spending in the first place. If you default on your loans, you will soon find out that nobody is willing to lend you money any more. Then the house of cards comes falling down, as they are finding out in Greece and elsewhere.
    Of course they shouldn't put it up for a referendum. The moronic voters would probably vote to default on the loans.
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    The banks along with governments persuaded people to borrow money they couldn't afford to pay back on the lie that they needed it to buy somewhere to live and that it would be a sound investment for the future. In reality this was just fantasy land and when the house of cards did come crashing down the banks went screaming to governments to get their money back that people couldn't afford to pay back.

    In reality most of the money given out in morgages was never in the banks possesion in the first place and the banks involved expected to get back 3 times the initial lent amount over the life of the loans. These loans then sparked a property price bubble meaning that many young people could never hope to afford to buy a place to live, while all the time landlords were pushing up rents because of the increased demand for renting by young people.

    For years banks have made huge amounts of money by facilitaing morgages without ever really having to do anything. Most of these morgages were then sold on by the banks generating them huge profits.

    For the most part ordinary people did what the governments were telling them to do, also people need somewhere to live and ordinary people had no choice but to take out huge morgages when property prices were so inflated.

    So when you start to look at what has really gone on it seems very unfair to blame the ordinary people of Greece or Ireland for the financial mess their countries find themselves in.
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    Quote Originally Posted by Chrisgorlitz View Post
    The banks along with governments persuaded people to borrow money they couldn't afford to pay back on the lie that they needed it to buy somewhere to live and that it would be a sound investment for the future. In reality this was just fantasy land and when the house of cards did come crashing down the banks went screaming to governments to get their money back that people couldn't afford to pay back.

    In reality most of the money given out in morgages was never in the banks possesion in the first place and the banks involved expected to get back 3 times the initial lent amount over the life of the loans.
    Imagine that. Someone expected to get a return on their investment.

    These loans then sparked a property price bubble meaning that many young people could never hope to afford to buy a place to live, while all the time landlords were pushing up rents because of the increased demand for renting by young people.

    For years banks have made huge amounts of money by facilitaing morgages without ever really having to do anything. Most of these morgages were then sold on by the banks generating them huge profits.

    For the most part ordinary people did what the governments were telling them to do, also people need somewhere to live and ordinary people had no choice but to take out huge morgages when property prices were so inflated.

    So when you start to look at what has really gone on it seems very unfair to blame the ordinary people of Greece or Ireland for the financial mess their countries find themselves in.
    In a democracy, the government is the people. Yes, I do blame the ordinary people for the government they elected.
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    I suspect that maybe the last thing the Germans would want is to see the euro currency house of cards come tumbling down. And that likely means that they will bend over backwards making every effort to hold the thing together---as long as they get a promise of repayment of principal, and can estimate reasonable losses.

    Does anyone have insite into the restructuring of coalitions for the new Greek government?

    On another note, if I were the head of Greece, I'd default tomorrow morning, and learn how to live without borrowed money. Screw the international bankers who want to sell debt with cheap money. Borrowed money is easy money and easy money is money poorly and/or frivolously spent. It's like a drug, "Just say no!"
    Anyone remember the following attributed to Alexander Fraser Tytler?
    A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ...
    Don't think majority, think lobbyists and campaign financing.

    and here, is my (wild guess)du jour:
    It was/is $100./bbl oil that caused the house of cards to fall, and presents an ill wind that tumbles down any attempts to rebuild it.
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    Quote Originally Posted by sculptor View Post
    I suspect that maybe the last thing the Germans would want is to see the euro currency house of cards come tumbling down. And that likely means that they will bend over backwards making every effort to hold the thing together---as long as they get a promise of repayment of principal, and can estimate reasonable losses.

    Does anyone have insite into the restructuring of coalitions for the new Greek government?

    On another note, if I were the head of Greece, I'd default tomorrow morning, and learn how to live without borrowed money. Screw the international bankers who want to sell debt with cheap money. Borrowed money is easy money and easy money is money poorly and/or frivolously spent. It's like a drug, "Just say no!"
    Anyone remember the following attributed to Alexander Fraser Tytler?
    A democracy cannot exist as a permanent form of government. It can only exist until the majority discovers it can vote itself largess out of the public treasury. After that, the majority always votes for the candidate promising the most benefits with the result the democracy collapses because of the loose fiscal policy ...
    Don't think majority, think lobbyists and campaign financing.

    and here, is my (wild guess)du jour:
    It was/is $100./bbl oil that caused the house of cards to fall, and presents an ill wind that tumbles down any attempts to rebuild it.

    Thing that is really irritating is the realisation that most of the banks that actually 'lent' out money for these morgages never had the money in the first place. The banks were just acting like parasites leaching off people. You can't even say they performed the fuction of filtering out who and should and who shouldn't be lent money on their ability to repay it, an excuse governments use for giving banks money instead of the people, no in there greed they 'lent' money to almost anybody and in many cases actually convincing these people they needed the money.

    But that was not the real con, the real con was the fractional reserve banking system that allowed the banks to 'lend' money they never had. In effect the money 'lent' out was created out of thin air, the banks never had it. It was basically a series of numbers sent from one bank to another. Once a bank had agreed a morgage this was then logged on the banks balance sheet as an asset as would make money and in many cases actually sold on for the 3 times the principle sum that they expected to make.

    In reality ordinary people would have been far better off being to 'create' the money like the banks and then only have to repay the principle sum, not 3 times the principle!

    What service did the banks actuallly provide? Well it seems the banks have a monopoly on being able to create money. That's the only thing they actually do for a morgage holder, and the morgage holder ends up paying through the nose for the privilege.

    Banks could be replaced with co-operatives of people working together, in this way they could agree not to rip each other off. People would only then end up repaying the cost of inflation on top of the principle not an entire bank staffs wages and there shareholders profits.
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    As for Germany I think the current policy is to try to maintain the status quo as long as possible while not having to shell out any money. They seem to think that others might act to put some money up for keeping Greece in the Euro, but they know it would only be a temporary fix. Behind the behind the scenes I think they've accepted that Greece is going but are hoping that they can still keep the rest together in smaller Eurozone.

    The realities of the situation though make for grim reading, as there are still several Eurozone economies with debt problems and no real way of repaying the debts whilst their economies are still trapped in the Euro.
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    Ultimately the reason the banks over-lend goes right back to globalization.

    The easiest way to keep your home currency low is to lend out your holdings in foreign currency to whoever will take it at whatever interest rate you can get. That way you're never actually exchanging it, and so it never has any actual effect on the exchange rate.

    It's what China does with US dollars in order to avoid having its trade surplus revalue the Chinese Yuan. (Please tell me if that's hard to follow. I'll attempt to describe it more completely/carefully.)
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    Quote Originally Posted by kojax View Post
    Ultimately the reason the banks over-lend goes right back to globalization.

    Well that played it's part, especially if your talking about American banks. But it's not the whole story, there were major mistakes made by the US government and to a degree they were 'mugged' by the chinese who had seen had already witnessed the effects that resulted from cheap credit given to South east asia a decade earlier.

    The easiest way to keep your home currency low is to lend out your holdings in foreign currency to whoever will take it at whatever interest rate you can get. That way you're never actually exchanging it, and so it never has any actual effect on the exchange rate.

    Generally speaking economies that have larger foreign currency reserves are stronger and so is their currency, so I suppose by reducing your reserves it is one way to weaken your currency, but I'd hardly think the best way as you'd be hurting the health of your own economy in the process.

    It's what China does with US dollars in order to avoid having its trade surplus revalue the Chinese Yuan. (Please tell me if that's hard to follow. I'll attempt to describe it more completely/carefully.)
    At the moment and indeed for quite some time the US have been unhappy with the Yuan's value because they feel it unfairly disadvantages their trade balance. In this respect though they have failed to really capitalise on the situation their in. They have an opportunity to aquire chinese currency and assets at below market value soley because the chinese are keeping them undervalued. In doing so they can actually 'create' more US currency that can devalue it in the process making it easier for them to compete on trade.
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    (wild guess) du jour
    One day soon, the federal reserve will start printing $dollars like they're going out of style. We will have massive inflation(inflation is actually deflation of the value of the currency) and then we can pay our debts off with devalued currency. They did this to end the stagflation of the 70s and screw the japanese who were our main creditors in the early 80s, then Paul Volker raised interest rates to tame the inflation that the fed had created, culminating with greenspan raising one more time which caused the market crash of 1987. The Federal reserve is a pirate organization that does not work for you nor me.
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    Quote Originally Posted by sculptor View Post
    (wild guess) du jour
    One day soon, the federal reserve will start printing $dollars like they're going out of style. We will have massive inflation(inflation is actually deflation of the value of the currency) and then we can pay our debts off with devalued currency. They did this to end the stagflation of the 70s and screw the japanese who were our main creditors in the early 80s, then Paul Volker raised interest rates to tame the inflation that the fed had created, culminating with greenspan raising one more time which caused the market crash of 1987. The Federal reserve is a pirate organization that does not work for you nor me.
    Be very interesting to see if they do go that route again and china ends up getting shafted.
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    Quote Originally Posted by Chrisgorlitz View Post

    Generally speaking economies that have larger foreign currency reserves are stronger and so is their currency, so I suppose by reducing your reserves it is one way to weaken your currency, but I'd hardly think the best way as you'd be hurting the health of your own economy in the process.
    You can use your foreign currency holdings as collateral to get a loan and/or borrow money in your own currency. Thereby converting the currency through the back door. But still not affecting its exchange value.

    Stuff like that is how we get these huge bubbles like the real estate bubble, or the gold bubble. People mistakenly think that the current value of an asset is going to be stable enough to lend money against...... and are sadly disappointed.

    It's what China does with US dollars in order to avoid having its trade surplus revalue the Chinese Yuan. (Please tell me if that's hard to follow. I'll attempt to describe it more completely/carefully.)
    At the moment and indeed for quite some time the US have been unhappy with the Yuan's value because they feel it unfairly disadvantages their trade balance. In this respect though they have failed to really capitalise on the situation their in. They have an opportunity to aquire chinese currency and assets at below market value soley because the chinese are keeping them undervalued. In doing so they can actually 'create' more US currency that can devalue it in the process making it easier for them to compete on trade.
    That would be a tremendous vulnerability, except China is still a command economy. The government simply won't allow the sale of any of its country's assets. From the perspective of a free market economy, that means they just plain aren't playing fair. But of course they're not trying to win the game of "free market economics". They're trying to win the game of "economics" in general by using command economic strategies against players who showed up expecting to play a game of "free market economics".

    It's like going into a boxing match, and then winning by kicking the other player in the groin. He looks at you all surprised, and you just say: "Dude, who said this was going to be a boxing match? I thought this was just an ordinary fight." Turns out it was. So why are all the other countries wearing boxing gloves then?
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    I think though, as a non American, I have got to say hat's off to China for the way in which it is going about things. From an American perspective I would definately agree that it looks like China arn't trying to have a fair fight, but let us be honest here in a fair fight China would lose every time. What would have happened already if it were a fair fight, you would have seen large American corporations moving in on mass and buying up Chinese assets. This would quickly followed up with a massive push towards comsumerism with American companies advertising campaigns dominating most of China's markets. This in turn would probarbly be followed by European companies trying to get in on the act and a share of the huge new trade market. The ensuing free for all would probarbly destabilise the Chinese government by wrestling away all it's power, so big foreign companies can do what they want and exploit the country in any way they'd have seen fit. We see this all the time other countries especially in places like Africa.

    So on balance you have to think from a Chinese perspective they are doing a good job. They are slowly opening their markets but at their pace under their control. They investing abroad, buying up natural resources and have turned their economy into a world power house that everyone now expects will overtake that of even America.

    You have to think that other countries looking at China's example must be thinking playing fair is a mugs game.
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    [QUOTE=Chrisgorlitz;333239]you would have seen large American corporations moving in on mass and buying up Chinese assets. This would quickly followed up with a massive push towards comsumerism with American companies advertising campaigns dominating most of China's markets. This in turn would probarbly be followed by European companies trying to get in on the act and a share of the huge new trade market. The ensuing free for all would probarbly destabilise the Chinese government by wrestling away all it's power, so big foreign companies can do what they want and exploit the country in any way they'd have seen fit. ...
    ... Chinese ... buying up natural resources and have turned their economy into a world power house that everyone now expects will overtake that of even America.QUOTE]

    Change the tense of the top quoted para. and you've basically got a history lesson from a century ago. (i hope they're good at forgiveness)
    I have often read the phrase "China is ungovernable". Maybe the technology will help?
    My beloved spouse runs a writing center at the university, and has many students from china, both grad. and undergrad, and they almost all spend freely.
    It seems that a lot of chinese want to be more like(their image of) us. How nice. I hope that our leaders treat them with as much respect and friendliness as we do here in Iowa.

    Back to watching the eu summit and greece. Which is very entertaining. Better'n a soap or citcom.
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    The Euro continues to fall against the pound, Italy down graded (no nearly at junk status), still the EU does nothing of significance. The Euro is continueing it's slow death with debts mounting in southern european countries and as yet no way of out of the downward debt spiral. The protracted death of the Euro is only serving to prolong a situation that has the potential to pull the whole world back into recession.

    There needs to be a controlled scrapping of the Euro sooner rather than later so that europes indebted countries can start on the long road to getting their economies back in shape, the current situation is only serving to increase the debt levels and the hardships the people of these countries are already suffering.

    The longer this goes on the harder it will be when the inevitable happens, cynics would say the real reason this is being dragged out is to give wealthy influentials the opportunity to move their money to make the most of the coming collapse.
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