Meanwhile, Across the Pond

Txsteader · #1 02/12/10, 06:14 AM

Is anybody watching what's happening with Greece and the EU?

It looks like it's becoming a tinderbox that's about to ignite. Germany and France fear their own taxpayers' anger if they bail out Greece (this a.m., Merkel said 'no aid') while Greece implodes and the euro dissolves.

How might this affect us?

hintonlady · #2 02/12/10, 07:15 AM

They can just print more money. Seems to be working out pretty well here.

#3 02/12/10, 07:42 AM

It is creating some tension around the world and particularly in Europe. If they let Greece go down in flames I'd say it's a near certainty that Spain and Portugal will follow which will threaten the stability of the entire European Union.

If they do bail Greece out it may be the end of the present governments in Germany and France.

I forsee a lot of money running to the U.S. looking for a safe place to hide.

.....Alan.

NoClue · #4 02/12/10, 08:12 AM

I've been telling people to avoid the Euro for years, and that relatively, the dollar was a far safer bet, even on this forum and everyone has told me I'm nuts.

7thswan · #5 02/12/10, 09:05 AM

If we keep going the way we are, this will be hapening here.

texican · #6 02/12/10, 08:33 PM

PIGS are going to bring down the euro. Portugal, Ireland, Greece, and Spain. Theyr'e all in trouble. But not as much trouble as six or seven of our own States.

**Terri** · #7 02/13/10, 12:24 PM

I am actually kind of confused. I see a LOT on Greece, of course, but I cannot see the forest for the trees.

OK, they are in financial trouble. They have been before and likely will again. How is this time different from the last time? And, why would 2 other countries go down with Greece?

Txsteader · #8 02/13/10, 12:53 PM

Quote:

Originally Posted by Terri

I am actually kind of confused. I see a LOT on Greece, of course, but I cannot see the forest for the trees.

OK, they are in financial trouble. They have been before and likely will again. How is this time different from the last time? And, why would 2 other countries go down with Greece?

The euro...and being part of the EU. I heard that Greece wanted out of the EU, other members said 'no'. So, it boils down to, do the other member countries bail Greece out or let them fail? It's a dicey situation because France and Germany's taxpayers are opposed to bailing them out. Yesterday, Merkel said no bailout....don't know if she's changed that position.

It's sorta like what's happening in California. Do we let them fail or bail them out? Like us, their (EU) economy is hanging by a fragmented thread, on the verge of collapse.

**Terri** · #9 02/13/10, 01:28 PM

How does Greece wanting out of the EU trash their economy? People still have euros. And, if would ruin them to get out of the EU, perhaps they should stay in it?

7.62mmFMJ · #10 02/13/10, 01:29 PM

The EU is a union of supposedly sovereign states. The euro is the currency. But the European Central Bank only manages the currency for the union not for a particular state. Which is one problem with their system.

Let me explain from our side. We have a federal government which has authority over every state in some manner and a Central Bank (Federal Reserve) which has broad authority to manage monetary policy in conjunction with the federal government. The EU has umpteen federal governments and one central bank.

In order to keep the Euro stable each federal government must abide by some rules such as deficit to GDP and debt to GDP. The PIIGS (Portugal, Italy, Ireland, Greece, Spain) have not been minding their budgets. Now they are in jeopardy of not being able to service THEIR debt which puts immense pressure on the shared currency. IN fact a bond sale in Portugal failed! So expect more of that.

The EU can not "bail out" a member country. The ECB can not bail out a member country. So we have an impasse about exactly how to "save" the PIIGS.

Of course, there is a HUGE moral hazard issue. If you save one, you save all, and no member country will ever have to live within their means again = tinderbox.

So we have governments (all socialist) spending way beyond their ability to tax and any external pressure to reduce wages or pensions is met with strikes and violence internally.

Go long popcorn and cable news!

What will it mean here? For a while the USD will BENEFIT from the trashing of the Euro (shiniest turd in the bowl). However, as the dollar rises, exports become difficult for US mfg. as other countries can't afford to buy our goods.

But the debt of These United States is on par with the PIIGS! The deficit and debt ratios are close. However, we have the world reserve currency. But our ability to pay for our debt is coming into serious question and that will cause a devaluation from printing money.

**Terri** · #11 02/13/10, 01:57 PM

So, basically the PIIGS imported to much and produced to little, and the governments borrowed what they did not raise in taxes? And now Greece cannot make their debt payment?

That DOES sound familiar!

Perhaps the bonds failed in Portugal because the citizens were angry that the government had borrowed so much and spent so much.

You are right: it is time to break out the popcorn.

Txsteader · #12 02/13/10, 02:12 PM

Quote:

Originally Posted by 7.62mmFMJ

The EU is a union of supposedly sovereign states. The euro is the currency. But the European Central Bank only manages the currency for the union not for a particular state. Which is one problem with their system.

Let me explain from our side. We have a federal government which has authority over every state in some manner and a Central Bank (Federal Reserve) which has broad authority to manage monetary policy in conjunction with the federal government. The EU has umpteen federal governments and one central bank.

In order to keep the Euro stable each federal government must abide by some rules such as deficit to GDP and debt to GDP. The PIIGS (Portugal, Italy, Ireland, Greece, Spain) have not been minding their budgets. Now they are in jeopardy of not being able to service THEIR debt which puts immense pressure on the shared currency. IN fact a bond sale in Portugal failed! So expect more of that.

The EU can not "bail out" a member country. The ECB can not bail out a member country. So we have an impasse about exactly how to "save" the PIIGS.

Of course, there is a HUGE moral hazard issue. If you save one, you save all, and no member country will ever have to live within their means again = tinderbox.

So we have governments (all socialist) spending way beyond their ability to tax and any external pressure to reduce wages or pensions is met with strikes and violence internally.

Go long popcorn and cable news!

What will it mean here? For a while the USD will BENEFIT from the trashing of the Euro (shiniest turd in the bowl). However, as the dollar rises, exports become difficult for US mfg. as other countries can't afford to buy our goods.

But the debt of These United States is on par with the PIIGS! The deficit and debt ratios are close. However, we have the world reserve currency. But our ability to pay for our debt is coming into serious question and that will cause a devaluation from printing money.

Thank you for explaining much better than I did.

On a sidenote: Speaking of unions, did you see where Craig Becker's nomination failed? Whew! That man's appointment would have been the death knell for small business.

sgl42 · #13 02/13/10, 05:38 PM

iceland was the preview of coming attractions. greece is now the canary in teh coal mine. many gov'ts around the world are bankrupt, many from bailing out the bankers (eg, iceland, ireland, UK, USA). the bankers are working to make sure the average working person pays the tab for the worldwide housing bubble that the bankers benefited from, by forcing gov'ts to invoke austerity measures on the populations. same thing the IMF and world bank have been doing for a long time for much of latin america.

it's coming here the USA too -- trillions for bailing out bankers and guaranteeing GSE debt, and a few crumbs thrown to bail out the auto companies, and a few token efforts to prop up underwater homeowners which despite massive fanfare on the annoucement end up helping a miniscule number of homeowners. note the increasing rhetoric in the US in various states as they come to terms with there own out of control state budgets, and talk of 'sacrafice' of cuts to benefits, etc.

since all the gov'ts have made far more promises than they can ever deliver on, they're looking for the way out. only 3 choices - increase taxes to pay it; default on it; inflate it away. it's a little harder to inflate in the eurozone due to the mechanics of how it's structured vs the USA or UK. but give'em time, i'm sure they'll figure a way. (some things i've read suggest the euro was specifically designed to force greater political union during a crisis, something that wouldn't politically fly without the crisis.)

so greece is simply part of the larger picture of gov'ts trying to skip out on their promises, and bankers trying to make sure they personally don't lose any money for their poor lending decisions. that means they're coming after you, thru cutbacks, taxes, exchange controls, inflation, etc. and lots of propaganda convincing you "no one could see it coming" (false), "we have to bail out the banks to save the economy" (also false).

--sgl