Dear Angela, It's Time To Do The Right Thing
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Interesting.
… that means you will need to put aside the interests of your own banks and industries for the time being; they won’t like it, it will cost them dearly.
You must mean do like Iceland.
Top Economists: Iceland Did It Right … And Everyone Else Is Doing It Wrong
Krugman also says:
A funny thing happened on the way to economic Armageddon: Iceland’s very desperation made conventional behavior impossible, freeing the nation to break the rules. Where everyone else bailed out the bankers and made the public pay the price, Iceland let the banks go bust and actually expanded its social safety net. Where everyone else was fixated on trying to placate international investors, Iceland imposed temporary controls on the movement of capital to give itself room to maneuver.
Its too bad that it is the way it is.
Banks, and gov. will not willingly downsize.
Leverage, and the printing press gives too many advantages.
With the leverage numbers that are 50 to 100, then it should be obvious that most of it came from the printing press at the back of the bank vaults. Most of the money lent out did not come from “savings”
Nobody wants to downsize to their actual income.This isn’t about Greece or even Germany.
The basic ideas of modernity and industrialization — the fashions that these ideas represent — have burned themselves out.
Punish Greece, why bother? Greece could be annihilated with nuclear weapons, every Greek survivor put to death, the ground poisoned with salt and plowed under, all these things and more: Europe and the rest of the world would still be flat broke.
The world has taken on massive debts in order to destroy the capital it needs to survive.
This is why imposed austerity doesn’t work, it’s redundant. Greece is becoming Eritrea or Yemen all by itself … by way of its precious automobiles. These monstrous things the Greeks have sacrificed their futures for, including those of their descendents out to twenty generations and more.
The human race may not survive ‘the Great Waste’.
Make no mistake about it: Greece cannot ever repay its debts. Germany cannot possible hope to repay Greece’s debts, not just SFV’s say-so but actions of the Germans themselves.
If repayment of Greek debts could end the European crisis and Germany could repay them repayment would have been done already. If industrialization could repay its own debts it would have done so, there would be no debts.
For Greece to repay debts insists that Germany at some point must also repay: this is also impossible! The US could not hope to repay Germany’s debts. No country can repay finance level debts, both GDP and GDP growth are borrowed, no country can gain a surplus that is something real.
Countries can only borrow at favorable rates of interest relative to other countries and play the spread/hope to refinance at a real discount.
All this borrowing is for lifestyle: fashion, chic, outre, avant garde … hip, flip, coquettish, whorish, demonic, gay! Lexus is nice, Ferrari is nicer. Pass that joint/champagne.
The resources gone are gone forever, those $20 barrels of crude will never return, they circle in the atmosphere waiting to visit Odin’s vengeance upon the fools who dared to waste them for nothing at all … for a handful of greater fools to get rich.
How tragic …
Perhaps Germany is getting everything in place to exit the Euro and Eurozone, but appearing to everyone else that they want Greece to exit first.
If anyone can leave the Eurozone unscathed, the whole system is likely to come crashing down. If Greece leaves, Merkel has to make a fine example of them so that no larger and more significant country gets the idea to get up and leave. A Grexit must be accompanied by the most draconian punishment imaginable for the Greeks, so that no one else dares to try it.
Like bluebird and Marc Faber, I think the Germans – and perhaps some others – will leave first.
Greece leaving makes little sense as the pressure on Spain, Portugal, Italy, Ireland and France will instantly increase.
I wonder why we’re hearing nothing more about Credit Default Swaps. These things were supposed to bring down the entire world…and then Greece semi-defaulted (is that like being a little bit pregnant?) and nothing much happened with CDS payouts. Was it just Y2K all over again–more smoke than fire? Or is this just a big accident waiting to happen in a world where there are just so many accidents waiting to happen and we can’t even keep track of them all anymore.
Or maybe the CDS are still very much at the forefront of Merkel and Company’s thoughts, even while CDS discussions are momentarily out of sight from the press, and Germany must walk away from the Euro first to prevent CDS payouts on the weaker eurozone countries. After all, Greece would still be in the Euro and would still be technically a non-defaulting country in a vastly devalued Euro-zone. Might be an argument for ALL the stronger countries to leave–avoiding CDS payouts for Spain, Greece, Portugal and all. No one has the money to pay those Credit Default Swaps out to the tune of 10s of trillions.
Nassim,
Greece leaving makes little sense as the pressure on Spain, Portugal, Italy, Ireland and France will instantly increase.
But the same is true if Germany leaves, of course. That’s perhaps the main problem.
As I wrote a few times last year, they’ve got themselves stuck in nasty bind. The best solution in theory might be a northern and southern euro divide.
But who would be in it? Nobody will volunteer to join Greece, and Italy will protest most. Unless you count France, which will never agree to join the club of the weak southern eurozone.
Still, if Germany wants to leave, Holland, Finland, Austria will insist on joining it. And so will France. But I can’t see France being acceptable to the others, the risks are too substantial that it will become a drag on their own finances. By the same token, France doesn’t want to be the rich uncle in the club of the weak.
I think the picture I paint in the article above, of the richer countries accommodating, paying, for Greece, Portugal, Spain, to leave, is the least worse path. But I don’t think the odds are high that Angela will listen to me. She will probably try to stretch it all until there’s nothing left to stretch. That means waiting for at least the October meeting.
However, both the stock markets and the bond markets (Spain, Italy) could make that wager turn into a very costly one. She should really try to take control and move before those markets can. But it doesn’t look like she feels she has that sort of control. It’s more likely that she’ll try to find a way to make Draghi’s ctazy plans palatable to her people. Hey, I could be wrong about her ….
Skip,
I wonder why we’re hearing nothing more about Credit Default Swaps. These things were supposed to bring down the entire world…and then Greece semi-defaulted (is that like being a little bit pregnant?) and nothing much happened with CDS payouts.
It was declared to be a NON-credit event.
Or maybe the CDS are still very much at the forefront of Merkel and Company’s thoughts,
That’s a safe bet.
… and Germany must walk away from the Euro first to prevent CDS payouts on the weaker eurozone countries.
I can’t see how that would work. If that were Germany’s biggest worry, they had better keep it all together till the bitter end.
It doesn’t appear there are any good ways to exit the Euro for any country, so they will keep kicking the can together until they all implode with one big kaboom.
Illargi,
This is not the first time I read your worries about this deflationary spiral in Spain causing Spain to disintegrate into independent regions, so I would like to share my opinion on this subject: Transparency international ranks Bilbao, the Basque financial capital, as the most transparent city in the country, yes the Basque country is by far, the most competitive, ethical and stable region of Spain. As such, we receive massive transfers of wealth from the rest of Spain, as Germany is now receiving cash flows from the relatively more corrupt mediterranean region. This situation would halt if Germany would opt to exit the EMU as it would halt if the Basque country would force independence from the rest of the peninsula. As Basques, we love to claim for independence but there is no one here with a bit of brain who would force a change in the status quo, as bad as the economic depression gets.
Hey Pablo,
As I wrote a while back, it’s when the wealth transfers halt, i.e. when the Basque country and Catalunya no longer receive the financial advantages of staying within the greater whole, that I see them begin to seriously consider leaving. I also think it’s very likely that Rajoy, Madrid in general, will try to take away some of the regions’ powers – and money-, and I don’t see that being received very well in the regions.
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