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26-11-2011, 11:49 PM
(This post was last modified: 26-11-2011, 11:54 PM by sgd.)
I think in the end, within some measure I think china will help out the europeans.
of course nothing is for free, like the arrangement with the americans. Many countries buy US treasuries and everybody knows the biggest buyers are the PRC and Japanese in return they get development, industries - high tech industries which produce valuable tech transfers and jobs, jobs that rightfully belonging to american workers and in the end after giving up all these crown jewels the americans will still owe people money on the bonds.
It's like lending money to someone, besides getting interest on the loan the borrower has to even cook for you and clean for you and even accomodate you.
I think if PRC can get a similar kind of leverage from the europeans I don't see why they won't buy european bonds.
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27-11-2011, 12:51 PM
(This post was last modified: 27-11-2011, 12:54 PM by corydorus.)
Lending money will only prolong their extravagence. Printing will give a better bite as the entire europreans wll bear the burden of high inflation. They will just find their purchasing power reduced. No property collapse, no absolute value cutback,retrench of civil servant can be controlled on their own pace and no salary or pension cut.
This will hinge on how strong their resolve to continue as a single euro.
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the modus operandi of all lenders are the same, to make borrower so indebted until he owns you a living, has to work for you, do you favors on top of having to payoff the loan.
To really save the european union is very simple. Forgive everybody's debt and start over is all that is required and all these problems will disappear everybody goes home happy.
but does anybody think germany who because of it's neighbors extravagance who now commands the largest influence and economic advantage over everybody else is willing to do that? 
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(28-11-2011, 10:42 AM)sgd Wrote: To really save the european union is very simple. Forgive everybody's debt and start over is all that is required and all these problems will disappear everybody goes home happy.
Those angmo retirees' pensions are invested in sovereign debts. Taking a haircut maybe, write off everything will mean that many of them will have to go back to the workforce to earn a living again.
Banks will go bankrupt. All the savings by the bank customers will take a major haircut.
Since banks are going bankrupt, no credit facilities will be available. Since no credit facilities are available, importers will find it hard to import goods using short term loans.
Since there are less import goods, the price will go up causing inflation.
With no savings, no pensions, probably also no jobs and higher inflation, the citizens decide to overthrow the government causing anarchy.
Since life is so painful, the french revolts decide to launch the nuclear to terminate their misery.
Just joking..haha..
But with so much at stake, I think ultimately, they will resort to printing money to solve the problems.
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(28-11-2011, 12:47 PM)yeokiwi Wrote: Banks will go bankrupt. All the savings by the bank customers will take a major haircut.
Since banks are going bankrupt, no credit facilities will be available. Since no credit facilities are available, importers will find it hard to import goods using short term loans.
Since there are less import goods, the price will go up causing inflation.
With no savings, no pensions, probably also no jobs and higher inflation, the citizens decide to overthrow the government causing anarchy.
Since life is so painful, the french revolts decide to launch the nuclear to terminate their misery.
Just joking..haha..
But with so much at stake, I think ultimately, they will resort to printing money to solve the problems.
The folks at UBS also think that civil war is a possible consequence of a Euro collapse. This is a summary of their report:
The economic cost (part 1)
The cost of a weak country leaving the Euro is significant. Consequences includesovereign default, corporate default, collapse of the banking system and collapse of international trade. There is little prospect of devaluation offering much assistance.We estimate that a weak Euro country leaving the Euro would incur a cost of around EUR9,500 to EUR11,500 per person in the exiting country during the firstyear. That cost would then probably amount to EUR3,000 to EUR4,000 per personper year over subsequent years. That equates to a range of 40% to 50% of GDP inthe first year.
The economic cost (part 2)
Were a stronger country such as Germany to leave the Euro, the consequenceswould include corporate default, recapitalisation of the banking system andcollapse of international trade. If Germany were to leave, we believe the cost to bearound EUR6,000 to EUR8,000 for every German adult and child in the first year,and a range of EUR3,500 to EUR4,500 per person per year thereafter. That is theequivalent of 20% to 25% of GDP in the first year. In comparison, the cost of bailing out Greece, Ireland and Portugal entirely in the wake of the default of thosecountries would be a little over EUR1,000 per person, in a single hit.
The political cost
The economic cost is, in many ways, the least of the concerns investors shouldhave about a break-up. Fragmentation of the Euro would incur political costs.Europe’s “soft power” influence internationally would cease (as the concept of “Europe” as an integrated polity becomes meaningless). It is also worth observingthat almost no modern fiat currency monetary unions have broken up without some form of authoritarian or military government, or civil war
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UBS has alot of vested interests in their exposure to european banking system. I will not put too much weights on such.
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Random thought comes to mind:
Perhaps EU will hv a fiscal union plan given what Merkozy has said today.
IMF comes to rescue, with ECB along?
No need for Eurobonds actually. It's not the actual actions that move the mkts, it's the assumption of some large emergency funds behind that will calm the mkts down.
Looks gd for this coming wk.
Let's see how Europe actual individual economies wld perform in next 1Q 2012.
And not to forget China's as well.
What a show tonight!!
Gd night everyone.
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IMF probably not enough money to rescue even though the Head is a French. Neither will China be a willing sucker.
Be it single EUROPEAN ZONE or Not, Print seems inevitable just in what currency. Maybe Both US and Euro will even print together and throw the bond to each other.
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