What Would a Euro Collapse Mean for the United States?
Economic & Financial Consequences:
In assessing the effects of a potential collapse of the euro, timing is everything. A sudden disintegration of the euro due to financial panic on international markets would almost certainly increase the risk of financial contagion spreading to the United States, especially in light of America’s $12 trillion debt load. In the ensuing turmoil, American banks could stand to face billions or possibly trillions of dollars in losses on their credit exposure to Europe, and thus call into question the solvency of the entire American financial system. At a very minimum, economic and financial chaos in Europe would severely disrupt American exports to Europe, and thus slow the economic recovery in the United States.
On the other hand, in a controlled break-up of the euro (a scenario whereby Germany tires of its role as EU paymaster and makes a policy decision to exit the single currency and reinstate the Deutsche Mark in an orderly, phased-in fashion), the United States could stand to benefit handsomely. Any unraveling of the euro would end that currency’s function as a reserve currency and boost the demand for safe-haven assets in the United States. As a result, a stream of money from Asia and elsewhere would flow into United States Treasury bonds, and thus provide financing for U.S. deficits. Although a stronger dollar would hurt American companies trying to sell abroad, a stronger greenback would also bring benefits to American consumers, in the form of lower oil and commodity prices and lower inflation.
Geopolitical Consequences:
A collapse of the euro would almost certainly spell the end of the EU as we know it. This, in turn, would have broadly positive implications for the United States. The architects of European integration have always dreamed of building a United States of Europe that could act as a counter-balance to America on the global stage. In recent years, European zeal to achieve superpower status has caused endless transatlantic friction on questions ranging from Airbus aircraft to Chiquita bananas to the war in Iraq.
But the euro crisis has already underscored the fundamental weakness of the EU by calling into question the financial viability of its social welfare model, which has long been promoted as a primary element of the EU’s soft power alternative to American hard power.
Unfortunately for Europe, the entire European project is hanging by the thread of a highly symbolic but woefully fragile euro. If the euro comes undone, it would rob the EU of its main source of international influence. A post-euro EU would probably devolve from the economic and political union that it is today to a simple free trade zone. In the process, it would deprive Europe of any hope of becoming a viable pole in a future multipolar world. It would also eliminate a would-be geopolitical rival to the United States.
With so much at stake, Europeans are unlikely to abandon the euro without a fight. Nor will Eurocrats, who understand that having a single currency is their best hope of holding and accumulating more power, allow the current crisis to go to waste. Thus it comes as no big surprise that rather than addressing the fundamental root cause of the EU’s current problems, namely profligate spending, Europe’s elite class is now advocating the transfer of yet more political power to an unelected bureaucracy in Brussels.
European leaders are saying that in order for the euro to survive, Europe urgently needs an “economic government,” one that would transfer all remaining responsibility for economic decision-making from individual EU nation states to Brussels. Under the scheme, EU countries would forfeit complete sovereignty over national tax and spending policies, all in the interests of “improved coordination.”
Romano Prodi, the former president of the European Commission, once told CNN that the euro was “not economic at all; it is a completely political step. The historical significance of the euro is to construct a bipolar economy in the world. The two poles are the dollar and the euro. This is the political meaning of the single European currency. It is a step beyond which there will be others. The euro is just an antipasto.”
It remains to be seen whether the euro will stand or fall. But either way, Europe seems set to lose.
I’m trying to keep my Schadenfreude to a minimum and not get a few t-shirts emblazoned with “I told you so.” Anyone familiar with internal European politics could see that there were vastly divergent opinions on the future of the EU not only between member states, but also between European citizens and their self-appointed elite in Brussels. The Germans want stable and willing recipients of German exports, the French want a United States of Europe, and the southern countries want to live beyond the means their overly regulated economies will allow. The Greek bailout has bought some time, but no one is foolish enough to admit that the problem is solved. In the time that I have lived in Europe, I have been constantly lectured about America’s perceived problems but from almost every corner of the EU, people have told me that America has been replaced by Europe on the world stage. (In fact, I heard just this sentiment a couple of weeks ago.) Unfortunately, the Europeans have fallen for their own propaganda. Their image of themselves in the world revolves around notions of a soft power counterbalance to American hegemony with a late entry into the workforce punctuated with years of holiday time and finished off by an early exit. Personally, I check my wallet before I order dessert; the Europeans should have done the same. Now the bill has come due and there is no one to pay it.
Right on, Jacob. I lived in Europe throughout the 70′s wheree I daily suffered their arrogant disdain for Americans.
I luxuriate in a long due payback to their smug superciliousness.
Can we do New Yorkers and New Englanders next?
What happens to the dollar when the US breaks apart?
Jacob is right. Common sense would have told the arrogant elites that oil and water don’t mix very well and now the European Union is coming apart. The sooner the better. Howard
I agree. If the EU shrinks to a free-trade zone, it will be the best thing for them. It unfortunately was not what the EU elite wanted because it doesn’t provide the counterbalance to American power they feel Europe deserves.
I have never quite figured out how Brussels got to be the center of all this.
Because it is the secret capital
of the secret societies which
actually control Europe ?
Because it is the political analog of a LaGrange Point,
where the powers of the various major players cancel ?
They speak French and form a useful highway to France for invading German armies.
Also chocolate.
Brussells ended up at the center precisely because it was insignificant. The capital could not be either in France or Germany, because it would imply to either a subordination to the other.
Of course, there is historical precedence for that sort of arrangement. It is exactly how the U.S. ended up buidling its capital in a neither north nor south swampy no-man’s-land.
The swamp is still there, in a manner of speaking. I don’t think that Brussells will ever match it for longevity, however.
It was when I lived in France as a young man (over 20 years ago), that I first heard about even the idea of the euro. I didn’t know enough about policy at that age to have any real opinion about the economics of it. However, although I was not French, I could feel it, strangely, as a sort of second-hand culturally affront. When even a foreigner goes to a country, one expects to see the tangible symbols of that country. Money is a potent symbol, and people get attached to it, even in a second-hand way. Every day, the money told me I was in France, and I had a connection to it.
As near as I could tell, the French themselves absolutely hated the idea. I figured that meant it would never happen. Silly me. At that age I had no idea how powerful and detached from public sentiment the Pan-European Elitist Bureaucracy really was.
I’ve been wondering now if this crisis won’t spark a continent-wide assertion of national pride. Getting one’s own pictures back on the currency might become a big movement.
Strange Days.
Don’t forget that the whole purpose of the International Progressives is to destroy the whole concept of national identity, and the “tangible symbols of that country” are thus the first to go.
It is important for everyone to keep in mind that there is a great gulf between Europeans and their rulers. For instance, you say that “French want a United States of Europe”. Is that so? Somehow, I think that the French man in the street wants no such thing.
I agree the average man on the street may not want a U.S. of Europe but just like politicians worldwide those in power always want more power and influence. Makes htem feel more important….to themselves.
I should have been more specific; the French want a United States of France. When I was living there, one of the most frequent questions was “What do you think of Europe?” A German will not ask this question usually, and when he/she does, they ask “What do you think of Germany?” The real question behind the French query is “Do you prefer France or America?” The French idea behind the European Union is that it gives them the ability to punch above their own weight on the world stage. The average man on the street believes the EU should exist to further French interests alone with aspirations for global strength to counter America. This is why they are all in favour of the free movement for French citizens to work in Britain, but they are largely against the right of Polish plumbers to add an element of competition to their own markets. A lot of the design of the EU is made to help the French advance their visions for the world without taking the steps to strengthen their own economy to make it plausible. (Being from England, I’m sure you know all about how the CAP subsidizes French farmers to the detriment of other nations.) The French vote against the constitution in 2005 showed a rift between the French public and the government on this issue; many thought it amounted to an Anglo-Saxon takeover of French politics. They want a US of France, but they only want it when it is French in character. I haven’t been to France in a couple of years, but most of the talks I’ve had with French people in Germany show largely no change of opinion on this issue.
The attitude that you are describing is completely consistent with my own experiences living in France as well. They like “Europe” only to the extent that they can presume leadership over it, and use it as a springboard for world influence. Some French are obsessed with the fact that they can’t match to U.S.
I can illustrate that with a personal anecdote. I was once walking and minding my own business when a college-age French kid crossed the street just so he could stop me in my tracks. Face to face, he glared at me and said, in English, “The French airforce could kick the U.S. airforce’s ASS!” Then he stomped off.
French Air Force vs U.S. Air Force. snicker.
French Air Force versus the mighty midgets pee-wee soccer team. Snicker.
Take some lessons
http://www.dailymotion.com/video/x9hws8_red-flag-09-l-armee-de-l-air-en-ala_tech#from=embed?start=3
I think the story ran in the Saturday Evening Post,
and was a fictional worst-case example of French attitude:
Two aging Aces from WWII were flying combat scenes for a movie,
whilst being harrassed by a French aviator; In the climactic scene,
the Spitfire and the Messerschmitt were on a collision course, when
the Mirage dove down between them at supersonic speed, distracting them
just long enough to prevent the last-second evasive maneuver they had planned.
On the other hand, one has the French attitude displayed by Captain Bezu Fache,
the character played by Jean Reno in ‘The Da Vinci Code’, and, now that I think,
Audrey Tautou’s character Sophie Neveu; How many of the French today have, or
even aspire to,that attitude, that Elan Vital ?
Look like the NATO tigers appreciate our pilots, they awarded them with the “silver tiger” (9 videos on the festivity and contests)
http://www.dailymotion.com/video/x80wm0_5x9-tigres-en-plein-ciel_sport
I also have a lot of similar anecdotes. (Anyone who has lived there does.) Here is the short version of one strange event. I was at a dinner party where a woman started complaining that all modern technology had an English name. I suggested that France invent something and give it a French name and she immediately stood up and started shouting “I don’t give a damn about American world hegemony!” This all took about a minute; if anyone doesn’t give a damn, why does it seem to occupy every waking moment of their time. The French are extremely jealous that they are largely insignificant on the world stage. If/When the Euro fails I am going to go back for a month long “ha ha!” tour.
buffoon
Wow, great line of argumentation from the citizen from a one idea state. Why don’t you do us all a favour and stop coming here to bomb us with incoherent missives from the land that time forgot? I’m sorry if the truth hurts about your precious Pétainistan, but the truth is that the French are a bitter, twisted people that can barely have a 5 minute snack without it devolving into a hate America party.
Somehow, I still really pity you guys. It’s quite sad really.
Try coherency next time.
Jacob,
I’m not going to surrender to such a fair commenter, that shows his spirit largeness toward us, BTW, very teutonic by these times ! Be carreful that it reverses against you though, one never knows ! so a bet, where will you searching a new asile ? by the French of course ! hope you’ll get some stomach ache with your anti-french feelings
Jacob
you’re repeating the media rumors, there’s not a objective fact in what you’re writing, or at least your discourse dated from 10 years ago.
The Polish plumber was a threat to our enterprises, in that sense that he could get contracts in our countries with a polish currency value, lower prices lower wages, and no social charges. Since then a amendment was voted, polish plumbers can operate in EU but they must respect the countries laws where they do, so that there still is a bit of concurrence for the contracts.
PAC benefit more to France, escuse-me, but to the big agro-alimantery industries, like for UK, Germany whatever. Sorry if France is the biggest agricultural productor !
what I wrote in a former topic:
Home farm subsidies UK 2008
http://farmsubsidy.org/GB/browse
tell me which societies belong to the queen of England, and to the dukes of England ?
so, looks like big agro-alimentary enterprises are getting the jackpot !
and I reassure you, in France, it’s the same, poor small agricultors get fast nuthin, just a tip to buy new clothes for Easter ! Though as France is the first agricultural productor in EU, of course, the allotments are bigger, don’t forget that amid the lucky beneffitors of the EU PAC subsidies, Prince de Monaco comes 2nd, after Queen of England.
Now, I tell ya, I’m against these subsidies, cuz they make our agricultors working like serfs, they aren’t free to product what would make them fairly earning their life, in a true free market situation
I could go on and on, since you still would carry on your demonization of France, wonder if that makes you more happy
More of the same from a citizen of a one-idea country. The CAP, as it is known in English, is a horrible monstrosity of which France is the number one recipient. The English are paying so that French agribusiness can remain underdeveloped and uncompetitive in the international arena without suffering the disadvantages this would usually entail. France is still a capital of elite snobs and a country of farmers.
This has nothing to do with media rumour. The EU bureaucracy reeks of French influence which is why it functions so poorly and has a behemoth sized democratic deficit. If you hadn’t lived your entire life in a one-idea state you might be able to think critically and not just parrot the verbal graffiti produced in the intellectual vacuum that is France. The reaction to the Polish plumbers was just par for the Euro course and represents one of the reasons why the EU in its current form is most likely doomed; Europeans regard citizens of other countries as foreigners and seek to protect any prized national entities from any form of competition.
I’ll repeat myself. The French want a United States of France to attempt to punch above their own weight on the international scene. The only French euro-skeptics that have any sway in the national discourse are people who reject the “Anglo-Saxon takeover” of greater France. I know you consider anything that doesn’t fit the one-idea state mentality as demonization, but eventually the French will have to face reality. You have helped convince me that this is not highly likely.
“I want my money Baaaaaaaaaaaaaaaaack” was a famous “Hit” in the past decades
but for whom ?
“The Queen and one of the richest men in London, the Duke of Westminster, are among the biggest winners from this year’s payment of farm subsidies”
http://www.independent.co.uk/news/uk/home-news/fat-cats-benefit-from-eu-farming-subsidies-780192.html
I’m not responsible of certain politicians velleities that want to direct the EU. Sarko Does, Merkel and her banksters do, UK lobbies in Brussels do (the most numerous BTW)
I’m fed up with the elitist EU that wants that the richests get more rich, and that the good popole become serfs
When it comes to sovereign bonds of countries other than France, how much is held by French banks? Plus, how much of it is Greek, or Spanish, or Portuguese
or Italian or German?
As long as French banks hold more in dodgy bonds than they have in total assets,
well dumping those dodgy bonds, like the Swiss, is the only option. Because why
should French banks be bailed out?
http://www.nytimes.com/interactive/2010/05/02/weekinreview/02marsh.html?ref=global
we own each others, though our capitalisation is in a better shape than the german banks, that still haven’t recovered from the 2008 subprimes chaos, because they still have, besides EU debt bonds, lot of these american bad debt bonds
I just returned from France. Four days in Paris (a bottomless pit for money, even at current rates) and Lourdes. Paris strikes me as the twin of New York – a compendium of everything human beings should want to relegate to the trash bin. Lourdes, full of Frenchmen at this time of year, is as delightful and pleasant a place as could be imagined. Friendly, helpful people, concerned, non-judgemental, definitely French and Frankophile, but warmly welcoming the rest of the world to their special place.
So which is France? I would offer the position that Paris is no more France than New York City is America. And thank God for that!
http://www.youtube.com/watch?v=bypLwI5AQvY&feature=channel
Here’s the truth of the matter. A tour de force. Or farce. You decide. UKIP MEP, Farrage was fined something like 4000 Euros for this outburst but boy, was it worth it.
When the new EU Constitution was being ratified we were promised a referendum. Knowing full well that the British would overwhelmingly say no, Brown abandoned this manifesto pledge and signed anyway. No consultation with the electorate, why bother with that lot? They’re only voters.
That’s democracy EU style. However those ‘mere voters’ voted Brown out a few weeks ago.
When France, the Netherlands and Ireland did hold referenda, the voters said no. So what did those little Hitlers in Brussels do? Why, they ignored the result and then rigged another one guarranteed to get a yes.
That’s how they work.
Dumb idea to start with.Why try to saddle the Germans with a bunch of lazy ass Euro-Trash who DON’T WANT TO WORK. Neo-Libs suck!!!
Hmm..Perhaps hybridization is the answer;
All future EU politicos to be one half
of a Franco-German married couple.
Why not ask why tax evasion is as great as it was recently in Greece? Why not ask if Landesbanken are solvent?
As long as questions are not asked which have a direct bearing on the situation,
who benefits? Hardly the common man who views honesty as something necessary, instead of how Mark Twain saw it: Honesty is valuable, let us economize it.
Speaking of honesty and European bonds: From todays Times Online, apparently the ECB has disclosed that Eurozone banks face upwards of 195 b. Euro of bad debt in the next year and a half. I’m not sure how this flew under the radar.
Remember the history, recent what else, of this idea of Europe as integrated “Union”. All those “referenda” pretence that the populations had some say in what their SELF-APPOINTED chiefs were doing. Remember the “Maastrict” treaty, rejected by voters in the populations permitted the “referenda”? (remember some populations were refused even this pretence at “Democracy”?) Remember, the “leaders” didn’t like the results. SO AS IS THEIR WONT — they held the
“referenda” again and again until they could say the result favoured their plans. And when they couldn’t, they changed the wording of the Treaty and applied it anyway. So much did these European politicians/elite envy and hate the super-power status of those vulgar, uncultured, rich Yanks, they used special dishonesty, and lies to “compete”. WHILE AT THE SAME TIME, until “Europe”, very like the “United Nations”, could actually be a serious partner, THOSE YANKS COULD, AND WOULD -AS IS THEIR WONT – CONTINUE TO PAY THE BILLS, MONEY AND BLOOD, FOR NECESSARY PROTECTION FROM THE BADDIES. while the Europeans could bribe their populations with cradle to – grave unearned welfare. But as it turned out, the ONLY BADDY IS and was the United States of America. Just listen to “news” programs, e.g NBC, CBS, NPR, BBC et al and read “up-market” newspapers, e.g. Washington Post, New York Times,et al and listen to dinner party conversations of Oxbridge/Yale/ Harvard/ Georgetown etc. and wannabees. AND NOW THE PRESENT CHIEF EXECUTIVE OF THE USA AND HIS SYCHOPHANTS IN CONGRESS AND COURT DEMAND THAT THE USA EMULATE THESE SO CULTURED, SO INTELLIGENT EUROPEANS whose systems have proved unworkable in the real world. YEP — power addled.
It doesn’t matter what the man in the street in France wants or the streets of any other European country. Under socialism you do what you’re told and the occasional election doesn’t change that. They only mean a more conservative or liberal socialist government assumes control while the underlying institutions remain the same. This is what the Ombami are aiming for in this country. After two world wars, the European elites decided the man in the street couldn’t be trusted even though elites are what drove the countries to war in the first place.
“Strategic patience”, “courageous restraint”, “soft power”. How to destroy 2,500 years of civilization with gobbledygook.
That stuff does work, if and only if you are prepared to release the restraints and bring the full weight of military muscle down on our adversaries should they not respond correctly to our soft power. You abuse our grace, you get our wrath.
Where have I heard that before:
‘No better friend, no worse enemy.’ ?
Oh, that we had a strong America-loving President in times like these, instead of the ball-less wonder who currently resides in the White House.Thanks again to all you ass hats who voted for the mighty”o”.
The United States is on the hood for the Euro Via the Credit line opened by the Federal Reserve, guaranteeing support for the Euro.
If the Euro goes down, so does the US dollar.
The United States is on the hook for the Euro Via the Credit line opened by the Federal Reserve, guaranteeing support for the Euro.
If the Euro goes down, so does the US dollar.
I just don’t see how an orderly unraveling of the Euro could possibly take place. Each coin and each piece of paper money would have to be redeemed by its country of origin. Each coin has a distinctive face that identifies the country in which it was minted. Although the bills do not appear to be distinguishable, each is identified as to country of origin by a small code sequence on its face.
Once the process of unraveling begins, there will be massive economic disruptions as everyone attempts to convert their money at the most favorable exchange rate. The Greeks and Spaniards will try to convert (by hook or by crook) the Euros in their accounts to the German-issued paper euros, and nobody will be accepting cash that doesn’t originate in one of the economically stronger countries.
It will be a really ugly mess.
And plenty of people who don’t know the difference will be swindled by those that do.
Of course someone will be left smarting after the unravelling. After all, the Dutch feel that their currency was heavily devalued against the DM when entering and have long resented paying so much into EU coffers per person.
The Swiss will not skip a beat. In fact, they may profit greatly from a failed Euro.
My guess is that they already have; I would love to know how many people are putting their money there instead of non-Eurozone banks.
Decades before it was even tried the two world wars may have killed off the possibility that a united Europe project could succeed. After having depleted its population of first class people Europeans began allowing in Muslims, who are, as everyone by now knows, hostile to any and everything that is European and not Muslim. So, even if the Euro project had succeeded—and, in all fairness, it might yet survive the current crisis—Europe had already sown the seeds of its own destruction in the millions of inassimilable Muslims it had drawn into its midst as replacement bodies for its slaughtered millions. Long before it was even tried any reasonably objective person could see that a lot more than good intentions were needed if a pan-European project was to succeed. Can Europe do any of the things it needs to succeed, starting with ending all Muslim immigration and demanding that the ones that are in Europe assimilate?
The big question now is not whether the Euro social-welfare model will survive. Rather it is: Will it fail before the contagion becomes irreversible in the United States? And when it does fail, will the reasons it was not sustainable be communicated to the American voter or will the left and their advocates in the media succeed in convincing a majority that the same methods will lead to a different result here?
I fervently would like to be optimistic and perhaps after the next couple of election cycles I will be. Until then…
I continue to be amazed anyone ever thought the Euro would work.
The first pass at the Euro, the Exchange Rate Mechanism collapsed. The Euro will collapse, but in a much worse way, as the PIGS have had a decade to cook their books while borrowing money at German exchange rates.
Go pick up a copy of “The Rotten Heart of Europe.” History ignored and repeated, but worse.
What Would a Euro Collapse Mean for the United States?
Competitive devaluation and retaliatory dollar collapse.
Were the Euro to fail as an alternate reserve currency, the Dollar would appreciate (and thus the Yuan), hurting exports. Since the Yuan is tied to the Dollar, it would not help the U.S. repay debts to China. But at least America would enjoy the uncharacteristic satisfaction of Schadenfreude, though cutting off one’s nose to spite one’s face does not normally make good long-term economic policy.
As long as the actual, or authentic, value of assets is quite different than what the
holders of those assets say they are, trouble with a capital “T” is moving inexorably
towards the limelight.
Let the attempts begin to get around that.
Given that the Netherlands has elections on June 9, or thereabouts, do you figure the euroskeptics will be strengthened by the result?
It could certainly have an influence, but I think a lot of the next election will be decided by immigration policies. The Dutch are more pro-market than many other EU countries, and while this isn’t saying much, I think their legendary tolerance is at a breaking point. Geert Wilders is the man to watch. I am interested in finding out what the Dutch press is making of all of this, but my Dutch skills are severely limited. By limited, I mean nonexistent.
Do you read the columns, and writings of Ambrose Evans-Pritchard, who is the International Business Editor of the Telegraph? The elections wouldn’t only hinge on immigration, but also who pays for all the bonds that frankly are not even worth a bucket of warm spit.
Right now the interest rates demanded by the markets of sovereign bonds of Greece are much higher than those of the Netherlands. This shows that Dutch bonds are more solid than Greek bonds. Therefore, those holding Greek bonds, Spanish Bonds, Portuguese Bonds, Italian Bonds, French Bonds, and German bonds
will wind up with less than what they shelled out for them.
Which means, either banks, and those holding bonds which frankly are as solid
as quicksand, will go bust, or they will be bailed out. If they are bailed out, there simply isn’t enough money in the global economy to settle the debts
100 per cent.
What it translates to is less money around, and those who perpetrated all of this will probably have covered their tracks better than Nazis who hid, and successfully eluded Nazi hunters like Elie Weisel – and they will live out the
rest of their lives being very quiet about what they did, all the while coming
up with fiction to account for the time of what they were quiet about.
The name doesn’t ring a bell, but I’m sure I have read his articles a couple of times since I semi-regularly read the Telegraph.
I agree with you. The Piigs’ bond holders will likely take a nasty haircut; in the case of Greece, it seems almost unavoidable at this point meaning German and French banks will take a beating and probably need bailing out to remain operational. For what it is worth, Wilders is apparently on record supporting a return to the Guilders and has said that Greece leaving the Eurozone would be the best for everyone involved. The Dutch have certainly had a streak of skepticism about the Euro that I feel is deserved. I muddled through some Dutch articles and found this one quite representative of the more conservative opinion in the Netherlands at the moment. http://www.noodzakelijkkwaad.net/wordpress/griekenland-een-ongemakkelijke-waarheid (When I said non-existent, I probably should have said I can read it o.k. but find it a massive pain.) The article basically makes unflattering comparisons between Greek economic freedom and that of developing countries. As far as the upcoming elections, I don’t know enough about internal Dutch sentiment to make a guess about how much this will figure into things.
The truth is, the citizens of Europe have largely been unable to voice their opinions on European issues. The Dutch and French soundly defeated the Euro treaty leaving member states to essentially rewrite the same thing and pass it by parliaments instead of national vote to avoid the “uncomfortable” sting of democracy. The Dutch that I know thought they got cheated when they joined the Eurozone because the Guilder was devalued significantly against the DM from my recollection. It will certainly be interesting to see what happens and why.
Your assessment of the worthlessness of those bonds is spot on, as is what will happen after a possible fallout.
You being able to understand Dutch puts you up on me, and frankly I am not surprised. The Sovereign bonds of Norway, for instance, are not getting attention because they bear a closer resemblance to the rock of Gibraltar than
to quicksand. Greece, Iceland, Ireland, Spain, Portugal, Italy, France, Germany, Great Britain and the United States, on the other hand have sovereign
bonds bearing a closer resemblance to quicksand. Whether it is because of black market economics, or debt that simply cannot be repaid (whether it is public or private), or what “Inside the Collapse” which aired on “60 Minutes” back in mid March of this year fingered.
http://journalisted.com/ambrose-evanspritchard is pretty good as to the columns and articles of Ambrose Evans-Pritchard (I differentiate between the two, for columns tend to be more opinion pieces, whereas articles are to be opinion-free zones) and he attracts comments from those who see Brussels in
a positive light, as well as those who see that city in a negative light. The to and fro is hardly posed. Intelligence is questioned, and dark motives
are assigned to those who arrive at different conclusions. Call it the legacy of Hyde Park in London.
When all is said and done, the bonds whose foundations are akin to quicksand
will atomize balance sheets like termites will go after houses, but no exterminator. It will be bumpy because there isn’t going to be much money left in circulation anywhere. So, get used to seeing prices back to 1950s levels, and if any fat cats want to justify their entitlements, well private security firms will be a growth area in the economy.
“Ambrose Evans-Pritchard” is the one that launched the noise that the US congress rejected the IMF help for greece. Though german papers are saying that IMF has already reached Greece to the damn of the german banksters. So I wouldn’t rely on a eurosceptic blogger, Brits have always criticised whatever we decided in EU (specially the French), and are likely those that launch falsh rumors. One would say that they want to orientate the markets ! But if Spain is defaulted, then some Brits banks will have big problems
When all else fails, pray for a miracle:
The peoples of the defrauded nations
insist that their leaders sit down and
agree to a distribution of debt which
allows all to survive, though they all
‘Rise up from the table a mite hungry’
_And_ allocates authority in the recovery
plan in proportion to the debt assumed.
P.S. They also create a brand new bureau
to identify and persecute all those who,
from fanaticism or for reward, were party
to a plan which cheated the many to reward
the few.
Is OPEC still considering dropping the dollar for the Euro?
I’d sooner see a currency that the Mid East oil producers would come up with, taking place, than oil being priced in euros.
http://www.telegraph.co.uk/finance/economics/6819136/Gulf-petro-powers-to-launch-currency-in-latest-threat-to-dollar-hegemony.html
Try an old, simple, proven method of exchange: Barter.
With computerized communication and bookkeeping one
can agree in advance to exchange one shipload of
sweet light crude for ten shiploads of wheat, one of
which is in turn exchanged for 1/2 a shipload of
copper ore, etc, etc; Welchers on one exchange must
ante up more in the next, or be dealt out of the game.
I thought they went with a basket of currencies several years ago. In recent years the price of oil has been moving in opposition to the strength of the dollar.
Perhaps you don’t understand the nature of European pols. This will be an excuse for tighter control of member states of the euro. Fear over the value of the money people have in the bank accounts will be enough of an excuse for the rights of the people in the euro zone states to be abrogated. What they could not do by vote, they will do by decree, in order to “save the euro”. Whatever is necessary to exercise further control over these states. When in human history can you imagine control being readily given back to the people from a centralized power?
The US is obviously not any better. The financial turmorial has also given our politicians the ability to decree whatever they want to via fear, that otherwise the citizens would not have accepted.
I’ll turn a new phrase: Those who value their money more than liberty will eventually lose control over both.
Perhaps, and perhaps not.
When forced to face the music, and dance an existential adagio,
the people of the EU may choose the Slavonic Dance from ‘Allegro Non Troppo’;
The archetypal leader by successful example in that piece was in complete control,
right up until he tried to abuse his follower’s trust by leading them off a cliff,
and looked back over the edge to see a sea of newly risen moons staring back at him.
I don’t see how the “US of Europe” would ever have significant geo-political power outside of the EU–power still requires some military muscle and the will to use it.
Seems the US of Europe is just a better vehicle for elites to control the serfs (and amass great, but fleeting, power and fortunes within the EU).
military muscle and the will to use it…
Considering the rate of progress in Mil-Tech,
as in the Assassin Drones now flying over
Afghanistan, the brute strength and sacrifice
required of past militaries may not be needed.
Moreover, the future may be now in that regard;
Secret weapons are best used in surprise attacks.
Jacob, would the Russians or other countries such as Japan benefit from a fall of the euro?
I think the Russians would love to see the EU’s eastward expansion into their former sphere of influence stopped dead in its tracks or rolled back if at all possible. The Russian economy is heavily dependent on oil and gas which it supplies to Europe. This has been the cause of a lot of confrontation in recent years. In fact, many countries have turned to Iran as an alternate source of energy after it became clear that Russia would gladly turn the gas off if it didn’t get its way. Some of the importation from Russia will be necessary regardless of price, but a weakened Euro will help boost German exports as well as raise fuel costs at home. A lot of what happens will depend on how/when/if the Euro ceases to exist in its current form. A messy exit may strengthen Russia in the short term, but petroleum products are their only real export and any sharp decrease here will be a major blow. (When oil shot up to over $100 a barrel a couple of years ago, Russia and Venezuela started a lot of saber rattling. When it slumped again, it was an obvious blow to their ability to project power outside of their borders.)
As far as Japan, I don’t think it will effect them as much as China. China has benefitted from a weak Dollar-Euro exchange rate. Many companies sought to produce in China to hedge against the strong Euro; Airbus is one notable example. As far as Japan, I think any weakness in the Eurozone could weaken exports at a time when their recovery is fragile. The Japanese have had a rough go for a while and have struggled to produce adequate growth. Germany, who shares Japan’s export driven economy and has similar structural problems, has seen most of its growth from within the Eurozone. This will certainly weaken the German economy which may in turn give Japan a slight boost, but overall I would say it will be negative for them.
Any way to have the New York State and California join the other US of Europe?
While the USa might gain some from a Euro demise. the two countries that will gain the most are Russia and China.
Oh and btw this is how world wars get started.
When your economy fails your neighbors goods and lands look very tempting. Good thing europe does not have a big military. but russia does.
At least if the Euro falls apart, most everyone will “flee” to the dollar.
Long-term US interest rates will fall like a stone. I’ll be able to buy a MUCH larger house with a mortgage of 1-2%.
Can’t wait. Let the Europeans flail.
We fought two world wars to avoid the unification of Europe against us. The collapse of the EU would pose some dangers to us, but on the whole it would be positive.
Rumors of France debt downgrade on the horizon. Sarko wants to raise age eligability for pensions.
Greece is being advised to leave the Euro and default on it’s debt. That will hit French and German banks hard.
German and Spanish budget fights.
I think we see the Euro go under 1.20 this week. This will be another rough week in EuroLand.
good, then you’ll be able to afford our wines !
All of the countries in the Euro had rules about how debts and deficits. If countries don’t meet those restrictions – and Greece was hiding debt off the books, helped by Goldman of course – then shouldn’t they just get kicked out of the Euro as a lesson to others? Aren’t we just rewarding losers?
I really don’t understand all the handwringing. Maybe its because I’m one of those exceptional Americans I suppose.
FYI Index Journal last year had an entire issue on commodities indexes – I think they may have the potential to be the next institutional currency, especially if the dollar and euro wash out. Any thoughts? Reply here or to my home page above.
More than all, I laugh at the people giving in to the Roth IRA. They’ve paid taxes, and will be taxed again. If you don’t believe it, look at the money the Federal government needs.
We’re all screwed. The Roth IRA types will be hardest screwed. The trusting and the maimed, etc.
Since the fall of the Russian Empire, we have all been living in an economic fantasy world. There appeared to be ample money, but there wasn’t. There will now have to be a correction – everywhere, including the USA. We will all be poorer than we appeared to be. Luckily, it will be a global correction, so maybe we won’t end up in a war.
WAR? Why Micahael,don’t be such an alarmist. Euros dont fight: they submit,as in Dhimnitude, they are FAR too sophisticated to fight;that’s for us uncouth Yanks and assorted cowboys. Only remember: WE WILL NOT FIGHT FOR YOU!
LET ME TRY THAT AGAIN.#31 Fight? Euros fight, as in a WAR? Don’t be such an alarmist;Dhimnis don’t fight , they submit;they’re too sophisticated to fight;that’s left to cowboys and other uncouth Americans,who will NOT ever again fight for Europe.The European drunken spree is over,and the hangover will see a Muslim volkerwanderung convert your churches to mosques,your children into slaves,and cast your post modern welfare state post modern”culture” into the garbage heap of history.We are next,and it will be fun to see whether American exceptionalism really exists, or was just a wishful thought in the mind of American consevatives. Regardless, it’s going to ber the greatest cataclysm/party/garbage disposal event,since the end of the Roman Empire! One thing is certain: The faux-progressive Yuppie plutocracy/welfare state will die,and that’s a consummation devoutly to be wished.
So what happens when Texas refuses to pay California’s debt? Or Alaska chooses not to pay into New York’s gaping maw of indebtedness?
Sure, it’s easier for EU members to leave, but hey…. Maybe THAT’s how we starve the beast – just leave. Think BO would order another civil war?
The European Union was created by bureaucrats for bureaucrats. Then they persuaded politicians to believe it was invented by politicians for politicians. Both groups of unwashed barbarians were after control and power. They also believed that the EU would undermine the USA.
The barbarians gained control, amassed power and hurt the USA. They must be well pleased with themselves.
The house they built had no real foundation and now it’s falling down. When the Euro goes, panic and chaos will spread to the US. The US is in trouble regardless of what happens to the Euro. A collapsing Euro will just fast-forward the US into reality.
In the ensuing chaos they could give every European a a plastic bucket full of Euros and a felt tip pen. In France each person would write ??? Francs on the euro notes; in Germany ??? Deutschmarks on each Euro note and so on. In Canada, Australia, New Zealand, SE Asia, India, and South America things will get strange because we are all connected to the global economy. In Canada we are also joined at the hip to the US economy – might be good, might be bad.
Having a French mother and reading all the references to the French in these comments, all I can do is repeat that age old truism “France would be a wonderful country, if not for the French”.
Marie Claude, you are right about British banks being in trouble if/when Spain defaults. But, those banks are hardly alone. So too will French Banks, German banks, and Italian banks, albeit for different reasons.
At least Swiss banks got out of Greek sovereign bonds. So, they are okay for now.
Europe put the cart before the horse. The efficiencies they sought to obtain via a single currency are only had with a level of free trade that we have here in the US between the states. It doesn’t matter that there are poor states and rich states in Europe. We have poor states and rich states in the US too, but California manages to get along using the same currency as Mississippi. The difference between the United States and the European Union is that the American states have almost no trade barriers between them, nor are they allowed to tax each other.
You are correct. The even bigger factor is that there is much greater labor mobility in the U.S. A worker from Michigan can move to Texas, and still speak the same language (sort of). A worker from California can move to Utah, and still be in the same culture (sort of).
A Greek worker cannot move to Germany or France in the same way, and the language barrier is actually probably the smallest of the problems, compared to the regulatory and bureaucratic obstacles.
The hope was that they could create the Euro, and then create the unified nation to go with it. It’s not going to happen. Despite regional differences, Americans are all Americans. However, I’ve never once heard someone introduce themselves as a “European”.
Nothing will stop a Euro Collapse
I think the idea of the EU as a safe haven for international currencies was an illusion that the EU really believed was possible ,but now the stark contrasts in individual governments of each country within the EU has reared its head. An issue we all knew existed but was on the ‘wait-and-see’ approach to it. When you have each country within your “Union” with so many different agendas and politics that differ so vast to the next ,it inherits unstability that really dismisses the fact of a unified currency. Any situation will get magnified and have bigger effects on the overall standing as percieved from the outside world.
what is any currency worth? we think we found it.. plz look at the summery. its only 1.1/2 pgs (www.theherm.org) we need a base scientific measurement for what currency is worth anywhere in the world . like, horse power ……….
thx jeff beller 845-313-8888