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Thread: Obama: Solving Euro Crisis of ‘Huge Importance’

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by AdamT View Post
    Yep, I guess that's what they said after WWII.
    America was in a economic and industrial boom before the end of ww2 so not sure what your getting at here.

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by VanceMack View Post
    Tell that to your grandchildren when they are stuck with the debt from our recklessness, irresponsibility and stupidity
    I have no idea how this relates to the fact that the claims were hyperbole.

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by Higgins86 View Post
    America was in a economic and industrial boom before the end of ww2 so not sure what your getting at here.
    I'm going with, our grandfathers and great granfathers ran up a far greater debt than we're running up now -- the last time we saw an economy this bad. And you know what? We dealt with it just fine. Until around 1982....
    Last edited by AdamT; 11-30-11 at 12:06 AM.

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by AdamT View Post
    I'm going with, our grandfathers and great granfathers ran up a far greater debt than we're running up now -- the last time we saw an economy this bad. And you know what? We dealt with it just fine. Until around 1982....
    Do you believe we have the potential for the same technological evolution and economic growth? We are getting very close to the same Debt/GDP ratios of the 1940s and frankly, our internals still suck. Traditionally I am an optimist, but I'm having to dig deep to find the light at the end of this tunnel.

    EDIT: Didn't mean to derail this thread to America. I'm still hoping PeteEU or drz-400 returns to further discuss Europe and what our role should be in bailing them out. AdamT, if you want we can take our projections about the US economy to a different thread.
    Last edited by Rhapsody1447; 11-30-11 at 12:17 AM.
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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by Rhapsody1447 View Post
    Do you believe we have the potential for the same technological evolution and economic growth? We are getting very close to the same Debt/GDP ratios of the 1940s and frankly, our internals still suck. Traditionally I am an optimist, but I'm having to dig deep to find the light at the end of this tunnel.

    EDIT: Didn't mean to derail this thread to America. I'm still hoping PeteEU or drz-400 returns to further discuss Europe and what our role should be in bailing them out. AdamT, if you want we can take our projections about the US economy to a different thread.
    I don't think we have the opportunities now that we had in the 40's, but we absolutely have the ability to dig out of this debt problem, and it wouldn't even be that difficult if the two sides would just f*cking come together and meet each other half way.

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by Rhapsody1447 View Post
    Thanks I didn't realize my numbers were out of date. Hopefully there was no major discrepancies.
    Morning and no major discrepancies but a few changes (France deficit went from 7.1 to 7.0.. always better to get from the source

    I know you are making the Greek debt go poof but the issue we are discussing is printing by the ECB. The ECB buying bonds is different than wiping them out. The inflation comes as a result of pumping newly printed money into the system to buy toxic debt. This worked in our country by preventing the banking system from collapsing, but the subsequent recovery has been dismal despite additional stimulus to the tune of $1 trillion.
    Printing money to save the banks has zero to do with your bad growth. There are many factors that influence your lack of growth. First off the average American is far more indebted than the average European, which means the wiggle room is much smaller. And when you hear daily that the world is coming to an end because the Federal government and European governments are in too much debt, then people and companies automatically shut down and baton down the hatches so to say. As your economy is 70% consumer driven then these two factors will mean less growth. Add to that, the political mess you have over there and it creates serious uncertainty for companies and people, only making the problem even worse. The printing of money did one thing.. saved your banking sector so that you would have one in the future when the doom and gloom crap is over and removed a large amount of toxic assets from the market when at the same time pushing more money and liquidity into the market. It is actually done all the time, but not in that scale of course.

    The Germans' fear is that if you start printing now to monetize the debt you set a precedent for future action by the ECB. That is why it was so important to prevent it when it was first formed.
    And I agree with them. There is a moral hazard and other issues including inflation, but we have reached a situation where it is simply needed. It can be done as long as the ECB keeps control over its printing and focuses on getting the debt burdens down and economies working again. It has always been the role of the central bank to pump liquidity into the system when needed and that includes printing money, but because of the German stance then the ECB is handicapped on this point.

    Reference my earlier post on necessary size of a EU bailout (of the banking system) to understand the massive size the bailout would need to be in order to be effective (2.1tn).
    2.1 trillion is nothing compared to the cost of not doing anything. And we have to go away from this "bailout" terminology.. it is not a bail-out but a back stop, a guarantee of bank debt, something that all other national banks do, except the ECB. In the US you went and bought massive amount of assets from the banks and "washed them". In the UK they did the same and nationalised the banks.

    I think you are deluding yourself about Italy. Economists forecast a recession in 2012 and the markets definitely disagree with you about Italian debt being a problem.
    Markets are not rational, as I have stated over and over again. Something or one is pushing markets in the direction they are going because certain countries are being overlooked and have the same economic outlook as Italy and Spain. And I am not deluding myself about Italy, it is most people that dont understand how big an economy Italy and the composition of Italy's debt. Italians have a huge saving rate (15ish%) and 60+% of the national debt is owned by Italians themselves. Also Northern Italy is as wealthy if not wealthier than Germany and depending on how you measure it, Italy has a higher productivity than Germany. Now that is not saying they dont have problems, but it is fixable problems and pushing them over the brink does not help the issue. Italy has a primary surplus.. and next year will most likely have a real surplus.. and yet Italy is being pressured by the markets? makes zero sense when the UK has rising unemployment, rising debt and deficit and zero growth. Why should Italy who has its economy in some what check pay 7.4% in yield, where as the Uk who zero control over its finances pay 2.3%?

    I think we should let the German people decide whether they want a devalued Euro or not. I'm no expert on European economics but aren't a majority of their exports to other EU countries? Wouldn't this negate the positive effect of a weakened Euro?
    First of all, like it or not, "letting the people decide" complex economic issues is idiotic... yes it sounds undemocratic, but I am not willing to "let the people decide" when I fully know that they are so easily persuaded by idiots like Farage and other anti-Euros... the stakes are too high and 99% of the people have very little understanding about the situation or process so they will clammer to those who they understand and that is people like the Farage idiot.

    Secondly, yes something like 60% of their exports are to other EU countries, but of those EU countries 10 are not in the Eurozone, including the UK. But that is some what irrelevant, because the consequences of not having the Euro would mean 100% of exports would be outside the new German Mark, which would be insanely highly priced which would choke all exports.

    It sounds like the only way to have a sound monetary union between countries with such of a diverse range of problems would be to bring them under one European government. You can't leave the system unchanged and just expect the weaker countries to fix their issues at the expense of the stronger countries.
    Not really. It all depends on how you set things up. But that is another discussion. The idea now is to make sure that the European governments dont go nutso on spending during good times, which has been a problem before.

    So you would be in favor of expelling countries that run a deficit above a certain level? I can support that.
    Depends on the time and amount. Greece yes, Spain, Italy, Portugal no. You always have to take into consideration the economic times. A country that has 6% deficit during times with 3% growth needs to get its priorities fixed. A country that has 6% deficit during a recession is normal.

    But wait, you later say that the targets have to move depending on economic conditions. Do you realize the difficulty in regulating this and enforcing it? I absolutely agree that economies should work by having deficits in a recession and surpluses in a boom. The problem is that rarely happens once the presses start running. Just look at my country to see an example of this.
    No offence, but your country is a joke when it comes to budgets and politics. The US has not had many surpluses in the last 50 years...

    And it does work and has worked for most countries. During boom years there was surpluses or minor (less than inflation) deficits. The problem comes with countries like Greece lie and what to do about that. First off you need a system that makes it impossible to lie, which means checks and balances from a central European place. That means meddling in budgets up to a point. Secondly you have the recession aspect of the situation where deficits naturally climb because of less tax income. The deeper the recession the larger the deficit. This must be allowed up to a point, especially when it is the job of the government to try to kick start the economy.. but that of course requires that debt levels and spending fall during the good times.

    I don't understand your position. On one hand you say austerity is idiotic and you can't cut spending in a recession, on the other you claim Europe is in a recession and the solution is to cut spending. You seem to put waaay too much faith in the promises of surpluses. All predictions point to a recession in Italy in 2012. Are they still going to run a surplus with record bond yields and falling tax revenues? I won't even touch the idea of a Greece surplus. They already got a 50% bond haircut which will probably be revised higher.
    No no.. I dont think the solution is to cut spending.. the markets think it is.. I think it is idiotic during a recession... it will do nothing but prolong the recession. We saw it in the early 1930s when the US and European countries cut deep because of the crash and it caused nothing but even more recession.

    And I dont put too much faith in surpluses. You have to remember many countries have been cutting hard and brought down their deficits during times of recession.. which I dont like, but is a fact. Any small amount of growth and growth in tax revenue would push these deficits over into surpluses.

    Greece has not gotten a 50% haircut .. yet. The political bullcrap and voting has not been done yet to make it official. Plus the Greeks themselves are dragging their feet. Greece frankly is somewhat irrelevant since they will go belly up in one way or another..and it is small change frankly.

    Also if you dispute the Irish numbers there is no way you can accept the Greek numbers with a straight face. Read this article if you want to understand the rampant fraud in Greece's financial accounting.
    I dispute the Irish numbers because they dont seem to include the bank guarantee that the previous Irish government made. I also some what dispute the UK debt numbers.. since they do not include the debt held by the nationalised banks.. The Greek numbers are under a freaking loop now, so they are unable to hide and cheat any more. Yes it was in the past a huge problem, but now.. not nearly.

    I know that the European crisis didn't pop up this year. However, the Greek haircut did, the European bond yields skyrocketed, renewed fears of recession in Italy did, and new political failures in Greece did. I agree that it has been bleeding for 2 years due to incompetent politicians but your fantasy that the crisis is "mostly made up" is absurd. I could post a full page of just links to articles about the severity of the crisis in Europe. I'm sure that wouldn't matter though.
    I know you can post pages and pages of links about the so called crisis. And if you read those pages, then the "problem" changes almost monthly.. Take Spain, first the media said it was a sovereign debt problem..PIGS. But then suddenly the media found out hey wait a minute, Spain has less debt than all the other major countries. So then the media with help from the financial industry, turned their attention to Spanish banks! That lasted a few months when the media found out that Spain had been in consolidation mode in its Cajas for years and the marketshare of the Cajas was 3% of the over all banking sector in Spain, and that the main big Spanish banks were healthier than most other European banks. Then the media briefly turned towards the regional debt problem in Spain.. only to find out that it was included in the over all Spanish sovereign debt and deficit, and was a small part. Now days they are focusing finally on the unemployment problem, which was always the real issue in Spain..

    My point is, much of the doom and gloom is not based on facts and figures but on rumours and hearsay and that is what has been pushing Europe around for the last 2 years. And the more doom and gloom the more people baton down the hatches and the longer the crisis goes on.

    In my world 15% inflation would be considered a problem. I'm not one of those conservatives who believe all printing is evil and that inflation is the devil rearing it's head but it's a tricky beast. I think the German people have every right to vote against it if they want. It's time for the unelected thugs in the EU to cede some of their power back to the people who pay their salaries.
    The Germans go to the polls every 4 years or so.. they have their say. The "unelected" thugs in the EU are exactly who? The Commission? must be since they are the only unelected people in the EU system, and they have zero power to force anything down on the people, since all laws and so on need to be approved by elected peoples both in the EU parliament (where Farage the idiot is talking from in the video btw) and national parliaments and governments.

    But yes 15% is high, but it is not catastrophic in a short period. But 15% is also unrealistic. The UK has been printing money like no tomorrow as has the US, and inflation is 5%ish.
    PeteEU

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by Rhapsody1447 View Post
    EDIT: Didn't mean to derail this thread to America. I'm still hoping PeteEU or drz-400 returns to further discuss Europe and what our role should be in bailing them out. AdamT, if you want we can take our projections about the US economy to a different thread.
    I need my sleep!!!!

    As for the US helping out Europe.. it is in their own interest.. like it or not. Plus who would buy your crap if it was not for Europe and Asia?
    PeteEU

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    I haven't had a chance to read your response yet but major news just came across the wire. Looks like the Fed just lowered the pricing on existing temporary US dollar liquidity swap arrangements by 50 basis points along with major central banks across the world. This is exactly what I said earlier about the Fed assisting the Eurozone without involving the US budgetary process.

    The Federal Open Market Committee has authorized an extension of the existing temporary U.S. dollar liquidity swap arrangements with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, and the Swiss National Bank through February 1, 2013. The rate on these swap arrangements has been reduced from the U.S. dollar OIS rate plus 100 basis points to the OIS rate plus 50 basis points. In addition, as a contingency measure, the Federal Open Market Committee has agreed to establish similar temporary swap arrangements with these five central banks to provide liquidity in any of their currencies if necessary. Further details on the revised arrangements will be available shortly.
    Fed, Five Central Banks Cut Rate on Dollar Swaps - Bloomberg

    Stock futures in the US are up 2% and almost all the European indices are up 3%.
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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by AdamT View Post
    I don't think we have the opportunities now that we had in the 40's, but we absolutely have the ability to dig out of this debt problem, and it wouldn't even be that difficult if the two sides would just f*cking come together and meet each other half way.
    That would require some big time losses. That's what those in power are trying everything imaginable to avoid. It can't happen. The two sides are those who can provide some financial stability and those who are going to take a loss.

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    Re: Obama: Solving Euro Crisis of ‘Huge Importance’

    Quote Originally Posted by Rhapsody1447 View Post
    I haven't had a chance to read your response yet but major news just came across the wire. Looks like the Fed just lowered the pricing on existing temporary US dollar liquidity swap arrangements by 50 basis points along with major central banks across the world. This is exactly what I said earlier about the Fed assisting the Eurozone without involving the US budgetary process.
    IMO, that's a welcome step that will reduce the risk of a liquidity crunch and ensuing breakdown of market function. This development does not spare EU countries facing debt-related pressures from the need to pursue credible fiscal consolidation.

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