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  Topic Review (Newest First)
02-02-2015 04:37 PM
sburns2421 Greece exit of the Euro seems inevitable at this point.

How will that impact the remaining EMU countires, the Euro as a currency, as well as the USD? There are billions to be made and lost based on investing depending on the outcome and transient response.



02-28-2012 02:00 PM
sburns2421
Quote:
Originally Posted by sburns2421 View Post
Currently there is such a spread in wealth, and the ability to survive economically, between countries in the EMU that it is unsustainable, IMO.

It seems in the EMU you have countries holding their own (Germany, France, Belgium, et al), and countries who are flat-out broke (The so called PIIGS: Portugal, Ireland, Italy, Greece, Spain). Of those holding their own Germany and France are obviously the big players and the only ones who could possibly have spare funds to bail out Greece.

But to bail out one sets a dangerous precedent for the others. If Greece is saved, why shouldn't Spain or Ireland? And make no mistake, there is a good likelihood of all of them needing help in the next couple of years. I think this is forgotten or ignored by many outside of the situation.

For all sides it seems like a terrible choice. For Germany, bail out Greece and then have to do the same for others, possibly bankrupting yourself as well. Or don't bail any of them and watch as the whole "Club Med" region falls into a deep depression and all of its nasty historical effects. I suppose it is possible the decision could be made to devalue the Euro by inflation of money supply, although this would also have terrible effects on creditor nations within it such as Germany. So what if you receive payments on the loan you own when the currency is worth a fraction of what it was when the loan was originated?

The PIIGS are locked into the Euro and cannot devalue their currency, EU countires not in the monetary union have a clear advantage in this regard should they need it (Sweden and UK for example). Greece and the others may decide "defection" from the Euro as a currency is the lesser of all the painful options. Default on debts and revert to their own currency and it will be basically worthless outside of Greece. But their exports and tourism will pick up and consumption of imports will drop dramatically. A relatively short period of acute pain versus longer suffering as they become an undercalss of the European continent and locked into the Euro. What happens with Greece will be very telling.

If things with Greece do not go the way the German government thinks it should, they instead could be the one who jumps. That was the basic idea of the article. Basically pull out and let their neighbors rot. Nationalism was not eliminated by the EMU, nationalism is another aspect discounted by many when it comes to this ongoing crisis.
Greece was downgraded to "Selective Default" by S&P last night.
UPDATE: S&P Downgrades Greece To Selective Default, Cites CACs - WSJ.com

Not sure what the trigger is to force the payout of Credit Default Swaps. No one really knows how many billions there are of these or who holds the ultimate repsponsibility of paying them in the event of a government default. Consensus I read is conservatively in the $300B range, but with the interlinking of banking all over the world it is almost impossible to get a certain figure.

Now Greece is hoping to trade $200B of their (likely) worthless government bonds with others equally likely worthless bonds. If they cannot, default or another round of bailout is their only real options. But Germany is taking a hard line with Greece as it knows if it continues to bail them out there are other countries within the EMU also wanting to be bailed out. Spain and Italy have GDP in the top 20 in the world, they are simply too big to be bailed out.

IF the CDS payout event is triggered (I doubt an S&P downgrade to selective default is the trigger threshold), this could set up a cascade effect that could ripple through all world banking including the US.

March could be interesting in the Chinese proverb sense.



12-01-2011 01:20 AM
sburns2421 The Federal Reserve of the US is printing money, or more specifically making money available for essentially zero interest to banks. The big banks can borrow tens of billions of dollars basically for free so that they meet the capital minimums. This started due to the latest crisis of 2008 (that continues today) as TARP. Without TARP basically all of the big US banks and at least AIG in insurance would have failed like Lehman. There is undoubtedly more money available today (most as electronic "cash" in bank computers) than there was 4 years ago. Something like $1.5T more dollars.

The theory is that making cheap money available will stimulate the economy by making it easier for companies or individuals to take out loans and grow their business or purchase stuff. This assumes however that a business actually has demand and the only holding them back is the interest rate. Of course in a consumer based world economy without demand you have no economy. People are up to their eyeballs in debt and don't need any more stuff (at least in the US).

The United States has a unique position as the world's reserve currency which allows them to "print" more or less with impunity. But they appear to be abusing this privelege and it will come back to haunt us in the long run.

Europe as a whole is broke as hell and even with the huge defecit spending and weak economy within the US, it makes no sense to me that the Euro would stengthen today if the dollar/yen/pound was what was bailing them out, but that is what happened.



12-01-2011 12:26 AM
Gnhtsg
Quote:
Originally Posted by nycstripes View Post
We're all printing money like mad...
Proof?

I've been hearing that wolf cry for about two decades. Gee, shouldn't rampant inflation have caught up with that by now? It hasn't.

Just today, in fact, I heard an economist say that the one thing Merkel will not allow is an increase in the printing of Euros by the ECB. Sounded like they haven't been doing any excess printing. But you know more than economists so I'll defer to your expertise.

This "printing money like mad" BS reminds me of the crying-wolf cannard about federal regulations causing unemployment. I'll post a link to that story when it becomes available, 'cause I know you seek the truth.
12-01-2011 12:10 AM
Gnhtsg
Quote:
Originally Posted by sburns2421 View Post
Now, 18 months later, it takes basically the intervention of the world to keep Europe afloat.

Huge rally today and the dollar was down a bit compared to the Euro. Neither one makes sense to me...

Central Banks Announce Coordinated Liquidity Effort to Alleviate Euromess naked capitalism
It's a world economy now. Saving Europe helps save us, China, etc.

This would never have happened if Reagan/Gramm/Clinton hadn't deregulated financials and Bush/Norquist hadn't gutted the SEC, and everyone else hadn't towed the Wall Street free-market line during testimony (Greenspan, Summers, et. al.). We have mainly ourselves to blame. The world must hate us by now. Meditteranean social structure and work ethic makes it even worse. Gonna be a long crawl out of this hole. And Summers, etc. laugh all the way to the bank. Occupy everything.
11-30-2011 11:56 PM
nycstripes What's keeping all of the currencies from completely crashing is the hope that they've got their crap together...which they do not. We're all printing money like mad and we're still headed for a steep cliff.

If the market creeps up some more, I'm bailing on my 401k and getting it into savings. The market is way too volotile for my taste. I believe it will crash again because despite the "deal" they've reached in Europe, Greece, Spain, Italy, Potrugal and other countries are completely broke and no deal is going to change that.

Worse is that we're propping up the Euro even though we are essentially broke as well. Why can't Europe borrow directly from the Chinese instead of us doing it to "donate" to the f'd up Europeans? Sickening.
11-30-2011 11:34 PM
sburns2421 Now, 18 months later, it takes basically the intervention of the world to keep Europe afloat.

Huge rally today and the dollar was down a bit compared to the Euro. Neither one makes sense to me...

Central Banks Announce Coordinated Liquidity Effort to Alleviate Euromess naked capitalism



04-19-2010 02:08 PM
sburns2421 Two months ago it was Greece, and after much posturing and games it appears a bailout (loan) is in place. Part EU and part IMF. It was interesting watching how all sides played this one. Germany actually benefits from a weaker Euro as they export so much, so on the one hand a bailout that dilutes the value of the Euro is advantageous. That has to be tempered with the precedent set for helping their poorer partners however.

A strong Euro actually hurts Germany's exports and helps the US to export more. Considering the US will provide a few billion of the bailout to Greece and gets a cheaper Euro to boot it sounds like we probably got the worse end of this deal.

Portugal is now in the sights of the big money players, and just as Greece was tested so too will Portugal this spring. There is a possibility it will be like dominos, one struggling Euro nation after another will be tested, and the players get bigger (Spain, Italy) as you go.

Going to be an interesting summer.



02-12-2010 08:20 AM
DesperateSP2 The problem is Asia is desperately looking for a new reserve currency/medium. Chinese do not fully trust the dollar and the Indians even more so. The great bubble of 2000-2008 has shaken faith in the once unassailable fiat money system and when India bought a few hundred tons of gold from the IMF she sent a very strong signal. Either the US gives the world a new Bretton Woods Agreement or the dollar days as a reserve currency are numbered.

Europe now. Yesterday the press announced a bailout package for Greece which amounts to... zero. Apart giving lots of "moral support" and recommending measures to reduce budget deficits Germany has refused to move as much as a finger. Greece has to weather the storm on her own. In short they are either being pushed toward Italian-style "creative financing" or asking the IMF for help. I personally believe Greece will probably try the first approach since the EU has turned a blind eye on both Spain and Italy for the past ten years and will probably do the same for other member States. This means the Stability Agreement is effectively dead and buried and the "economical acrobats", like Italy, are conning Germany, Holland etc once again. No, wait, this means Germany, Holland etc are allowing themselves to be conned once again.
02-10-2010 07:08 PM
20_RC51_00 regardless what the ECB or the FED do there is only one end result and there is no changing it or mitigating it, only postponing it. All the central banks/govts know this.... either that or they are in a mode of "group think", or blatenlty stupid and wreckless with the money and livelyhood of the populace (which is suicide!.... or more likely homicide lol). IMO what they are trying to do is pospone in a hope that the other tanks first because to follow is to be in the priveleged position relative to the first loser.
02-10-2010 02:06 PM
sburns2421 If Germany chooses to bail out Greece the domino effect for other weak countries will possibly mean the end of the EU as it exists today. Greece is a relatively small economy, GDP is $261B. Spain and Italy combined have a GDP more than ten times that amount. Germany would have a very hard time bailing them out as well.

I do not disagree that deficits as a percentage of GDP for each country are an important metric, but also look at the percentage of total external debt to GDP.
Greece = 161% ($420B/261B)
Spain = 171% ($1939B/1134B)
Italy = 127% ($1785B/1406B)
Ireland = 1267% ($1824B/144B)
Portugal = 214%
Germany = 178%
United States= approx 100% ($13400B/13400B?)

Also factor into that the dollar's current fortuitous standing as the reserve currency and you can make the case that the US, for all its problems, has a huge advantage over the Euro. People get scared country X is going down? Pull money out of country X and put it into dollars. That same flight to safety was what boosted the dollar last winter when the crisis came to light.



02-10-2010 12:01 PM
DesperateSP2 There's one interesting thing to note about the economies of Greece, Spain and the US.
Greece is running a deficit equal to 12,3% of her own GDP. Spain is running a deficit equal to 11,6% of her own GDP. The USA are running a deficit equal to 11,4% of their own GDP.
Yet while the two former countries are presented as basket cases on the brink of making extremely painful choices to make ends, the USA are presented to be in top shape. Tim Geithner said there are zero risks of having Moody's downgrade the AAA rating on US bonds. Easy to say since Moody's is pretty much on a leash (the proof: they are blissfully ignoring the most explosive situation in the world, namely Japan).
The assumption is usually the US has the almighty FED covering their backs while Greece and Spain have a very reluctant German-controlled ECB.
But all the FED can do is simply print more money to buy US bonds: a textbook inflationary scenario. They cannot even slash interest rates anymore since they are already in Bank of Japan mode. Very dangerous, considering the fact that the main US banks are sitting on mountain of liquidity (held at the FED which pays them a little overnight interest). Even if the FED stops "printing" money overnight this liquidity is bound to start trickling through the dam. If the US government finds a way to force/cajole banks to lend at pre-2008 levels (to keep up GDP growth at the present unrealistic levels) inflation will undoubtedly explode. The FED knows this. The US government knows this. It's a lose-lose situation: either bite the bullet and accept a "Japan's Lost Decade" scenario waving bye bye to tumultuous nominal GDP growth (needed to keep bond interest rates down on international markets) or embrace the risks of inflation. This implies of course a stable international situation.
We Europeans are in a different tight spot. As I said the ECB is largely controlled by Germany. Germany has used the euro very craftily: it helped her to make their own exports more palatable while keeping the CPI at home under control. The costs have been shouldered by peripheral members like Greece, Portugal, Hungary etc. Their exports became less and less competitive and they experienced serious problems with the wage-consumer prices system. Their leadership knew perfectly when they signed the EMU: the alternative was to be barred from the rich German market. To somewhat sweeten the pill Germany promised gifts in the form of EU funds. Peripheral members took they'd be helped out in case of a financial crisis though Germany never openly committed to that.
Now the crisis is here and Athens and Madrid have already expended the last cartridges. They are waiting for the ECB and Germany to come to the rescue. As I've already said while the kanzellerin favors a bailout plan, most of the country opposes it, including her most powerful political allies (the Bavarian Christian Party). Too expensive and too risky.
If Germany bails out Greece and Spain it would take away what little meaning the Stability Agreement (imposing a 3% limit to deficits, only Luxembourg regularly meets it) carries. And rescuing Spain would be "expensive" to say the least. If the ECB were to inflate the euro to help Club Med countries kanzellerin Merkel and her government would need new jobs, fast. German voters do not forgive inflation and may as well turn to someone promising them out of the euro. Another lose-lose scenario.
02-08-2010 02:29 PM
sburns2421 At first I wasn't too excited about the bonus issue with the bank employees, although as time has gone on I find my anger rising with regard to continued payouts to people working for broken banks. The big guys (BoA, C, et al) are broken if not technically broke. They would be insolvent and would have went the way of Lehman had TARP not been passed. I saw a thing last week that the average, the average, bonus was $400,000 for these executives for 2009.

Here is my thoughts about bonuses for their employees.
1. If a bank still has TARP funds, no payouts of bonuses, period. These bonuses can be deferred indefinitely until the bank pays back TARP. An employee which resigns to work for another bank gives up his deferred bonus.

2. TARP is "paid back" when the firm has repaid in full with interest equal to the average of the overnight rate (essentially 0%) and the highest rate they charge customers on their credit cards. Suck on that one for a minute.

3. No new employees can be hired with bonus clauses for TARP-dependent banks.

4. Any foriegn bank which chooses to do business in the US must abide by all regulations of the US (this means you, UBS). Any employees who are either US citizens or work in the United States for one day will be assessed income taxes that year by the IRS.

Some may say this tramples on the sanctity of contracts. I would counter that Obama and crew already blew that one away with the Chrysler and GM bankruptcies. There is a clear order in which parties get paid in a bankruptcy, but somehow Gettlefinger and the UAW was able to jump up in line.

Others within the banking industry say that not paying these bonuses would give foreign banks or non-Tarp banks the pick of the litter of employees. If foreign banks want these guys to do the same for them they did to the US and UK banking industry...have at it.



02-08-2010 03:01 AM
Area 51
Quote:
Originally Posted by DesperateSP2 View Post
I'll give you a hint...
...his voters want precisely this.
I agree with about 1/4 of your entire post and disagree with the rest. But it's too long and too late to get into it.
02-07-2010 02:49 PM
20_RC51_00
Quote:
Originally Posted by DesperateSP2 View Post
I'll give you a hint of US politics and economy as seen from the outside.
When President Obama was elected in 2008 he had the whole of Europe at his feet. Someone even proposed he should be nominated EU president since he was far more popular than any European politician.
Then the Nobel Prize came. The media had really a hard time explaining why a man who had barely had time to move into the White House was given the same award Mother Theresa and Linus Pauling obtained after a lifetime of efforts. Then came the "drone warfare" in Pakistan and the request to NATO allies to send in more troops for the "surge". While Euro politicians hurried to Persepolis to bring gifts and promises to the Great King, President Obama's popularity in Europe tanked. Americans have little idea how deeply unpopular the occupation of Afghanistan is here. While a few sycophantic journalists may still spout insanities about "fighting terrorists", we just do not see the point. The fact that medias tend to downplay news of NATO "allies" being killed or wounded surely doesn't help.
Now, I have already said that for his personal faults I believe President Obama to be a very intelligent man. And as intelligent as he is, he's understood perfectly Europe's doomed. His performance at Copenhagen was worthy of the most consummate politicians: he pleased the self-important European peacock strutting in their garden with grandiloquent dialectics but defused the potential crisis with Asia by doing absolutely nothing. A little after he announced he will not take part in the US-EU talks set for March: he'll send Secretary Clinton instead. Europe's been taken in and woke up to discover everybody's betting on her decline, even the man she considered her best friend.
Economy now. The crisis is not over, the depression's just started. Yet America desperately wants to believe the good times are here again and the government is only to happy to deliver. Younger Americans look up at their Baby Boomer parents and grandparents and say to themselves "hey, we want the same lifestyle they had!". Bring in more mortgages, bring in more inflation, bring in larger fiscal deficits. While Deng Xiaoping told Chinese to go out, roll up their sleeves and get rich, US politicians are telling Americans: stay there and we will make you rich. Your only duty is to keep on spending and trusting us. How dangerous is such a policy? And how stupid are the people believing it? When we were young the only path to prosperity was working hard, saving money and be smart enough to understand your position. Right now the path to prosperity is getting a loan and squandering the money on hopeless ventures or simple consumption. Even if you try saving money what's the point? Interest rates are zero, inflation will eat your savings like a legion of starving rats.
Yet President Obama is intelligent enough to understand his voters want precisely this.
sums it up quite well.

The boomers should have been left the aftertaste of their spoils. Too bad about the bailouts. It really would have wipe their dumb smirks off their faces and set them straight seeing their savings and pervers investments tank! There really is no justice is this world.
02-07-2010 10:02 AM
DesperateSP2 I'll give you a hint of US politics and economy as seen from the outside.
When President Obama was elected in 2008 he had the whole of Europe at his feet. Someone even proposed he should be nominated EU president since he was far more popular than any European politician.
Then the Nobel Prize came. The media had really a hard time explaining why a man who had barely had time to move into the White House was given the same award Mother Theresa and Linus Pauling obtained after a lifetime of efforts. Then came the "drone warfare" in Pakistan and the request to NATO allies to send in more troops for the "surge". While Euro politicians hurried to Persepolis to bring gifts and promises to the Great King, President Obama's popularity in Europe tanked. Americans have little idea how deeply unpopular the occupation of Afghanistan is here. While a few sycophantic journalists may still spout insanities about "fighting terrorists", we just do not see the point. The fact that medias tend to downplay news of NATO "allies" being killed or wounded surely doesn't help.
Now, I have already said that for his personal faults I believe President Obama to be a very intelligent man. And as intelligent as he is, he's understood perfectly Europe's doomed. His performance at Copenhagen was worthy of the most consummate politicians: he pleased the self-important European peacock strutting in their garden with grandiloquent dialectics but defused the potential crisis with Asia by doing absolutely nothing. A little after he announced he will not take part in the US-EU talks set for March: he'll send Secretary Clinton instead. Europe's been taken in and woke up to discover everybody's betting on her decline, even the man she considered her best friend.
Economy now. The crisis is not over, the depression's just started. Yet America desperately wants to believe the good times are here again and the government is only to happy to deliver. Younger Americans look up at their Baby Boomer parents and grandparents and say to themselves "hey, we want the same lifestyle they had!". Bring in more mortgages, bring in more inflation, bring in larger fiscal deficits. While Deng Xiaoping told Chinese to go out, roll up their sleeves and get rich, US politicians are telling Americans: stay there and we will make you rich. Your only duty is to keep on spending and trusting us. How dangerous is such a policy? And how stupid are the people believing it? When we were young the only path to prosperity was working hard, saving money and be smart enough to understand your position. Right now the path to prosperity is getting a loan and squandering the money on hopeless ventures or simple consumption. Even if you try saving money what's the point? Interest rates are zero, inflation will eat your savings like a legion of starving rats.
Yet President Obama is intelligent enough to understand his voters want precisely this.
02-06-2010 10:42 PM
Area 51 So in your pea-sized brain the Dems are toast. But they'll still have a majority. What does that make the Republicans? Besides airport-stall lovers, I mean.
02-06-2010 09:39 PM
RockyMt As opposed to the recent "Louisana Purchase" or any of the 100 other under the table, backroom deals that Barry is doing now in his new "open" admin.? You all drank the sound-bite cool aide, and now it just doesn't taste the same does it? No worries, the Dems have shown even with a President and majorities in the House AND Senate, they are too limp dick to pass ANYTHING. They're TOAST next election cycle!

Semper Fi!

-Rocky-
02-06-2010 09:02 PM
Area 51 Speaking of puppeteers, how about today's article about Republican senators holding up the confirmations of Obama appointees?

washingtonpost.com - nation, world, technology and Washington area news and headlines

It seems that our senators are willing to trade confirmation votes for pork barrel spending. Now that is real conservative fiscal policy if I've ever seen it. Change we can believe in...not.

It sounds suspiciously like extortion too. Isn't there a law against this sort of thing? Gee, maybe I should have posted this in "Right-Wing Perverts".

But of course, after Old FART reads this he will probably want to talk about CFLs...again.
02-06-2010 08:29 PM
Area 51 ^
Exactly. Get in line, XFOB.
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