Let's Make a European Deal

The Greek financial rescue signed on the weekend is a multi-year package totaling €110 billion.  It is a necessity if Greece is to avoid default on May 19th. As Prime Minister Papandreou said with Mediterranean brio, “What is at stake is the survival of the nation”.  Surely not.  Many nations have survived defaults, Russia and Argentina to name only the most recent.  Survival, in Mr. Papandreou’s terms, means within the European Monetary Union and the European Union. Those memberships might not survive a Greek default.

The Greeks had been defiant as recently as one month ago when Prime Minister Papandreou told his European fellows leaders that if help were not forthcoming then he would go to the IMF for a loan. Mr. Papandreou was counting on European pride; he neglected to consider German practicality. Angel Merkel said, we agree let us go to the IMF.

We can assume the Greek rescue becomes fact, if not this weekend then some moment before the May 19th bond redemption.  Let us further assume the best political case. The Greek people acquiesce and support the government. The protests in Parliament Square in Athens die out.  The anarchists return to Eksarxia. No other revisions are made to government deficits. The world economy continues on its moderate recovery and does not fall back into recession.  In those favorable circumstances, what can we expect will be the long-term effects of the Greek debt rescue?

Austerity plans will follow in Portugal, Spain and perhaps Italy.  Frightened by the terms that the IMF will impose on Greece, governments in those countries will not want to risk credit market displeasure.  There will be protests from unions, civil servants and social welfare rentiers, but the logic of the private debt markets will impress all but the most recalcitrant of the population. It is far better to be in control of your finances than to cede power to the IMF.   The logic of the debt market is simple.  Governments cannot compel private individuals to lend money the way they can compel tax obedience on their own citizens.

Austerity will keep EMU economic growth below that of its trading partners and below its own long term potential. The IMF predicts that the Euro zone will grow 1.0% in 2010 and 1.5% in 2011.  That is less than the projected growth for the United States, 3.1% in 2010 and 2.6% in 2011, the United Kingdom 1.5% and 2.5% and even Japan 1.9% and 2.0%.  Individual EMU countries will perform better. Germany and other high value exporters will be relatively prosperous with a recovering world economy, but the EMU as a whole will have an extremely weak recovery.

The ECB will keep rates low longer than the United States.  The central bank will have no choice. European governments and the IMF need not only the approval of their legislatures but also the acceptance of their people. With inflation at 0.9% in March and 1.4% yearly and core CPI at 1.0% in March, low rates are a popular concession that the ECB can afford.

Anemic growth in the EMU and the inability of the ECB to raise interest rates will keep the euro on the defensive as the Fed slowly but with the security of moderate GDP growth starts on the long road back to normal interest rates.

The cost of this three-month wrangle and IMF rescue will be to halt the political unification of the EU in its tracks.  The Lisbon treaty was already widely unpopular in Europe but at least the accretion of central power to the EU commission could be held up as some kind of logical extension, comparable to the federal union of the US.

In its first real test of operational as opposed to theoretical unity, the EMU and the EU were forced to turn to the IMF for help.  The nations of the European Union turn out to be nations first and EMU members second. The EU did not turn to the IMF for liquidity; there was plenty of money available within the EU to rescue Greece. It was for political expediency and cover that the IMF was needed. The IMF was able to force the terms on Greece at arms length from the EMU. The fiction was a useful in Germany, where it kept the taxpayers from bearing the entire financial burden, as it was in Greece, where German imposed terms has unfortunate historical connotations.

The Greek debacle will also have permanent ramifications in the bloc of countries that are EU members but not participants in the single currency. The Union has 27 members, the EMU only 16. All EU members are supposed to give up their individual currencies and join the euro as soon as they can meet the convergence criteria of the Maastricht Treaty and satisfy the 3% and 60% deficit and debt limits.

For relatively advanced countries  like Poland, the Czech Republic and the Baltic trio of Estonia, Latvia and Lithuania, whose economies can compete with  Germany and France, as well as less developed nations as Bulgaria, Romania and Hungary,  whose economies are not ready to compete, the advantage of a separate currency has been demonstrated without reserve. Countries in different stages of development and with different cultures cannot necessarily compete successfully in the world market simply because the political logic of a formerly war torn continent says they must.

By the time the full costs of the prolonged Greek crisis are realized they will have affected almost every aspect of European political and economic life.

It has permanently damaged the ability of the Europeans to accomplish the economic and political agenda of current leadership set for them by the immediate post World War Two generation. It will inhibit European GDP growth for several years, at least as long as the austerity budgeting lasts and perhaps longer. It has undermined the credibility of the ECB and its ability to counter inflation. Finally, it has shown the world that the EU cannot sustain any claim to federal status. Brussels is only a bureaucracy. When politics become difficult the Europeans act as nations and not as part of a federal union.

The US Dollar cannot but benefit. Regardless of the dollar's comparative economic performance in the future, the US currency will retain its preeminent status in the world economy. Its only competitor for reserve status, the euro, is the currency of the EMU, an economic but not yet a political unity.


Joseph Trevisani

Caro Arrábida

O meu obrigado pela participação na brincadeira,  simples e inofensiva.

Era apenas para descongestionar o cérebro do trading por uns momentos.

Conforme prometi aqui vai o nome do craque autor da resposta.

A resposta é de um craque Português talvez o mais odiado por todos , mas  que não deixa ninguém indiferente,  mesmo depois de ter morrido há cerca de 40 anos.
A personagem é curiosa como acabamos de ver .

O autor do artigo julgo que queria chamar a atenção para o seu lado socialista!! , e foi interessante a sua resposta  dizendo, sem saber, e sem qualquer influencia, que se tratava  do comportamento de uma pessoa ,  naquelas circunstancias, do  comportamento de uma pessoa de extrema esquerda.

É interessante o resultado de uma análise sem preconceito.  É que se tivesse indicado de inicio o nome do autor, ninguém diria que a resposta era de pessoa extrema esquerda, mas sim de extrema direita( é-lhe atribuída governação direita ).

Já está ver que a resposta é atribuída ao Dr. António que governou o País, durante a  ultima grande crise da 1ª metade do século passado , de 1920 a 1930, mais ou menos. Governou de 1928 a 1970 mais ou menos.

A brincadeira era simples ,se se soubesse o nome do autor de inicio ,  a resposta nunca seria extrema esquerda. Veja-se como são estas coisas.

Não deixo  o texto integral para não causar polémica.

Arrabida , cumprimentos, bons negócios, e obrigado pela participação
fisher

Caros companheiros
Zimmerman , e Camafeu

Gostei  dos vossos  comentários  porque mostram que o Mundo parece estar descontrolado.

E o descontrol paga-se caro, com crash nas bolsas.

Como sabem eu defendo  a queda do Dow para os 4.000 pontos e defendo a teoria de crise dos Maias e Chineses para o fim de 2012, porque estão de acordo com minhas teorias, mas ainda faltam 2,5 anos.  

Em minha opinião não há lugar  a falhanços.. E estes vossos comentários vêm reforçar estas previsões porque mostram que está tudo perdido , está tudo endividado , e vai tudo estoirar daqui a 2 ou  3 anos com mais Países no incumprimento certamente.

Todo o Mundo parece que está entusiasmado com o aumento das dividas . Todo o Mundo defende o aumento das dívidas.

Os Gregos devem estar descontrolados. Estão com uma divida às costa de muitos biliões.  
Em vez de  pagarem o que devem , o que seria fácil hoje, vão agravá-la, aumentando-a, em mais 110 biliões.  Se não podiam pagar uma divida mais pequena como vaõ pagar agora uma divida maior. Qual a lógica disto, não há.

Isto vem mostrar que o Mundo perdeu a cabeça,  perdeu a noção da lógica,  tudo vai ter de de cair, com um estoiro que se ouvirá na china.  É como a capitulação do mundo financeiro. E estamos ainda no principio. Faltam ainda quase 2,5  anos calculados para o estoiro pelos Astecas há mil anos atrás.   2,5 anos é o tempo dos Gregos comerem estes 110 biliões.

E vem dar razão há minha teoria que o crash virá e colocará o Dow nos 4.000 pontos . Não tenham dúvidas, o crash virá. Os acontecimentos recentes assim o indicam.

Quem me dera estar enganado.

Nota: isto é apenas uma opinião pessoal . todos podem dizer o contrário que não faz mal nenhum.


Caros amigos acabei agora de ouvir uma ideia inteligente:
Ou comemos menos , ou exportamos mais, dizia agora João Salgueiro , nos Prós e Contras. Afinal ainda existe inteligência em Portugal !!. Ainda não estamos perdidos

 fisher,

Conta lá então a alternativa que o governo Grego tem, não aceita os 110 Biliões, e faz o quê?...vai assaltar um banco na Alemanha?

E depois escreves que devia pagar o que deve em vez de se endividar mais, e como iria pagar, se está à beira da bancarrota, não conseguiria honrar compromissos no curto médio prazo, não achas que iria piorar ainda mais a situação?... Como sabes todos os países aumentaram as suas dívidas, num curto espaço de tempo, precisam agora de um período mais longo para poderem recuperar, a oportunidade que se está a dar à Grécia, e eventualmente a outros paises, é essa de conseguirem recuperar aquilo que precisaram de injectar no tempo de crise.

Mais adiante escreves que até 2012 o governo grego vai estoirar os 110 Biliões.. e eu imagino os Gregos a estoirarem todos esses Euros em Festas com muito fogo de artificio, num bacanal grego alargado a toda a nação, deve ser porque eles sabem que o mundo vai colapsar em 2012 e então vão aproveitar muito bem estes dois anos e meio, e divertir-se à grande e à francesa.Tens também de pensar que estes 110 Biliões não são emprestados só assim, a fundo perdido, há um plano, e estará a ser vigiado, pq no que diz respeito a emprestar capital, os paises que o emprestam com certeza que quiseram garantias, e para mais a Alemanha, sovina como é! a Grécia a bem ou a mal terá de entrar num período de austeridade, com tudo muito controlado, agora as consequencias que poderão vir daí, o que irá provocar no País não sei, por esse lado poderá ser uma situação explosiva, mas que alternativa tem a Grécia?... Não aceitar a ajuda só iria prolongar o estado agonizante em que se encontra, com a ajuda poderá respirar melhor e traçar caminhos para sair da situação em que está.

Fisher gostava de saber como é que tu resolverias esta questão, partes logo do principio que não há solução para o problema Grego, e a tua solução seria: Deixem ir a Grécia ao fundo e assim acabam-se os problemas. E Acrescentarias: Não há solução para Paises demasiado endividados, devem todos sem excepção deixar de existir. Até condenares o Mundo ao Colapso.  

The ECB IS Printing

The ECB has been running its printing presses overtime, and it now looks like the presses are going to be running 24/7. The debt of Europe is now being monetized, which basically means that if a country can’t pay what it owes-viola! The ECB will just print more.

Europe’s commercial banks have been able to take the Greek bonds it buys to the ECB and swap them for cash that the ECB prints. This is the indirect monetization system-literally the printing of new money to pay old debts. Before, the ECB’s policy was to accept Greek bonds as collateral for cash as long as at least one credit rating agency maintained an investment grade rating on Greece.

Some thought that the ECB would actually toughen their collateral rules in the wake of the debt crisis and make it more difficult (and expensive) for the banks to trade their bonds. But then came last week’s downgrade of Greek government debt to junk status by Standard & Poors. The ECB’s response? It actually relaxed its collateral rules and will now accept Greek debt no matter how low Greece’s credit rating goes.

No one knows exactly how much Greek debt has been bought by Europe’s commercial banks, because the numbers are not made public. Also unknown what would happen with this bond-for-cash- swaps should Greece ever default on its obligations. For example, can the ECB hold the banks accountable and force them to reverse these swaps (i.e. return the cash received from the ECB for Greek debt)?

Of course, the situation goes way beyond Greece because the implication that is that any country (Portugal, Spain, etc.) that finds it too difficult and expensive to sell bonds into the market will also have its debt monetized by the ECB. In other words, the ECB, with its relaxation of collateral rules, has basically announced that it will print as much money as necessary, or, as much as it can before people decide they’ve had enough and abandon the euro altogether.

We’re actually starting to see this already because the euro is declining not only against other paper currencies but against gold as well. In fact, all paper currencies have been, and will continue to, devalue relative gold.

I said last week that the euro is a doomed currency and that I expected to see it decline to the lower 1.20’s as the year progresses. With the ECB now on a dedicated mission to monetize the debt of Europe, what’s likely to happen is that my downward target will need to be adjusted.

Matt Carniol

28/04/2010
O mercado quer sangue
Portugal acaba de inaugurar a temporada de sacrifícios no altar do mercado para tentar acalmar os deuses das finanças.

Em uma medida extraordinária, o pais ibérico antecipou de 2011 já para 2010 uma série de medidas visando cortes de gastos estatais. Entre as principais, está a limitação em 75% da chamada remuneração líquida de referência (que varia entre 420 euros e 1.257 euros) para o recebimento do seguro-desemprego por desempregados.

O primeiro-ministro português, José Sócrates, deixou claro que as medidas visam responder "ao ataque especulativo sem fundamento à divida soberana portuguesa".

O prêmio (spread) exigido por investidores para comprar títulos da dívida de Portugal (na comparação com o pago pela Alemanha, o mais baixo da União Europeia) já se aproxima do pedido à Grécia quando o país anunciou, na semana passada, que precisa ser socorrida para não reestruturar sua dívida.

Falava-se na semana passada em US$ 60 bilhões para os gregos. Agora, em US$ 150 bilhões. Se for isso mesmo e o problema se estender a países como Portugal, Irlanda e até Espanha, estaremos diante, mais uma vez, de águas nunca antes navegadas _como ocorreu no início da Grande Recessão de 2008/2009.

Agências de classificação de risco rebaixaram a dívida portuguesa ao seu pior nível em termos históricos, grega (reduzida a "lixo") e, agora, a da Espanha. Embora estejam desacreditadas, as notas dessas agências aparecem em muitos contratos de bancos e em papéis que circulam no mercado. Quando um país é rebaixado, o refinanciamento de suas dívidas se torna ainda mais complicado.

A atual crise na Europa é consequência do alto endividamento de seus países e de um cenário de baixo crescimento (leia a coluna Beco sem saída). Dificilmente esse nó será desatado tão cedo, sem graves consequências de longo prazo.

Com um mercado altamente engessado e com um setor produtivo e agrícola extremamente dependente de subsídios, a União Europeia se assemelha mais a um transatlântico enferrujado. Neste ano, no melhor cenário, poderá crescer apenas 1%. Sem o PIB aumentando mais rapidamente, todos os problemas ficam maiores, pois dívidas e déficits são calculados pelo mercado sempre como proporção do PIB.

Quanto mais cresce esse denominador (o PIB), menores ficam os problemas estruturais.

Os EUA, com uma economia bem mais aberta, dinâmica e sem amarras e sem grandes obrigações para demitir ou contratar, já estão apontando para um crescimento de 3% do PIB neste ano. Mantida essa tendência, seus problemas de endividamento, hoje em alta, podem começar a diminuir no médio prazo.

O caso da Europa é grave porque, além de endividada, terá de fazer cortes profundos para aplacar a ira do mercado e provar que terá como honrar suas dividas.

Isso, infelizmente, só tende a segurar ainda mais o crescimento do PIB e a reforçar o aparecimento de uma série de números ruins.


Fernando Canzian, 42 anos,
http://www1.folha.uol.com.br/folha/pensata/fernandocanzian/ult1470u727246.shtml

Hollies

Desculpe que diga que respeito a sua opinião, como não podia deixar de ser, mas não posso concordar minimamente.

Mas. desculpe que diga  que já respondi ,praticamente a todas as questões que Pôs, nos escritos anteriores.

Desculpe que diga mas tudo o que eu possa dizer não vai  concordar. Por uma simples razão  , você defende o agravamento das dividas dos Países com novas dívidas, e eu  defendo exatamente o contrário, eu defendo a redução imediata das dividas e do seu pagamento faseado mas rápido, começando a pagar já, e defendo imediatamente o aumento das receitas em suponhamos 20% mais ou menos , que é muito fácil..  São visões opostas.  Nada tem de comum .

Para perceber melhor a sua ideia diga-me:

Suponhamos que a Grécia deve 500 biliões . Agora com o novo empréstimo de 110biliões  ,na sua opinião a divida sobe para 610 biliões ou reduz para 390 biliões, a divida cresce , ou reduz ?.  

Eu defendo que o que está a dar cabo das economias e a provocar esta crise enorme é o excesso de divida.

A crise ainda nem começou , mas vem aí

Cumprimentos
fisher

ola

é claro que a crise não acabou , há um ano atrás era o Dollar que estava em fogo  cerrado e artilharia pesada , ouviam se entrevistas dos srs. tubarões o dollar vai acabar !! vendam vendam ...desfaçam se dessa nota, agora o filme é o mesmo os actores são os europeus Grécia e Portugal tanto se fala neles que estão na boca do mundo , enfim pode ser que o turismo aumente se o vulcão da Islândia deixar, e o Euro cai a pique , lembram se euro/dollar a 1.60 agora 1.30 quem investe trilhões nos câmbios deve estar a fumar um charuto nas caraíbas e a esfregar as mãos.

e um bom gestor sabe que uma empresa não sobrevive com o aumento de dívida , ela tem de obter lucros e abater a dívida , porque o lucro so é líquido se a empresa não tiver dívida governar é a mesma coisa , e os políticos neste País só querem encher os bolsos .

como diz aquela música "O POVO È QUE PAGA!""

heheheh
bons negócios e nervos de aço

Citação de: fisher em Maio 04, 2010, 22:31

Hollies

Desculpe que diga que respeito a sua opinião, como não podia deixar de ser, mas não posso concordar minimamente.

Mas. desculpe que diga  que já respondi ,praticamente a todas as questões que Pôs, nos escritos anteriores.

Desculpe que diga mas tudo o que eu possa dizer não vai  concordar. Por uma simples razão  , você defende o agravamento das dividas dos Países com novas dívidas, e eu  defendo exatamente o contrário, eu defendo a redução imediata das dividas e do seu pagamento faseado mas rápido, começando a pagar já, e defendo imediatamente o aumento das receitas em suponhamos 20% mais ou menos , que é muito fácil..  São visões opostas.  Nada tem de comum .

Para perceber melhor a sua ideia diga-me:

Suponhamos que a Grécia deve 500 biliões . Agora com o novo empréstimo de 110biliões  ,na sua opinião a divida sobe para 610 biliões ou reduz para 390 biliões, a divida cresce , ou reduz ?.  

Eu defendo que o que está a dar cabo das economias e a provocar esta crise enorme é o excesso de divida.

A crise ainda nem começou , mas vem aí

Cumprimentos
fisher

04/05/2010
Outro atentado terrorista (nas bolsas)

Como era previsível, as piranhas do mercado financeiro sentiram o gosto de sangue, na forma do pacote de ajuda à Grécia, até agora o maior da história, e passaram imediatamente a buscar outra presa. Surgiu, nos mercados, um boato (entre as centenas que os operadores financeiros espalham diariamente) de que estava em preparação uma ajuda ainda mais portentosa, desta vez para a Espanha, no valor de 280 bilhões de euros, mais de duas vezes e meia o que foi prometido à Grécia.

"É uma absoluta loucura", reagiu o presidente do governo espanhol, José Luis Rodríguez Zapatero, forçado, justamente pela "loucura", a passar todo o tempo de uma entrevista coletiva a defender a solvência de seu país.

Não adianta: o rumor mais o fato (real) de que as economias europeias estão excessivamente endividadas mais a notícia de que a produção industrial chinesa estava aumentando no menor ritmo em seis meses - tudo isso levou a um desastre nas bolsas da Europa. Na Espanha, houve uma queda formidável (5,41%), a segunda pior jornada do ano, levando o índice ao nível mais baixo desde meados de julho passado.

Na Grécia, como é óbvio, o tombo foi maior (6,6%), mas não escaparam Paris, Londres, Frankfurt, Milão.

Não adianta Zapatero esbravejar e dizer que "não podemos estar continuamente pendentes das especulações". São elas que marcam a pauta, goste-se ou não.

Tanto que o dado sobre a produção chinesa seria pouco significativo em outro ambiente. Afinal, não houve queda, mas crescimento menor --e em um período de apenas seis meses, que é reduzido para decretar que a economia chinesa, motor do mundo, vai desacelerar, que a China vai comprar menos commodities (o Brasil seria uma vítima, nessa hipótese) e por aí vai.


O fato é que os mercados estão praticando atos seguidos de terrorismo financeiro, sem que os governos consigam reagir à altura e em tempo.


http://www1.folha.uol.com.br/folha/pensata/clovisrossi/ult10116u730074.shtml

Fisher,

as situações não se resolvem de um momento para o outro, é preciso tempo, e é isso que aqui está também em causa.  Há algo que me parece claro, a Grécia precisa dessa ajuda, se não precisasse tb não a solicitava, dizes que em vez de contrair mais dívida deveria começar a pagar a que têm, e como faria isso?... Fisher gerir um País envolve ter recursos financeiros, aquilo que a Grécia não tem neste momento, daí todos esses Biliões de empréstimo, que vai ser executado segundo um plano, quando a Grécia tiver as contas mais equilibradas, com as medidas que irá tomar, começará a honrar este empréstimo, e a fazer descer a Divida, mas isso tem de ser com tempo, é nisso que temos de confiar, a Grécia neste momento não consegue fazer isso, e sem esse empréstimo ficaria paralisada. É claro, que passado um determindado tempo, se as coisas piorarem em vez de melhorarem, aí sim, será um grande problema, e existirem mais paises na situação da Grécia, aí não sei... mas uma coisa de cada vez, querer ver tudo resolvido de imediato é uma fantasia. Já li tb aqui no Fórum referirem-se à Islandia, que esteve também à beira da Bancarrota, tens ouvido, lido alguma coisa sobre a situação da Islandia.... aparentemente a situação ficou controlada, pelo menos não existiram réplicas, até agora.

Caro Fisher

Só agora dei conta da sua resposta à brincadeira que propôs no fim de semana e em que eu participei com todo o gosto, tendo pena que não tivesse havido mais participação. Confesso que essa resposta seria a última que eu daria, mas como dizem, os extremos tocam-se !... e vindo de quem vem, nada pode surpreender (digo eu), portanto sempre a aprender.

Bons negócios também para si, e cumprimentos
Arrabida

Greek rescue more than everyday political monkey-business

Poof – above Europe, a trillion dollars just popped out of the air! The Greece bailout is even more impressive than the $700 billion that popped out of the air in September 2008, for the U.S. Wall Street bailout. It’s not just that politicians delight in distributing money like candy, knowing the invoice won’t come due until after they have left office. When gasp-inducing amounts of money pop out of the air, something more than everyday political monkey-business is at hand.

European Union nations decided they have an extra $1 trillion to spend because the Greek debt meltdown threatens not just Greece, but money itself. Currency, at heart, is a Ponzi scheme. Money has no inherent value. You can’t eat it or wear it: money is only good to the extent someone will trade you something for it. Nowadays most money can’t even be held in the hand, rather, exists entirely as numbers on electronic ledgers. If Greece failed financially, why should anybody believe government statements about money? That’s what had European governments spooked.

No gold ingots were offered to Greece, no satchels of unmarked bills — only some zeroes. “Your money problems are solved because we assigned you a bunch of zeroes:” that was the essence of Monday’s statement to Greece by the European Central Bank. The award to favored businesses of a bunch of zeroes was likewise the essence of the 2008 Wall Street bailout. Only by drawing ever-more people into an arrangement this nebulous can nations keep alive the notion that currency – digits on ledgers – holds great value. This is a Ponzi scheme on a scale that would make Charles Ponzi blush.

Three core powers sustain a modern state: military force, police power and the administration of money. Of these, money is most important. The United States Congress, and the legislatures of the European Union, quickly would be reduced to poorly run debating societies if they didn’t exert authority over money.

And money at the national-government level is a Ponzi scheme. Money that you trade face-to-face to a grocer or car mechanic is real enough, zeroes on government and big-corporate accounts are abstractions. The fear that big banks would be exposed as guardians of vaults full of zeroes caused Congress to throw $700 billion without protest in 2008; now the fear that sovereign purses would be exposed as stuffed with tremendous quantities of nothing caused European governments to throw $1 trillion.

Many commentators are pointing out that it is fundamentally absurd to respond to excessive debt, whether in Greece or on the part of U.S. homeowners who signed gimmick mortgages, by offering more debt. It is absurd. But this absurdity sustains the illusion of currency – it continues the Ponzi scheme. (See below on other unsettling aspects of borrowing-based bailouts.)

Political-elite fear must run deep in order for $1 trillion to be offered as a gift. When Congress bailed out American banks and mortgage-holders, at least the funny-money was flowing to constituents of the legislators making the decision. In this week’s European bailout, voters in Germany and France are being asked to sacrifice to sustain a spoiled, unproductive lifestyle in another nation, possibly in several. Why would Germans who work hard sacrifice so that Greeks can continue to work little, perhaps so that Spain and Portugal can take the afternoon off with pay?

Because money itself is at stake. German and French politicians are sure to be hammered by angry constituents who don’t like being compelled to subsidize Greece. But Germany and France benefit because at least the illusion of currency is sustained. That’s what is in the deal for the European nations providing the $1 trillion.

“We’ll just borrow more” cannot, logically, go on forever. But sustaining the notion that government-issued bonds are valuable allows today’s politicians to avoid hard choices, passing them along — with more problems added — to tomorrow’s politicians. And after handing out free money, the second-favorite activity of politicians is avoiding hard choices.

Before becoming Barack Obama’s budget director, Peter Orszag ran the Congressional Budget Office. At the CBO, an advisory agency, Orszag repeatedly warned against debt: since becoming a White House official, he has yet to meet a giveaway he didn’t like. In September 2008, in a little-noticed exchange on the PBS television show Newshour, Orszag the CBO director warned of an ultimate day of reckoning in which lenders stop lending. The subject of discussion was the $700 billion being thrown at credit markets:

ORSZAG: One thing we need to remember is we’re lucky that we have the maneuvering room now to issue lots of additional Treasury securities and intervene aggressively to address this crisis.

JEFFREY BROWN: Wait a minute. Explain that. Lucky in what sense?

ORSZAG: That people are still willing to lend to us. If in 20 or 30 years we continue on the same path, with rising health-care costs and rising budget deficits, we would reach a point where we wouldn’t have that ability.

Will it be 20 years until “people” – meaning Asian governments and oil-state sovereign funds – stop being willing to lend to the West, or will that moment come sooner? In 2000, the United States national debt, stated in today’s money, was about $7 trillion; now the number is nearly $14 trillion.

That is to say, adjusting for inflation, Washington has incurred as much debt in the last decade as in the entire prior history of the United States. Money can pop out of the air at such a prodigious pace if you’re running a Ponzi scheme — but all Ponzi schemes ultimately are exposed. How long until the United States and European Union want to postpone yet another problem by yet more borrowing, and no one is willing to lend?

WHY IS THE BAILOUT OF GREECE WORSE THAN THE BAILOUT OF WALL STREET?

The U.S. banks and Wall Street firms bailed out in 2008 had assets; Greece has only liabilities. So far about $370 billion of the $700 billion Wall Street bailout fund has either been repaid to U.S. taxpayers or never actually spent, and it is likely more will be recouped. However zany or ill-managed, the Wall Street bailout involved tangible assets that had a decent chance of recovering their value.

Greece, on the other hand, is a pure money pit. Suppose the European Central Bank offered you a loan to take Greece private. The asset side of the ledger – historical sites, Mediterranean vistas – would pale before the liabilities side.

The latter shows hostile public employees who shut down cities and commit arson as they demand two months’ of bonus wages for no work; a public pension system that offers full retirement at age 61 (in the United States, it’s 66); corrupt, spineless officialdom; and tax-evading millionaires protected by said corruption.

Greece’s productivity is low, its welfare costs high, its business climate poor – and try to name the last important economic innovation to come from this nation. There is little chance the Greek GDP will grow rapidly enough to pare debt. The best-case for the bailout (assuming austerity actually is imposed, which may not happen) is that it prevents debt from growing appreciably worse.

Reuters dispatch, Tuesday, regarding Greek government bonds: “Moody’s said a cut to the Baa range or even below investment grade was possible.” Is there one single person in the world who believes Greek national debt is an investment? Investments offer future yields. All Greece currently offers is ever-more demands for special handouts. That Greece may be the future of the West is more than a little disquieting.

BUT AMERICA ISN’T GREECE, RIGHT?

The sudden jump from $7 trillion to $14 trillion in U.S. debt is hardly the only scary sign. A year and a half ago, the CBO projected that Social Security outlays would not exceed revenue till 2017; instead this has already happened.

In 2009, the CBO said Social Security would run a roughly $150 billion surplus in the years representing a two-term Barack Obama presidency; now a $70 billion deficit is projected for that period. In 2009, a report from the trustees of the Social Security system said the United States has $107 trillion in unfunded future pension and health care liabilities – that’s about eight times present national debt. Not one thing is being done about the liabilities, while Congress expands health care entitlements and for three consecutive years has awarded bonus Social Security checks to pensioners.

All the current, undisciplined U.S. borrowing is happening before the main cohort of the Baby Boom retires. Debt loads have long been expected to increase at that point. Responsible administration of government would have entailed a concerted effort to pay down debt prior to the Boomers’ retirement party.

Instead in Washington under Obama and George W. Bush it’s been giveaway after giveaway, without accountability. Those projected billions in “savings” from health care reform? No specifics in the bill. Supposedly cuts will be imposed by an “independent physician advisory board,” but the board does not hold its first meeting until 2015. Cost controls on subsidies to the new insurance exchanges don’t begin until 2019, by which time Obama, Nancy Pelosi and most everyone else who backed the bill will have left office.

AREN’T WE ALL KEYNESIANS NOW?

We are. The argument for increased government spending during cool economic periods is quite solid. But the flip side of Keynes is that when the economy is strong, government spending should decline, in order to retire bonds incurred during the cool period. With the global economy now bouncing back, is there any chance any Western government will respond by reducing spending? Giveaways justified in 2008 and 2009 as “emergency” appropriations will become the new norm, from which interest groups will demand further sweeteners. Benefits must go up because of the cloudy-weather crisis! The chocolate milk shortage! The bridge-abutment repair crisis!

AT LEAST INVESTORS STILL LOVE THE UNITED STATES, RIGHT?

Allan Meltzer of Carnegie Mellon University, author of the authoritative and ultra-ponderous “A History of the Federal Reserve” — Volume Two, Book Two was just released and only brings the reader up to the Reagan years – has noted that gimmicks are being used to mask the printing-money aspect of the last three years of Washington policy.

The Federal Reserve has been lending money to banks at token interest – in late 2008 and throughout 2009, the Fed charged banks half a percent, the rate now is .75 percent. (The average in 2007, the year before runaway federal borrowing began, was about 5 percent.) Banks draw funds from the Fed at almost no interest, then buy Treasury bills, or loan to clients who buy them; Congress spends the proceeds from the sales of T-bills; government goes further into the red using money that appears to come from investors, but actually comes from government issuing IOUs to itself.

Not only is this a bookkeeping swindle on a scale not even Fannie Mae dared contemplate, Meltzer believes such gimmicks will cause a round of ruinous inflation. Because there hasn’t been inflation in a generation, we forgot the lesson of the 1970s, which was that inflation is much worse for the average person than slow growth.

Further, inflation could trigger a feedback loop on debt. In the current fiscal year, Washington is paying about $200 billion in interest on federal borrowing. Even mild inflation could push federal debt-service costs to $700 billion annually – roughly the total expenditure for Social Security benefits last year. The only ways to service such high added debt will be higher taxes on the middle class, plus cuts in Social Security benefits and Medicare. Defense spending cuts and higher taxes on the wealthy would help, but cannot alone solve the kind of problem that rising borrowing costs would trigger.

Thus even with the improved tax revenues that economic recovery will bring, the U.S. debt situation may grow worse. Unless you think China is going to give the United States a $14 trillion low-introductory-rate, no-docs liar’s loan.

http://blogs.reuters.com/gregg-easterbrook/2010/05/13/greek-rescue-more-than-everyday-political-monkey-business/

The Euro Currency Crisis May Pause

The European experiment (the creation of a monetary union in the absence of a centralized fiscal authority) is now reaping the rewards of breaking its own rules. Membership in the EU allowed profligate spenders like Greece to borrow at rates that were too low relative to their level of risk, and lax oversight, along with the use of derivatives, gave them the ability to leverage up their debt-to-GDP ratios above treaty levels. By doing so, Europe put  its banking system at risk because it is the large commercial banks that hold much of the paper.

All that’s available to Europe now is to have the ECB print. Where do you think the money for the €700 billion, or €1 trillion (or whatever number is being talked about) backstop plan is coming from?

What’s been happening to the euro is nothing more than a good old fashioned currency crisis, which is defined as currency depreciation coupled with declining bond prices (and higher interest rates). That’s exactly what we’ve been seeing over the past several months because this rapid of a decline is a reflection of the fact fewer and fewer businesses and financial institutions were willing to accept euros in exchange.

Do you want to get paid in euros now? Neither do Europe’s banks (or their customers), which is why the Fed had to re-start its swap facility with the ECB.

European banks need dollars to complete more of their transactions, because euros are not being accepted as there is no way to hedge against a currency undergoing such a rapid decline. So, thanks to the Fed, the ECB can again swap euros for dollars and then lend the commercial banks all the greenbacks they need.

What this means in essence is that Europe doesn’t have its own currency at this time because the banking system can’t function using the home currency. And if that isn’t a currency crisis, I don’t know what one is.

With that being said, we may be seeing a shift in sentiment due to several factors:

- The ECB deciding to print and buy as much sovereign debt it can lay its hands on.

- The European sovereign debt backstop facility.

- The Fed’s currency swap facilities.

- European banks are generating profits (granted due to exceptionally easy monetary policies, but profits nonetheless).

The price action seen last week could be an indication of things to come. As the euro declined an astounding 5.58% from the peak on May 10, European stocks rose in all but one of 18 western European markets with the Stoxx Europe 600 Index rallying by 4.8%, the most in 10 months. At the same time, a measure of banks in the index gained 6.7%.

As the world was imploding back in the Fall of 2008 and the TARP (along with globally coordinated quantitative easing) were being implemented, the S&P 500 continued to trend down until reaching a bottom on March 9, 2009. From there of course we’ve seen about a 70% gain to April 26 of this year. What this shows is that coordinated and extraordinary actions by Central Banks and governments can support the system and cause rapid, strong growth to occur no matter to what degree things are disintegrating. And while this may seem somewhat obvious in retrospect, it certainly wasn’t the view when these programs were first being implemented and the global financial system looked as if it was falling into the abyss.

If you compare the Lehman collapse to the current European sovereign debt crisis, with the TARP being analogous to the €700 billion EU backstop facility, we may see markets react positively at a far more rapid pace exactly because investors have recently traded through a similar circumstance and have witnessed the eventual outcome. So, while I said on April 22 that the euro would move into the lower 1.20’s, after over 900 pips of depreciation what I’m saying now is that it’s time to close short euro positions and look for a bounce into the mid 1.25’s with an eventual move towards the lower 1.28’s.

This doesn’t mean that the euro can’t depreciate further; indeed, I believe that a declining euro is an essential element of the European plan. But the depreciation cannot be “disorderly” i.e. over 5.5% in one week, because it’s too destabilizing to the banking system.

http://www.fxinstructor.com/blog/a-good-old-fashioned-currency-crisis

Merkel Warns of Europe's Collapse

'If Euro Fails, So Will the Idea of European Union'

In a dramatic appeal for Europeans to come together to address the common currency crisis, Chancellor Angela Merkel warned Thursday that if the euro collapses, so will the idea of European unity. She also described the current euro crisis as Europe's greatest test since the collapse of communism.

During a speech given during the awarding of the prestigious Charlemagne Prize for furthering European unity in Aachen on Thursday, Chancellor Angela Merkel used strong words to address the current euro zone crisis. If the euro collapses, Merkel warned, "then Europe and the idea of European union will fail." In her speech to guests gathered to honor this year's recipient of the award, Polish Prime Minister Donald Tusk, Merkel called on Europeans to come together, saying that deeper coordination of economic and finance policies is needed.

"We have a common currency, but no common political and economic union," she said. "And this is exactly what we must change. To achieve this -- therein lies the opportunity of the crisis."


European governments, she said, promised their citizens stability for the common currency, the euro, "and we must keep that promise." Merkel described the current crisis as the "greatest test for the EU since the collapse of communism." If we do not succeed in mastering this crisis, she warned, it will have "unforeseeable consequences" for Europe. "But if we succeed, then we will have a stronger Europe than ever before."

Polish Prime Minister Tusk added that the debt crisis didn't mean the beginning of Europe's twilight. "Paradoxically, I see an opportunity in the crisis," he said during his acceptance speech, "to strengthen and further develop Europe. The bell is tolling for Europe, and overcoming this crisis will be the best proof."

http://www.spiegel.de/international/germany/0,1518,694696,00.html

Caros amigos Fisher e Camafeu
"Nós temos uma moeda comum, mas não comum da União política e económica", disse Angela Merkel

Neste momento passa-me pela cabeça o seguinte: que situação humilhante para Portugal, precursora do descobrimento do Novo Mundo e do comércio internacional com todo o continente africano ,com a Índia e com o Japão, etc....

Portugal como parte da península Ibérica poderia começar a  pensar grande novamente , abandonar estes  europeus falando para o vento e aliar-se aos planos brasileiros de comércio e de relações diplomáticas mais estreitas com países em desenvovimento e com as ex-colônias portuguesas, pois a grande  mídia divulga a todo o instante  que, para a Comunidade Européia,Portugal e alguns outros países são integrantes periféricos,sem grande importância...

Lingua:Vantagem comparativa e competitiva

Com mais de 260 milhões de falantes, é, o portugês, como língua nativa, a quinta língua mais falada no mundo, a mais falada no hemisfério sul, a terceira mais falada no mundo ocidental e das que usam o alfabeto latino. Além de Portugal, é oficial em Angola, Brasil, Cabo Verde, Guiné-Bissau, Macau, Moçambique, São Tomé e Príncipe, Timor-Leste e, desde 13 de julho de 2007, na Guiné Equatorial, sendo também falado nos antigos territórios da Índia Portuguesa (Goa, Damão, Ilha de Angediva, Simbor, Gogolá, Diu e Dadrá e Nagar-Aveli) e em pequenas comunidades que faziam parte do Império Português na Ásia como Malaca, na Malásia e na África Oriental como Zanzibar, na Tanzânia.  E as elites portuguesas só querem  falar inglês e alemão....rsrsrsrs...ridículo....

Históricamente falando, a impressão que fica, é que estas elites enriqueceram povos  do continente europeu  nos últimos quinhentos anos e agora encontram-se perdidas na ponta do mapa sem coragem para decidir que rumo tomar com o seu povo....

Neste momento,nós brasileiros gostariamos de ver a nação portuguesa em uma situação de detaque, trabalhando conosco, de forma pacífica, na reconstrução dos elos com o que foi perdido.

Desculpem eu alongar o assunto sem ter uma ótima visão histórica sobre o seu todo , mas é o que sinto como um __Costa__, um descendente português que sou.

Olhem para o Sul. Aqui é que está a salvação.Mudem a estratégia.
Saudações

Zimermann.'.