"Euro will be dead in five years"

[Skybird]

http://www.telegraph.co.uk/finance/f...ive-years.html

Let's hope so. The final crash-down will hurt and will do a lot of damage. But better an end with horror, than a horror without end.

Four of the economists said that despite the wider suspicion that Greece or some of the weaker economies may be forced out of the currency, the most likely country to leave would be Germany.

Well, that part I will not believe until it happens. Germans are so eager to prove they are the friendly euroopean neighbour and no longer the bully of the block, that it makes them stupid beyond suicidal tendencies. Which is especially true of it's politicians. that the EU commission openly pushes the project of turning the currency union into a transfer union and a club of solidaric debt-sharing, so far has triggered only remarkably little protest from the governmental parties, and the opposition as well.

The fourth case against the 750 billion bailout project has just been filed at the German Constitutional High Court. All four cases are still open. The question is whether or not the court will allow to get intimidated by governmental pressure, or will follow the laws of the Federal Republic of Germany, and it's Basic Law. From a legal point of view, the issue is clear, and this bailout must be considered illegal and incompatible with the German constitution and the sovereignity of the German parliament, and state (assuming of course that soveriegnity still has any meaning anymore in Euroland, which from a EU-commission point of views simply is not the case)

economists say that while years ago they saw a drift of investors and stockholders away from the dollar and towards the Euro, the euro currently gets abandoned en mass (what a surprise). Part of the people "in panic" go back to the dollar (a big mistake in the long run), but a majority seems to flee into other currencies (and gold, of course, which currently is not so attractove anymore due to the high price niveau and solid gold haveing become rare).

Funny. Years ago I had a clash with Subman who now is long since gone, over gold. He laughed when I said that I had made some minor investements into solid gold (the only way to make business with gold, if you ask me, just some "Kaufoptionen" in times of trouble are worth nothing), as a final iron reserve for times of real drama and emergency (meteor impact, nuclear war, world epidemic decimating mankind, stuff like that ) He said that there is no profit to make from trading with gold, and no interest worth the name. I said that you do not buy gold for doing such things, but to have a solid iron reserve that in case of emergency you can trade for substantial items and goods even long after stockmarkets have gone down the drain and printed banknotes are worth nothing anymore.

Additionally, the price of gold since then has more than doubled. That means I have doubled my wealth as far as I had invested it into gold. Gold prices need to fall by 65% comparted to the present, before i would have made a real loss. I will never trust in just some printed papers.

However.

[Alex]

Originally Posted by Skybird

Let's hope so. The final crash-down will hurt and will do a lot of damage. But better an end with horror, than a horror without end.

You and I will be good friends.

[Respenus]

While I understand your concerns over the EU and the euro (let's just say that the whole ordeal has been as botched up in the worse possible manner, threatening the existence of the common market and the prosperity and stability of Europe), what do you think will happen if the euro went away? The financial markets (damn them to hell while we're at it) and more importantly, the common market, which would find itself in a big crisis due to convergence and exchange issues. Do you have any alternatives in mind which would ensure stability, yet without the current structure?

As far as gold goes, we're on par. I only wish I had had the monies and the smarts to invest when it was "relatively" low.

[Tchocky]

Great thing about gold is that you can eat it in a crisis.

[Skybird]

Originally Posted by Respenus

While I understand your concerns over the EU and the euro (let's just say that the whole ordeal has been as botched up in the worse possible manner, threatening the existence of the common market and the prosperity and stability of Europe), what do you think will happen if the euro went away? The financial markets (damn them to hell while we're at it) and more importantly, the common market, which would find itself in a big crisis due to convergence and exchange issues. Do you have any alternatives in mind which would ensure stability, yet without the current structure?

No, and I doubt anybody has. It's a bit like an emergency landing on a foreign planet. You now know you shouldn't have taken the trip, you meanwhile have learned that your rocket has shown to work unreliably, but your engine is failing and you need to go down. Once you have, you only have to choices: stay in your capsule and sooner or later die from suffocation or dehydration for sure (thats the status we currently have), or daring to open the door and see what's out there - and risk to get killed by the alien atmosphere. Or not.

The point of it all? We shouldn't have gone there: not into euroland (and not into space, in that metaphor: not with that faulty rocket). And now you ask me how to get out of he messwithout risks and without losses? I think that is impossible.

I am not about avoiding damage and guaranteeing stability. I am about limiting already present damage that constantly increases , present and future one, I am about limiting the damage to the ammount that cannot be avoided. If you want no damage at all, you shouldn't have gone this way into Euroland. Abandoning the Euro will do massive damage to European economies, and the german economy as well. Possible that in global competition we will not recover from that in our lifetime. The alternative, however, is worse: stay with the euro, no matter the costs. The costs will strangle us, first the rich nations, than the poor. The way the Eu tries to turn Germany even more into the paymaster for the irresponsible smaller nations in the south, really has rang the alarm bells.

So, in a nutshell: with your question I think you simply are a bit too late. The times of "stability" are far behind us.

Add to this the fact that we have approached paytime for the bill we have mounted over the past five decades so irresponsibly. That makes it even worse. We have not even responsibly managed economies and wealth while we were wealthy indeed and our economies ran fine. We did not care to stockpile reserves and to save for the times of emergency we should have expeted to come. Now they are here, by our fault, and they find us not only unprepared, but even having put ourselves in highly damaged positions, without need. If we could not evben live by the income we made when the economy where massively booming, how less we can live with our current ways with the minimal growth rates we can expect even if from now on it all would run optimal for us? We live and lived beyind our means, making debts even in boom-times. So what do you expect...?

That's not just a gale ahead of us. For some nations it could become a white wave. Wet and cold we all will get, and very much so. I am relatively sure that some european nations will collapse. That is an obvious conclusion with so many candidates for that.

[Skybird]

Originally Posted by Tchocky

Great thing about gold is that you can eat it in a crisis.

In case you are not ironic, but mean you can trade it for bread when money has no meaning anymore, you are right.

[UnderseaLcpl]

Excellent analysis, all-round, Sky. I completely agree with you, but probably for different reasons.

The Euro is tanking because the E.U. thought it could do the same thing the US does; borrow heavily or assume debt and largely ignore the consequences. Not all nations in the E.U. are as much to blame as others, but the E.U. as a whole assumes ultimate culpability.

What the E.U. has effectively done is to debauch its own currency, which is the surest way of destroying any economy. The US has been heavily debauching its own currency for quite some time now, but it survives because the dollar became the international reserve currency before anyone else could claim the title, and in a bigger way to boot.

What the E.U. apparently did not realize is that when faced with an inflationary crisis, is that investors - both state and private, will flock to the currency that has traditionally demonstrated the most stability. In this case, it's the dollar. They buy dollars, which are heavily buoyed by the incredible GDP of the US, thus reducing the supply of dollars, thus increasing the value of each dollar at the expense of their own economies.

Europe needs to undergo a major correction of this fiscal policy, as you mentioned. I believe that the market would do this most effectively, and perhaps you have your own ideas, but in any case we are agreeed upon the fact that the change will be painful.

My beliefs are colored by Milton Friedman's observation that inflation is like a drug for nation-states. Few people like taxes, but everyone loves getting free stuff. Thus, printing currency or devaluing currency to pay off debts incurred by public expenditure is a very popular political move. People see the benefits immediately, but they often fail to notice that their unit of currency buys less today than it did last year, or they blame the fact on other factors.

Like any drug, the greater the "high" is, the greater the corresponding "low" will be. And like any drug, the "lows" are a lot more permanently damaging than the "highs". Even worse, you'll need a greater high each time to overcome the previous low, hence the trend towards exponential inflation.

The US is something of a special case, because of our unique position, but we can't keep this up forever. When we go down, it's going to be painful for everyone. Economies around the world will be thrown into chaos as the price system undergoes a radical restructuring. No amount of E.U. fiscal reform is going to change that.

My greatest fear is that after the fact someone will try to step in and introduce a global currency. God help us if that ever happens........and now I'm going off on a tangent.

In any case, good analysis, Sky

Well Sky, I have nothing to add.
You covered the entire topic with accuracy.
Our perceptions and conclussions match perfectly.

Well done, sir!

[Jimbuna]

Great points Sky

I'm pleased the UK have dithered so long about whether to ditch the £ or not.....doesn't mean it's any stronger a currency though

[STEED]

Euro 'will be dead in five years'

No chance.

I am a hard core sceptic who has never got it wrong, two million years of gut instinct tells me its here to stay.

I'm going to my local bookies to put a £20 bet on the euro will stay.

[Skybird]

http://www.spiegel.de/international/...699471,00.html

Addressing Gauweiler's latest constitutional complaint, Berlin said that if the injunction is issued, it could directly result in a Greek bankruptcy. The government also stated that the euro rescue package agreed to by the EU member states in Brussels was "not a legally binding international agreement, but merely a political statement."

Just a political statement? Who does the government think it could make believe this nonsense?

Kerber and his supporters plan to challenge the rescue package's legality under both German rules as well as European law, and they would like to see the German Constitution Court also force the European Court of Justice in Luxembourg, the EU's top judicial body, to address whether the euro bailout is legal under European law.

The German court traditionally is friendly towards past german policies of european integration, and only rarely decides against policies the government claism to serve in that function. Last year we have had a ruling that - partially - was such a challenge of wanted obedience to this european integration imperative, but such rulings are not issues often.

That the EU court would rule against what the governments have decided, I hardly can even imagine, for many observers and insiders agree that the record of the highest EU court in opposing offiocially wanted EU policies is everything but impressive. That may have somethign to do with that the judges are being called into office by EU governments, are being payed royal wages, are serving for limited time only - and can be confirmed for another term afterwards by just these governments. This serves as a nice incentive to not bite the hands that feed them.

[UnderseaLcpl]

Originally Posted by STEED

I'm going to my local bookies to put a £20 bet on the euro will stay.

It may stay, but that doesn't mean it will be worth anything. Precious metals are gaining on every currency the world over while the Euro continues a fairly steady drop against the major currency pairs. Consumers, investors, and even entire nation-states are losing faith in the Euro as a medium of exchange. Given the completely unsustainable nature of current E.U. fiscal policy, political discord, and the rising popular sentiment against the E.U., I don't see the Euro maintaining its status as a viable currency.