Germany got checkmated

Skybird · 03-06-12, 07:20 AM

http://www.spiegel.de/international/...818966,00.html

Quote:

Since the 2007 financial crisis, immense imbalances have formed within the otherwise harmless payment system that exists between the central banks of the 17 euro-zone member states. While Italy, Spain, Ireland, Portugal and Greece, all hit hard by the debt crisis, show deficits totaling over €600 billion, the claims owed the Bundesbank have climbed to €498 billion.
As long as the monetary union continues to exist, this isn't a catastrophe. The money is virtual, created by central banks, and its existence doesn't mean that an equivalent amount is lacking elsewhere. But as soon as a country leaves the euro zone, or the currency union collapses entirely, things get critical.
"We're caught in a trap," Sinn says. "If the euro breaks apart, we're left with an outstanding balance of nearly €500 billion, owed by a system that no longer exists." That figure, €500 billion, is more than one and a half times Germany's annual federal budget.
(...)
"This is dangerous," Sinn says, his eyes flashing. These outstanding balances owed by other central banks open Germany up to blackmail, he explains. "Now everyone knows we have to save the euro, at almost any cost."

Let the funeral feast begin. I see absolutely no possibility how Germany could manouver itself out of this self-imposed suicidal constellation.

We accepted this suicidal insanity becoming reality without anyone pointing a weapon at our head. We Germans are total and complete idiots, me thinks. And still our leaders boast with wide opened mouths and get away with their lies, and still the German people lets them do and does not hunt them down and hang them in the streets instead.

German public debts have exceeded 2 trillion Euros. Calculating all pensions and obligatiosn from current employees in poublic service, analysts estimate the real debt burden caused by the stazus quo and the curreently living people in the range of 6-8 trillion. Compare this to the US with 5 times as big a population - but only (roughly) two times as high a public debt currently. One could argue that Germany financially is worse off than the US. The difference is that markets and most people still have not won full awareness of it - that'S why we still get a better credibility score than America over our financial situation, and find it easier to lease money. But as I see it there is a very solid chance that we will fall from higher, and crash at the bottom with a much louder bang one day in the future. And then it is once again party time in Europe.

Its all madness. M-A-D-N-E-S-S.

Herr-Berbunch · 03-06-12, 08:09 AM

Does anything make you happy, aside from PMDG's 737 NGX and SBP?

kraznyi_oktjabr · 03-06-12, 08:11 AM

Quote:

Originally Posted by Skybird

German public debts have exceeded 2 trillion Euros. Calculating all pensions and obligatiosn from current employees in poublic service, analysts estimate the real debt burden caused by the stazus quo and the curreently living people in the range of 6-8 trillion. Compare this to the US with 5 times as big a population - but only (roughly) two times as high a public debt currently. One could argue that Germany financially is worse off than the US. The difference is that markets and most people still have not won full awareness of it - that'S why we still get a better credibility score than America over our financial situation, and find it easier to lease money. But as I see it there is a very solid chance that we will fall from higher, and crash at the bottom with a much louder bang one day in the future. And then it is once again party time in Europe.

Its all madness. M-A-D-N-E-S-S.

Taking into consideration what happened last time when German economy collapsed I would prefer not to be anywhere nearby you (Germany) when that happens.

Oberon · 03-06-12, 08:52 AM

Looks like you're stuck in the treadmill and can't get out.

What happens when Hollande gets into power though, that's what worries me.

Skybird · 03-06-12, 08:53 AM

Quote:

Originally Posted by kraznyi_oktjabr

Taking into consideration what happened last time when German economy collapsed I would prefer not to be anywhere nearby you (Germany) when that happens.

The economy collapse is made even more likely due to Germany's big archilles heel - its vital dependency on exports. If a certain part of these exports suddenly are no longer given, say China pushes us out of according market segments, this inevitably causes income losses for Germany that will make themselves felt as a cascade throughout the full economic, tax-, social system. From a certain critical treshhold on, these cascading effects will unfold a self-dynamic by which they increase all by themselves even without further energy added from outside. And then we will go at increasing pace where Greece is today.

Just that there is nobody willing - and even less: able - to bail Germany out.

This also will be the dying-hour of the EU and the damn Euro, for Germany as the most important and prominent financnier of the EU and the Euro, no longer will be able to fulfill that role.

We still deliver the Chinese the know-how by which they become able to not only to compete with us, but to out-produce us. They even benefit from many of our own national, misled subsidies. And we still pay them developement aide.

I cannot understand why people still do not see these links and these future scenarios. Sinn in the essay above describes something that by detailed knowledge I did not say myself since I lacked the detailed background info, but by principle mechanism I criticised since several years. But I don't think I am that ingenious, actually these things are quite simple, in principle. So I think those having the helm instead are too stupid, and suffer from massive tunnel-vision and denial of reality. They hide behind micro-details and thus do not see the greater contexts. Also, since they allowed things to detoriate this far, I think they also are more or less out of control by now.

Means: we are beyond the point of no return.

And there are more exmaples of typical German follies and self-betrayal in our innerpoltiical scene, from house-reonovations over climate policy to subsidies for solar panels that directly foster the Chinese competitors.

But the only thing that tops our self-betrayal is our unbearable missionary spirit by which we still mean to save the whole planet while our home already falls apart.

03-06-12, 09:14 AM

Quote:

Does anything make you happy, aside from PMDG's 737 NGX and SBP?

Surely this should be making him happy.
If the process proceeds to its worst possible result then the outcome would be skys stated vision of utopia.

Jimbuna · 03-06-12, 09:34 AM

And to think Cameron was recently criticised in some quarters for refusing to sign up to the Euro

Herr-Berbunch · 03-06-12, 11:08 AM

Quote:

Originally Posted by Tribesman

Surely this should be making him happy.
If the process proceeds to its worst possible result then the outcome would be skys stated vision of utopia.

Dan D · 03-06-12, 03:52 PM

Two things, no make it three things:

1) self-defeating prophecy vs. self-fulfilling prophecy

Very clever, the use of reverse psychology in this thread,I mean. A prediction, or call it early warning, that prevents what it predicts from happening by causing rebellion to the prediction with this outcome specifically in mind.

“A self-defeating prophecy is the complementary opposite of a self-fulfilling prophecy: a prediction that prevents what it predicts from happening.
A self-defeating prophecy can be the result of rebellion to the prediction. If the audience of a prediction has an interest in seeing it falsified, and its fulfilment depends on their actions or inaction, their actions upon hearing it will make the prediction less plausible. If a prediction is made with this outcome specifically in mind, it is commonly referred to as reverse psychology.

It is important to distinguish a self-defeating prophecy from a self-fulfilling prophecy that predicts a negative outcome. If a prophecy of a negative outcome is made, and that negative outcome is achieved as a result of positive feedback, then it is a self-fulfilling prophecy. For example, if a group of people decide they will not be able to achieve a goal and stop working towards the goal as a result, their prophecy was self-fulfilling. Likewise, if a prediction of a negative outcome is made, but the outcome is positive because of negative feedback resulting from the rebellion, then that is a self-defeating prophecy.”

2) on the topic: Sinn's analysis is an opinion piece, other experts strongly disagree, examples here:

target2-the zombie-returns

worse than Sinn

criticism summed up here:
http://www.karlwhelan.com/IrishEcono...nnMunchau.pdf:
…” which is now becoming a blogosphere staple: The supposedly enormous credit risk the Bundesbank is incurring in the event of the end of the euro.
if the euro were to collapse suddenly, Germany could stand to lose a large proportion of its claims – some 20 per cent of gross domestic product.
A couple of comments about this issue.
“ First, every national central bank in the Eurosystem currently has assets that exceed their liabilities and total Target2 credits equal Target2 liabilities. Thus, the most likely resolution of Target imbalances in the case of a full Euro breakup would be a pooling of assets held by Target2 debtors to be handed over to Target2 creditors to settle the balance. This may leave the Bundesbank holding a set of peripheral-originated assets that may be worth less that face value but this scenario would result in losses to the Bundesbank that would be far short of the current value of its Target2 credit.

Second, as Gavyn Davies discusses in this interesting FT article, central bank balance sheets are simply not the same as normal private sector balance sheets. It is unwise for central banks to go around printing money to purchase worthless assets so it is generally appropriate to insist that a central bank’s assets at least equal the value of the money it has created.

That said, should the Bundesbank end of losing a bunch of money because its Target2 credit was worth less than stated, there would be no earthly reason why the German public would need to give up large amounts of money to ensure that the Bundesbank remained “solvent”.
In a post-euro world, the Bundesbank would be one of a select number of central banks that could be counted on to print a currency likely to retain its value. Weidmann could write himself a cheque, stick it in the vaults and declare the Bundesbank to be solvent without any need to call on the German taxpayer.
That isn’t to say a euro break-up would cause no problems for Germany. The likely appreciation of the new DM would see Germany lose competitiveness which would hit its exports. It would also require recapitalisation of its private banks as their DM-denominated liabilities would rise in value relative to their balance sheets that may be left with significant non-DM assets. But the solvency of the Bundesbank will be very low down the list of potential problems.
One has to wonder whether Weidmann really doesn’t understand the nature of the Bundesbank’s Target2 credit or whether he is simply playing to a German audience that is used to regular missives on this issue from Hans Werner Sinn. Neither are attractive possibilities.

Now, who is right?

3) My prediction: Britain will join the euro to boost confidence & stability.

03-06-12, 08:09 AM	#2
Herr-Berbunch Kaiser Bill's batman Join Date: May 2010 Location: AN72 Posts: 13,203 Downloads: 76 Uploads: 0	Does anything make you happy, aside from PMDG's 737 NGX and SBP? __________________

03-06-12, 09:34 AM	#7
Jimbuna Chief of the Boat Join Date: Feb 2006 Location: 250 metres below the surface Posts: 190,452 Downloads: 63 Uploads: 13	And to think Cameron was recently criticised in some quarters for refusing to sign up to the Euro __________________ Wise men speak because they have something to say; Fools because they have to say something. Oh my God, not again!!

03-06-12, 03:52 PM	#9
Dan D Grey Wolf Join Date: Jul 2002 Location: 9th Flotilla Posts: 839 Downloads: 0 Uploads: 0	Two things, no make it three things: 1) self-defeating prophecy vs. self-fulfilling prophecy Very clever, the use of reverse psychology in this thread,I mean. A prediction, or call it early warning, that prevents what it predicts from happening by causing rebellion to the prediction with this outcome specifically in mind. “A self-defeating prophecy is the complementary opposite of a self-fulfilling prophecy: a prediction that prevents what it predicts from happening. A self-defeating prophecy can be the result of rebellion to the prediction. If the audience of a prediction has an interest in seeing it falsified, and its fulfilment depends on their actions or inaction, their actions upon hearing it will make the prediction less plausible. If a prediction is made with this outcome specifically in mind, it is commonly referred to as reverse psychology. It is important to distinguish a self-defeating prophecy from a self-fulfilling prophecy that predicts a negative outcome. If a prophecy of a negative outcome is made, and that negative outcome is achieved as a result of positive feedback, then it is a self-fulfilling prophecy. For example, if a group of people decide they will not be able to achieve a goal and stop working towards the goal as a result, their prophecy was self-fulfilling. Likewise, if a prediction of a negative outcome is made, but the outcome is positive because of negative feedback resulting from the rebellion, then that is a self-defeating prophecy.” 2) on the topic: Sinn's analysis is an opinion piece, other experts strongly disagree, examples here: target2-the zombie-returns worse than Sinn criticism summed up here: http://www.karlwhelan.com/IrishEcono...nnMunchau.pdf: …” which is now becoming a blogosphere staple: The supposedly enormous credit risk the Bundesbank is incurring in the event of the end of the euro. if the euro were to collapse suddenly, Germany could stand to lose a large proportion of its claims – some 20 per cent of gross domestic product. A couple of comments about this issue. “ First, every national central bank in the Eurosystem currently has assets that exceed their liabilities and total Target2 credits equal Target2 liabilities. Thus, the most likely resolution of Target imbalances in the case of a full Euro breakup would be a pooling of assets held by Target2 debtors to be handed over to Target2 creditors to settle the balance. This may leave the Bundesbank holding a set of peripheral-originated assets that may be worth less that face value but this scenario would result in losses to the Bundesbank that would be far short of the current value of its Target2 credit. Second, as Gavyn Davies discusses in this interesting FT article, central bank balance sheets are simply not the same as normal private sector balance sheets. It is unwise for central banks to go around printing money to purchase worthless assets so it is generally appropriate to insist that a central bank’s assets at least equal the value of the money it has created. That said, should the Bundesbank end of losing a bunch of money because its Target2 credit was worth less than stated, there would be no earthly reason why the German public would need to give up large amounts of money to ensure that the Bundesbank remained “solvent”. In a post-euro world, the Bundesbank would be one of a select number of central banks that could be counted on to print a currency likely to retain its value. Weidmann could write himself a cheque, stick it in the vaults and declare the Bundesbank to be solvent without any need to call on the German taxpayer. That isn’t to say a euro break-up would cause no problems for Germany. The likely appreciation of the new DM would see Germany lose competitiveness which would hit its exports. It would also require recapitalisation of its private banks as their DM-denominated liabilities would rise in value relative to their balance sheets that may be left with significant non-DM assets. But the solvency of the Bundesbank will be very low down the list of potential problems. One has to wonder whether Weidmann really doesn’t understand the nature of the Bundesbank’s Target2 credit or whether he is simply playing to a German audience that is used to regular missives on this issue from Hans Werner Sinn. Neither are attractive possibilities. Now, who is right? 3) My prediction: Britain will join the euro to boost confidence & stability. __________________

03-06-12, 08:52 AM	#4
Oberon Lucky Jack Join Date: Jul 2002 Posts: 25,976 Downloads: 61 Uploads: 20	Looks like you're stuck in the treadmill and can't get out. What happens when Hollande gets into power though, that's what worries me.