The Economist: "Risk that the Euro disintegrates within weeks is alarmingly high"

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    Nov 25, 2011 3:00 PM GMT
    http://www.economist.com/node/21540259

    FIRST Greece; then Ireland and Portugal; then Italy and Spain. Month by month, the crisis in the euro area has crept from the vulnerable periphery of the currency zone towards its core, helped by denial, misdiagnosis and procrastination by the euro-zone’s policymakers. Recently Belgian and French government bonds have been in the financial markets’ bad books. Investors are even sniffy about German bonds: an auction of ten-year Bunds on November 23rd shifted only €3.6 billion-worth ($4.8 billion) of the €6 billion-worth on offer.

    Worse, there are signs that the euro zone’s economy is heading for recession, if it is not there already. Industrial orders in the euro zone fell by 6.4% in September, the steepest decline since the dark days of December 2008. A closely watched index of euro-zone sentiment, based on surveys of purchasing managers in manufacturing and services, is also signalling contraction, with a reading of 47.2: anything below 50 suggests activity is shrinking. The European Commission’s index of consumer confidence fell in November for the fifth month in a row.

    Now an even bigger calamity is looking likelier. The intensifying financial pressure raises the chances of a disorderly default by a government, a run of retail deposits on banks short of cash, or a revolt against austerity that would mark the start of the break-up of the euro zone.

    The German government can probably shrug off a failed auction: it likes to price its bonds as richly as it can, and occasionally cannot sell all it would like, even in untroubled times. Still, the timing is awful, and other governments are not so lucky: the contrast between Germany’s borrowing costs and those of other euro-zone sovereigns is stark (see chart 1). European banks are dumping the bonds of the least creditworthy, and other assets, in an attempt to conserve capital and improve cashflow as a full-blown funding crisis looms. Governments are promising ever more severe budget cuts in the hope of pacifying bond markets. The direct result of these scrambles is a credit crunch and a squeeze on aggregate demand that is forcing Europe into recession. Add the indirect effects on the confidence of consumers and businesses, and the downturn will be deep.
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    Nov 25, 2011 3:16 PM GMT
    I wish I could be a little more positive, but I think what we are witnessing now, not only in the US, but globally is just the tip of the iceberg. Apparently the good life of so-called affluence based strictly on credit is coming to an end. I hope everyone is prepared for austerity measures in their personal life and has at least a little in savings. Amazing how you posted this on a day of excess -- Black Friday in America. I shop when I want to shop not when the media tells me.
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    Nov 25, 2011 3:44 PM GMT
    The main effect of government debt, lavish entitlements, big governments, stifling anti-innovation taxes and regulations. That is the lesson for the US along with simple math that shows even if increased taxes on wealthy did not impact the business climate, it would do little to fix the underlying problem.
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    Nov 25, 2011 3:48 PM GMT
    vincent7 saidI wish I could be a little more positive, but I think what we are witnessing now, not only in the US, but globally is just the tip of the iceberg. Apparently the good life of so-called affluence based strictly on credit is coming to an end. I hope everyone is prepared for austerity measures in their personal life and has at least a little in savings. Amazing how you posted this on a day of excess -- Black Friday in America. I shop when I want to shop not when the media tells me.


    What do you have against good value? ;). I'll be finishing most of my Christmas shopping this weekend off American online sites I think. It'll be considerably cheaper... I don't really care what the marketing says... it's more about the pricing that's important to me.

    Otherwise I'd agree that we are in for a period of deleveraging - and more importantly, reducing the size of governments around the world. The choice is stark: smaller economies with larger governments or smaller governments with larger economies. I'm optimistic that most will choose the latter.
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    Nov 25, 2011 4:03 PM GMT
    I have nothing against good value. The bargains always seem to be there for me regardless of when I shop.
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    Nov 25, 2011 4:11 PM GMT
    riddler78 said...The choice is stark: smaller economies with larger governments or smaller governments with larger economies. I'm optimistic that most will choose the latter.

    I think you're right, but the small percentage of dummies and ideologues will be making noise kicking and screaming.
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    Nov 25, 2011 9:45 PM GMT
    While some Americans are prone to "blame Bush" for their financial difficulties, the results of profligacy and living on borrowed dollars is stark in Europe. It looks like it is about to get worse.

    http://www.telegraph.co.uk/finance/comment/jeremy-warner/8913884/Death-of-a-currency-as-eurogeddon-approaches.html

    The defining moment was the fiasco over Wednesday's bund auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK. [...]

    Investors have gone on strike. The Americans are getting their money out as fast as they decently can. British banks have stopped lending to all but their safest eurozone counterparts, and even those have been denied access to dollar funding. The UK hardly has anything to boast of; it's got its own legion of problems, many of them not so dissimilar to those of the eurozone periphery.

    But almost anything is going to look preferable to a currency which might soon be assigned to the dustbin of history. All of a sudden, the pound is the European default asset of choice.

    What we are witnessing is awesome stuff – the death throes of a currency. And not just any old currency either, but what when it was launched was confidently expected to take its place alongside the dollar as one of the world's major reserve currencies. That promise today looks to be in ruins.
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    Nov 25, 2011 9:55 PM GMT
    riddler78 saidWhile some Americans are prone to "blame Bush" for their financial difficulties, the results of profligacy and living on borrowed dollars is stark in Europe. It looks like it is about to get worse.

    http://www.telegraph.co.uk/finance/comment/jeremy-warner/8913884/Death-of-a-currency-as-eurogeddon-approaches.html

    The defining moment was the fiasco over Wednesday's bund auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK. [...]

    Investors have gone on strike. The Americans are getting their money out as fast as they decently can. British banks have stopped lending to all but their safest eurozone counterparts, and even those have been denied access to dollar funding. The UK hardly has anything to boast of; it's got its own legion of problems, many of them not so dissimilar to those of the eurozone periphery.

    But almost anything is going to look preferable to a currency which might soon be assigned to the dustbin of history. All of a sudden, the pound is the European default asset of choice.

    What we are witnessing is awesome stuff – the death throes of a currency. And not just any old currency either, but what when it was launched was confidently expected to take its place alongside the dollar as one of the world's major reserve currencies. That promise today looks to be in ruins.


    Well, maybe if Europe puts fascists in charge throughout the Eurozone, like they have in Greece, the bond raiders will be appeased. icon_rolleyes.gif

    http://www.realjock.com/gayforums/1979305

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    Nov 25, 2011 9:59 PM GMT
    Christian73 said
    riddler78 saidWhile some Americans are prone to "blame Bush" for their financial difficulties, the results of profligacy and living on borrowed dollars is stark in Europe. It looks like it is about to get worse.

    http://www.telegraph.co.uk/finance/comment/jeremy-warner/8913884/Death-of-a-currency-as-eurogeddon-approaches.html

    The defining moment was the fiasco over Wednesday's bund auction, reinforced on Thursday by the spectacle of German sovereign bond yields rising above those of the UK. [...]

    Investors have gone on strike. The Americans are getting their money out as fast as they decently can. British banks have stopped lending to all but their safest eurozone counterparts, and even those have been denied access to dollar funding. The UK hardly has anything to boast of; it's got its own legion of problems, many of them not so dissimilar to those of the eurozone periphery.

    But almost anything is going to look preferable to a currency which might soon be assigned to the dustbin of history. All of a sudden, the pound is the European default asset of choice.

    What we are witnessing is awesome stuff – the death throes of a currency. And not just any old currency either, but what when it was launched was confidently expected to take its place alongside the dollar as one of the world's major reserve currencies. That promise today looks to be in ruins.


    Well, maybe if Europe puts fascists in charge throughout the Eurozone, like they have in Greece, the bond raiders will be appeased. icon_rolleyes.gif

    http://www.realjock.com/gayforums/1979305



    Or perhaps they shouldn't have spent so much to begin with.