http://online.wsj.com/article/SB10001424052748704240004575084853361540506.html?mod=WSJ_hpp_LEFTTopStories Wtf, Greece? If you want job security and for the economy improve, how about stop overturning cars in the street and f*cking go to work? If I were some other European Union country who is going to bail these guys out so the Euro doesn’t go haywire, I would be pretty annoyed.
The EU will have to signal intentions & take action. Any dithering will be have high costs economically, socially & politically. Should be some fairly easy money on the table for anyone following developments & savvy. Would love to be in a macro shop weighing up the odds right now…
I am thinking that shorting the Euro and buying Greek sovereigns might be a good strategy right now. The Europeans are so wedded to the EMU idea that it is nearly impossible to imagine them not bailing out Greece in some way - it’s just a question of how to do it and save face. Obviously, one wouldn’t want to bet the farm on it, and maybe control risk with options.
It’s not that the Europeans are so zealous about the union that they are willing to bail out one of their members at any cost. The problem is that they have shared monetary policy since they all share the same currency. If Greece has a financial crisis and the EU needs to issue more Euros, all the other EU countries will gets screwed by the inflation. It’s like if you open a business and invite your entire family to become partners. While you might get some superstars (UK, Germany), you also end up with your handicapped brother Bilo…
Hello Mister Walrus Wrote: ------------------------------------------------------- > It’s not that the Europeans are so zealous about > the union that they are willing to bail out one of > their members at any cost. The problem is that > they have shared monetary policy since they all > share the same currency. If Greece has a financial > crisis and the EU needs to issue more Euros, all > the other EU countries will gets screwed by the > inflation. It’s like if you open a business and > invite your entire family to become partners. > While you might get some superstars (UK, Germany), > you also end up with your handicapped brother > Bilo… He saw it coming… http://euobserver.com/?aid=16030&rk=1 Date: 17.05.2004 Friedman: ‘Strong possibility’ of euro zone collapse EUOBSERVER / BRUSSELS - Milton Friedman, the Nobel-Prize winning US economist and one of the most influential economists of the 20th Century believes there is a “strong possibility” that the 12 member euro zone could collapse “in the next few years”. In an exclusive interview with the EUobserver, Professor Friedman argues, “there is a strong possibility that the euro zone could collapse in the next few years because differences are accumulating between countries … I’m not saying it is a certainty, just that it is a strong possibility”. He suggests that the euro could be replaced with the old national currencies.
While it’s certainly possible that the Euro will be dissolved, this is a highly unlikely scenario for the foreseeable future. It’s more likely that the EU will tighten its membership requirements and/or kick out the countries that are f*cking up everything. The EU originally had 6 (?) members, but now there are 27. There is a lot of fat that could be cut if necessary.
What is the upside of using the euro?
Another problem is the amount of Greek soverign debt held by European banks. If Greece defaults, it will send shockwaves through the European financial system.
mwvt9 Wrote: ------------------------------------------------------- > What is the upside of using the euro? A single currency encourages free trade and price stability. Free trade is particularly important in a zone like Europe, which has a bunch of small countries with their own economic niches. Imagine if different states in the US had different currencies; there would be a lot of friction associated with inter-state economic activity.
In today’s paper the vice prime minister (or whatever the english translation is) blamed Germany and world war II for Greeces economic state today and said the Germans were taking all their gold from the national reserve at the time and said something like…" I am perhaps not saying they should give it back, but a thank you would be in place" He does not have many fans today.
mwvt9 Wrote: ------------------------------------------------------- > What is the upside of using the euro? What is the upside to the US of having a single currency rather than 50 separate ones? If an alien landed on earth knowing nothing of existing world currencies, there is no way they would suggest one currency for over 1bn people in China, another for 1bn plus in India and then separate currencies for dozens of countries with populations of less than 10m. The current currency split across the globe is arbitrary and sub-optimal. The euro is a brave and worthwhile attempt to correct that in my opinion.
Carson Wrote: ------------------------------------------------------- > mwvt9 Wrote: > -------------------------------------------------- > ----- > > What is the upside of using the euro? > > > What is the upside to the US of having a single > currency rather than 50 separate ones? > > If an alien landed on earth knowing nothing of > existing world currencies, there is no way they > would suggest one currency for over 1bn people in > China, another for 1bn plus in India and then > separate currencies for dozens of countries with > populations of less than 10m. > > The current currency split across the globe is > arbitrary and sub-optimal. The euro is a brave and > worthwhile attempt to correct that in my opinion. Except that you have separate governments with different agendas. This should lead to a collapse as Friedman predicted. I could see it if you are in favor a single world government. Call me crazy, but I would keep a whole bunch of different currencies. That being said currencies and economics are not my strong suit and I may be making a very naive argument.
mwvt9 Wrote: ------------------------------------------------------- > Hello Mister Walrus Wrote: > -------------------------------------------------- > ----- > > It’s not that the Europeans are so zealous > about > > the union that they are willing to bail out one > of > > their members at any cost. The problem is that > > they have shared monetary policy since they all > > share the same currency. If Greece has a > financial > > crisis and the EU needs to issue more Euros, > all > > the other EU countries will gets screwed by the > > inflation. It’s like if you open a business and > > invite your entire family to become partners. > > While you might get some superstars (UK, > Germany), > > you also end up with your handicapped brother > > Bilo… > > He saw it coming… > > http://euobserver.com/?aid=16030&rk=1 > > Date: 17.05.2004 > > Friedman: ‘Strong possibility’ of euro zone > collapse > > EUOBSERVER / BRUSSELS - Milton Friedman, the > Nobel-Prize winning US economist and one of the > most influential economists of the 20th Century > believes there is a “strong possibility” that the > 12 member euro zone could collapse “in the next > few years”. > > In an exclusive interview with the EUobserver, > Professor Friedman argues, “there is a strong > possibility that the euro zone could collapse in > the next few years because differences are > accumulating between countries … I’m not saying > it is a certainty, just that it is a strong > possibility”. > > He suggests that the euro could be replaced with > the old national currencies. On the flip side, a crisis could well create the momentum for stronger economic union - the EU is a political construct first and foremost. It was formed after WWII to stop France & Germany going to war again (wars in the previous 70 years over resources in the Saar region). The ECSC became the EC. Political first. EMU and the Euro came later. So, if the political will is there, there might be moves towards stronger integration - precisely because these differences require concerted action: there might be larger concessions of sovereignty in fiscal areas too and the euro might benefit. If you were a PIG, would you rather be out of the EU or cede some sovereignty to stay in. Think of the costs and benefits of that particular decision. What would you do if you were Greece? If you go to Turkey (outside the EU), they prefer you to pay in Euros than Lira. That says a lot. I’m sure a lot of Germans would like their DMs back though…
I was thinking about this this morning too. It may well be that the solution to this crisis is greater centralization of political authority in Europe. Monetary support in exchange for political power. This may be to Europe what the end of the Articles of Confederation was to the United States. I don’t foresee as strong a federal union in Europe as the US, but I do think strengthening authority is just as likely, perhaps more likely, than the dissolution of the Euro.
^^ Well this is exactly what is in fact happening, except not in a formal and structured way, like a change in the constitution would imply, but in other ways. Greece gets implicit financial backing of Europe, but in return Europe gets to tell Greece how to run its budget in the future (cuts and reforms that will come along). That is in fact political power. We are a long way from any control that goes beyong fiscal/budgetary policy in Europe. In fact, none of us alive today or even our children will witness a real “European army” for example.
^“In fact, none of us alive today or even our children will witness a real “European army” for example.” Has anyone ever witnessed such a thing? Sorry, I couldn’t resist!
This is already sort of happening. The EU has had to approve Greece’s budget plans since this crisis began. It’s part of the reason why people are rioting - they don’t like the spending cuts on unemployment benefits, welfare, etc.
mwvt9 Wrote: ------------------------------------------------------- > Carson Wrote: > -------------------------------------------------- > ----- > > mwvt9 Wrote: > > > -------------------------------------------------- > > > ----- > > > What is the upside of using the euro? > > > > > > What is the upside to the US of having a single > > currency rather than 50 separate ones? > > > > If an alien landed on earth knowing nothing of > > existing world currencies, there is no way they > > would suggest one currency for over 1bn people > in > > China, another for 1bn plus in India and then > > separate currencies for dozens of countries > with > > populations of less than 10m. > > > > The current currency split across the globe is > > arbitrary and sub-optimal. The euro is a brave > and > > worthwhile attempt to correct that in my > opinion. > > Except that you have separate governments with > different agendas. This should lead to a collapse > as Friedman predicted. > > I could see it if you are in favor a single world > government. Call me crazy, but I would keep a > whole bunch of different currencies. > > That being said currencies and economics are not > my strong suit and I may be making a very naive > argument. 1 - The Euro will NOT collapse, and certainly not because of Greece. 2 - Friedman’s prediction was made 6 years ago. How would you define a “few years” exactly? My own prediction : There will be a recession “in the next few years”. I bet I’ll get that right…eventually!
phils23 Wrote: ------------------------------------------------------- > > 1 - The Euro will NOT collapse, and certainly not > because of Greece. > > 2 - Friedman’s prediction was made 6 years ago. > How would you define a “few years” exactly? > Good point. I wasn’t really talking about the timeline, but I didn’t make that clear. It is my understanding that Friedman has been saying that it would happen at some point since the inception of the Euro as he didn’t believe in the concept. > My own prediction : There will be a recession “in > the next few years”. I bet I’ll get that > right…eventually! You are right now! Or just were. When you look at the arguments that Muddahudda and bchad are making I am wondering if the Euro will never collapse. Maybe it won’t, but there will have to be changes to the power structure to those that use it. Isn’t that evidence that it can’t work the way the system is set up? I am not saying those changes are bad, but it seems to be a zero sum game to me. Some countries are going to win and some are going to lose. As concession are made by some countries it will start to look like one economic government over all the countries that participate. At that point it because like one big country with one currency. The same as before the euro only bigger. That is what I was thinking, but like I said I am not really qualified in this area and I like to hear from those who are.
I agree with what you say mwvt9. I think further integration of the eurozone is needed and likely to occur. In my opinion the best template for a currency union of this kind is the UK. 4 countries, 1 currency. Each retains it own history, culture and traditions yet they have successfully integrated many aspects of their political and economic systems. I don’t hear too many in the UK (only a small number in Scotland and very small number in Wales and England) calling for a break up of the union and sterlingzone.