Posted on 03/04/2010 2:51:28 AM PST by wolf78
First the euro, now the pound. Britain's currency is coming under massive pressure as speculators bet that the UK's national debt will soon get out of hand. Like Athens, London has its share of problems -- and the Brits don't have any euro zone partners to back them up.
Schadenfreude may be a German word, but it has never been a foreign concept in Great Britain -- particularly in recent months as the British watch the trials and tribulations of the European common currency, the euro. The budgetary and debt problems facing Greece, Portugal, Italy, Ireland and Spain have merely reinforced their conviction that staying out of the euro zone was the right decision. Unlike Berlin, London is not under pressure to come to the aid of Athens.
But speculators have not just taken aim at the euro in recent days. The British pound, too, has become a favored target -- showing Brits how vulnerable their own currency may actually be.
Alarm on the Markets
[...]
The problems start with the size of the country's budget deficit. With a budget deficit of 13 percent of GDP this year -- Greece's is 12.7 percent -- Britain is by far the deficit champion of the G-20 states. Britain has so far avoided an Athens-style crisis primarily by virtue of the fact that its economy is much more flexible and competitive than Greece's. Furthermore, most still believe that the country is capable of shrinking its debt without outside help. Also, unlike Greece, which is facing the need to immediately refinance €20 billion in debt, most British debt won't come due until 14 years from now.
(Excerpt) Read more at spiegel.de ...
This is simply an attempt by the Germans to deflect attention elsewhere - the “Eurozone” is in panic mode and Germany will suffer the most when the Euro comes crashing down around them.
This is simply an attempt by the Germans to deflect attention elsewhere - the “Eurozone” is in panic mode and Germany will suffer the most when the Euro comes crashing down around them.
Countries are no different than corporations - they all must deal with the same exact set of resource constraints. Borrow & spend your way to riches ... or to poverty?
Greece isn't first on the list; rather it's way down around #10 or so. First up were sub-prime mortgages 2-3 years ago. Then corporates, now weaker sovereigns (PIIGS). Next to last will be the UK, and finally, for the grand finale, the US will have its moment on the world stage.
After both private & public debt is defaulted & currencies radically re-aligned, perhaps the global economy can get back on its feet.
When the Euro collapses, Germany, being the “richest” of the Eurozone countries will take a HUGE hit.
Furthermore - on what basis do you claim that Germany’s finances are reasonable? What is Germany ratio of Current Debt to GDP? What is thier REAL New Debt to GDP ration?
Supposedly, ALL Eurozone members were limited to 3.0%. Germany was the first to break that rule. Over the years, not one country (to include Greece) has been truely disciplined under this rule - indeed most have continually reported to be within the limits!
The collapse is coming and Germany is in panic mode because they KNOW what it will mean for thier economy when it happens!
Germany
Fiscal Deficits (% of GDP, year, then percentage/estimate)
07 -0.5
09 -4.2
10e -4.6
14e 0.0
Public Debt (% of GDP, year, then percentage/estimate)
07 63
09 79
10e 85
14e 89
UK
Fiscal Deficits (% of GDP, year, then percentage/estimate)
07 -2.6
09 -11.6
10e -13.2
14e -6.8
Public Debt (% of GDP, year, then percentage/estimate)
07 44
09 69
10e 82
14e 98
Germany is very export dependent. How are they going to sell their expensive tools, cars to people who can only pay in junk money? Exports will collapse. And then do you think the German consumer will, with Europe collapsing like a pile of salt in the rain, open up their wallets and produce a internal spending boom? I think not.
That’s true. Self-sufficiency requires a country that has diverse enough natural resources, a large and diverse enough manufacturing base, consumerism by citizens who save, and enough cultural morality for exceptional levels of order and peace. We recently had that for a couple of decades.
In the old days, Egypt, China, the empires used to have, Oh I don’t know, ten years of grain stored. Now there isn’t much need for physical storage like that. But now we don’t have, by and large, shocks of physical goods, but now financial shocks. Book keeping really.
Why?
How can we have very very liquid markets in ‘securities’( paper ) and have it effect the physical reality, the people, goods, service, manufacturing so much?
How with all these lawyers, government intervention have we become so much more frail in paperwork, symbols, digits on a hard drive somewhere. Meanwhile all the factories are just fine, workers work, consumers buy.
Very strange.
I am in the same situation - and I guess most bankers are, too.
I guess it’s not only about bookkeeping - it’s about the promised rights to consume raw materials, services, products and the use of land and hands in the future.
So it’s about trust. Will the debitor be able to fullfill it’s promise to the creditors ?
The promise beeing for example to deliver not only 10$ but the right to consume a tripple whopper at burger king - to name an internationaly fixed value - and with that the right to parts of a cow, hands and places and services involved etc.
For many debitors today the answer would be - no. So the creditors don’t ‘invest’ anymore but in direct values like land or basically needed businesses (warren buffets train deal).
There’s no possibility at all to run a system based on returning 20% interests - because after a brief time the debitors had to promise the earth and the moon.
So the promise has to be diluted by inflation (owe you 10$ + interest but I will increase the ammount of money in a way you won’t get more then a diet coke) - taxes have to be payed on revenues from capital lending - interests had to be paid on money.
The later failed as an instrument to regulate the balance between debt and credit if I see it correctly. And that had to do with political influence on Mr. Greenspan.
Yes.
I know, for a fact, the Federal Reserve has failed, many many times. It basic charter is contradictory. To protect the value of money, AND low unemployment. And to supply money. The value has dropped, according to some, 99 percent. We have had much unemployment and money supply has gone from flood to bust.
Like housing with HUD/Urban Renewal it has failed, save in the case of the Fed, to give a lot of jobs to dorctoral economists who sing it tune, the most famous case being Greenspan.
I think the world will want to have a new type of money, separate from government control, a partial gold backed to start.
........................
Yes investors are getting shafted. They won’t get support until the workers pension investments get hurt, which they are already. The masses not only don’t care, they dislike, investors, only of course until their checks don’t show up.
I think for a long time we were in a period of growing trust. Now we are in a period of declining trust.
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