What Might Trigger the Euro’s Demise

The American ^ | 12/03/10 | Desmond Lachman

[TigerLikesRooster]

What Might Trigger the Euro’s Demise

By Desmond Lachman Friday, December 3, 2010

Filed under: World Watch, Boardroom, Economic Policy The Greek, Irish, Portuguese, and Spanish governments already have tenuous holds on power. A deepening in their economic crises could give rise to populist governments ready to dump the euro.

Last week, the European sovereign debt crisis took a decided turn for the worse. No longer is the crisis confined to relatively small economies like Greece, Ireland, and Portugal. Rather, it has now spread to the systemically more important high-debt countries like Spain and Italy. These developments have attracted the attention of the European Central Bank, which again felt obliged to calm the markets by providing increased liquidity.

As Milton Friedman already foresaw when the euro launched in 1999, the essence of the European periphery’s economic predicament is that these countries have not played by the European Monetary Union’s budget rules. Indeed, over the past decade, Greece, Ireland, Portugal, and Spain all ran up extraordinarily large budget and balance-of-payments deficits that will be extremely difficult to correct without their own separate domestic currencies.

Stuck within the euro straitjacket, these countries cannot resort to currency devaluation to restore their sizeable losses in international competitiveness. Nor can they devalue to boost exports as a cushion to offset the highly negative economic impact from their major fiscal retrenchment. Nor are their European and International Monetary Fund (IMF) masters allowing them to write down their excessive debt burdens. Attempting to adjust under these conditions must be expected to entail many years of painful deflationary and recessionary conditions, as we already witness in both Ireland and Greece.

[TigerLikesRooster]

We have been having a weird see-saw game. One day American economy slips again, and Euros watch it with glee. Next day, EU economy slips further, and Americans feel Schadenfreude. We will have a few more episodes like this before both fall off the cliff.

[TigerLikesRooster]

P!

[pnh102]

Heh. Sounds more like there will be a rise in populist governments in Germany, France and the other productive nations in the EU that are sick of bailing out the losers and will themselves want to dump the Euro.

[Charles Martel]

So, if California (for example) had its own currency (besides the peso, I mean)...

[FromLori]

I noticed this line in the articled..

“Indeed, over the past decade, Greece, Ireland, Portugal, and Spain all ran up extraordinarily large budget and balance-of-payments deficits that will be extremely difficult to correct without their own separate domestic currencies.”

While that may be true of Portugal and Greece it’s not true of Ireland at all they were doing fine actually better then Germany, France, etc. until they were forced to take on the banks bad debts.

On a side note I think the Irish would be better off opting out of their New World Order European Union and in any case I don’t think it is our responsibility to bail them out again.

Why the Irish Crisis is Going Global

“And its public debt, about 65 percent of GDP, is far below Greece’s crushing load, which is 126 percent of GDP. Ireland’s debt levels are even lower than those in France, Germany and the United Kingdom.”

in full

http://finance.yahoo.com/news/Why-the-Irish-Crisis-is-Going-usnews-4028366968.html?x=0

Up to €50 billion—nearly $50,000 for every household in the Emerald Isle

http://online.wsj.com/article/SB10001424052748704506404575592360334457040.html

Ireland’s Debt Servitude

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100008812/irelands-debt-servitude/

[FromLori]

`The Euro is Doomed’

A senior U.S. intelligence source, who has been monitoring the Irish debt crisis by the hour, told EIR today that, in effect, the European Monetary Union is dead. For the past 72 hours, there has been a total freeze-up of the European corporate bond market. No capital has been raised, especially for Irish and Portugese companies. “It is worse than the freeze-up in the United States in 2008, and there are significant amounts of corporate paper reaching maturity in Europe, that must be rolled over.”

More http://www.larouchepac.com/node/16702

[Happy Rain]

The Euro has always been Monopoly Money—there is no Euro nation—there is France Germany Greece etc there is no Euro--when nations decide to stop playing the board game--nationalism—the normal behavior of peoples bound together by distinctive customs cultures and mores will make the paper subjective script when times get tough.
The USA has “invested” trillions in propping up a Europe as stable as it was in 1919 only this time instead of a few nations defaulting we will have to eat the debt of a whole continent. and on top of the Obama debt we,our children,and their children,will have to develop the ability to graze in order to survive.

[Nervous Tick]

>> We will have a few more episodes like this before both fall off the cliff.

Can’t you just let me enjoy my American schadenfreude for a little while, without bringing me down with that off the cliff stuff?

:-)

[Oatka]

Indeed, over the past decade, Greece, Ireland, Portugal, and Spain all ran up extraordinarily large budget and balance-of-payments deficits that will be extremely difficult to correct without their own separate domestic currencies.

i.e. "Quantitative Easing" until they go Weimar Republic.

[UCFRoadWarrior]

It is more and more obvious Globalism is Dead.

The first major nation that drops a unified currency, stops or limits free trade, and gets out of the WTO, IMF, etc...is going to be a big winner

[Jolla]

If Germany and France had ventured into EURO land alone, the others may have followed, but those two brought in too many too fast and they will all sink together now.

[The Comedian]

"Economic Holocaust" ping.

Increasing volume ping list watching the slow motion Economic Holocaust.

FReepmail me if you want on or off
The Comedian's "Economic Holocaust" ping list...

Frowning takes 68 muscles.
Smiling takes 6.
Pulling this trigger takes 2.
I'm lazy.

[expatpat]

Yes, indeed. They suffered from the same excess of ambition that the Germans also suffered from militarily in the 1940s. Overextending oneself is not smart. I’m afraid the US is doing the same thing....

[BenKenobi]

Very true, and Ireland will probably be fine. The problem is that the Irish are small fish in the Euro system. Italy and Spain are huge fish.