Posted on 12/13/2011 10:14:08 PM PST by Arthurio
-snip-
A run on the banks by savers keen to put their money into a core euro country would bring down the banking system of the departing country overnight.
Companies and private households would not have access to loans, nor would they be able access any more cash.
The state, which in this situation should support the banks, would be bankrupt as well. Financial markets would deny it access to funding.
The new currency, once it is introduced, would depreciate by between 30% and 50%, which would multiply the government’s debts.
The depreciation would lead to imported inflation and trigger trade union demand for compensation, setting off a hyperinflationary spiral.
The bankruptcies of banks in Southern Europe would bring about the downfall of their northern counterparts because the latter have lent them large sums of money in the belief that monetary union would last forever.
Anticipating an appreciation, huge capital flows would drive up the new Deutschemark. Many medium-size companies would become uncompetitive overnight.
(Excerpt) Read more at blogs.reuters.com ...
Huge amounts of money would come into the US.
Best response so far.
and cheap european vacations!
“Best response so far.”
True, but my post was second...
A Belgian guy that I befriended through a forum moved
here to the Philippines last year.
He is retired and a quite knowledgeable guy, having traveled the world, working for an international chemical company.
He says that the Euro crisis is way overblown and not as serious as the media paints it, but that is just his opinion, and he is probably biased by being from the home of the EU.
He was visiting me yesterday, and cited a number of figures, such as percent of GDP and total debt for various countries, making it sound not so serious.
A failure of the Euro, however, would surly be felt around the world.
“Huge amounts of money would come into the US.”
Uh...who do you think has been loaning money to European banks?
US Banks and Brokerage Houses Tied to Europe
Posted by Ann Barnhardt - December 8, AD 2011 11:24 PM MST
I didn’t know the exact mechanics as laid out in the ZeroHedge piece linked below, but I had been told a month ago that the entire US banking and brokerage/clearing paradigm was massively and inextricably tied to Europe, and thus the fuse on the whole thing was already lit and burning down quickly, and it was and is just a matter of time until the fuse burns down to detonation. When Europe goes, we go too. This combined with being notified of the risk of clawback actions to clients are the two top reasons why I pulled the plug on BCM. I reiterate, if we make it past Christmas it will be a miracle.
And here is the URL to the Market-Ticker.org piece addressing the same thing:
http://market-ticker.org/akcs-www?post=198790
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I personally have had a difficult time sleeping the past two weeks because of this shit. SatinDoll
What concerns me most about a Euro collapse (other than obvious panic that would ensue) is that it would greatly strengthen the USD, I believe, and that could crush silver and gold. In which I have reasonably good sized investment. It should also seriously crunch the stock market. I am not sure how long the phenomenon would last. I believe that if you are a gold/silver holder you have to be willing to withstand some heat. I do *not* think the Euro crisis is overblown, I believe it is mathematically provable that the money does not exist to solve their liquidity issues.
These last few days, gold has dropped about $100. This is what I’m talking about. Some of that is USD strength. Some of that is “sell anything” margin calls. Some of that is Euro bank run; related to margin calls, in a way. While I am willing to withstand some heat, I can’t tell you that I am unconcerned.
IMHO your investment in gold should be considered as a store of wealth and value, not an investment. If the dollar strengthens and the Euro tanks, the Fed will need to increase quantitative easing in order to devalue the dollar so as to help the Euro hold on. Gold looks good for the several coming years.
I wonder what EU countries are doing behind the scenes. They HAVE to have a contingency plan if the euro collapses. I wonder if these countries have warehoused drachmas, deutchemarks, francs, etc. Just in case. Britain was smart to have kept the pound.
He is lying.
Look at a globe of the earth
He couldn't get further away from Europe unless he went to deep outer space.
They are buying gold.
And the biggie:
Sovereign states selling gold by the ton for cash as credit dries up in Europe
What you describe is what is happening in Greece
“A run on the banks by savers keen to put their money into a core euro country would bring down the banking system of the departing country overnight. “
“He is lying. “
“He couldn’t get further away from Europe unless he went to deep outer space.”
___________________________________________
Sorry, but he travels back to Belgium about every two months, and he is quite knowledgeable.
He just returned from there two weeks ago.
Anyway, “lying” is a very serious word, and one I do not take lightly.
If you want to disagree, that is fine, but do not shoot the messenger.
I have no idea about what will happen to the Euro.
Fortunately, I have very few left in my Slovak bank account.
It would be good—Massive inflation will hit Europe. Right wing political parties will dominate. New Fascism will rise up. A new leader will surface—expel Arabs out of Europe —Re-arm and rebuild a new capitalist/fascist European Empire. Link with Russia to dominate Africa and Asia (maybe make an alliance with Japan) —It will be a whole new World Order!
Or maybe not....
Precisely.
There will be a surge in the USD for a while, as investors would seek to have dollar-denominated assets or dollars. Also, the new “legacy” Deutschmark which would be brought back would gain and it would gain against all other European currencies.
Gold, IMHO, will back burner for a few years, possibly going very low. Every nation needs dollars to conduct international trade. The price of gold relative to currencies fluctuates, so even if it were legal tender, companies that sell goods internationally would not accept it for payment. As far as electronic gold, there’s already a whole concern about that market overstating physical. Hypothecation may come into play there, so gold funds, etc., I would avoid like the plague. The smart money, no doubt, is looking at electronic gold askance. Soros, for example, is purportedly bought a gold jewelry maker in China after dumping his gold holdings. See the connection - physical + demand ?
European business is already working on their plans (story already in the news) to transition back to their own currencies though they’re not saying it’s definitely going to happen, they of course have to plan. It represents kind of a big one-time accounting needed to handle valuation, i.e., gains/losses on the transition. Quite hairy, indeed.
From there, it depends on when Euro nations get back to each of them independently cutting their government spending, and how well they do. The big stumbling block is their ability to create new small private sector businesses, the only decent engine for hiring a lot of unemployed and getting productivity out of them. How quickly and how well they do that determines how good or bad the standard of living will be inside each country.
1/3 of Germany’s GDP is exports. Which will be hurt drastically by the Deutschmark rapidly appreciating. Other European nations will have trouble affording the German goods and services.
By 2013, the U.S. Congress will be facing another debt ceiling with enormous pressure to not lift it. Some of our large banks will probaby also have gone bankrupt because there will be large backlash against bailouts. This would also possibly blow through the current debt ceiling before 2012 election and another bailout by the WH will cause sparks to fly in in the U.S.; IMHO, that is, therefore, not something Obama wants to do until after the election. Of course, after the election, if O loses, the administration will crap all over everything in the WH, and all over the country from one end to the other, pardoning criminals, giving Treasury money away to friends, destroying records, stealing everything but the steel framing of the WH (in the grand style of the Clintonistas), etc., but that’s neither here nor there regarding the dollar.
The U.S. economy may go in the pooper even worse than it is now if the Euro is “ended”.
Inflation may be exacerbated by this due to companies who have the ability to increase prices doing so as a result of falling sales (this is already happening with things like electricity and food).
The U.S. $15+trillion Treasury debt can’t be repaid unless the Federal government actually runs surpluses; and the Federal government has what would appear to be a perennial $1+trillion per year deficit. Of course, if deficits are eliminated, after a decade or two of low interest rates lower than growth in GDP the nation would “grow into” that debt level. Trouble is, our regulatory environment makes the small business engine starve for oxygen.
If things don’t change in the U.S., eventually (again, it’s already happening), the U.S. is heading for exactly the same situation that Europe is now in. In that situation, gold would, of course, be rising dramatically again. This may be triggered sooner than expected by the Euro being dropped. That’s why, IMHO, it’s wisest to simply very gradually buy gold, so one always has plenty of cash and buys on dips. Trying to be greedy and get gains out of gold would require smart timing, whereas gradual accumulation (of small physical coins in physical possession) provides a nice hedge against calamity.
As far as the whole story being overblown, this would not be in the news at all if European government bond auctions were working sufficiently to any extent. The fact that the story is unfolding as it is with so many high-level meetings yielding nothing and the U.K. refusing to go along last Friday, means that the fan can see the poop. Governments being anywhere near their credit limit is when they are going off the rails. If they were small banana republics it would be just another day, but this involves the leading powers in the world.
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