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Euro failing credibility test
Washington Times ^ | 12 May 2002 | Martin Walker

Posted on 05/12/2002 11:25:33 PM PDT by July 4th

Edited on 07/12/2004 3:53:28 PM PDT by Jim Robinson. [history]

ROME, May 13 (UPI) -- Soaring national debt in Italy, pre-election tax cuts in France and a stagnant German economy are threatening to bust the European "stability pact" on reducing budget deficits, and dangerously jeopardizing the credibility of the euro currency.


(Excerpt) Read more at washtimes.com ...


TOPICS: Business/Economy; Front Page News; Germany; Government; News/Current Events; United Kingdom
KEYWORDS: euro; europelist; eurozone; france; fundingtheleft; funnymoney; germany; italy; pound
Take this entire article into account, and add in the right-wing pressure in some countries for complete withdrawal from the system. (Le Pen, the most notable.) I think the Germans had best stop shredding their Deutschmarks now...
1 posted on 05/12/2002 11:25:34 PM PDT by July 4th
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To: July 4th
Polls show a majority of close to 2 to 1 against joining, and the euro's mounting credibility problem will make Blair's challenge no easier.

The leaders of most EU countries didn't care if their subjects wanted to join the EU or not.

2 posted on 05/12/2002 11:42:44 PM PDT by nickcarraway
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To: July 4th
Why the Euro will Fail

Nominally, the Euro is being offered as (1) a way to achieve greater economic prosperity, (2) an alternative to the U.S. dollar, and (3) a means by which inter-country tensions can be reduced. It will fail on all those counts.

A nifty thing about a common currency is that it forces a common monetary discipline on the participants. If the participants share a common monetary philosophy, internal stresses are minimized. The problem in Euroland is that the countries involved have wildly different monetary histories (and presumably different expectations) due to their markedly different monetary philosophies. For example, the Germans are (were) rightly proud of their Deutschmark, due, in no small part, to their monetary discipline. The Italians, on the other hand, have a history of monetizing their national debt, producing severe inflationary pressures.

A country's monetary philosophy has many policy implications, which manifest themselves in many ways, such as government debt, size of the public sector, inflationary forces, expectations of the governed, etc. Try to imagine the Italians living under the austere discipline of a Prussian monetary policy. There would be riots in the street. (And in fact there were riots, when tight money policies were attempted in the 70's and 80's).

If Euroland component countries have wildly different expectations, why has there been relatively quiet acceptance of the Euro transition? One great advantage for the Euro-dreamers has been that the Euro was implemented during a time of great economic prosperity. The 90's were the time of the great, speculation-driven, Clinton Bubble. Public coffers were overflowing. Now that the Bubble has burst, expect growing economic problems and rising unemployment with resulting pressures on political and monetary policies. Even in these relatively good times, the Euro has been under pressure. Its value, relative to the US dollar, has fallen some 25% since its introduction 3 years ago.

The Euro's first major hurdle will occur when the economies of Euroland experience dissimilar conditions. This will force some hard choices. Should any of Euroland's weaker players slip into recession, expect the pressure on the Euro to inrease dramatically as political compromise steps in. The hoped-for formulation would be for the weaker countires to engage in significant fiscal discipline. However, local politics wil prevent that from happening.

The second major problem with the Euro is the resulting creation of the bureaucratic superstructure. A federalized layer of bureaucrats is being put in place in Euroland. Here the problems will be legion. Checks and balances are limited, so expect the size of this layer to grow inexorably.

It has been suggested that this new political entity will be equivalent to the US federal government's role, but this mischaracterizes the nature of the beast. The countries involved all have sovereign government bureaucracies in place already; think ministries of defense, judiciary, security, welfare, etc. None of the exisiting layers are to be eliminated (that would be "unfair"). So new layers are to be added to coordinate and implemement new Euroland laws, edicts, and policies among the various countries.

While it could be argued that a more efficient economic engine can easily absorb this additional cost, it is important to remember that Euroland is not noted for its efficiency and innovation. Take sluggish, socialist-leaning countries, tie them together with a new layer of bureaucrats and what is the result? An economic powerhouse, or something that more closely resembles the old USSR -- a socialist, centralized, supra-national bureaucratic backwater? Internal stresses will grow as additional socialist laws and programs are put in place to accommodate various "unfair" economic and political dislocations. One nation's economic advantage becomes another's political problem. The Eurocrats will be asked to step in and "fix" things.

Euroland officials are already admitting privately that decision-making by the current European Council is already close to unworkable. And they fear it could be paralysed when up to 10 extra nations from southern and eastern Europe join in 2004. Their solution? Add a new management layer, an "EU super council" comprised of predominate Euroland countries. And so it grows.

The US has been relatively quiet on this whole issue. In part, it is because the issue is somewhat arcane. After all, to most people, economics is boring. Plus, the whole issue came to fruition during the time of Clinton. He and his ilk share in the vision of a political superstate, even at America's expense. Many on the left are watching in hopeful anticipation of the Euro's success. Conservatives, on the other hand, should realize that this will inevitably knock the Europeans for a loop. A set of major economic competitors (and problematic world allies) are in for a bumpy ride. Best to keep quiet while they shoot themselves in the foot.

The Euro will fail in its ostensible economic goals, but it will succeed in its true hidden ones, the promotion of a 'new European Soviet,' as Mikhail Gorbachev put it during a recent visit.
3 posted on 05/13/2002 12:57:23 AM PDT by My Identity
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To: July 4th
The EU has a trade surplus. We have a huge trade deficit and a growing budget deficit. The Euro will gain and the US Dollar will fall. The credibilty of the US in accounting and reporting under scrutiny by Congress. US market overvalued now. Dollar will fall......GOLD will go up. Currencies all around the world in trouble. Worldwide stagflation.....Gold safe harbor. Watch Gold go up.
4 posted on 05/13/2002 1:13:58 AM PDT by BlackJack
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To: nickcarraway
I can't believe that anyone really believed that this Euro would ever work. There are countries involved that can't even agree on which side of the table they should sit. There are countries that have not agreed with one another for hundreds of years,yet along comes the vaulted Euro and puff,everyone agrees.

If you believe this, there is a bridge for sale.

5 posted on 05/13/2002 3:45:13 AM PDT by chiefqc
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To: BlackJack
US market overvalued now. Dollar will fall......GOLD will go up. Currencies all around the world in trouble. Worldwide stagflation.....Gold safe harbor. Watch Gold go up.

Black Jack,

That is the biggest bunch of nonesense. You must be 'pumping gold' for a living.

As a 20 year veteran of high leverage futures trading, and being one of the best at it, if I don't say so myself, I can spot a pin-head hawker a mile away. Shut up and quit misleading people.

There is a fundamental flaw in your assessment. Gold is NOT a currency anymore. It was categorically dumped, and is still being dumped worldwide by national banks, PRECISELY to support paper currencies.

Goldman Sachs, as an example, rarely ever makes a huge mistake in a long term trading position. Not only did they start shorting gold when Booby Rubin was Treasury Sec. under Clinton, they took a huge position shorting gold, then worked with England's bank to short more. Then Australia went short. Even Ruassia is selling gold for Pete's sake. It's been that way for years now- gold is not going to be "rising", it is not a "safe harbor", it is not a "currency" anymore. Get over it.

In the last 6 or so years, more people have lost more money following horribly disingenuos advice like yours, hoping they were being "safe" in gold, and while there have been 2 short covering rallies in gold of no fundamental significance (the rallies were technical in nature and nothing else), people like you continue to advise honest investors to buy the crap gold you don't want, so you can get out in a temporary rally or short covering spurt.

Shame on you.

If you actually want to learn something about gold, study the technical and fundamental relationship between gold and oil. If you have the brains to figure that out, you won't have to make a living trying to convince other people to buy the commodities you want to dump. You'll feel monumentally better about yourself as well.

By the way, the indexes are not "overvalued"- that particular word is a horrible misnomer. "The market", which is actually the S&P 500 (that's what the world operates on- actually the S&P 500 futures is the "real market"), and the market is never "overvalued" or "undervalued"- it is a "settlement" of buyers and sellers at any given time based on the technical assessment of the index's behavior.

So, because you fail to understand that gold is NOT a "buy" anymore and you fail to understand that world currencies operate WITHOUT a gold standard and are based on DERIVATIVES, you'll continue to mislead people, and that is just plain wrong.

May you recieve a full margin call for every investor you lie to.

There's a tried and true tact that I used to take when I traded. When an idiot like yourself tried pumping the price, a few of us wealthier traders would pummel the other side of the trade and run you into your stops to get you out, then we'd cover our shorts, and buy. then, and only then, had the market "absorbed" ding dongs like you and could get on with the real business of moving in the right direction.

"Oh nay is vanity profitable to aye."

....and one other thing... the Euro - I could give a dam what happens to it. I just trade the thing whatever way its going. If it croaks, great, if it lives, I could care less. One thing for certain though, you'd have to be a complete idiot to truly not think that if the Euro collapses- every single Euro dollar won't go right into the strongest and most stable currency in the world- and that, my unknowledgeable friend is and will remain the U.S. Dollar. Nobody buys gold in a currency exit- that'd be absolutely assinine- they buy derivative dollars with a HUGE leverage advantage.

Gawd how stupid can people be to believe such gold nonesense?

6 posted on 05/13/2002 4:23:48 AM PDT by GotDangGenius
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To: GotDangGenius
Futures traders are the worlds biggest crooks....98% of investors who buy into your line of BS lose not only the capital but everything else...how do I know....I worked for First Boston.....as for this gem

Goldman Sachs, as an example, rarely ever makes a huge mistake in a long term trading position.

A former hedge fund staffer says he has detailed Goldman Sachs' involvement in IPO "laddering" schemes to regulators looking into alleged illegal practices in the IPO market during the tech boom, The Post has learned.

Nicholas Maier, a former executive at loud-mouth television commentator Jim Cramer's hedge fund during the go-go late '90s, had a ringside seat to the goings-on. He told The Post he spoke for six hours with investigators from the Securities and Exchange Commission.

He told the SEC that while he was at Cramer & Co., now known as Cramer Berkowitz & Co., Goldman Sachs repeatedly made the allocation of coveted initial public offering shares a condition of his buying additional shares at a price to be determined later by Goldman Sachs.

"The more I promised to buy in the aftermarket, the more shares I could expect to get," Maier said he was told by a Goldman Sachs broker. "If I reneged on my aftermarket order, I could expect to feel the consequences, or be docked on future allocations," Maier alleged.

Maier told lead SEC investigator for the IPO investigations Tammy Stark on April 29 that Goldman kept a "book" on each deal that recorded the price at which Maier should buy more stock.

Maier said that after the three-hour interview, the SEC showed him one of those books, for Marvell Technology Group, which went public in June 2000 in an offering led by Goldman Sachs.

"It has a column for aftermarket orders, and in it was listed an order for the stock from Cramer & Co. for 35 percent above the opening price," Maier said. "This is the smoking gun," Maier said he thought at the time.

Goldman Sachs officials declined comment.

"Jim's firm did not do anything improper with regard to IPOs," said Cramer's lawyer Eric Seiler. Seiler said the SEC has not contacted Cramer.

Soliciting orders to buy additional shares - at an inflated price - after the IPO stock begins trading in the open market is known as "laddering" or "tie-in agreements."

Legal experts say it can be illegal to tie the allocations of shares to additional purchases. The practice, which Maier says was widespread on Wall Street, served to jack up stock prices artificially.

Additional buying gave the impression, to the uninitiated, that demand for that stock was skyrocketing. It fed the appetite for tech stocks and the IPO boom that later went bust, wiping out $4 trillion in market value.

The SEC's probe into illegal laddering practices by Wall Street's elite brokerages is a continuation of the successful investigation into how IPOs were allocated by Credit Suisse First Boston.

In January, CSFB settled charges that the firm extorted high commissions from clients before giving them big chunks of hot IPO stocks. CSFB paid a $100 million fine to the SEC without admitting or denying guilt. But the investigation led to the dismissal of three employees and the resignation of top exec Allen Wheat.

Meanwhile, there are hundreds of lawsuits from angry investors seeking millions in compensation.

Maier's damaging testimony and that of others could bring bigger troubles for Goldman Sachs and other Wall Street firms at the center of the SEC's laddering probe.

Morgan Stanley, Robertson Stephens and J.P. Morgan Chase are also reportedly subjects of the probe.

Maier wrote a book published in March called "Trading with the Enemy," about his former employer and controversial CNBC on-air personality and co-founder of financial news Web site TheStreet.com - Jim Cramer. A chapter in that book entitled "House of Cards" triggered the SEC to invite Maier to testify, Maier said.

Cramer, no longer affiliated with the hedge fund, has dismissed the allegations in Maier's book.

The above from NY Post...this from Forbes

• How Much Do Futures Brokers Have to Hide?

In early April, a square-jawed reformer named Eliot Spitzer shook with Poseidon-like force at Merrill Lynch's rickety reputation for research and left it in shambles. The New York State attorney general unearthed now-infamous e-mails in which Merrill analysts derided stocks they touted to small investors as "dogs" and "pieces of junk." Within days Merrill switched from outrage to surrender: At its annual meeting in late April, CEO David Komansky abjectly apologized to his clients.

With one thrust, Spitzer is accomplishing what the SEC and the U.S. Attorney's office have failed to do: force radical reform on Wall Street research. "The markets depend on integrity and honesty of information," says Saul Cohen, a lawyer at Proskauer Rose in New York. "The SEC failed to ensure that honesty. Spitzer stepped into the vacuum."

But the Spitzer investigation will do far more than, say, separate analysts' pay from investment banking deals; it could also vastly increase the financial damages Wall Street faces. That has investors worried: Since Spitzer released the damning e-mails on April 8, Merrill Lynch stock has tumbled 23%. The six leading U.S. banks have since shed $48 billion, one-tenth of their market capitalization.

The threats against Wall Street lurk in two corners. First, the settlements with New York and other states over corrupt research will be costly, especially for Merrill. Spitzer is demanding around $100 million in fines. But dozens of other states and their chagrined Merrill clients will likely win lesser amounts. David Trone of Prudential Securities reckons that Merrill will have to pay between $500 million and $1 billion. Spitzer is now examining Salomon Smith Barney, Goldman Sachs, and other firms. If e-mails show that their analysts purposely misled investors, they may face Merrill-sized payments too.

As for your rant on GOLD....8 of the top 10 funds with returns of 60% or better over the past 12 months are all GOLD FUNDS....PLUS Bullion is up 17% since Jan.....at last check Dow and Nasduck still in the red.......

7 posted on 05/13/2002 4:57:37 AM PDT by robnoel
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To: robnoel
As a 20 year veteran of high leverage futures trading, and being one of the best at it, if I don't say so myself, I can spot a pin-head hawker a mile away. Shut up and quit misleading people.

Rob it looks like we got another "genius" here that has never seen a bear market and thinks that things are always going to be the way he's experienced it. Sure, hard-asset people have hurt their case by being doom and gloom even while the economy (and stocks) were doing good but the arrogance that the anti-gold people project is even more despicable.

How can "gotdanggenius" expect people to respect his position when his posts show no respect for anyone else's?

8 posted on 05/13/2002 7:05:20 AM PDT by rohry
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To: rohry
:-)....as gold moves higher the shills get louder and more frantic....time is on our side and only time will tell who is right....I'm more than happy to wait and laugh!
9 posted on 05/13/2002 7:39:14 AM PDT by robnoel
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Comment #10 Removed by Moderator

To: GotDangGenius
Why the anger? I don't sell gold or try and mislead folks. I have a small portion of my portfolio in gold and it has done well for me recently. I have certainly avoided gold in the past but with a weakening US dollar....gold will rise.

The canadian dollar was up nicely today. I feel the US recovery will be weaker than most are expecting....gold seems to track the US dollar... and with the US trade deficit huge and US budget deficit increasing it could weaken the US dollar further. Gross of PIMCO seems to feel that inflation will double this year to 3%. Not much....but increasing.

Yes ...I know that a lot of institutions have been shorting gold and have huge short positions. A lot of derivatives out there that might have to unwind. That would also help gold.

With a lot of instability in the world due to terrorism and banking problems in Japan more investors might want to have a small position in gold like myself.

Good luck with your trading......you sound a lot smarter than me....thats for sure!

11 posted on 05/13/2002 5:06:37 PM PDT by BlackJack
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