Financial fuckery thread

[Faust]

Here comes the default, I better buy anything I want from outside europe now before my currency becomes worth nothing on the exchange.

[Scribbly]

I've also noticed that the comments in the FT have been taking a much harder stance, with more and more people essentially saying 'Let the corrupt banks fall and lets all get on with our lives'.

My gut says that this is going to be a very, very tough Christmas. If the banks go down, they'll take companies and jobs with them. If they don't, they're running towards another credit crunch because they want to hold on to as much money as they can in case someone calls their bluff and they are made to pay up for the stupid amount of risks they've been gambling. Which will also hurt companies, and jobs.

With the Occupy protests getting people pissed off, and government cuts starting to bite on top of that, adding more people to the queue for jobs that don't exist...

Yeah. This year has sucked, but I think by the time the new year rolls around, we're going to be in an even worse position. Nobody at all seems to expect that the EU will actually get a programme together to deal with this crisis. Even EU officials themselves are talking about trying to prevent another immediate 'credit event' rather than deal with the long-term issues and address the problem.

[Cain]

Ah, but the markets are positive!

Which, if anything, should tell you just how much markets are to be trusted with day to day decision-making.

I'm just glad I'm living in a bubble which involves catering to foreign elites.  Most of my student's families wealth should stay intact, regardless of what happens to the Eurozone.  In theory.

But yeah, bad times are coming.

[Cain]

China to the rescue

http://www.ft.com/cms/s/0/7505d210-00ba-11e1-8590-00144feabdc0.html#axzz1bnrwip9T

Any Chinese support would depend on contributions from other countries and Beijing must be given strong guarantees on the safety of its investment, according to Li Daokui, an academic member of China's central bank monetary policy committee, and Yu Yongding, a former member of that committee.

"It is in China's long-term and intrinsic interest to help Europe because they are our biggest trading partner but the chief concern of the Chinese government is how to explain this decision to our own people," said Professor Li. "The last thing China wants is to throw away the country's wealth and be seen as just a source of dumb money."

He added that Beijing might also ask European leaders to refrain from criticising China's currency policy, a frequent source of tension with trade partners. The US argues that an intentionally undervalued renminbi unfairly supports Chinese exports.

To be fair, I am sympathetic to Chinese concerns.  China is in favour of EU integration and cohesion, and so is invariably upset when it turns out the EU is being used by member states to advance their own interests (ie; roughly 80% of the time).  China wants to make sure its investment is protected against what it sees as a weak and institutionally untrustworthy body.

On the plus side, Chinese pressure may aid European integration and promote its importance at the elite-political level.

[Cain]

More speculation about Germany reintroducing the deutsche mark

http://seekingalpha.com/article/302290-germany-is-already-printing-money-deutsche-marks

If this is true, and Malmgren is correct, then the euro will absolutely implode. Germany is widely held to have the strongest balance sheet in the EU (though even the Head of its Central Bank admits that the country's real Debt to GDP is over 200%).

However, compared to the PIIGS, Germany is relatively rock solid from a fiscal point of view. It's also the largest economy in the EU. So if the Germany pulls out (70% of Germans believe the euro has no future) then Europe will experience a wave of defaults starting with Greece and spreading throughout the PIIGS.

We're already seeing hints of this occurring. Germany Vice Chancellor, Philip Roesler said on September 11 that Germany won't participate in any more bailouts and that any German politicians who approve more bailouts is committing political suicide.

We also have reports of Sarkozy and Merkel screaming at each other in recent meetings. France has announced plans to possibly nationalize several banks just "in case." And Germany has dropped more than a few hints that it's fed up with the situation.

Heck, even mainstream "thinkers" like Alan Greenspan says the euro is "doomed" to fail.

Something very bad is brewing behind the scenes. The Sarkozy- Merkel talks, the short-selling bans, the halted stocks, the leveraged EFSF, the hints of QE 3, all of this is telling us that the financial system is on DEFCON 1 Red Alert.

Ignore stocks, they're always the last to "get it." The credit markets are jamming up just like they did in 2008. The banking system is flashing all the same signals as well.

[Cain]

http://www.ft.com/intl/cms/s/0/e1a2c6b2-02fe-11e1-899a-00144feabdc0.html#axzz1cL3CySX4

Wolfgang Schäuble, a heavy hitter in German financial circles, is calling for the introduction of a Tobin Tax.

[Scribbly]

Greece has been promised a referendum on the bailout proposals by its PM http://www.bbc.co.uk/news/world-europe-15526719

Opinion polls in Greece show that most people do not support the austerity deal.

Mr Papandreou told a meeting of his governing Socialist party that Greek people would have the final say on the package, which is designed to reduce Greek debt by about 100bn euros.

"The command of the Greek people will bind us", he was quoted as saying by AFP news agency.

Markets are panicking all over again, and the FT is hilariously reporting that this strikes at one of the core strengths of the Eurozone; its fundamentally undemocratic nature.

After all, if the Greeks get to vote on it, why shouldn't the Germans, who are going to be paying the majority of the cost? And everyone else? And then it all becomes a horrible mess and everything collapses.

The news has also damaged the Italian economy, and they have hit the danger level mark used by some clearing houses; this apparently made matters infinitely worse in Portugal and Ireland, as this is the level at which other people just stop buying government debt.

Portgual, Ireland, Italy, Greece and Spain are all going to be coming under far more pressure in the next few weeks. I wouldn't be surprised if some, or all, of these countries are forced out of the Eurozone, as some people have been clamouring for for a while, and possibly out of the EU as well. Especially if this referendum goes ahead and is voted down, as people seem to be expecting to happen.

[Faust]

It is very unlikely that Ireland will be forced out, we've been jumping through the hoops set by the eu and the IMF and they have too much invested in us.

If Greece rejects this it will just be changed slightly and pushed through.

[Scribbly]

If Greece rejects this, the French banks will go under. France will be forced to do another bailout, and the populations of the 'healthy' countries will be even more pissed off that they seem to be paying for something that nobody else wants.

As a result, the Eurozone is likely to break up. The PIIGS will be casualties because they are still likely to require further investment and are in a completely different economic bracket to the 'healthy' economies.

Even though Ireland has been jumping through hoops, this isn't going to be a managed and nuanced breakup. In general the EU is becoming rapidly unpopular amongst the populations of its constituent nations, and it is likely that if the politicians are forced to listen to them, the message they are going to receive is one which involves retrenchment, nationalism, and protectionist policies - can you really see politicians motivated by that bringing Ireland back into the fold just because it has been cooperative compared with Greece, when to most people the whole lot are bundled together as one category?

[Faust]

Only if the PIIGS default could that occur and Ireland is no longer in an unstable position, we've had three qualters unexpected growth as opposed to stagnation or recession. Our banks don't have anything imbedded in Greek or French banks because if anything they have become insular with no money to throw around.

I could see countries restoring their own currencies but not breaking up, not this late in the game.

[Scribbly]

'Restoring their own currencies' is pretty much what I mean by a breakup of the eurozone. Though I expect that such a measure will be followed by the countries seizing control over their own trading policy again, and becoming more protectionist.

What do you mean by breakup?

[Faust]

'Restoring their own currencies' is pretty much what I mean by a breakup of the eurozone. Though I expect that such a measure will be followed by the countries seizing control over their own trading policy again, and becoming more protectionist.

What do you mean by breakup?

Free travel, right to work and property ownership. Basically The eu a decade ago. 

[Cain]

It's hard to call.  If we go back to a 1999 position, then that would be...well, still pretty bad, it flushes nearly a decade of economic policy down the drain, and probably adds another two decades worth of trouble onto any future full financial union.  But it can be recovered from.

The thing is, I can see a further process taking part.  As anti-EU rhetoric becomes increasingly popular, and becomes even easier to be against the Euro, Eurosceptic parties will both toughen their rhetoric and gain unprecedented support.  It could quickly snowball out of control.

[Triple Zero]

The thing is, I can see a further process taking part.  As anti-EU rhetoric becomes increasingly popular, and becomes even easier to be against the Euro, Eurosceptic parties will both toughen their rhetoric and gain unprecedented support.  It could quickly snowball out of control.

And with that, their right-wing extremism, you mean?

Although our (barely-not-extremist) left wing Socialist Party is also against the Euro/EU. I even voted for them once. Not because of the EU but because their top guy seemed pretty smart, especially confronting populist idiots like Fortuyn and Wilders (unfortunately he stepped back after the previous elections).

[Cain]

Yes.

Somehow, I don't see Left Euro-scepticism gaining ground in such a climate.

Also, is it just me, or is the media really glossing over how the Greek top military brass all got fired just before the referendum was announced?  I mean, it may have been a simply pre-emptive measure...but that's a very serious step to take, regardless.  Were there rumours of a coup being planned?