LIR Gold Target in 2019: $30,000.Revised due to QE programs.
Insanity: doing the same thing over and over
again and expecting different results.
Albert
Einstein.
Even by the cringingly low standards of
continental Europe, what just took place Sunday and Monday in Brussels against
Greece, was stunningly shocking. Germany dictated that the Greek Prime Minister
commit treason against the hapless Greek serfs, and the Greek Prime Minister
abjectly, grovelingly complied. All the
other German vassal states of Europe joined Germany in giving Greece a kicking.
Most knew that they were only a heartbeat away from becoming the next Greece. In
time most would need a big fat German friend.
But the EU is dead in its present form.
Europe’s voters just saw that the Brussels Emperor hasn’t any new clothes. The
wealth and jobs destroying European Monetary Union gets to stagger on to its
next crisis on Greece, and in time to a crisis on Belgium, France, Italy and
Spain. The EU, EC, and EMU have no future in the 21st century. To
the youth generation and the pensioners, they are the problem not the solution.
The Germanic euro, far from being the new reserve currency to replace the continental
Europe hated American dollar, has now begun its glide path to an unstoppable
crash in the French Alps.
Below, the insanity of Germanic Europe
2015. Everything falls when the next European crisis arrives. Hopefully Brexit
arrives well before then.
"If the EU cannot
resolve a small problem the size of Greece, what is the point of Europe?"
Romano Prodi, former chief of
the European Commission, former Italy Prime Minister.
Europe's Insane Deal With
Greece
Jul 13, 2015 11:24 AM EDT
After a 17-hour summit, Europe's leaders have reached a deal.
If the Greek parliament passes a package of reforms by Wednesday night, the
country's creditors will move forward with a third bailout on terms that are
much stricter than previous proposals.
If the deal proceeds, it will avert the immediate chaos that Greece's
uncontrolled exit from the euro area would entail, and enable European leaders
to talk about something else for a while. Unfortunately, it does nothing to
address the fundamental issues that have repeatedly landed Europe in crisis
since 2009. Former German Economic Minister Karl-Theodor zu Guttenberg quipped
that Europe hasn’t been kicking the can down the road, it's been kicking it up
a hill and wondering why it keeps rolling back on its foot.
The core issue: Although the European Union can handle economies of widely
varying types and levels of development, the euro area cannot. Greece’s gross
domestic product per person was about half of Germany’s when it joined the euro
in 2001. Since then, Greece’s competitiveness relative to Germany’s has slid by
about 40 percent.
For a currency union to handle widely divergent economies, they must be
deeply integrated across multiple dimensions. In the U.S., the average citizen
of Mississippi makes just $20,618 a year, compared with $37,892 in Connecticut
-- almost as big a gap as between Greece and Germany. Yet the U.S. doesn’t
worry about a “Missexit,” because the country has various mechanisms for
smoothing over differences among its states. The recent problems of Puerto Rico
show the danger of being locked to a currency without such buffers.
The mechanisms include large fiscal transfers-- by necessity currency unions
are transfer unions. Last year, 28 U.S. states sent the equivalent of 2.3
percent of their gross domestic product through the federal budget to the other
22 states. The biggest donor, Delaware, gave 21 percent. The biggest recipient,
North Dakota, got 90 percent. By contrast, in 2011 Germany made a net contribution
of 0.2 percent of its GDP to the EU budget, while Greece received 0.2 percent.
Would German voters really support a tenfold jump in their contributions from
210 euros to 2,100 euros per person?
Large-scale fiscal transfers are not the only mechanism needed. Mississippi
has probably run the equivalent of a current account deficit with New York ever
since the Civil War. Every April, the banks in the Federal Reserve system
reallocate assets and smooth over such regional imbalances. By contrast, when
Greece runs a deficit with Germany -- for example, due to trade with Germany or
capital flight from Greece -- its
central bank accumulates debts to the Bundesbank indefinitely. The Bundesbank
currently holds more than 500 billion euros in credits against other euro zone
central banks. Again, would German taxpayers be willing to see the Bundesbank
regularly write off some portion of those liabilities?
----Finally, the U.S. has a deep single market for products, services and
labor and a true national banking union, all of which in Europe are only
partially completed projects. The lack of truly integrated markets allowed real
interest rates and inflation to diverge across the euro zone, leading to a loss
of competitiveness and a credit boom and bust in the south.
Thus, the euro area is stuck in a dysfunctional netherworld between a fully
integrated union and a more flexible exchange rate mechanism. So Greece has to
become a lot more like Germany (unlikely), the euro area needs to become a lot
more like the U.S. (also unlikely), or we’ll have another crisis (very likely).
More http://www.bloombergview.com/articles/2015-07-13/europe-s-insane-deal-with-greece
Tsipras Sells Betrayal of His Campaign Promises to Greece
July 13, 2015 — 2:28 PM BST
Prime Minister Alexis Tsipras, who came to office six months ago
pledging to end austerity and restore “dignity” to the Greek people, now plans
to sell an onerous bailout deal at home by arguing it could have been much
worse.
That was the message Tsipras delivered Monday morning in Brussels after
all-night talks with European leaders. They resulted in plans for large-scale
asset sales, tax hikes and spending cuts, many of which must be approved by
parliament right away. The agreement, he said, would avert “a collapse of the
financial system” and, most importantly, keep Greece in the euro, which the
premier calls his No. 1 goal.
Tsipras is seeking to implement measures even harsher than those
rejected by Greek voters in the July 5 referendum on austerity -- which he
himself called after the previous round of discussions. To succeed, he may need
to begin by shoring up his own party ranks.
The plan, agreed to by Greece and the leaders of the 18 other euro
countries, requires a level of austerity that Tsipras’s Coalition of the
Radical Left, or Syriza, will find difficult to swallow.
Political Earthquake
Syriza’s landslide electoral victory
represented a political earthquake in Greece, sending relations with European
partners into disarray and serving as an inspiration to other left-wing
parties across Europe.
On election night in late January, Tsipras told cheering crowds in central
Athens that “continued kowtowing” to creditors would end. The landslide victory
swept aside New Democracy, Greece’s traditional center-right party, which had
urged voters to stay the course with existing bailout arrangements.
Following the markets on both sides of the Atlantic since 1968. A dinosaur, who evolved with the financial system as it was perverted from capitalism to banksterism after the great Nixonian error of abandoning the dollar's link to gold instead of simply revaluing gold. Our money is too important to be left to probity challenged central banksters and crooked politicians.
No comments:
Post a Comment