eurozone collapse

World War III will be started with a printing press, not a bomb

rafifarber Eurozone Crisis , , ,

Aside from the fact that the mantra is repeated by virtually every media outlet, mainstream and otherwise, why should any Eurozone country defaulting have anything to do with that country leaving the Euro? Except for Yanis Varoufakis, who is virtually the only Keynesian econometrician who seems to have a workable solution for Europe, everyone else just assumes that default equals exit. Why should this be?

Take the United States for example. The US is a dollar zone. All fifty states use the dollar, and California is about to go bankrupt. Is anyone seriously discussing California leaving the dollar zone if it defaults on its debt? No. Miami, where I come from, declared bankruptcy when I was a kid. Did anything happen to my family? No, because we weren’t stupid enough to buy the municipal bonds of a bankrupt municipality. And by the way, Miami did not exit Florida after it went bankrupt. As it should happen in a bankruptcy, those who own the debt lose the money. That’s it.

So why are we even discussing Greece “leaving the Euro”? Why should they? How does that help anything? Who decides if they are going to be kicked out? Who is in charge of the Eurozone who makes these decisions? Why should it even be an option? What is going on here, has anyone asked these questions?

If Greece did “exit,” it wouldn’t be Greece leaving of their own accord. What would happen is that the European Central Bank would stop giving Greece euros to fill their ATMs, and the country would literally run out of currency and they would have to start printing their own. So the answer is whoever is in charge of the ECB makes these decisions.

Who is in charge of the ECB? Mario Draghi, an Italian? I doubt he’s the one who’s going to make the final decision to stop giving currency to a Eurozone member.

Whoever has his hands on the switch is probably in Germany. The implication is that the Germans literally control Europe. They decide who’s in, who’s out, who starves, who lives, who dies. Germany conquered Europe. Again. Without anyone noticing. It’s August 31, 1939, but instead of Poland, the Krauts are about to invade Greece.

It’s interesting. We always thought World War III would be started with a nuclear bomb. It looks more and more likely that it will be started with a printing press.

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Greece is out of bailout money; Spain is locked out of bond markets

rafifarber Eurozone Crisis , ,

The New York Times is reporting today (June 6) that Greece is running out of money to pay its immediate obligations. This is mostly because they’re not getting enough bailout money because the bailer outers don’t know if Greece’s next government will agree to the terms of the bailout, and Greece doesn’t have a government yet because the Greeks couldn’t decide whether or not they want to agree to those terms. So another election is scheduled for the 17th, elections cost millions of Euros which the Greeks don’t have, and in the meantime they have no money left.

The terms, by the way, are that Greece must commit suicide if they are to be able to collect on their bailout.

The budget gap is widening as the so-called troika of lenders — the International Monetary Fund, the European Central Bank and the European Commission — withholds 1 billion euros in bailout money earmarked for government financing while it waits to see whether new leaders elected June 17 will honor Greece’s commitments.

Even if the troika delivers that money, Greece will struggle to cover its obligations. It underscored a harsh reality that is playing out in other troubled euro zone economies. Prolonged austerity is making it harder, not easier, for governments like Greece to become self-reliant again.

What the New York Times isn’t telling you is that the ECB is making a nice profit off the so-called Greek austerity, which is only inflating Greek debt all the more. Yanis Varoufakis calls it “ponzi austerity”.

Meanwhile, Spain is complaining that nobody wants to lend Spain money anymore. They warn that if that happens and nobody lends Spain money anymore, they won’t be able to pay back the money they owe to other people who lent them money in the past. So they need new money to pay back previous lenders.

The Ponzi scheme is about to end! Quick! Somebody print some Euros for the love of the Eurozone!

Tomorrow there’ll be something about Italy. Just end this thing already and put Europe out of her misery.

Why There is No Way for Europe to Avoid Collapse

rafifarber The Jewish Libertarian Blog , ,

Come sit around the fire while Crazy Economic Collapse Uncle Rafi explains why there is no way out for Europe in the simplest terms you’ve ever heard. The key to international finance is this: If a 7 year old can’t understand it, chances are it’s a bunch of bullshit.

I read some more crap today on Bloomberg about the grand master bazooka artillery plan that the European Central Bank has to come up with to “solve the European debt crisis.” Something about “recycling funds via financial instruments through the IMF and out it’s newly defined cloaca that excretes Euros” or something. I had no idea what I was reading. It sounded so sophisticated and financish that it made whoever wrote the stupid thing sound really smart. But I’ll put my life on it that the writer had no idea what the hell he was even writing about.

It reminded me of a psychology class I took in college where I wrote this paper having absolutely no clue what I was even saying, but it sounded very sophisticated. Don’t ask what grade I got.

So here’s the short answer of why there is no escape: This is a cultural problem. In hebrew, Talmudic speak, it’s called a tarbus ra’ah, a bad culture. The basic problem is this. You have X amount of wealth in Europe. But you have X+50 amount of debt, that X wealth can’t cover. So, you have one of 3 choices and a Wild Card:

1) Work your butt off to create X+50 wealth out of the current X wealth you have to pay off all your debt.

2) Print X+50 Euros, thereby not creating any new wealth, but rather diluting X existing wealth to smaller units to make it look like X+50, but really it can only purchase X because prices will go up. Anyway, pay back your debt in cheap Euros and watch the middle class disappear and possibly revolt.

3) Call it a day and default, and watch the global economic system cascade.

Wild Card) Sell Vatican City to the highest bidder for X+100, give the Jewish People 50 for all the stuff that was stolen from us over the past 2000 years and stuffed in Vatican vaults, and pay off the debt with the rest.

Choice 1 ain’t gonna happen. Choice 2 might happen, but then people will lose faith in the Euro, and 3 will quickly ensue anyway. The Wild Card is an option, but I doubt the Pope has the guts.

In life, the truest things are the most simple to understand. Ain’t no complicated “financial recycling” gonna do nothin’. Either you got the money, or you don’t. And you don’t, so you gotta print it, because you won’t give up your precious 35 hour work week and welfare systems, and if you even try, the entire Unionized continent will go on strike because they think they DESERVE printed money, driving you even DEEPER into debt than before.

Heh, good luck Europe. See you on the short side.