tag:blogger.com,1999:blog-33825131217256115.post560119560675082069..comments2023-07-19T09:18:00.774+01:00Comments on Ye Olde Blogge: If the Dollar fails, how can the Euro not fail along with it?DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comBlogger51125tag:blogger.com,1999:blog-33825131217256115.post-11303183972491682332011-03-22T12:14:47.064+00:002011-03-22T12:14:47.064+00:00"Other parties will have had to sell their go...<i>"Other parties will have had to sell their gold in defence of their currencies, and their paper gold market systems."</i><br><br>As they all know the score (gold's true value), I can't see any nation actually doing this. That would be naive. You don't use your actual insurance policy to fight the fire you are insured against.<br><br>Anecdotal evidence suggests the physical market is getting pretty tight.<br>Sooner or later paper and physical will part company, and that will be the end. Punctuated equilibrium. The entire monetary system rests on gold being available at the paper price. It's the "lynchpin", if you like.Blondiehttp://www.blogger.com/profile/03271512349186616514noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-59514444883958236442011-03-22T12:14:46.373+00:002011-03-22T12:14:46.373+00:00Fauvi: As I am still a newbieMe too -- I have only...Fauvi: <i>As I am still a newbie</i><br><br>Me too -- I have only been a citizen of FOFOAland for approx a couple of months. We are all of us perpetual students, I think. (With perhaps the exception of FOFOA, of course... :) )<br><br><br><i>It’s not easy to follow his mental gyrations and ppl need answers like yours and fairly quickly!</i><br><br>I agree, there is definitely a market for simplistic clarity. However, the brand of simplistic clarity that I hope I am successful in attempting to bring on occasion, isn't in the longer term as good for the readers as the more cryptic and well-rounded nature of FOFOA's messages, along with some of the more seasoned commenters. I think it helps the reader to <i>Think Long And Hard</i> (smile), and better understand the wider picture as a result. But yes, I also see as you do, that not everyone is a Strategic Thinker, and perhaps it is useful to many people to have some Starters For Ten Points, to help them along the road a little... :-)DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-90195429765065795362011-03-22T12:14:45.951+00:002011-03-22T12:14:45.951+00:00It was remiss of me not to include a link to the S...It was remiss of me not to include a link to the SCO wiki, for those that haven't heard of it. <i>Bad Baron!</i><br><br><a href="http://en.wikipedia.org/wiki/Shanghai_Cooperation_Organisation" rel="nofollow">Wiki:SCO</a>DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-10918559298223412782011-03-22T12:14:44.730+00:002011-03-22T12:14:44.730+00:00Welcome, TDoC. Thank you for the kind words, which...Welcome, TDoC. Thank you for the kind words, which are always appreciated but certainly never expected. ;)<br><br>It will be very interesting to witness how this does pan out. It could go any of many ways couldn't it? It does seem lately there is a dawning realisation, or public admittance perhaps, that any solution must revolve around gold if it is to be taken seriously and not collapse again in a few years. (See recent Zoellick and Hoenig statements for example.)<br><br>At the end of the day, the US does have a buttload of gold. They just don't choose to count it on their balance sheet and let people measure their Dollar. They could do this and it will put a floor under this by now long-toothed currency, but when one looks at the number of them in existence around the world today, in terms of the comparison to the level of gold reserves, it's going to measure up a long way short of the ECBs comparable metric.<br><br>Interesting times.<br><br>I can see that the US will not be keen to give up their exorbitant privilege without a struggle. But really, other than the controls to the Dollar printing press, what gives the US these days any objective right to be ahead of the rest of the world? They have run up the biggest pile of debts in the history of man, bigger than everyone else in the world put together, they're not exactly a manufacturing export juggernaut any more; how can they seriously expect to come out of this the richest kids on the block still...DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-60067182351867009832011-03-22T12:14:44.327+00:002011-03-22T12:14:44.327+00:00By the way TDoC, I reckon you can count the UK in ...By the way TDoC, I reckon you can count the UK in on the whole "being in shit" thing alongside the US and Canada. Ironic that we should have been lending you good folks some "money" recently, eh? (I hope you guys will feel just as charitable when the roles are reversed later! :->)<br><br>In fact, a whole lot of places will be in deep trouble if the Dollar takes a beating. Everywhere that still has the US Dollar as its primary reserve asset. Japan springs to mind most immediately and significantly, but by no means exclusively.<br><br>I reckon the UK can look forward to the Euro in its future. I don't know whether we give in while we still can get a decent deal out of it, or we do it when we have no choice. [sigh]DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-39423904276519744842011-03-22T12:14:43.890+00:002011-03-22T12:14:43.890+00:00...The ECB doesn't have to worry about HICP co......<br><br>The ECB doesn't have to worry about HICP consumer price inflation taking off, because no net-new Euros are going to enter the wider economy. However, you will be thinking "but there are more Euros in the system now though, and there isn't more gold or foreign hard currency added to the reserves? The Euro will go down on the forex markets because the ECB reports will show that it has been diluted", and you will be right to think that. The Euro goes down a little against the US$ [but... the Fed are printing too, no? :) ]. The ECB won't care about this, all they are concerned about is HICP consumer price inflation, which as I said above should not materially change as a result of this "bail out", because no new cash is going to enter the economy and circulate to push up prices. The ECB don't care directly about the exchange value of their currency, only about demonstrating responsibility and transparency in issuance to maintain confidence, and <br>of course that single mandate of ~2% HICP consumer price inflation per year that is their only goal.<br><br>But won't the Germans be up in arms about this? They remember the Weimar experience painfully well, and they do not want to see inflation. Again, no new cash is going to enter the economy and circulate to push up prices, and confidence in the ECB's restraint isn't about to be smashed and bring on a hyperinflation either I think. All that has happened is the old bond has expired and the debt has been moved from one party to another. A currency deflation and crisis of confidence through default has been avoided. In fact, Germany loves this steady and planned dilution -- they get a nice tail wind to their export-led economy, because they become more competitive on world markets the lower their currency is against others. The rest of Europe being economically weak is exactly what Germany gets out of the currency union. Without the profligate states elsewhere on the patch, the Deutschmark would have put paid to any plans of a continued export-led success for Germany, and their local economy would have atrophied long ago. They would have massive numbers on the dole, and who would pay for that?<br><br>So, in short, I see the ECB printing Euros out the wazzoo in order to ensure there are no significant defaults, and everyone coming to think it's a good thing.DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-82971395828558754172011-03-22T12:14:43.554+00:002011-03-22T12:14:43.554+00:00Japan aren't happy to buy individual Eurozone ...Japan aren't happy to buy individual Eurozone PIIGS sovereign debts, but are comfortable with the idea of buying bonds of ESF.<br><br><a href="http://www.bbc.co.uk/news/business-12159399" rel="nofollow">http://www.bbc.co.uk/news/business-12159399</a>DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-33346379083375872932011-03-22T12:14:43.136+00:002011-03-22T12:14:43.136+00:00It seems like in the end we agree -- Fractional Re...It seems like in the end we agree -- Fractional Reserve Banking ( creation of credit money within the walls of commercial banks, multiplying high powered money issued by the Central Bank) is the root of all evil. :-)<br><br>If the Central Banks of this world showed more restraint in issuing this high powered money, that the banks then multiply by issuing credit, rather than turning a blind eye to the bubbles and enjoying the tax rewards that come from then, we would have a better world. <a href="http://barondayne.blogspot.com/2010/11/on-much-misunderstood-euro.html" rel="nofollow">The issuance of Euros by the ECB is outside of the control of national politics</a>, and this makes it a superior mechanism in this regard, IMO.DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-63945234515308395772011-03-22T12:14:42.815+00:002011-03-22T12:14:42.815+00:00So... they will raise funds in the ESF by selling ...So... they will raise funds in the ESF by selling AAA rated bonds to investors in China/Japan/MiddleEast/etc, then using the funds to loan to troubled Eurozone states, so that those states can then buy back their previously-issued bonds, which are trading at a discount to face value at the moment.<br><br>Pretty slick solution, no? The states can afford the below-market interest rates charged by the ESF, the investors are happy with the risk/reward profile of these new bonds, and the states will pay those lower rates on a smaller principal because the market has already discounted the risk of the old state-specific bonds. In a little more time, the old bonds will drift back up to near par, I would expect. How much better could this be for all concerned?<br><br>All eyes to start turning to the other big debtors shortly now methinks.DPhttp://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-267560490686500902011-01-28T17:23:55.252+00:002011-01-28T17:23:55.252+00:00So... they will raise funds in the ESF by selling ...So... they will raise funds in the ESF by selling AAA rated bonds to investors in China/Japan/MiddleEast/etc, then using the funds to loan to troubled Eurozone states, so that those states can then buy back their previously-issued bonds, which are trading at a discount to face value at the moment.<br /><br />Pretty slick solution, no? The states can afford the below-market interest rates charged by the ESF, the investors are happy with the risk/reward profile of these new bonds, and the states will pay those lower rates on a smaller principal because the market has already discounted the risk of the old state-specific bonds. In a little more time, the old bonds will drift back up to near par, I would expect. How much better could this be for all concerned?<br /><br />All eyes to start turning to the other big debtors shortly now methinks.DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-7176357070010755622011-01-28T15:44:57.745+00:002011-01-28T15:44:57.745+00:00Reuters: Analysis - Euro fund sale shows there'...<a href="http://uk.news.yahoo.com/22/20110126/tbs-uk-economy-euro-analysis-7318940.html" rel="nofollow">Reuters: Analysis - Euro fund sale shows there's a way, if there's a will</a><br /><br /><i>The ease with which the euro zone's financial stability fund raised super-cheap borrowing this week may mark an inflection point in the bloc's debt crisis -- it shows financing presents no bar to solving the problem.<br /><br />...</i>DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-15895120455332579692011-01-26T09:37:05.801+00:002011-01-26T09:37:05.801+00:00Oooh, well lookie here. A very well-bid (understat...Oooh, well lookie here. A very well-bid (understatement of the year to date) sale of bonds from the ESF takes place. Asia and the Middle East can't get enough of this idea. Eurobonds are go.<br /><br /><a href="http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8282038/Asian-investors-lead-massive-demand-for-first-Euro-bail-out-bond.html" rel="nofollow">http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8282038/Asian-investors-lead-massive-demand-for-first-Euro-bail-out-bond.html</a>DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-12598813512180764112011-01-12T12:33:00.174+00:002011-01-12T12:33:00.174+00:00Confirmation Germany thrives on a currency with re...Confirmation Germany thrives on a currency with reduced exchange value, keeping export demand high and unemployment low.<br /><br /><a href="http://www.telegraph.co.uk/finance/economics/8254644/German-economy-grows-at-fastest-pace-since-reunification.html" rel="nofollow">http://www.telegraph.co.uk/finance/economics/8254644/German-economy-grows-at-fastest-pace-since-reunification.html</a>DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-2633314326261467942011-01-12T09:11:48.712+00:002011-01-12T09:11:48.712+00:00It seems like in the end we agree -- Fractional Re...It seems like in the end we agree -- Fractional Reserve Banking ( creation of credit money within the walls of commercial banks, multiplying high powered money issued by the Central Bank) is the root of all evil. :-)<br /><br />If the Central Banks of this world showed more restraint in issuing this high powered money, that the banks then multiply by issuing credit, rather than turning a blind eye to the bubbles and enjoying the tax rewards that come from then, we would have a better world. <a href="http://barondayne.blogspot.com/2010/11/on-much-misunderstood-euro.html" rel="nofollow">The issuance of Euros by the ECB is outside of the control of national politics</a>, and this makes it a superior mechanism in this regard, IMO.DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-27322678930821367662011-01-11T22:53:26.209+00:002011-01-11T22:53:26.209+00:00I disagree - housing bubbles are almost always the...I disagree - housing bubbles are almost always the result of credit money created withen the walls of commercial banks.<br />Yes politicans are cretins but that is partially a result of their subservience to the current money system - they willnot and cannot be rational senators and congressmen when the populace with a vote are monetory heroin addicts.<br /><br />I have grave problems with the freegold mechanism as all power derives from a possibly fictional balance sheet.<br />We must always strive for balance in systems between the Hamiltonian and Jeffersonian views - I fear the freegold mechanism gives far too much power to the monetory priesthood.The Dork of Corkhttps://www.blogger.com/profile/01118115538944689118noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-82609986461290858302011-01-11T09:44:55.881+00:002011-01-11T09:44:55.881+00:00@TDoC: The housing boom was caused by creation of ...@TDoC: The housing boom was caused by creation of high-powered money in combination with lax oversight of the fractional reserve banking system, allowing the broad money supplies to massively expand (monetary inflation, of the kind where the new cash WILL enter the economy and circulate to push up prices). The governments were complicit in encouraging both sides of this, clearly. If they hadn't allowed that party to get out of control, their workers wouldn't have needed the pay rises that were unaffordable once the housing boom party music inevitably stopped. The problem here is the governments were greedy soft money debtors, and they couldn't (or wouldn't) see beyond the next election that they hoped to win by promising people things that weren't sustainably affordable, especially in a hard money system like the Euro.<br /><br />Buiter is paid by Citigroup. He would therefore naturally prefer the bank deposits were being backstopped directly, rather than via government bonds. If the cash goes to the governments, the banks will still have to beg for it again from the governments, to paper over their private problems. That is how Ireland was broken, backstopping private banking problems with public money (albeit they stupidly did that before getting the money from the Central Bank, which was utter insanity but I guess they hadn't realised that things had changed, monetarily...). Better for the banks that the money comes direct from the CB and they only have to beg the once. Not better for anyone else though.<br /><br />The best thing for everyone but the banks and politicians, would have been if there was never the bubble in the first place. This would have been avoided if either of the following things (and ideally both) had been the case:<br /><br />1) Fractional Reserve Banking wasn't in place, or at least there was a much more conservative ratio enforced and idiotic holes like not requiring reserves on non-demand deposit accounts, allowing demand-deposit accounts to be swept into non-demand accounts overnight, bundling together groups of crap into tradable securities and rating them AAA -- aka "casino banking", or perhaps "financial Russian roulette" would be more apt a name.<br /><br />2) Governments hadn't gone on a spree with the easy debt, paying their public sector workers too much and helping to stoke up the demand for high priced housing. If the public sector unionised workers had been left behind early on, they would have been up in arms and the politicians would have had to draw a line under the thing.<br /><br />Hopefully, some governments and voting publics will have learned a valuable lesson from all of this. Taking on debt is like holding a stick of dynamite while someone else holds the detonator.DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-75307115378157238522011-01-11T09:20:40.579+00:002011-01-11T09:20:40.579+00:00If Merkel doesn't come around soon, France and...If Merkel doesn't come around soon, France and Germany will be paying through the nose as well and the problem will then be out of control.<br /><br /><a href="http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8251389/EMU-debt-crisis-edges-ever-closer-to-the-core.html" rel="nofollow">http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8251389/EMU-debt-crisis-edges-ever-closer-to-the-core.html</a>DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-79622016766223729672011-01-11T09:17:47.968+00:002011-01-11T09:17:47.968+00:00Japan aren't happy to buy individual Eurozone ...Japan aren't happy to buy individual Eurozone PIIGS sovereign debts, but are comfortable with the idea of buying bonds of ESF.<br /><br /><a href="http://www.bbc.co.uk/news/business-12159399" rel="nofollow">http://www.bbc.co.uk/news/business-12159399</a>DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-65021594643601222232011-01-11T01:11:46.159+00:002011-01-11T01:11:46.159+00:00@DP
Given that the commercial banks are reducing t...@DP<br />Given that the commercial banks are reducing their credit production especially in over banked Iberia and Ireland the ECB should create high powered money - although Buiter seems to favour covering checking account liabilities on the ECB balance sheets rather then goverment debt.<br />This is unfortunate as with the exception of Greece Goverment spending has been well managed - the overspending of goverments in Iberia and Ireland was due to the almost hyperinflationary environment in housing created by private credit - this forced these Governments to pay excessive wages to Goverment employees so that they could live withen 50 miles of their job.<br />The ratio of goverment debt relative to the ponzi was low until the ponzi became apparent.<br />The refusal of the ECB to recognize this obvious flaw is maddening although I suspect they knew full well what was going on and used the crisis to accomplish their long term goals in the freegold sphere - redirecting reserve dollars into Gold.<br /><br />As for the Swiss they are a enigma wrapped up in a cuckoo clock - I have no idea what there bottom line is other then the bottom line.The Dork of Corkhttps://www.blogger.com/profile/01118115538944689118noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-53323560388043094502011-01-10T16:29:40.131+00:002011-01-10T16:29:40.131+00:00As if by magic, this afternoon sees an article at ...As if by magic, this afternoon sees an article at the Telegraph, telling us <a href="http://www.telegraph.co.uk/finance/financetopics/financialcrisis/8250484/Germany-may-agree-to-expand-750bn-bail-out-fund-as-ECB-buys-bonds.html" rel="nofollow">Germany may agree to expand €750bn bail-out fund, as ECB buys bonds</a>.<br /><br />By my estimation, the ECB currently have little choice but to directly monetise. If the ESF were instituted and was able to attract international capital via bond issuance, this would in all likelihood avoid the need for the ECB to issue the Euros to paper over the problems, as I was saying earlier. So really, it would seem to me that the better course of action for the Eurozone as a whole, might be to setup the officially-supported notion of the ESF and to enable it to achieve the desired result of shoring up the PIIGS debt without having to resort to printing Euro. It would have the ECB backing though, in case it would need to come to that (thereby providing the impeccable credit rating that is required in order to obtain the low interest rates and high demand from international investors).<br /><br />Merkel doesn't yet appear to see it is necessary, or in my view in fact desirable, unfortunately. Somehow, I think before long it might come out that in fact, she does after all.DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-47546844296969880662011-01-10T12:57:44.479+00:002011-01-10T12:57:44.479+00:00@TDoC: (RE: your comment about the Swiss rejection...@TDoC: (RE: your comment about the Swiss rejection of Irish debt)<br /><br />Do you think the Swiss might prefer to buy ESF debt, backed by the whole Eurozone and the ECB, rather than that of individual nations? Just a thought.DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-19614951030067630702011-01-10T12:13:12.858+00:002011-01-10T12:13:12.858+00:00...
The ECB doesn't have to worry about HICP ......<br /><br />The ECB doesn't have to worry about HICP consumer price inflation taking off, because no net-new Euros are going to enter the wider economy. However, you will be thinking "but there are more Euros in the system now though, and there isn't more gold or foreign hard currency added to the reserves? The Euro will go down on the forex markets because the ECB reports will show that it has been diluted", and you will be right to think that. The Euro goes down a little against the US$ [but... the Fed are printing too, no? :) ]. The ECB won't care about this, all they are concerned about is HICP consumer price inflation, which as I said above should not materially change as a result of this "bail out", because no new cash is going to enter the economy and circulate to push up prices. The ECB don't care directly about the exchange value of their currency, only about demonstrating responsibility and transparency in issuance to maintain confidence, and <br />of course that single mandate of ~2% HICP consumer price inflation per year that is their only goal.<br /><br />But won't the Germans be up in arms about this? They remember the Weimar experience painfully well, and they do not want to see inflation. Again, no new cash is going to enter the economy and circulate to push up prices, and confidence in the ECB's restraint isn't about to be smashed and bring on a hyperinflation either I think. All that has happened is the old bond has expired and the debt has been moved from one party to another. A currency deflation and crisis of confidence through default has been avoided. In fact, Germany loves this steady and planned dilution -- they get a nice tail wind to their export-led economy, because they become more competitive on world markets the lower their currency is against others. The rest of Europe being economically weak is exactly what Germany gets out of the currency union. Without the profligate states elsewhere on the patch, the Deutschmark would have put paid to any plans of a continued export-led success for Germany, and their local economy would have atrophied long ago. They would have massive numbers on the dole, and who would pay for that?<br /><br />So, in short, I see the ECB printing Euros out the wazzoo in order to ensure there are no significant defaults, and everyone coming to think it's a good thing.DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-4489846989994141202011-01-10T12:12:36.924+00:002011-01-10T12:12:36.924+00:00@TDoC (RE: W.Buiter @ FT Alphaville, commented her...@TDoC (RE: W.Buiter @ FT Alphaville, commented here above and also I now see at FOFOA's place):<br /><br /><i>Apologies for not responding earlier to this question you placed, I have only just got around to reading the artlce you provided the link for.)</i><br /><br />The national sovereigns cannot print Euro to pay their debts. Investors are scared they will get a default, rather than repayment through inflation as they might receive elsewhere. They demand an elevated interest rate for buying the bonds of those sovereigns that are of concern.<br /><br />The ECB are the only people that can issue Euros. They can issue as many as they see fit, and the idea they might outright default on a Euro obligation is a non-issue (although stealth default via inflation is still always a potential issue, and that is why interest rates were invented). Because the ECB will, like the US Fed, never default, any entity that is officially backed by the ECB will have an exemplary AAA credit rating assigned to it because it should be unthinkable it would default. Such an entity would get plenty of offers from investors, at the lowest of interest rates (based on the outlook of future restraint at the ECB).<br /><br />The way I see this heading is the sovereigns will be bailed out whole by the ESF, when it is necessary to do so. When the interest rate demanded of them becomes intolerable (over 7% perhaps being a current threshold to begin discussions?) the ESF will offer to buy the debts that must be rolled over, for a "reasonable rate of interest" (about 5%-6% looks "reasonable" currently I guess, based on the Greek and Irish deals worked out lately?). The ESF will either receive the necessary cash from international investors in exchange for bonds that it issues, or failing that the ECB can step in to buy the ESF's bonds if investors for some reason are losing confidence even in the ESF! The ESF will then have the bond, and the previously issued bonds of the national sovereign will be settled at expiration with this "bail out" cash. The cash was already spent into the economy when the now-expired bonds were issued, long ago - there are no new Euros that are going to enter the economy and bid up prices because this new cash is going to the buyer of the previous bond; it is non-inflationary (it is also non-DEFLATIONARY, unlike the alternative default).<br /><br />The national sovereign gets to live on and fight another day. It didn't get out of jail free, because it still has to pay that "reasonable rate of interest", but it has now played its "get out of jail for reasonable amount of bail" card. The country in question is still going to have to pull in its horns and get its fiscal house in order -- because they don't have another card, I suspect(? At least IMO they shouldn't).<br /><br />For global investors, better to invest in an economic block that is humming along with a mild inflation but most people are still in a job rather than draining cash from their government in welfare payments, than in some other economy that is in a chaotic deflation or hyperinflation due to a debt crisis that wasn't resolved in a similarly controlled manner. If they can invest in a way that has the backing of the entire block, rather than a single nation within it, this has to be preferable to them.<br /><br /><b>If the ESF managed to sell bonds at a good rate of interest to international investors, I think it's job done and the remainder of the comment here will be irrelevant. So reading beyond here let's assume that for some reason the international investors could not be coaxed to earn a secure but small return on ESF bonds... the ECB had no choice but to issue new Euros to give to the ESF in order for the ESF to buy the bonds of the national sovereign. This is really the disaster scenario, basically the wheels really must be seen to be coming off for it to come to this, surely?</b><br /><br />Cont'd...DPhttps://www.blogger.com/profile/01965423353442076871noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-33009371679652622992011-01-07T20:56:01.296+00:002011-01-07T20:56:01.296+00:00Again the moving silver standard is a ad hoc arran...Again the moving silver standard is a ad hoc arrangement to internalise the North American economy as all it needs after maybe 20 years of reindustrialization is outside oil that it can pay for in Gold via the indirect transfers that bankers have a ability to arrange.<br /><br />Also while its industrial base has been ravaged by the global petrodollar system it still has elements of skills in various high technology areas that other countrys never quite achieve to the same standard.<br />However this skill base may go the way of the British boffin culture of the 1960s which was annihilated by the new monetarists.<br />Who really knows what the future may bring.The Dork of Corkhttps://www.blogger.com/profile/01118115538944689118noreply@blogger.comtag:blogger.com,1999:blog-33825131217256115.post-77002860255570984282011-01-07T20:36:21.129+00:002011-01-07T20:36:21.129+00:00@DP
I think the surprise in the Euro system may be...@DP<br />I think the surprise in the Euro system may be the ejection of Ireland from the Euro.<br />This may actually reduce the Euro liabilities in the longer term although the ECB may take a huge hit on the mortgage collateral that I beleive they hold on their assets side as there has been a significant amount of dark matter present in Dublin.- therefore Eurogold might correct downwards after a period of time reinforcing the illusion of the take no shit Euro<br /><br />A significant development has been the rejection of Irish paper by the Swiss central bank on the 21st of December.<br />I think Ireland is being set up for a reintegration withen the BOE direct sphere of influence again.<br /><br />however good luck collecting the 200 billion+ loaned to Ireland - outside a small amount of sovergin debt it looks unrecoverable as most of these "investments" have no real yield.<br /><br />Check out the excellent corner turned blog for a good view of Irish financial affairs<br /><br />blog.cornerturned.com/2011/01/04/the-man-from-zurichThe Dork of Corkhttps://www.blogger.com/profile/01118115538944689118noreply@blogger.com