Best of the Week
Most Popular
1. The Trump Stock Market Trap May Be Triggered - Barry_M_Ferguson
2.Why are Central Banks Buying Gold and Dumping Dollars? - Richard_Mills
3.US China War - Thucydides Trap and gold - Richard_Mills
4.Gold Price Trend Forcast to End September 2019 - Nadeem_Walayat
5.Money Saving Kids Gardening Growing Giant Sunflowers Summer Fun - Anika_Walayat
6.US Dollar Breakdown Begins, Gold Price to Bolt Higher - Jim_Willie_CB
7.INTEL (INTC) Stock Investing to Profit From AI Machine Learning Boom - Nadeem_Walayat
8.Will Google AI Kill Us? Man vs Machine Intelligence - N_Walayat
9.US Prepares for Currency War with China - Richard_Mills
10.Gold Price Epochal Breakout Will Not Be Negated by a Correction - Clive Maund
Last 7 days
Double Top In Transportation and Metals Breakout Are Key Stock Market Topping Signals - 18th July 19
AI Machine Learning PC Custom Build Specs for £2,500 - Scan Computers 3SX - 18th July 19
The Best “Pick-and-Shovel” Play for the Online Grocery Boom - 18th July 19
Is the Stock Market Rally Floating on Thin Air? - 18th July 19
Biotech Stocks With Near Term Catalysts - 18th July 19
SPX Consolidating, GBP and CAD Could be in Focus - 18th July 19
UK House Building and Population Growth Analysis - 17th July 19
Financial Crisis Stocks Bear Market Is Scary Close - 17th July 19
Want to See What's Next for the US Economy? Try This. - 17th July 19
What to do if You Blow the Trading Account - 17th July 19
Bitcoin Is Far Too Risky for Most Investors - 17th July 19
Core Inflation Rises but Fed Is Going to Cut Rates. Will Gold Gain? - 17th July 19
Boost your Trading Results - FREE eBook - 17th July 19
This Needs To Happen Before Silver Really Takes Off - 17th July 19
NASDAQ Should Reach 8031 Before Topping - 17th July 19
US Housing Market Real Terms BUY / SELL Indicator - 16th July 19
Could Trump Really Win the 2020 US Presidential Election? - 16th July 19
Gold Stocks Forming Bullish Consolidation - 16th July 19
Will Fed Easing Turn Out Like 1995 or 2007? - 16th July 19
Red Rock Entertainment Investments: Around the world in a day with Supreme Jets - 16th July 19
Silver Has Already Gone from Weak to Strong Hands - 15th July 19
Top Equity Mutual Funds That Offer Best Returns - 15th July 19
Gold’s Breakout And The US Dollar - 15th July 19
Financial Markets, Iran, U.S. Global Hegemony - 15th July 19
U.S Bond Yields Point to a 40% Rise in SPX - 15th July 19
Corporate Earnings may Surprise the Stock Market – Watch Out! - 15th July 19
Stock Market Interest Rate Cut Prevails - 15th July 19
Dow Stock Market Trend Forecast Current State July 2019 Video - 15th July 19
Why Summer is the Best Time to be in the Entertainment Industry - 15th July 19
Mid-August Is A Critical Turning Point For US Stocks - 14th July 19
Fed’s Recessionary Indicators and Gold - 14th July 19
The Problem with Keynesian Economics - 14th July 19
Stocks Market Investors Worried About the Fed? Don't Be -- Here's Why - 13th July 19
Could Gold Launch Into A Parabolic Upside Rally? - 13th July 19
Stock Market SPX and Dow in BREAKOUT but this is the worrying part - 13th July 19
Key Stage 2 SATS Tests Results Grades and Scores GDS, EXS, WTS Explained - 13th July 19
INTEL Stock Investing in Qubits and AI Neural Network Processors - Video - 12th July 19
Gold Price Selloff Risk High - 12th July 19
State of the US Economy as Laffer Gets Laughable - 12th July 19
Dow Stock Market Trend Forecast Current State - 12th July 19
Stock Market Major Index Top In 3 to 5 Weeks? - 11th July 19
Platinum Price vs Gold Price - 11th July 19
What This Centi-Billionaire Fashion Magnate Can Teach You About Investing - 11th July 19
Stock Market Fundamentals are Weakening: 3000 on SPX Means Nothing - 11th July 19
This Tobacco Stock Is a Big Winner from E-Cigarette Bans - 11th July 19
Investing in Life Extending Pharma Stocks - 11th July 19
How to Pay for It All: An Option the Presidential Candidates Missed - 11th July 19
Mining Stocks Flash Powerful Signal for Gold and Silver Markets - 11th July 19
5 Surefire Ways to Get More Viewers for Your Video Series - 11th July 19

Market Oracle FREE Newsletter

Top AI Stocks Investing to Profit from the Machine Intelligence Mega-trend

Euro Crash, ECB Losing Credibility as it Prints Money When It Said It Wouldn't

Currencies / Euro May 14, 2010 - 03:06 AM GMT

By: Charles_Maley

Currencies

Best Financial Markets Analysis ArticleIf you really think about it, the Euro is as much of an experiment as it is a currency. As I mentioned in my previous post, the Euro idea was that 16 different countries could join hands under one united monetary policy. The trick is to accomplish this under separate cultures, political structures, and economic climates. How’s that working out?


Anyone who looks at this situation like a human being and not an academic analyst realizes it’s a tough task.

The three amigos, Angela Merkel (Chancellor of Germany), Nicolas Sarkozy (President of France), and Jean-Claude Trichet (head of the European Central Bank) have engineered a $962 billion rescue package. Impressive as it sounds however, the rescue package still has major flies in the ointment, and essentially buys nothing more than time.

Europe is effectively borrowing huge sums from itself. The “PIGS” do not just have a debt problem; they have an economic growth problem, which means they must get more productive and export more. Spain and Portugal are still hemorrhaging and the 20% unemployment will sure put a cramp in any growth. This means a lower Euro if the economy wants to survive.

And why is no one talking about France? Italy owes France $511 Billion (20% of their GDP) on top of Ireland at $60 billion, Greece at $75 billion, Spain at $220 billion and Portugal at $45 billion. That’s a total of $911 billion (over 35% of their GDP) owed to them by questionable countries.

If things continue to deteriorate in Italy and Spain how can’t France suffer. Also, who does France owe and how much? It seems endless.

Ludwig Von Mises, the father of Austrian economics said “There is no means of avoiding the final collapse of a boom expansion brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

To add to the problem the ECB is losing credibility. Last week they said debt monetization (buying bonds) was not even under discussion. Then they did exactly that a few days later. If you change horses in mid stream investors might just get the impression that you’re not to be trusted. They may trust you even less when they realize the solution will be funneled through a “special purpose vehicle”, which is a way concealing questionable accounting by removing debt from the balance sheet and moving it elsewhere.

What is this, three-card monte?

Move it where you like, it’s still there, under one of those cards. Citicorp and Enron attempted to solve their problems through “special purpose vehicles” and look how well that worked out.

Now, finally I would like to take a moment to clear up all this confusion of exactly who owes who what.

Here is a breakdown of the “PIG” debt structure as of December 31st, and expressed in Dollar terms.

Ireland, Spain, Portugal and Greece all owe Italy. Hold on though, because Italy owes all of them money too, plus Italy owes France, Germany and Great Brittan. I owe you, but you owe me less, but he owes me more than you. If I get him to pay me some, I can pay you some, if you can get the other guy to pay you some, so you can pay me some.

It reminds me of the great Abbott and Costello comedy skit “Who’s on First?”  (Click here to view video)

Enjoy this article? Like to receive more like it each day? Simply click here and enter your email address in the box below to join them.  Email addresses are only used for mailing articles, and you may unsubscribe any time by clicking the link provided in the footer of each email.

Charles Maley www.viewpointsofacommoditytrader.com Charles has been in the financial arena since 1980. Charles is a Partner of Angus Jackson Partners, Inc. where he is currently building a track record trading the concepts that has taken thirty years to learn. He uses multiple trading systems to trade over 65 markets with multiple risk management strategies. More importantly he manages the programs in the “Real World”, adjusting for the surprises of inevitable change and random events. Charles keeps a Blog on the concepts, observations, and intuitions that can help all traders become better traders.

© 2010 Copyright Charles Maley - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules