The Greatest Depression

[krischan]

Question - "Should the Fed save Europe from disaster?"

Of course not! You sweep the poo off your rug, we care about ours. You cannot save us anyway and vice versa. Likewise, the one shouldn't give friendly or haughty advice to the other, that's just a cheap attempt do distract from one's own problems and failures by blaming others. The same goes to the English government BTW.

I'm a supporter of the Euro, but it seems that all of Europe expects Germany and France to do something while nobody wants Germany to gain too much of the power which will come from doing that. That sounds a lot like "give us your money, then shut up and don't come back", doesn't it? BTW, if we are able to help others, we already have the power which they don't want us to have, don't we?

I don't think that Germany takes advantage of the situation, but I expect our government not to put our heads in the lion's maw and vouch for the future credits of others without having a say on making these debts.

[jmervyn]

I think the real question is that can the Fed afford to save Europe.

Of course we can! We'll just print more dollars. After all,
"There will always be more; that's what <more> MEANS!" - Earl Sinclair, The Dinosaurs.

Of course not! You sweep the poo off your rug, we care about ours.

Not sure if you're trying for a double entendre here, since the standing turn of phrase is to 'sweep something under the rug' and our establishment is definitely doing so frantically.

You cannot save us anyway and vice versa. Likewise, the one shouldn't give friendly or haughty advice to the other, that's just a cheap attempt do distract from one's own problems and failures by blaming others.

Oddly, that hasn't stopped Europeans from taking big stinky dumps on the U.S. for decades. But as I said here some years back, watching the European Socialist experiment drag all of Europe into the abyss will be a Pyrrhic experience at best; we're following on your heels.

I'm a supporter of the Euro,

Why? What makes sense to you about having a common currency but individual State government? It comes as no surprise that the Greeks and Italians having gold-plated civil servant careers would cause this instabilty.

it seems that all of Europe expects Germany and France to do something while nobody wants Germany to gain too much of the power which will come from doing that. That sounds a lot like "give us your money, then shut up and don't come back", doesn't it?

I prefer the analogy of the Greeks holding a gun to their head and threatening you.

BTW, if we are able to help others, we already have the power which they don't want us to have, don't we?

I hope your Faraday cage is operating at full force, lest that knock on your door be some heavily armed EUrocrats.

I don't think that Germany takes advantage of the situation, but I expect our government not to put our heads in the lion's maw and vouch for the future credits of others without having a say on making these debts.

Which is exactly what you're being expected, and demanded, to do. But hey, THE WON has already stated one of the most outrageous lies of his career to date (and that's a high hurtle already) and claimed that America would support the EU as long as it didn't involve U.S. taxpayer dollars.

[krischan]

Why? What makes sense to you about having a common currency but individual State government? It comes as no surprise that the Greeks and Italians having gold-plated civil servant careers would cause this instabilty.

Because it's a win-win situation.

1. Each EU country on its own has a smaller economy than the US, Japan, China etc. with accordingly less influence. If each country did its own thing, it would be even easier to play off one against the other than it already is.

2. If Germany had its own currency, we might have run into the same problem as Japan and Switzerland, with a currency that would be more sought after than the others, leading to higher exchange rates. We would have difficulties to get our wares sold and we even might have a deflation like Japan because our money might gain value at a higher rate than you can earn by collecting interests on investments in other currencies. The currencies of many other countries would devalue in comparison to ours (like they did all the time before the Euro) which means less imports for them and less exports for us.

With respect to the Euro, the economically strong countries can sell more into other countries because the others lower the value of the currency while the other countries would have a more stable currency than they would have with their own money.

We have to strengthen our inner market in order to be less dependent on exports, but that will not come for lower exports, but in addition to what they already are like. However, using more self-made goods would also mean less imports from other countries, the medal has two sides.

Germany has 2 trillions of debts (80% of our yearly GDP*), but the advantage of ours is that more than 99% of them are made under German sovereignty, i.e. they are made in whatever the German currency might be (not to be confused with the question who owns the bonds). I guess it's similar with the US because the dollar is a world currency. In contrast, many EU countries have made debts under the law of other countries (often up to 40% in contrast to our 0.5%), so they will have to be paid in whatever the other countries' currencies might be. That means, if the Euro falls apart, Germany could pay in D-Mark (which will skyrocket if we had our own currency again) while e.g. Greece would be screwed because their Drachmes would devalue massively because of their massive debts. That means Germany could start the money press in order to pay back the debts and to counter the deflation and devalue the currency at the same time (in theory... the state cannot command the Bundesbank to do that). However, we wouldn't be able to get all that stuff sold which is meant for other countries because of the exchange rates.

I'm an amateur at these things. Half of it is the result of what just came to my mind when writing this, so my thoughts about it might not be complete. There might also be counter-arguments which I didn't consider at all.

* The GDP is a bit of a bogus number. If you sell something and then buy it back, both transactions will add to the GDP AFAIK, so it's easy to increase it artificially, e.g. to let the debts appear less severe, and the expressiveness of the GDP has to be assessed in separate.

[jmervyn]

Because it's a win-win situation.

Yeah, I guess you forgot that Margaret Thatcher quip about "other people's money"...

1. Each EU country on its own has a smaller economy than the US, Japan, China etc. with accordingly less influence. If each country did its own thing, it would be even easier to play off one against the other than it already is.

Sure; it's the same principal the United States' confederacy is based upon. This is immaterial. Not only is the Euro a fiat currency, but the individual countries were not "states". They're countries. If the Greeks, say, fund Palestinian terrorists to the tune of 6 hundred billion Euros, then who has to pick up the bill?

2. If Germany had its own currency, we might have run into the same problem as Japan and Switzerland, with a currency that would be more sought after than the others, leading to higher exchange rates.

You have no idea how much your referring to what I knew to be the norm as "the same problem" amuses me.

Such currency markets are simply the way the world works, while the Euro was a great exercise in mystical thinking. A nation-state's currency is valued at whatever people will consider it to be worth. You can try to artificially peg your currency to another unit, but I recall seeing illegal currency trading even back when I was there.

The currencies of many other EU countries would devalue in comperison to ours which means less imports for them and less exports for us.

Making you unpleasantly akin to the U.S.

That means, if the Euro falls apart, Germany could pay in D-Mark (which will skyrocket if we had our own currency again) while e.g. Greece would be screwed because their Drachmes would devalue massively because of their massive debts.

I still have all my old Marks.

There might also be counter-arguments which I didn't consider at all.

I'll forgive you. Having been the spittoon for European Socialists for a long while now, I'm somewhat more lucid and versed in understanding Euro-twaddle than you are. However, the GDP issue isn't immaterial; over-producing West Germans are still unequally yoked with lazy French/Irish and wastrel Spanish/Italian/Greek types. My suspicion is that the French & Irish will be allowed a seat at the adult's table after they are appropriately spanked, but the 'southerners' won't.

[krischan]

Making you unpleasantly akin to the U.S.

I don't think the dollar is overvalued. It's pretty low in comparison to the Euro and that's what the dollar should compare with, not the Chinese currency which is undervalued anyway.

I still have all my old Marks.

I still have old Reichsmark from before 1923, from my grandfather. They only have a collector's value, unlike your D-Marks (the good old ones from the 80s and before, with e.g. the sailing ship on the DM10 note?) which you can still exchange at the Bundesbank, even those from 1948 when the D-Mark was established. I changed all the bank notes into Euros and donated the coins.

I'll forgive you.

I knew you will bite on that :azn:.

Having been the spittoon for European Socialists for a long while now, I'm somewhat more lucid and versed in understanding Euro-twaddle than you are. However, the GDP issue isn't immaterial; over-producing West Germans are still unequally yoked with lazy French/Irish and wastrel Spanish/Italian/Greek types. My suspicion is that the French & Irish will be allowed a seat at the adult's table after they are appropriately spanked, but the 'southerners' won't.

You mean it would be best for all non-German EU members to bind their currency to a future D-Mark? Maybe a few small neighbour countries would do that, but there are none with currency problems (except maybe Belgium) and France, Poland and in particular England certainly won't.

[stillman]

I'm still confused about whether or not I should pay off the rest of my student loan. Predictors of fiat currency collapse and economic disaster keep advising to get out of personal debt. But why bother, says I? If there are millions of folk who each owe 100k, then what's the point of paying my loan off especially if the economy collapses? I already feel ripped off from paying most of it with the looming possibility that I may as well have never paid any of it.

[Noodle]

I'm still confused about whether or not I should pay off the rest of my student loan. Predictors of fiat currency collapse and economic disaster keep advising to get out of personal debt. But why bother, says I? If there are millions of folk who each owe 100k, then what's the point of paying my loan off especially if the economy collapses? I already feel ripped off from paying most of it with the looming possibility that I may as well have never paid any of it.

Are you comfortable stealing?

[stillman]

If the goods turn out to be worthless, is it really stealing? It's like I steal a couch which is infested with bugs, saving the homeowner a trip to the dump.

Also, who is the real crook? They loaned me bad money pretending it was good.

But if it really is stealing on my part, let's just say Robin Hood: Prince of Thieves with Kevin Costner is one of my favorite movies!

And...I'm disgruntled. I'm full of excuses. Did I mention I'm a philosopher sometimes as well? The bigger thieves are those who owe 5x more money. And shouldn't the country pay off its debt and set a good example for little fish like me? I'll do it if they do it!

I'm a new person now. That guy who signed the papers was the old me!

Maybe price gouging laws will arise in the future, so I'm doing the right thing like a visionary.

[krischan]

You feel ripped off for having to pay back your debts after you spent the borrowed money? Are you from Greece?

If I borrow money from you, can I consider not to pay it back as well?

The bigger thieves are those who owe 5x more money.

Did I get this right, you accepted money from a thief? If you don't want to give it back to that thief, then give it back to those whose money he stole .

I'm a new person now. That guy who signed the papers was the old me!

Maybe your creditor is a new person as well, so you will have to start with your payments from anew

I'm full of excuses.

OK, I will assume that you aren't serious :azn:

Please take note of the amount of smileys I added.

[SaroDarksbane]

Trying to call it never goes well Saro

Bah, I wouldn't dare to speculate on when we finally go over the cliff, given that I'm not the one with my foot on the gas.

But you knew I was.

I didn't know, but I would have guessed.

Krischan is smug in the knowledge that he will be a citizen of the re-emerging Holy Roman Empire

I'm down if Berlusconi gets to be the antichrist.

Yeah, but unfortunately my "401K" is in international funds, which for some insane reason are pegged more to European futures than to Asian ones.

I went through my 401k and dumped any funds that had high exposure to EU banks. Oddly enough, the "self managed account" option available to me specifically doesn't allow investment in precious metals. Guess the central banks don't like competition, eh?

Plus, I finally have a base (and no I won't tell you where).

Unfortunately, I'm stuck in the suburbs outside Orlando. At least I have a privacy fence around my yard, and a nice garden going. Early next year I'm going to get my pitiful front and back doors swapped out for some heavier duty fare, maybe see about getting those metal roll-down hurricane shutters for my windows, and replace a useless tree or two for some fruit or nut trees instead.

Should the Fed save Europe from disaster?

The question is, can they? When the Bernank decided on QE1 and QE2, the official inflation numbers were around or below 0%. The current official inflation number is near 4%, with the real number over 10%. That's why we haven't seen QE3 yet; Bernank is painted into a corner. He'll print in the end. He has to; like the scorpion and the frog, it's his nature. But I think it will be after the EU goes and the US banks are faced with massive losses on their exposure to PIIGS debt.

Related Question: If France and the UK slip (further) into trouble, will the new acronym be PIIGSFUK?

I'm still confused about whether or not I should pay off the rest of my student loan. Predictors of fiat currency collapse and economic disaster keep advising to get out of personal debt.

Yeah, I'm hedging every which way. I don't hold any high interest debt (credit cards) to protect myself from deflation, but I'm not putting any extra on my mortgage or student loans in case of inflation. I have cash in a TBTF bank, soon to have cash in a credit union (in case of a run on the bank), cash on hand (in case of a run on the credit union), and precious metals (in case cash becomes worthless altogether).

Are you comfortable stealing?

What's stealing? If they demand to be paid in paper, I'll gladly repay them in paper.*

* Value of said paper not guaranteed.