The Future of Europe

[FRED]

Hat tip to globaleconomicollaps

[c1ue]

Re: The Future of Europe

Perhaps I'm thick, but how is ECB servicing of MCD debt via ECB issued bonds different than outright monetization?

This sounds fine from a theoretical balance sheet perspective, but it still involves the ECB's balance sheet growing immensely via literal creation of money - something Germany doesn't want. Will the German hard money sentiment be fooled so easily as by putting another layer in the middle of the chain of obligations?

It also doesn't resolve the issue for when the MCD debt is not able to be repaid.

Does anyone really think the Greek debt is repayable, regardless of who 'services' it?

Sure, the ECB can extract value from the entire euro region via euro bond creation, but again this is precisely what Germany seems to be against.

Mr. Varoufakis then brings up the EIF and EIB as a federal investment entity - when he had just said federalization isn't possible, and right afterwards puts forward the EFSF or ECB or whatever as the entity which prints money to bail out the European banks and then takes on European bank equity - in the process turfing out all of the individual national banking regulatory agencies.

Again, isn't precisely the ECB's inability to print money the obstacle? And that said inability is due to Germany? How exactly is the fiat destruction of individual EU nation banking regulations not federalization? Why would these agencies agree to be destroyed if in fact the EU is not ready for 'steps to federalization'?

It seems all of Mr. Varoufakis' proposals involve a massively expanding ECB balance sheet - with some adornment to make it seem like it isn't the ECB directly doing so.

I'm not saying this is wrong, but the devaluation of the euro via a massively expanded supply of euro securities is exactly what Germany doesn't want, but which Club Med/PIIGS and France do.

Am I missing something?

I do agree that the pace of federalization cannot possibly keep up with the progress of the crisis, and I do also agree with much of Mr. Varoufakis' characterization of the roots of the problem.

It is just the solution reads like it came straight out of Sarkozy's hands, when Merkozy is what matters.

[vinoveri]

Re: The Future of Europe

How does one invest/speculate if one is convinced (as I am) that the ECB will print, one way or another (as if LTRO is not tantamount to printing).?
Hard assets is it I suppose.

So what happens in 3 years when the LTRO loans are due?.... They just do it again and again and again. It is a means to compensate the creditor class for while keeping the accounting fiction and solvency facade continuing.

[globaleconomicollaps]

Re: The Future of Europe

Hat tip to globaleconomicollaps

I got that off NC.

It might be worth watching all the INET videos.

[globaleconomicollaps]

Re: The Future of Europe

Perhaps I'm thick, but how is ECB servicing of MCD debt via ECB issued bonds different than outright monetization?

This sounds fine from a theoretical balance sheet perspective, but it still involves the ECB's balance sheet growing immensely via literal creation of money - something Germany doesn't want. Will the German hard money sentiment be fooled so easily as by putting another layer in the middle of the chain of obligations?

It also doesn't resolve the issue for when the MCD debt is not able to be repaid.

Does anyone really think the Greek debt is repayable, regardless of who 'services' it?

Sure, the ECB can extract value from the entire euro region via euro bond creation, but again this is precisely what Germany seems to be against.

Mr. Varoufakis then brings up the EIF and EIB as a federal investment entity - when he had just said federalization isn't possible, and right afterwards puts forward the EFSF or ECB or whatever as the entity which prints money to bail out the European banks and then takes on European bank equity - in the process turfing out all of the individual national banking regulatory agencies.

Again, isn't precisely the ECB's inability to print money the obstacle? And that said inability is due to Germany? How exactly is the fiat destruction of individual EU nation banking regulations not federalization? Why would these agencies agree to be destroyed if in fact the EU is not ready for 'steps to federalization'?

It seems all of Mr. Varoufakis' proposals involve a massively expanding ECB balance sheet - with some adornment to make it seem like it isn't the ECB directly doing so.

I'm not saying this is wrong, but the devaluation of the euro via a massively expanded supply of euro securities is exactly what Germany doesn't want, but which Club Med/PIIGS and France do.

Am I missing something?

I do agree that the pace of federalization cannot possibly keep up with the progress of the crisis, and I do also agree with much of Mr. Varoufakis' characterization of the roots of the problem.

It is just the solution reads like it came straight out of Sarkozy's hands, when Merkozy is what matters.

I agree with most of this. However, I think that the Germany government posturing against inflation is pro-forma. At every opportunity, they have splashed out to rescue this or that bank or "emergency " EFSF-ESM or what ever acronym de jour. If they are presented with a "backdoor" bailout plan that gives them plausible deny-ability, they will eat it up. What kind of banker friendly government doesn't like inflation anyways?

[c1ue]

Re: The Future of Europe

I agree with most of this. However, I think that the Germany government posturing against inflation is pro-forma. At every opportunity, they have splashed out to rescue this or that bank or "emergency " EFSF-ESM or what ever acronym de jour. If they are presented with a "backdoor" bailout plan that gives them plausible deny-ability, they will eat it up. What kind of banker friendly government doesn't like inflation anyways?

I don't agree with this sentiment that Germany is only posturing.

While it is certainly possible, even probable that at least some elements on the German political class are in favor of the EU/euro/EU bureaucracy, the bailouts to date have been much more about saving German banks' exposure to PIIGS debt rather than outright monetization of all PIIGS debts.

Equally so there has been a historical and consistent stance within the Bundesbank against monetization, and this has also manifested politically as well as in public opinion.

As for banker friendly governments - inflation itself isn't a guarantee of a beneficial environment for banks. It can be, especially if the banks are placed in a bottleneck position of credit creation, but is also a function of the regulatory environment.

In this post:

http://www.itulip.com/forums/showthr...s-then-and-now

there is an interesting parallel drawn between the rise of investment banks at the expense of the commercial banks due to interest rates in the 80s, the money market fund as interest bearing vehicle, and the since then repealed Regulation Q inside Glass Steagall.

[globaleconomicollaps]

Re: The Future of Europe

http://yanisvaroufakis.eu/2012/04/18...ratic-deficit/

[jk]

Re: The Future of Europe

it will be interesting, to say the least, to see what a hollande presidency does to the crisis management process.

[Chris Coles]

Re: The Future of Europe

My question about his modest proposal has been on the table for a long time now; where is the track record of the EIB making suitable investments that will bring the entire European economy back into long term growth? In fact, the EIB has no such track record. Having asked that several times, he now seems to be casting about for a wider solution.

If you follow his web site, yes, he is bringing the thoughts of others into the debate; but he seems locked into a continuing dialogue with the rest of the planet about what has happened and he does not give a clear impression that he has a satisfactory solution.

He certainly seems to have "Clout" with the media, but increasingly, those of us that have tried to debate what we see as a flaw in his thinking, seem to be pushed away.

[pksubs]

Re: The Future of Europe

interesting video : I can summarize it as: more power to the bureaucrat (to apportion funds raised from ECB bonds to member states), to make investments (EIF-pvt sector partnership without member state involvement), and to pick winners in the banking industry. Maybe nothing works very well right now in the EU, but the faceless, unelected, unaccountable bureaucrat having even more power seems counter intuitive.

Not that I have a solution of my own to propose, of course ..

[globaleconomicollaps]

Re: The Future of Europe

My question about his modest proposal has been on the table for a long time now; where is the track record of the EIB making suitable investments that will bring the entire European economy back into long term growth? In fact, the EIB has no such track record. Having asked that several times, he now seems to be casting about for a wider solution.

If you follow his web site, yes, he is bringing the thoughts of others into the debate; but he seems locked into a continuing dialogue with the rest of the planet about what has happened and he does not give a clear impression that he has a satisfactory solution.

He certainly seems to have "Clout" with the media, but increasingly, those of us that have tried to debate what we see as a flaw in his thinking, seem to be pushed away.

This is the crux of the issue for me. Economists cannot even explain what is going on right now. They will not be able to offer a cure for the disease if they cannot describe it.

[Chris Coles]

Re: The Future of Europe

This is the crux of the issue for me. Economists cannot even explain what is going on right now. They will not be able to offer a cure for the disease if they cannot describe it.

His strength is that he is very good at describing the underlying problems; however, when faced with criticisms of his solution; he throws one off his site. I can still read his posts, but can no longer present my own comments. It would appear that I am neither the first nor the last to be so evicted.

[Polish_Silver]

Re: The Future of Europe

I liked the idea of an orderly default mechanism. But what exactly is that? I guess banks thought that
soverieigns couldn't fail---where did that idea come from?


Yanis doesn't say who will take the loss in the current situation--- I guess he just kicks it down the road so far nobody cares.

[globaleconomicollaps]

Re: The Future of Europe

I liked the idea of an orderly default mechanism. But what exactly is that? I guess banks thought that
sovereigns couldn't fail---where did that idea come from?


Yanis doesn't say who will take the loss in the current situation--- I guess he just kicks it down the road so far nobody cares.

The ultimate goal is to have a "United States of Europe", much like the USA, where the individual states have effectively no power. They are vestigial organs, like the appendix. It is inconceivable that a "State" of the United States of America would be allowed to fail because it would be a statement that the central government has incapable of dealing with it's own "limbs" . I see the exact same dynamic playing out right now in Europe. Greece should have undergone one of it's periodic bankruptcies by now. Instead we see this colossal drama that never ends. It is quite likely that Yanis V. understands that if the crisis can be postponed for a few years the cavalry will arrive.

[c1ue]

Re: The Future of Europe

I liked the idea of an orderly default mechanism. But what exactly is that? I guess banks thought that soverieigns couldn't fail---where did that idea come from?

The same place as all the other bad ideas from the real estate bubble: banksters.

What is really pathetic is that sovereign debt default isn't by any means new - the '80s troubles of US banks in Latin America come to mind.