Euro devaluation

[yadayada]

I was under the impression that the ECB couldn't do QE....so how exactly are they doing this today?

each country has to take 80% of their risks. So ECB isn't carrying the risk if bonds arent worth what they bought them for. So if for example greece fails, they will take 80% of the pain. And richer countries will take 20% of the pain.

[peter1234]

I was under the impression that the ECB couldn't do QE....so how exactly are they doing this today?

each country has to take 80% of their risks. So ECB isn't carrying the risk if bonds arent worth what they bought them for. So if for example greece fails, they will take 80% of the pain. And richer countries will take 20% of the pain.

And then bail out the country if it fails.

;)

[SpecOps]

I was under the impression that the ECB couldn't do QE....so how exactly are they doing this today?

each country has to take 80% of their risks. So ECB isn't carrying the risk if bonds arent worth what they bought them for. So if for example greece fails, they will take 80% of the pain. And richer countries will take 20% of the pain.

 

I dont know how likely this is though, the general people of the EU are beginning to see the Euro and the EU for what it really is, a failed experiment that is enforcing hardship on millions of people to protect the wealthier countries in the Euro. Sooner or later than are going to give the EU the finger and go it alone, things cant get much worse for some.

 

Even in the UK, which has come out relatively unscathed considering, the general public despise the EU and everything it is doing - trying to enforce actions onto sovereign countries - it's completely undemocratic and we are seeing an uprising in extremely right wing parties coated in socialist rhetoric against draconian spending cuts forced on them by the EU. The whole thing is unfolding in a much too similar way to the rise of the Nazi party, people are worried.

[giofranchi]

I dont know how likely this is though, the general people of the EU are beginning to see the Euro and the EU for what it really is, a failed experiment that is enforcing hardship on millions of people to protect the wealthier countries in the Euro. Sooner or later than are going to give the EU the finger and go it alone, things cant get much worse for some.

 

Even in the UK, which has come out relatively unscathed considering, the general public despise the EU and everything it is doing - trying to enforce actions onto sovereign countries - it's completely undemocratic and we are seeing an uprising in extremely right wing parties coated in socialist rhetoric against draconian spending cuts forced on them by the EU. The whole thing is unfolding in a much too similar way to the rise of the Nazi party, people are worried.

 

+1

 

Gio

[yadayada]

I have to correct that, they will not buy greek bonds. But yeah you are right. Draghi has already said in so many words that he will backstop those bonds. But I find it hard to see how he will do that. Germany would probably not be ok with this. And he really needs his permission. That is probably another reason why the euro is getting dumped. The market doesn't really believe Draghi's bluffs anymore. Because 1 trillion is still small compared to the total money supply of 10 trillion. I think the US QE was bigger compared to their money supply. And the euro dropped almost 20% in less then a year.

 

The problem is, there is no money in greece. They have to cut. Their debt is massive. You could say it is bad, but the greeks have been pampered, and now they will have to take the pain. If they would spend money anyway, they would not be able to borrow money.  Who wants to borrow money to greece with that debt load? I also doubt greece could do something similar as the nazi's. They dont have the ability. Having been to some southern european countries, it does look that a lot of the middle class live close to poverty levels there.

 

Interesting thing is that a lot of wealth would be destroyed by a euro devaluation. Because imports would cost more, and we Import more then we export. Those factories that moved ot outside Europe, will not come back right away just because the euro is a bit cheaper. And the business that are hurt most are small and mid sized businesses (so the regular people). The large companies who export a lot, they can pay their personal the same amount, and  now make more money.

 

So really all a euro valuation does is squeeze the small and midsize businesses really hard (because they cannot fully give those lower prices to the consumer), the consumer (because they buy more imports then exports) and it will help the 0.1% who owns shares in the exporting companies that now have fatter profit margins because they basicly pay their personal the same amount that is now worth less on the currency markets.

[Palantir]

I was under the impression that the ECB couldn't do QE....so how exactly are they doing this today?

each country has to take 80% of their risks. So ECB isn't carrying the risk if bonds arent worth what they bought them for. So if for example greece fails, they will take 80% of the pain. And richer countries will take 20% of the pain.

 

While I get that, isn't the ECB not permitted to flat out printing money Fed style? At least that was what was circulating in the news in years prior.

[yadayada]

I was under the impression that the ECB couldn't do QE....so how exactly are they doing this today?

each country has to take 80% of their risks. So ECB isn't carrying the risk if bonds arent worth what they bought them for. So if for example greece fails, they will take 80% of the pain. And richer countries will take 20% of the pain.

 

While I get that, isn't the ECB not permitted to flat out printing money Fed style? At least that was what was circulating in the news in years prior.

Im not an expert, but my impression is that those bonds will have to be returned into the market at some point. This is not printing money and then leaving them on the ECB balance sheet forever. You could say this is a massive loan to the Euro zone (or mostly southern EU countries). At some point those bonds will be sold again, and if that happens at a loss, the southern countries will basicly take 80% of the losses if everything happens as planned.

 

That is also the idea of US QE. Except critics now say they have gone too far. Because how the hell do you unwind 4 trillion $ of assets without completely shaking up the markets? If that goes wrong, US taxpayers will foot the bill. If they don't that would seriously shake confidence in the dollar (so indirectly, US citizens would still feel the hurt then). 

[Kiltacular]

I was under the impression that the ECB couldn't do QE....so how exactly are they doing this today?

each country has to take 80% of their risks. So ECB isn't carrying the risk if bonds arent worth what they bought them for. So if for example greece fails, they will take 80% of the pain. And richer countries will take 20% of the pain.

 

I dont know how likely this is though, the general people of the EU are beginning to see the Euro and the EU for what it really is, a failed experiment that is enforcing hardship on millions of people to protect the wealthier countries in the Euro. Sooner or later than are going to give the EU the finger and go it alone, things cant get much worse for some.

 

Even in the UK, which has come out relatively unscathed considering, the general public despise the EU and everything it is doing - trying to enforce actions onto sovereign countries - it's completely undemocratic and we are seeing an uprising in extremely right wing parties coated in socialist rhetoric against draconian spending cuts forced on them by the EU. The whole thing is unfolding in a much too similar way to the rise of the Nazi party, people are worried.

 

http://www.scribd.com/doc/134732321/Margaret-Thatcher-Forbes-1992

 

 

[writser]

I'm surprised we haven't discussed this crucial aspect of quantitative easing yet (from the letters page of the FT):

 

Sir, Whether the European Central Bank chooses to embark on a programme of sovereign QE (or quantitative easing, as it used to be known) is of little day-to-day interest to most citizens of the EU. Whether the compilers of dictionaries accept that QE is now a word in its own right — as opposed to an abbreviation — is of far more relevance to us scrabble players. Using a Q without needing a free U it would rapidly be up there with Qi (the Chinese word for life force) as one of the most useful words in the lexicon.

 

Richard Kemmish

 

Surbiton, Surrey, UK

[yadayada]

http://i62.tinypic.com/2gydn6b.png

According to Podemos:

"Spaniards should be aware that it is physically impossible that they can pursue policies that meet the national interest, within the euro as it is designed. The euro was conceived as a real trap, but nowhere is it written that people have to accept it ."

 

Interesting what is happening in greece. Minister of finance just said they will not negotiate, and Dijnselbloem walked out right after that:

http://www.keeptalkinggreece.com/2015/01/30/dijsselbloem-you-just-killed-troika-varoufakis-wow-video-pics/

 

Honestly I understand why they dont want to sell off state assets. It will not really help paying that debt, and your letting innocent people bleed basically. And those assets will be sold for too cheap most likely. Very interesting what will happen. Minister of finance is not really a politician at all, he even said he does not like politicians because they debate to make eachother look bad. They dont want to have discussions to find solutions.

 

Interview with finance minister after dijnselbloem drama:

http://deredactie.be/cm/vrtnieuws/buitenland/1.2224641

Im a big fan of this guy already! Other Pig countries should be envious.

[constructive]

Nobody is going to offer Greece financing on terms anywhere near as good as the troika. I think refusing to negotiate with the troika, in the face of 11% yields and running out of cash, signals this is the big one. Either they exit the Euro or they force a huge >$100B haircut within the next few months.

 

Bad news for Fairfax/Eurobank - and many other European banks.

[petec]

I dont know how likely this is though, the general people of the EU are beginning to see the Euro and the EU for what it really is, a failed experiment that is enforcing hardship on millions of people to protect the wealthier countries in the Euro. Sooner or later than are going to give the EU the finger and go it alone, things cant get much worse for some.

 

Even in the UK, which has come out relatively unscathed considering, the general public despise the EU and everything it is doing - trying to enforce actions onto sovereign countries - it's completely undemocratic and we are seeing an uprising in extremely right wing parties coated in socialist rhetoric against draconian spending cuts forced on them by the EU. The whole thing is unfolding in a much too similar way to the rise of the Nazi party, people are worried.

 

+1

 

Gio

 

+2

[Jurgis]

I dont know how likely this is though, the general people of the EU are beginning to see the Euro and the EU for what it really is, a failed experiment that is enforcing hardship on millions of people to protect the wealthier countries in the Euro. Sooner or later than are going to give the EU the finger and go it alone, things cant get much worse for some.

 

Apparently your thoughts are quite popular. The problem is that if EU falls apart, Europe is finished. EU was and is the best future Europe could have. If EU falls apart, Europe will become a patchwork of squabbling, nationalist has-beens with no global weight, overpriced workforce, and pretty much the same amount of bureaucracy as in EU if not worse.

 

United Europe is the only way out for the old continent. But it's understandable that in bad economic times people go back to outdated insular nationalistic worldviews.

 

I was really happy with everything EU achieved. I did not think it was possible. The last 30-so years were the greatest in the history of Europe. Too bad it might end badly.

 

Europositive and proud of it.

[yadayada]

A lot of EU countries go through that ray dalio stage where they still think they are rich, but are really quite poor already. And will be even poorer if they dont make drastic changes. 35 hour work weeks, no evictions by banks and maximum salaries aren't those changes lol.

 

Argentina got stuck in that stage for many decades. It is really sad when a country is narcisistic like that, and cycles through one populist after another spending money they dont have to keep up the illusion. Northern europe will be fine though. They are a lot better off then the US. No massive budget deficits (except france) and managable debt levels.

 

Then there are those cheaper eastern EU countries which are really like emerging economies, but with shrinking populations. But low debt levels. EU is really in various ray dalio stages. Some countries are richer then they think like bulgaria and romania. Some are not as rich as they think (looking at you PIIGS!) and some are about as rich as they think they are, like germany, netherlands, switzerland, denmark etc.

 

And the ones that are about as rich as they think, are sick of the ones that are richer then they think leeching off them. And the ones that are richer then they think want to get out of the euro for some reason because they will be better off? Even though they will not be better off.

 

 

[Palantir]

Maybe this dip is a good buying opportunity to stack up on belgian beers. :D

 

www.belgiuminabox.com