Via BCF: More than £30billion was wiped off the value of Britain’s leading companies as world stock markets tumbled yesterday. […] The dramatic sell-off came as fears that Greece will abandon the euro sent shockwaves through the markets…
Via BCF: More than £30billion was wiped off the value of Britain’s leading companies as world stock markets tumbled yesterday. […] The dramatic sell-off came as fears that Greece will abandon the euro sent shockwaves through the markets…
This is only the anticipation of Greece withdrawing from the Euro. Its actual withdrawal will be worse. Greece is a mere rounding error compared with the size of the national debts of France, Italy or Spain. And if Germany won’t or can’t bail them out when their time comes then the Euro is probably doomed, and possibly the EU along with it.
Domestic politics is everything. The average German taxpayer is adamantly opposed to bailouts and Merkel knows it. Support a bailout, and her government is done.
GO GREECE GO!!!
Just go.
European central bank head, Mario Draghi, wants to “bail out” Greece and the Euro-zone by printing money. It works because the NYT’s economic whiz Paul Krugman says it does. Just look at Japan, heh. Bad example. Greece cannot “bail itself out” by printing money because it does not have it’s own currency. So Draghi will print Euros for all EU countries. But Germany does not want another ‘wheelbarrows of paper money’ debacle.
I believe there is an underlying problem in the world’s economy these days.
Google ‘news for deflation’. Twelve months ago there was nary an article on deflation – now almost 9 million results.
Seems that political leaders and central bankers around the world are in a panic – worried that their money printing ways have not created enough inflation lately (aka currency debasement at the expense of cash holders) They are freaking out that, horrors of horrors, consumers will not be stampeded into spend spend spend if the mindset of things always being more expensive down the road becomes passe’.
And so many “economists” (read ‘the Paul Krugman types’) are so beside themselves, worried that governments are so indebted because of their money printing ways they may have to, horrors of horrors, ease up on … yes, ‘quantitative easing’. If QE is reduced they all worry that deflation may very well set in. If consumers, that engine of “growth”, ever catch on that deflation means lower prices down the road, then they will simply delay spending. The central bankers seem worried that consumers will never spend again in a deflationary scenario. mmmm because we all know that consumers do not spend because they actually might need something but because it will cost more tomorrow – witness the Black Friday panic phenomena.
Now throw on top of all their worry the collapsing price of oil (glut?? hello Peak oil ??) and the threat that it could really force a downward deflationary spiral. This just cannot be good because we all know low energy prices are not good for consumers or something. But will cheaper oil not free up money that could just be spent on other goods? Yes but the inflation stokers worry, while it may be a wash, they do not want a wash – they want inflation rates of at least 2% and will print money to achieve it.
But Japan has been trying to reflate by way of QE for some twenty plus years now. But all they have achieved is to have the highest debt to GDP ratio of any major economy. Why, you say? Could it be because of demographics. Japan also happens to have the fastest population decline of any of the major economies. aka if there are not enough young people coming along to buy the old people’s stuff why build new stuff? Maybe economies can grow without population growth but I don’t know how.
Do I have all this right?
You have most of it right, Ron. Decline in oil price means we’re moving away from peak oil, not toward it. Generally, the decline in price will stimulate the world’s economies, not depress them. But this won’t necessarily last all that long. Just long enough to drive out some of the new oil supply coming into the market from Bakken, Alberta and other places. Once the most expensive sources are driven out, the price will surge again.
But for the rest of it, you’re right. We know that in the long run QE does not work based on Japan’s experience over two decades. That’s one major reason why unlike Japan Canada has a strong immigration policy. Otherwise we’d be in a similar sub-2 birth rate. Japan’s is now less than 1, meaning that the population halves about every generation.
In fact the birth rate in all OECD nations is less than 2, meaning population decline over time.
And yes, they want some inflation to ensure that money does not remain as currency but is either invested or spent. Problem is the Europe is heading into deflation, and Japan has been there for some time. And fiscal stimulus is now non-existent, as interest rates cannot go lower short of negative interest rates on bank balances.
The market goes up because …
The market goes down because …
there’s always an excuse or explication, mostly disconnected with anything
It actually might not be a bad thing if the Euro and EU collapse. It has been nothing but a freedom stifling welfare experiment all along. There have been social unrest signs that the German people are also waking up to the destructive nature of EU immigration laws.
There are signs through UKIP support that the British people are also waking up to the long term people destructive nature of the EU.
PWNED!
Saw it coming a mile away.
Suckers!
Ken, Greek failure won’t trigger the collapse of the Euro. It’s too small, a rounding error in the size of the Eurozone economies. But it will increase dramatically the tensions within the Eurozone and unquestionably a rise in interest rates, particularly long term interest rates.
And everyone will be looking askance at Euro banks, particularly those in Spain, Italy, France. Their credit costs are going to rise particularly if Daddy Warbucks isn’t there to backstop everything. After all, they wouldn’t bail out Greece, and the other three are too big to bail out.
But none of this is a good thing. It means deep recession or depression in Europe, and we will get hit too. There will be lower demand for everything with a decline of Europe into relative poverty. That means less demand for our goods and services.
Mr. Market sure gives lousy haircuts.
No tip for you.
Greek failure won’t trigger the collapse of the Euro
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True, but also look at Spain & Italy. You may change your mind.
I pulled everything out of stocks a year ago.
Add France to your list. Yes indeed the failure of any one of those could bring down the Euro completely. But Greece, no.
Grease failure could start the ball rolling. Tho insignificant in size, it could spook money out of other economies. And once investors start to flee, anything is possible, such as the collapse of one of the major, fragile economies mentioned. But in the long ran this would be a good thing, it will draw things back to a centrist position and get rid of much of the socialists policies in place today. And yup, there will be a lot op “relative” poverty, again a good thing, as necessity is not just the mother of creativity, it is also a work motivator.:-))
Not necessarily a good thing. The next logical step for the Eurozone is wage and price controls. In other words, more socialism and command control, not less. Of course it won’t work, any more than it ever worked in the past, but it will seem to work at least at first. And in desperate times, politicians and their voters grasp at ever more short term solutions.
As to fleeing investors, to where? Here? US bonds? All that will do is drive up currency values and strangle whatever economic growth we have as trade balances take a nosedive.
Remember what happened the last time a major world economy got in very serious deep trouble? We’re still cleaning up the mess and losses from 70 years ago.