Eurozone debt crisis

[oddstrader]

Well put Jeff i fear you may be correct.

It's easier to point the finger of blame at someone else than to face home truths.

Re: the Fed- If you're referring to QE2, I agree it's bad news. On a pedantic point, it doesn't use its printed money to lend money. It buys back its own bonds from the banks using money created ex nihilo - "out of nothing"! It's not for nothing that some people call QE a Ponzi scheme...

My main concern about QE2 is that it could lead to inflation as investors shun bonds and buy commodities like cotton or oil. If we get increased inflation in the UK, the Bank of England could be forced to raise interest rates to make our government bonds attractive to investors. In turn, that could mean the public have even less disposable income, and it could choke off the alleged recovery completely...

Jeff

It makes me laugh everyone always moaning about bankers and traders, yet no one ever talks about the world banks like the US federal reserve which basically lends countries billions it doesn't even have but just prints whenever it wants and rakes it in with the interest. In America alone over 99% of the 'money' doesn't even actually exist in paper form!

As for the problem with levels of personal debt, particularly in the UK, no one even mentions this anymore, its almost like there's been a media blackout on that issue ever since the credit crunch hit!

[Euler]

Will the ECB pull the plug on Ireland?

http://www.bbc.co.uk/blogs/thereporters ... ug_on.html

[Iron]

I take the rather controversial view that the Beeb should be giving this story a higher profile than Price William's engagement (not that that's not also something that's going to affect millions of people's lives for years to come)...

Jeff

Will the ECB pull the plug on Ireland?

http://www.bbc.co.uk/blogs/thereporters ... ug_on.html

[CaerMyrddin]

Just my five cents

Ireland isn't big enough to cause Euroland serious problems. Next in line will be Portugal, which is too close to Spain. Spain is a really big economy and the Euro would eventually collapse if Spain gets hit really hard.

Can't really see all that happening but wouldn't bet on it. Portugal is a hard bone as it has massive gold reserves and gold is soaring. Anyway, it's ironic Ireland is in financial trouble after helping it's financial system. Here in Portugal we did the same but fortunately it was a small bank. Anyway, I think that those banks should have been left to bankrupcy. Don't see other kind of companies being helped like that. They gambled their money, they should take the bill.

[oddstrader]

how the decisions of so few cause pain to so many

[CaerMyrddin]

I take the liberal view that any intervention (and this one is unfair IMO) on economy will cause distortion and not the social view of it, although I do considerer myself a social liberal and that is also a concern.

http://en.wikipedia.org/wiki/Social_liberalism

This is a controversial issue (if governmentes should interveen), but in fact you can account how much you will pay for these measures.

[hgodden]

If one bank is allowed to fail though then it would have huge knock on effects for that country (and others).... people and businesses who have money in that bank and others who lend to any bank that goes under could find themselves in huge amounts of trouble. Whatever political ideals you have, it would just cause a catastrophe!

[Iron]

Indeed.

And if Ireland itself defaults on its debts, that could have ramifications far beyond its border.

It might make the other so-called PIGS wonder why they're bothering with austerity measures. The institutions which lent Ireland money could be in deep trouble, with possible ramifications for the wider banking sector. And Britain may suddenly find itself with a new influx of migrants...

Jeff

If one bank is allowed to fail though then it would have huge knock on effects for that country (and others).... people and businesses who have money in that bank and others who lend to any bank that goes under could find themselves in huge amounts of trouble. Whatever political ideals you have, it would just cause a catastrophe!

[Iron]

Indeed.

It brings to mind the World War I analogy of lions lead by donkeys...

how the decisions of so few cause pain to so many

[Iron]

According to the BBC's business editor Robert Peston:

'A couple of fairly substantial economies, Ireland and Portugal, are teetering on the brink of collapse'.

From http://www.bbc.co.uk/blogs/thereporters ... risis.html

Jeff

[CaerMyrddin]

If one bank is allowed to fail though then it would have huge knock on effects for that country (and others).... people and businesses who have money in that bank and others who lend to any bank that goes under could find themselves in huge amounts of trouble. Whatever political ideals you have, it would just cause a catastrophe!

I understand what was told then and I understand it is a fair pont.

Well, I'm just not sure about it and much could be made to limit the effects of doing something different. There are funds that insure the cash you deposited and the governments could create temporary credit lines to keep things running smoothly.

Now, let's face it if you lended money to a bank that is in trouble, the minimum you have to do is securize that asset. And it's a private bussiness between privates

Well, it wasn't the option made and one can only make wild guesses, but you can see clearly that what was done was to sweep the huge debts that some banks had and they were transferred to public debt. Let's face it: the money was missing somewhere and what was made was to move this massive whole.

As someone once said, there is only microeconomy and bad economy

It's really hard to say what's for the best...

'A couple of fairly substantial economies, Ireland and Portugal, are teetering on the brink of collapse'.

Not so substantial, but in my opinion if the EU economy lifts, we should be ok. A chance to buy debt from these countries?

[Euler]

Ireland to get bail out

http://www.bbc.co.uk/news/business-11782356

Next country to come under pressure is probably portugal.

The thing that amazes me about this crisis is that everybody knew property was in a bubble but still people were happy to lend against highly inflated bricks rather than invest in the real economy. It was always going to end in tears. Central banks don't count asset inflation in their inflation figures but there is obviously a case for doing so or at least taking steps to counter obvious bubbles.

[Iron]

Indeed.

And I fear that Britain may yet go through what Ireland is experiencing.

I'd say that Britain's housing market is at 'fear' in this model of a bubble, whereas Ireland's is at 'despair':

http://trendfollowing.com/images/casey.gif

Jeff

The thing that amazes me about this crisis is that everybody new property was in a bubble but still people were happy to lend against highly inflated bricks rather than invest in the real economy.

[Euler]

I was appointed a fair while ago to help manage the Irish arm of a company and I remember seeing people who had property in Dublin. They bought ages ago then suddenly saw prices skyrocket beyond belief. The secretary of the firm left after she cashed in €1m of property that she bought for a pittance a decade earlier.

I kept an eye on the market and saw net yields turn negative. At that point it was screaming major problems from every angle but people just continued to chase up the prices. It was doomed for disaster. It was like the late 80's in the UK only more extreme.

[Iron]

I was thinking recently what the common factor is in all types of market, whether we're talking about Forex or the 3:30 at Wolverhampton.

I think it is this: bubbles form and bubbles burst.

It's like humans fail to learn from history, and keep making the same mistakes...

Jeff

I was appointed a fair while ago to help manage the Irish arm of a company and I remember seeing people who had property in Dublin. They bough ages ago then suddenly saw prices skyrocket beyond belief. The secretary of the firm left after see cashed in €1m of property that she bought for a pittance a decade earlier.

I kept an eye on the market and saw net yields turn negative. At that point it was screaming major problems from every angle but people just continued to chase up the prices. It was doomed for disaster. It was like the late 80's in the UK only more extreme.