$1,000,000,000,000 rescue for the Euro

[RandomGuy]

Talk about a shock and awe campaign.

:wow :wow :wow :wow :wow

EU shoots a giant money bazooka at the problem of the debt crunch.

EU creates $1 trillion package to save euro

By RAF CASERT and ELENA BECATOROS, Associated Press Writers Raf Casert And Elena Becatoros, Associated Press Writers – 1 hr 36 mins ago
BRUSSELS – The European Union put up a staggering $1 trillion Monday to contain its spreading government debt crisis and keep it from tearing the euro currency apart and derailing the global economic recovery.

Analysts said the huge sum supplied the "shock and awe" markets had been waiting for for weeks, at least in the short term, and the euro and stocks soared on the news.

European leaders negotiated into the early hours of Monday before reaching a deal in which governments that use the euro would join the EU and International Monetary Fund in putting up euro750 billion in loans available to prop up troubled governments.

The European Central bank will buy government and private debt to keep debt markets working and lower borrowing costs, a crisis measure dubbed the "nuclear option," while the U.S. Federal Reserve joined with other central banks in the effort, reactivating a currency swap program used during the earlier stages of the financial crisis to ship dollars overseas to be pumped into banking systems as short-term credit.

The overnight decision immediately jumpstarted markets worldwide. The euro immediately shot back to life and up to $1.30, recovering from Friday's 14-month low of $1.2523.

Stocks too basked in the glow. France's CAC-40 stood out in Europe, surging 285.08 points, or 8.4 percent, to 3,677.67. Athens' main index was up nearly 10 percent and Lisbon's PSI 20 jumped 9 percent too.

Japan's Nikkei 225 stock average rose 1.5 percent and Hong Kong's Hang Seng index added 1.3 percent. European markets jumped higher — major indexes were up more than 3 percent — and Wall Street was also expected to surge on the open, with Dow futures also 3.0 percent higher.

Officials acted after ominous slides in world stocks and the euro last week that raised fears that the debt crisis would spread from heavily indebted Greece to other financially weak countries such as Spain and Portugal. It reached the point where President Barack Obama discussed the crisis by phone with German Chancellor Angela Merkel and French President Nicholas Sarkozy.

Policy makers worried it could shake the world economy the way the bankruptcy of U.S. investment bank Lehman Brothers did in 2008, making banks fearful of lending to businesses, hammering stocks and killing off economic recovery.

It also raised long-term worries that the crisis would force a weaker member such as Greece out of the euro.

Analysts said the measures had put out the fire for now by eliminating fears that governments would lack funds to pay off their debts. But several raised long-term worries about spreading debt of budget sinners to more responsible governments, and pointed to the lack of tough rules to keep debt from piling up again.

"It buys time. We don't know if it will be enough. They're trying to give the impression that they're still united. They've bought some breathing space but that's all," said Song Seng Wun, an economist with CIMB-GK Research in Singapore. "This perhaps just postpones the inevitable, the euro may have to ultimately give way, that's the worst case scenario."

Jeremy Batstone-Carr from Charles Stanley stockbrockers said the underlying problem won't be solved unless governments stop piling up so much debt. "The last thing you give a drunk is another drink," he said. "Put differently, you cannot make any nation that is unable to service its accumulated debts more credit worthy by extending more credit."

European Commission President Jose Manuel Barroso promised tougher rules for member countries' spending.

On Wednesday, EU officials will propose tougher sanctions for financially wayward nations and more coordination between the governments on their economies. "We need stronger coordination, economic policy coordination," he said. It will be discussed by EU finance ministers next week.

Under Monday's three-year plan, the European Commission — the EU's governing body — will make euro60 billion ($75 billion) available while countries from the 16-nation eurozone would promise backing for euro440 billion ($570 billion). The IMF would contribute an additional sum of at least half of the EU's total contribution, or euro250 billion.

"We shall defend the euro whatever it takes," EU Commissioner Olli Rehn said after an 11 hour-meeting of EU finance ministers that capped a hectic week of chaotic sparring between panicked governments and aggressive markets.

Officials hope the massive sums will deter currency speculators from betting on a euro collapse after political posturing and soothing words failed to convince investors that Greece's financial implosion could be contained.

Markets had battered the euro and Greek government bonds even as EU leaders insisted for days that Greece's problems were a unique combination of bad management, free spending and statistical cheating that doesn't apply to other euro-zone nations.

Market jitters also partly contributed to a nearly 1,000-point drop in the Dow Jones industrials last Thursday. The Securities and Exchange Commission is meeting with heads of exchanges Monday to discuss how conflicting trading rules may have exacerbated the historic stock market plunge.

In the end, even longtime skeptic Germany realized Europe had to show the money after financial attacks on Greece's debt seemed poised to spread to other weak European nations such as Portugal and Spain. Fear of default led to investors demanding high interest rates that Greece could not pay, forcing it to seek a bailout. Many feared market skepticism would make Portugal and Spain pay more and more to borrow, worsening their plight.

Spain and Portugal have committed to "take significant additional consolidation measures in 2010 and 2011," a statement from EU finance ministers said. The two countries will present them to EU finance ministers at their meeting on May 18.

"We are facing such exceptional circumstances today and the mechanism will stay in place as long as needed to safeguard financial stability," the ministers said.

Merkel said her government would approve the rescue plan on Tuesday before parliament gave it "quick but thorough" consideration.

Separately, eurozone leaders on Saturday gave final approval for a euro80 billion ($100 billion) rescue package of loans to Greece for the next three years to stave off default. The IMF also approved its part of the rescue package — euro30 billion ($40 billion) of loans — on Sunday.

The Fed's move to back the euro defense plan reopens a program put in place during the 2008 global financial crisis under which dollars are shipped overseas through foreign central banks. In turn, these central banks can lend the dollars out to banks in their home countries that are in need of dollar funding in so-called swap agreements.

The Fed said action is being taken "in response to the reemergence of strains in U.S. dollar short-term funding markets in Europe" and to "prevent the spread of strains to other markets and financial centers." A "swap" line with the Bank of Canada provides up to $30 billion. Figures weren't provided for the other central banks involved. They include the Bank of England, the European Central Bank, the Swiss National Bank, and the Bank of Japan.

-----------------------------------------------

Now if they can just tackle the problem of tax evasion that so pervades Greek society that their government can't pay the bills...

[Nbadan]

So the Euros used an economic stimulus package - nice

[Winehole23]

Socializing risk in the Eurozone and currency swaps with North American and Japan constitute stimulus how, Dan?

[EmptyMan]

lol our fiat currencies are so fukked.

But of course, that is the agenda.

[Winehole23]

US taxpayers could be on the hook for $50 billion or more as part of the European debt bailout, which is likely to be a close cousin to the strategy used to rescue the American financial system.

http://media.cnbc.com/i/CNBC/Sections/News_And_Analysis/__Story_Inserts/graphics/__CURRENCY/euros_dollars_200.jpg
Determining the exact exposure at this point is nearly impossible until governments start stepping up to the window created by the European Union and the International Monetary Fund to stem the crisis in Greece and elsewhere on the continent.


But one rule-of-thumb formula puts potential US exposure at $54 billion should the entire IMF loan fund be tapped.



And that doesn't count the added exposure created by the Federal Reserve's decision over the weekend to participate in currency swaps to provide liquidity to jittery European banks. The swaps move resembles the Term Auction Facility the Fed instituted when the worst of the US financial crisis hit in 2007-08.


And the entire bailout package has been nicknamed "Le Tarp" by some for its similarity to the Troubled Asset Relief Program that bailed out US companies with taxpayer-backed loans.
http://www.cnbc.com/id/37084075

[Winehole23]

http://www.bloomberg.com/apps/news?pid=20601087&sid=an9qwBhKmH9s

[Winehole23]

http://www.ft.com/cms/s/0/8b24504e-5c65-11df-93f6-00144feab49a.html

[MannyIsGod]

50 Billion to stem a crisis that would do far more than 50 billion to our economy is OK imo.

[Winehole23]

Europe isn't saved yet. Neither are we for that matter. Perhaps the day of reckoning has been kicked down the road a few years...

What the US and Europe have done -- essentially to pawn tomorrow's GDP to stem today's default -- may have temporarily averted catastrophe, but have left their balance sheets weaker, i.e., more debt-burdened and susceptible to future shocks. This won't end well.

[Nbadan]

Better than doing nothing.....ask the GOP...

[Winehole23]

How do you know doing nothing would've been worse? If you don't allow values to correct, then add QE, counter-cyclical interest rates, plus a shitload of debt, you set yourself up for an even worse hangover later.

Blowing more asset bubbles isn't the cure -- it's the fucking disease.

[Winehole23]

Germany and France pulled Greece out of the bacon fire, but who's to say it won't be them next time? And if they melt down, who's to say we won't also?

[Winehole23]

The money bazooka was aimed at Greece, but we were also the beneficiaries. Does Europe have another one? Do we?

[Winehole23]

How many money bazookas do we have? How many does Europe have?

[Winehole23]

The way currency has been debased to meet the contingencies of transatlantic default is a public scandal and should be an outrage to anyone who depends on money to spend.

[Winehole23]

To have it all crash down on our heads later will only be all the more painful.

[Winehole23]

With all the extra obligations, and what not.

[Winehole23]

The business of America is making sure Goldman Sachs never goes out of business. That's for damn sure.

[Winehole23]

We already pawned our future once, for ourselves. Now we have just pawned it again for Europe's sake (http://en.wikipedia.org/wiki/Soke_%28legal%29).

[Winehole23]

How many more times will the world require us to pawn it, to stave off default and catastrophe?

[Winehole23]

I used to be torn about it, but now I feel pretty sure it was a mistake to have saved ourselves even once.

[Winehole23]

We're just settin ourselves up for even worse down the road. The political will won't come around until we're completely fucked.

[Winehole23]

Until then, the government will dick with it to death.

[Winehole23]

Have y'all heard we could lose our AAA rating?

[Winehole23]

(The recently announced criminal investigation of Moody's should put the damper on that, but it was scary for a second there.)

[RandomGuy]

(The recently announced criminal investigation of Moody's should put the damper on that, but it was scary for a second there.)

Dang man, hope you are getting some sleep.

[Cant_Be_Faded]

I only wish the common american understood that the us tax payers could really being footing a bill to bail out a fucking country most of us don't give a shit about or will ever visit.

They would laugh at your face like those stupid mind-slaves in china who believe the massacare at Tienanmen square did not really happen.

[smeagol]

This is what happens when you live beyond your means. Sooner or later, it comes back to bight you in the ass.

America continues to do it, runing those humongous deficits, which is nothing else but spending more than what you are making. At some point in time, countries have to start saving money to pay theird debt.

[Cry Havoc]

This is what happens when you live beyond your means. Sooner or later, it comes back to bight you in the ass.

America continues to do it, runing those humongous deficits, which is nothing else but spending more than what you are making. At some point in time, countries have to start saving money to pay theird debt.

Meh, not really. The world can support a fairly high standard of living.

What the world cannot support is the corruption in the highest levels of financing. Companies giving out multi-billion dollar bonuses like they're free candy at a parade.

I'm estimating vastly here, but from looking at the numbers, Wall Street corruption (meaning insider information, illegal collaboration, etc.) has done more damage to this country in the last 15 years than all other crime and corruption in the history of the US combined. The amount of corruption and profiteering in our system now is cataclysmic. And the people who are supposed to be protecting the system have been bought and sold like they're part of the stock market.

This would have happened if the citizens of the U.S. continued to live frugally, because the companies would still have found ways to overpower the system as long as the government was turning it's head.

[MannyIsGod]

WH you're not seriously advocating tieing currency to a benchmark for value purposes are you? Do you really want to go back to a barter system and its limitations?

[Winehole23]

WH you're not seriously advocating tieing currency to a benchmark for value purposes are you?Huh? I was criticizing countercyclical measures as being possibly related to the declining purchasing power of the US dollar. You don't have to be a gold bug to criticize that.


Do you really want to go back to a barter system and its limitations?Huh? You mean, like we had before before 1971?

That wouldn't be the worst thing in the world, IMO.

[MannyIsGod]

I think I'm misunderstanding you so maybe you could rephrase in one post what your point was?

[z0sa]

I love supporting Big, Huge, Gargantuan Business and the Old World with my taxes.

[Winehole23]

I think I'm misunderstanding you so maybe you could rephrase in one post what your point was?Bailouts like ours are foreseeably bad for the currency. Better?

[Winehole23]

Also, it's likely that the number of money bazookas we have is limited. Maybe it would've been wiser not to waste the shot.

[MannyIsGod]

They're absolutely bad for the currency. The question is whether they're worse than doing nothing at all. Sometimes you're not presented with a good option but merely a bad and worse option.

[MannyIsGod]

I honestly can't say for certainty that this won't end up badly, WH. But I do believe many of thing economists I've read say this was a needed action.

[MannyIsGod]

Although I'd like to read opinions of experts you have to the contrary.

[Winehole23]

I can't think of any experts who agree with me.

[Cry Havoc]

I love supporting Big, Huge, Gargantuan Business and the Old World with my taxes.

We might as just well put a robe around big banks and recommend they change their logos to scepters and/or crowns.

[Cry Havoc]

I can't think of any experts who agree with me.

I don't know if there is anything that can be done. Greece was on the verge of defaulting on it's payments. If that happened, you could see all of Europe fall into chaos. Despite the fact that it might cause a worse situation later, I'm not sure we can handle Europe virtually imploding overnight. You think the stock market has been bad? It would drop 3000 points in a day, maybe more, if Greece defaulted.

So..... there's nothing that can really be done at this point, IMO.

[Winehole23]

Despite the fact that it might cause a worse situation later, I'm not sure we can handle Europe virtually imploding overnight. You think the stock market has been bad? It would drop 3000 points in a day, maybe more, if Greece defaulted.Maybe every now and then, the market needs to crash. Maybe, every now and then, TBTF's and nation-states need to taste their own mortality.


So..... there's nothing that can really be done at this point, IMO.We could acknowledge the various defaults, let them happen and allow the markets reset accordingly. The political price for that would of course be unacceptable, but it will be again when the rest of the world loses confidence in our ability to pay.

Eventually, we could have default and a debt-deflation crash not so much in spite of, as because of, all our attempts to avoid it.

[boutons_deux]

The idea was to save Greece from sovereign default which was expected to knock on to much bigger Spain, and Ireland and Portugal.

Initial euphoria wore off quickly, like next day.

==================

http://graphics8.nytimes.com/images/2010/05/12/business/12leonhardtGraphic/12leonhardtGraphic-popup.jpg

# The New York Times

May 11, 2010

In Greek Debt Crisis, Some See Parallels to U.S.

By DAVID LEONHARDT

It’s easy to look at the protesters and the politicians in Greece — and at the other European countries with huge debts — and wonder why they don’t get it. They have been enjoying more generous government benefits than they can afford. No mass rally and no bailout fund will change that. Only benefit cuts or tax increases can.

Yet in the back of your mind comes a nagging question: how different, really, is the United States?

The numbers on our federal debt are becoming frighteningly familiar. The debt is projected to equal 140 percent of gross domestic product within two decades. Add in the budget troubles of state governments, and the true shortfall grows even larger. Greece’s debt, by comparison, equals about 115 percent of its G.D.P. today.

The United States will probably not face the same kind of crisis as Greece, for all sorts of reasons. But the basic problem is the same. Both countries have a bigger government than they’re paying for. And politicians, spendthrift as some may be, are not the main source of the problem.

We, the people, are.

We have not figured out the kind of government we want. We’re in favor of Medicare, Social Security, good schools, wide highways, a strong military — and low taxes. Dealing with this disconnect will be the central economic issue of the next decade, in Europe, Japan and this country.

Many people, including some who claim to be outraged by the deficit, still haven’t acknowledged the disconnect. Just last weekend, Tea Party members helped deny Senator Robert Bennett, the Utah Republican, his party’s nomination for his re-election campaign, in part because he had co-sponsored a health reform plan with a Democratic senator. Economists generally think the plan would have done more to reduce Medicare spending than the bill that passed. So, whatever its intentions, the Tea Party effectively punished Mr. Bennett for not being a big enough fan of big government.

Or consider the different fates of two parts of President Obama’s agenda. Mr. Obama has unrealistically said that taxes do not need to rise on households making less than $250,000, and this position has come to be seen as an ironclad vow. He has also called for billions of dollars in sensible cuts to agribusiness subsidies, tax loopholes and the like. The news media and Congress have largely ignored these proposals.

The message seems clear: woe unto the politician — in Washington, Athens or London — who tries to go beyond platitudes and show some actual fiscal restraint.

This situation obviously can’t continue, as Robert Greenstein, perhaps the leading liberal budget expert, points out. Mr. Greenstein’s politics make him sympathetic to the worry that all the deficit talk will become an excuse to pull back on stimulus spending while unemployment remains high or to gut social programs. But he also knows the numbers well enough to understand that our Greece moment, whether it takes the form of a crisis or not, is coming.

“Most of the public thinks, ‘If only the darn politicians could get their act together to cut waste, fraud and abuse, and to make tax avoidance go away and so on,’ ” Mr. Greenstein, head of the Center on Budget and Policy Priorities, says. “But the bottom line is, there really is no avoiding the hard choices.”

•

For Greece and possibly other European countries, change will come from the outside. The countries lending the money for the Greek bailout — chiefly Germany — are demanding big cuts to the welfare state. Greek citizens will soon have a harder time retiring in their 40s.

Here in the United States, we’re likely to have the chance to solve our problems before our lenders demand it. Those lenders continue see the American economy as a safe haven, thanks to our history of strong economic growth and political flexibility.

It is even possible that future growth will make the current deficit projections look too pessimistic. That sometimes happens when the economy is weak. In the wake of the early 1990s recession, for example, almost no one imagined that the budget would show a surplus by the end of the decade.

But the main issue isn’t the near-term deficit — the one created by the recession, the wars in Iraq and Afghanistan, the Bush tax cuts and the Obama stimulus. The main issue is the long-term deficit.

As societies become richer, citizens tend to want better schools, better medical care and other government services. This country is following that pattern, but without paying the necessary taxes. That combination has us on a course to Greece-like debt.

As a rough estimate, the government will need to find spending cuts and tax increases equal to 7 to 10 percent of G.D.P. The longer we wait, the bigger the cuts will need to be (because of the accumulating interest costs).

Seven percent of G.D.P. is about $1 trillion today. In concrete terms, Medicare’s entire budget is about $450 billion.The combined budgets of the Education, Energy, Homeland Security, Justice, Labor, State, Transportation and Veterans Affairs Departments are less than $600 billion.

This is why fixing the budget through spending cuts alone, as Congressional Republicans say they favor, would be so hard. Representative Paul Ryan of Wisconsin has a plan for doing so, and it includes big cuts to Social Security and the end of Medicare for anyone now under 55 years old. Other Republicans have generally refused to endorse the Ryan plan. Until that changes or until the party becomes open to new taxes, its deficit strategy will remain unclear.

Democrats have more of a strategy — raising taxes on the rich and using health reform to reduce the growth of Medicare spending — but it is not nearly sufficient.

What would be? A plan that included a little bit of everything, and then some: say, raising the retirement age; reducing the huge deductions for mortgage interest and health insurance; closing corporate tax loopholes; cutting pensions of some public workers, as Republican governors favor; scrapping wasteful military and space projects; doing more to hold down Medicare spending growth.

Much of this may be unpleasant. But by no means will it doom us to reduced living standards or even slow economic growth. We can still afford to spend more on Medicare — even more per person — than we do today, and more on education, the military and other areas, too. We just can’t afford the unrealistic promises that the government has made. We need to make choices.

“It’s not a matter of whether we have the resources to solve our problems,” as Alan Krueger, the chief economist at the Treasury Department, says. “It’s a matter of political will.”

For now at least, our elected officials are hardly the only ones who lack that will.

================

No politicians have the political will to even talk to the country straight, never mind having the political power to Do The Right Things (above).

[Winehole23]

Dang man, hope you are getting some sleep.I work late. Sometimes it takes a couple hours to wind down.

[z0sa]

Maybe every now and then, the market needs to crash. Maybe, every now and then, TBTF's and nation-states need to taste their own mortality.

That's always been the answer. But would many suffer for a few's mistakes?

[Winehole23]

Sure. Big time. But you don't cap a rotten tooth, you remove it. Leave it in, and sepsis can eventually kill the patient.

[Cry Havoc]

I remember the days that I thought capitalism could work in earnest. :lol Ah, to be young and naive again.

[Winehole23]

The Consequences of Not Letting Greece Go Broke

By Robert Robb (http://www.realclearpolitics.com/authors/?author=Robert+Robb&id=14645)
Surely it would have been better to let Greece (http://realclearworld.com/topic/around_the_world/greece/?utm_source=rcw&utm_medium=link&utm_campaign=rcwautolink) go broke.


The Greek national government doesn't have the cash to service its debt and private parties aren't willing to lend it any more. The natural solution would be for Greece to default and restructure its debt. Those who imprudently lent to Greece would incur a loss. The Greek government would have to curtail its spending to match what it could raise in taxes and from more demanding lenders.

Instead, euro zone countries cobbled together a $145 billion bailout package, designed to relieve Greece from the need to raise private capital for a couple of years.


Rather than calm anxiety about euro zone sovereign debt, rate spreads between fiscally shaky countries (such as Spain (http://realclearworld.com/topic/around_the_world/spain/?utm_source=rcw&utm_medium=link&utm_campaign=rcwautolink), Portugal and Ireland) and sounder ones (principally Germany) increased sharply.


So, euro zone countries cobbled together a $955 billion bailout fund over the weekend for all euro-denominated sovereign debt.


The rationale is supposedly to prevent contagion. There are two fears. One is that the default of any euro zone country on its public debt would have cascading effects on the economies of other countries. The second, more profound, fear is that the default on any euro-denominated sovereign debt would adversely affect all euro-denominated sovereign debt and the euro itself.


These fears would seem grossly overwrought. Banks and other private parties in other countries hold Greek debt, but not in the sort of concentrations to represent serious contagion risk.


The euro is a currency, a medium of exchange. The default of one borrower in a particular currency doesn't reflect upon the creditworthiness of other borrowers using that currency or the soundness of the currency itself. Indeed, as Greece was finding it more expensive to borrow, Germany was finding it less expensive.


These bailouts will have serious adverse consequences, for Greece and the euro zone's future.


Greece has to undergo a severe austerity program. If the spending cutbacks were because Greece defaulted on its debt and couldn't borrow any more money, the Greeks would have no one to blame but themselves.
Instead, the austerity program comes as a condition of the bailout funds from other euro zone countries and the International Monetary Fund. So, there are strikes and riots in Greece, claiming that the spending cuts are unnecessary and are being foisted on Greece by nefarious outsiders.
Some think that this is good, allowing local officials to take painful action while outsiders get the blame. But that does not make for a healthy democracy or more prudent future political choices.


Rather than contain contagion, these bailouts actually institutionalize it. Basically, the euro zone countries have said that we are no longer independent political economies that share a common market and a currency. Instead, if any of us are sick, then all of us may have to pay the hospital bill.


And they increase doubts, rather than alleviate them, about euro zone public finances and the soundness of the euro.


Most of the larger $955 billion bailout package takes the form of off-budget borrowing that nevertheless will be guaranteed by euro zone countries. So, the solution to too much government borrowing is even more government borrowing, only less transparent and secure.


And for the first time, the European Central Bank will buy dodgy sovereign debt private investors are shunning. The ECB says it will offset these purchases with the sale of other assets to avoid expanding the monetary base. But that means that the ECB will be trading good securities for bad ones. Regardless, monetizing sovereign debt isn't a path toward either fiscal discipline or a sound currency.


Prior to the bailouts, Greece's fiscal indiscipline didn't really jeopardize the euro zone enterprise. Now it does.http://www.realclearpolitics.com/articles/2010/05/12/the_consequences_of_not_letting_greece_go_broke_10 5552.html

[Winehole23]

Whether or not one believes that the €750bn European rescue plan (http://www.ft.com/cms/s/0/f96a6c14-5b48-11df-85a3-00144feab49a.html) will stabilise financial markets, its consequences for Europe’s economies are surely negative. Indeed, while many cheered the initial rebound (http://www.ft.com/cms/s/0/f23ee996-5c02-11df-95f9-00144feab49a,dwp_uuid=79cadde4-5c1b-11df-95f9-00144feab49a.html) in equity markets, the reactions in currency markets on the first trading day after the announcement were a harbinger of these negative consequences: the initial gains of the euro were erased by the end of the trading session.



Of course, the bail-out for holders of Greek government debt (http://www.ft.com/indepth/greece-debt-crisis) – and now possibly Spanish and Portuguese government debt – raises familiar problems of moral hazard that will increase risk-taking and encourage irresponsible government policy in the future. The loans and loan guarantees from other countries in Europe do not deal with the simple fact that the Greek government cannot service its debt and will eventually need to restructure it. At best the package gives officials some breathing room as they endeavour to reduce deficits and eventually restructure debts, though it is more likely that the adjustment problem will be made worse by being pushed down the road.



But most worrisome for the euro, and the likely reason for its remarkable reversal in the currency markets on day one, is the agreement by the European Central Bank (http://www.ecb.europa.eu/press/pr/date/2010/html/pr100510.en.html) to buy the debt of the countries with troublesome debt burdens, just days after it said it would not engage in such purchases. This agreement raises questions about the independence of the ECB, thereby creating political obstacles to the conduct of good monetary policy in the future.
http://www.ft.com/cms/s/0/eedbe85c-5d2a-11df-8373-00144feab49a.html

[MannyIsGod]

Krugman pretty much refutes the US/Greece comparison making the rounds today on his blog.

[Winehole23]

Um, did I compare Greece and the US?

[MannyIsGod]

What makes you think I was responding to you? :lol I didn't quote you, good sir. Scroll up and read the other posts.

[Winehole23]

What makes you think I was responding to you? :lol I didn't quote you, good sir. Scroll up and read the other posts.Starting a conversation with b_d about anything seems pretty improbable, but maybe you didn't mean to. I thought we were talking, is all. Carry on.

[MannyIsGod]

Well, I don't know if I cared or expected a response from him but I figured it was worth pointing out how poor the comparison between Greece and the US was. I probably should use the quote function more but I'm a lazy poster.

[Winehole23]

I probably should use the quote function more but I'm a lazy poster.Eh, you already cleared up the confusion. No worries.

[boutons_deux]

Days ago, Krugman said Greece on Euro can't create fiat Euros and inflate its way of debt (Which is how USA dumped a lot of its WWII debt). The US can print $$ and screw down its debt.

[Nbadan]

True. The Gold standard was a disaster....

[Nbadan]

Days ago, Krugman said Greece on Euro can't create fiat Euros and inflate its way of debt (Which is how USA dumped a lot of its WWII debt). The US can print $$ and screw down its debt.

Not too mention we owe a majority of that debt to ourselves...so, we are making interest payments too ourselves...

[Winehole23]

http://i28.photobucket.com/albums/c202/psybermetaline/screwball.gif

[Nbadan]

I remember the days that I thought capitalism could work in earnest. :lol Ah, to be young and naive again.

The biggest problem with capitalism is that greed has no heart...it's the perfect time to raise taxes on high incomes and show the world that we can reduce our deficit and pay down our debt...the dollar and stock market would soar, and unemployment would go down to a point where savings on unemployment and social services could be used for tax breaks for working families with children..

....but greed has no heart....we can't give children, 40% of who live in poverty in the U.S., other peoples money...

[Winehole23]

The more we borrow, the richer we'll get? What a relief. Makes me wonder why we didn't start borrowing massively long ago.

[Nbadan]

Maybe every now and then, the market needs to crash. Maybe, every now and then, TBTF's and nation-states need to taste their own mortality.

Seriously, you can't be advocating complete collapses...the costs would be astronomical...you would have social chaos.....

[Nbadan]

The more we borrow, the richer we'll get? What a relief. Makes me wonder why we didn't start borrowing massively long ago.


...the U.S. wasn't the sole global super-power....being the big bully with the biggest currency club has it's benefits...

[Winehole23]

The adjustment could be deeper, longer and more chaotic, the longer we put it off.

And please spare me your tender humanitarian feeling, Dan...what we're doing now might only be making matters worse for ourselves. Attempts by the state to "shore up" finance/banking only end up underscoring/institutionalizing its weaknesses.

And if bailout/stimulus has helped us to avert economic catastrophe now, perhaps it has only prepared the way for an even greater one later.

[Winehole23]

...the U.S. wasn't the sole global super-power....being the big bully with the biggest currency club has it's benefits...Only as long as the rest of the world has confidence in our ability to pay.

[Nbadan]

Why would we lose our ability to pay net interest? What's that? 300 billion/year?

[Cant_Be_Faded]

The question is whether they're worse than doing nothing at all. Sometimes you're not presented with a good option but merely a bad and worse option.

I will always always always believe that if the US and now Europe had not invented money out of thin air on an epic scales to make sure bankers get their payday, yes the common man would go through hard times, yes it would suck, but the market and the economy would have self corrected itself over time.

By doing these bailouts all we are doing is delaying the process of us taking our hits with harsh times and are making those harsh times even worse.
These bailouts are just kicking the can down the road, and are going to devalue the fuck out of the currencies involved.

These bailouts will always be complete and utter bull shit. Don't buy into their keynes bull shit, the markets would self correct but this whole scenario of Armageddon and complete financial collapse is a fear tactic. Thats all it's ever been.


These bailouts do nothing to fix the underlying problem. Nothing. No. Thing.