An Introduction To The Coming European Debt Wars

www.businessinsider.com...

Fasten your seatbelt girls, there's no stopping this train.

I guess the thing that amazes me so much is how many of these types seems to be living in denial. The proverbial, "Whistling in the wind".

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"Government debt in Greece is just the first in a series of European debt bombs that are set to explode. The mortgage debts in post-Soviet economies and Iceland are more explosive. Although these countries are not in the Eurozone, most of their debts are denominated in euros. Some 87% of Latvia’s debts are in euros or other foreign currencies, and are owed mainly to Swedish banks, while Hungary and Romania owe euro-debts mainly to Austrian banks. So their government borrowing by non-euro members has been to support exchange rates to pay these private-sector debts to foreign banks, not to finance a domestic budget deficit as in Greece.

All these debts are unpayably high because most of these countries are running deepening trade deficits and are sinking into depression. Now that real estate prices are plunging, trade deficits are no longer financed by an inflow of foreign-currency mortgage lending and property buyouts. There is no visible means of support to stabilize currencies (e.g., healthy economies). For the past year, these countries have supported their exchange rates by borrowing from the EU and IMF. The terms of this borrowing are politically unsustainable: sharp public sector budget cuts, higher tax rates on already over-taxed labor, and austerity plans that shrink economies and drive more labor to emigrate.

Bankers in Sweden and Austria, Germany and Britain are about to discover that extending credit to nations that can’t (or won’t) pay may be their problem, not that of their debtors. No one wants to accept the fact that debts that can’t be paid, won’t be. Someone must bear the cost as debts go into default or are written down, to be paid in sharply depreciated currencies, but many legal experts find debt agreements calling for repayment in euros unenforceable. Every sovereign nation has the right to legislate its own debt terms, and the coming currency re-alignments and debt write-downs will be much more than mere “haircuts.”

Choo-choo! All abord! Still some seats left on the Soros Crazytrain! Get yer shorts locked and loaded...

:popcorn:

What is interesting that almost all of these countries (+ Ireland) followed IMF neo-liberal cook book. Now they are sinking. Is not IMF common denominator at this crises?

I think what is happening is the same process that was used to loot the third world in the 70s/80s is now being applied to the developed world. This is my meta-take on the whole issue. The big banks and other players sucked the value out of South American and African states and then crumpled them up and tossed them over their shoulder like rusty tin cans.

They tried the same moves in Russia after the collapse of the USSR, and made some inroads during the Yeltsin aministration, but Putin headed them off at the pass.

Now they are turning the heat up on the eurozone and the US because there is nobody left to plunder. The big question is how quietly the citizens of these nations will go into that dark night.

Bankers in Sweden and Austria, Germany and Britain are about to discover that extending credit to nations that can’t (or won’t) pay may be their problem, not that of their debtors.

Hence the saying "If I owe the bank $1,000 it's my problem. If I owe them a million, it's the bank's problem".

They tried the same moves in Russia after the collapse of the USSR, and made some inroads during the Yeltsin aministration, but Putin headed them off at the pass.

Which may explain why Putin was warning Obama about the path he's embarking on. Just look at the collapse of Argentina to see where this is going.

Originally posted by silent thunder
I think what is happening is the same process that was used to loot the third world in the 70s/80s is now being applied to the developed world. This is my meta-take on the whole issue. The big banks and other players sucked the value out of South American and African states and then crumpled them up and tossed them over their shoulder like rusty tin cans.

They tried the same moves in Russia after the collapse of the USSR, and made some inroads during the Yeltsin aministration, but Putin headed them off at the pass.

Now they are turning the heat up on the eurozone and the US because there is nobody left to plunder. The big question is how quietly the citizens of these nations will go into that dark night.

Yes, I agree with your view. What is really sad that same scenario will pass and only few people will realize this. Who do not know history will repeat it. I can speak for Czech Republic and here are no signs of progress of economic/history consciousness. All commentators just repeat neoliberal mantras ad nausea, no real analyzes can be anticipated from these mindless parrots. There are few people at academic domain who do good work but they are completely ignored by MSM.

reply to post by silent thunder


That's my take as well mate..

The way I see it.. and History sees it as well.. there cannot be infinite wealthy powers.. power must reside through which ever medium at one place, but not everywhere... Not every country can be the USA.

So the USA, Europe and so forth has been used and abused and now serves no purpose.. our people are needy, whiny, they demand the world on a silver platter but lack education, will power and most importantly.. they are already constructed to perfection. Where else can profit be made?

The West is sinking, it will be as you say tossed aside.. the East will be the new power house of the World.. not only is there aged to no infrastructure that can be built, but not just millions like the US and Europe need homes.. but BILLIONS. Imagine the wealth.. imagine a corporation like Walmart with BILLIONS of eager MIDDLE CLASS citizens eager to consumer in China and India???

Your returns are higher, investing in a developing nation. That's economic fact. Riskier? Sure.. but the rewards are insane.

But don't worry! .. The West will probably destroy it's self in civil wars, wars of aggression, revenge, expansion .. and when they get done making a fortune off our battles, they will make another fortune watching us rebuild.

reply to post by Rockpuck


That has to be the most logical thing I have ever heard. I truly believe that is our path and there is no way to exit that path. The only way to do so would be to hurt the corporations and slow down growth by stopping free trade and open markets and resort to rich countries on trading with each other. Like only the OECD would be allowed to trade together. But our governments would never do that, we will be forced to live under debt, inflation and substandard living just to keep them wealthy. Then we will have civil wars and we will go broke and have to rebuild, and they will make a fortune off of that.

I am definitly not a Communist, but..... Isn't this exactly what they warned us about?

There is only 1 way to save ourselves now. It would be very unpopular and our governments would definitly not want to do it. This goes for the USA, Europe, Canada, AU, and NZ.

Cut free trade with nations. Resort to trade only with other wealthy nations, like the OECD.

Raise taxes on the extremely wealthy to 90%, raise it on very rich corporations to 50%, and raise Sales tax to a flat 25%.

Push extremely tight financial regulation, and bust up monoplies and limit the size of corporations.

Drop the minimum wage and lower regulations on workers; like nurses should not have to go to college they sould have on the job training like in the '60s.

Require a balanced budget and all countries should have a non-interventionist foreign policy; our countries should only be worried about what's happening inside not outside.

That's all I can think of right now.

reply to post by Misoir


In the past new markets opened doors to new money.. after the 70's and 80's, a sort of Dark Age of American history as there was little growth in consumer technology.. the late 80's and early 90's gave birth to personal computers.. the mid 90's the internet.. wealth expanded beyond reason. When it collapsed in 1999, the next bubble was cheap credit .. which promptly moved into Mortgages, a vast new market opens up (tripling derivatives as well) ..

So until we see a new technology to make huge sums of money off of.. the West will stagnate and decline. This is why you see some Government pundits promoting with zealous fervor "Green Technology" .. except it's to expensive for poor unemployed Americans to buy, and every Green job kills 4 non-green jobs.. Spain already tried it.

We are doomed .. we cannibalized our own economies.

Also please bare in mind this very wise quote: A Nation cannot tax it's self into prosperity.

[edit on 4/9/2010 by Rockpuck]

reply to post by Rockpuck


I did not know before the '90s we made our cheap money off of new currency venues. I really don't know what to say now.

What are we supposed to do? Like you said green technology is good and everything but it is a serious job killer. Please don't take this as sarcasm, but you appear like you know alot about this stuff so what could we do to save ourselves.

PLEASE DON'T SAY LIASSEZ-FAIRE CAPITALISM OR GO BACK TO THE FOUNDING FATHERS.

Edit to add:

I am not an economist but wouldn't our best bet be to revert back to agrarianism? I mean self reliance and agrictulture. We have the best country for farming so wouldn't that work?

[edit on 4/9/10 by Misoir]

Originally posted by Misoir
reply to post by Rockpuck

 

I am not an economist but wouldn't our best bet be to revert back to agrarianism? I mean self reliance and agrictulture. We have the best country for farming so wouldn't that work?

[edit on 4/9/10 by Misoir]

Not a bad idea, but today with mechanisation, agriculture won't provide enough jobs. You'll have enough to feed the country, but the country (i.e. people)won't have enough to pay for it. Unless of course you go full out communist, or abolish money altogether. I like that last idea, big time.

reply to post by Misoir

Please don't take this as sarcasm, but you appear like you know alot about this stuff so what could we do to save ourselves.

Nothing. It is impossible.. the only thing we could do is wage war amongst ourselves and rebuild.. Capitalism.. the Laisez Faire kind I am not supposed to mention.. allows steeper periods of economic decline and incline.. since we tried for perpetual growth, instead of growing over time we basically sprouted a modern nation over night. I mere 50 years to build everything we have.. our Government struggles to fix bridges and spends hundreds of millions on them. In China bridges, roads, high ways, factories, power plants.. they are growing like weeds. No .. free economics won't save us.

We couldn't handle it anyways.. we unregulated the financial market (which was a good thing) .. just to regulate it when it collapsed.. instead of letting it die like we should. We are a weak, pathetic and intolerable people. We deserve what we get. Privatize the profit, Socialize the loss. Fascism

Unless there is some new technology.. some secret something that will lead us into another investing frenzy?

Agraranism would be my favorite model.. but then again I grew up on a farm.. but it doesn't produce large wealth.. we couldn't stomach seeing the pension funds take a ding let alone start over and all be self reliant farmers..

You forget how weak and pathetic we are.