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Is the Euro doomed?

  • #21
  • Nov 30, 2010 5:29am Nov 30, 2010 5:29am
Quoting bbakker
In future, I suggest that you choose your words more carefully when posting to a world-wide forum, unless you like the back lashing.
I stand by ALL my comments in this thread. I have, however, experienced several people here who are clearly ignorant of history and economics, and who are intellectually ill-equipped to discuss the subject of this thread. This is not about the US vs. Europe, but about the future of the euro.

Let me add an additional thought. The current efforts to bail out Greece and Ireland may make it more likely that Portugal and Spain fail in the future, especially as we got closer to 2013. The question of the euro being doomed remains in play, and depends how the politics play out over the next few months.

Edit: OK, I have to get back to trading now. Maybe I will come back and play with you guys later.
  • #22
  • Nov 30, 2010 5:40am Nov 30, 2010 5:40am
Quoting bbakker
In future, I suggest that you choose your words more carefully when posting to a world-wide forum, unless you like the back lashing.
I'll second that. In future, maybe its better to go to a friend and have a beer while talking about things you don't know, rather then get pointed at your simple minded ignorance

a) what do you know about EU except from traveling prospects
b) EU is a union of 27 countries and you should think twice telling you know something about history
c) USA aprticipation in both WW was only a commercial en devour
d) we havent seen your USA army further than the west of germany
e) you didn't know that Baltic states dont have euro yet

the list could grow much longer, but I am wasting my time
  • #23
  • Nov 30, 2010 5:41am Nov 30, 2010 5:41am
Quoting GEfx
I stand by ALL my comments in this thread. I have, however, experienced several people here who are clearly ignorant of history and economics, and who are intellectually ill-equipped to discuss the subject of this thread. This is not about the US vs. Europe, but about the future of the euro.

Let me add an additional thought. The current efforts to bail out Greece and Ireland may make it more likely that Portugal and Spain fail in the future, especially as we got closer to 2013. The question of the euro being doomed remains in play, and...
If you cannot see that the language you are using is wrong, then you are a bigger fool than I thought!
  • #24
  • Nov 30, 2010 8:09am Nov 30, 2010 8:09am
Here's something on topic from Die Spiegel:
Why the Euro Will Survive the Crisis

By Sven Böll

Part 4: Why the Euro Does Not Need to Fear the Dollar or Yen
Earlier this year, the euro wasn't doing very well. In the course of the Greek crisis, the value of the European common currency had temporarily fallen as low as $1.20. A reverse trend has been apparent in recent weeks. It appeared that the financial markets weren't interested in the situation in Ireland, and the euro placidly hovered between $1.35 and $1.40.
The fact that no panic broke out in the markets can be explained by the habituation effect. Greece was a precedent-setting case, but Ireland is the second country to seek help and is thus no longer as exciting.
There is also some indication that the financial actors are reacting more rationally than they did earlier this year. Together, Greece and Ireland comprise exactly 5 percent of the economic output of the euro zone. And even if Portugal is added to that group, the total is still only 7 percent. This is still less than the share that the state of New York contributes to the United States' gross domestic product. And New York's collapse would hardly create turbulence for the dollar.


Global Investment Alternatives Unattractive
A serious threat to the euro would only emerge if the financial markets lost faith in major debtor countries like Spain and Italy. But there is little evidence of that happening right now. Firstly, that is because these countries have all passed austerity measures, and secondly because there is enough money available on the market.



Investors must be able to afford to spurn certain investment opportunities, and this is only possible when there are better alternatives. But within Europe, the chances of finding suitable alternatives are limited. Even if all international investors were to view Germany as the only safe haven on the continent, not all potential lenders would be able to get a piece of the action -- that would require Germany to take on additional debts worth hundreds of billions of euros a year.



And it's not as if a global investment alternative has emerged, either. Compared to the world's other two major reserve currencies, the dollar and the yen, the euro is not doing any worse. Indeed, it's actually faring better.


The Yuan Still Isn't a Global Reserve Currency
European governments are serious about austerity, while in the US there is no sign of how President Barack Obama plans to get his country's trillion-dollar deficit under control. Close to 9 percent of all US public spending this year was financed on credit, a considerably greater amount than in the euro zone. And whereas the European Central Bank has at least kept the inflation rate in mind with its currency policies, the US Federal Reserve keeps pumping billions of new dollars into the economy. It is unclear what the outcome of this gigantic wager will be.


The situation doesn't look much better in Japan. For a long time, the country was the world's second-largest economy after the United States. But the Japanese economy has experienced a lasting recession over the past 20 years, and this year it is likely to be overtaken by China. By comparison, Europe looks as dynamic as an emerging economy. The public debt in Japan is at about 200 percent of GDP, around 2.5 times as high as the euro-zone average.


And the much-celebrated emerging economies themselves are still packed with risks when it comes to investment possibilities. No one knows exactly how long the growth of the Chinese economy will continue. It will take a recession to truly determine the true condition of the country's economy.
Nor is it foreseeable at the moment that the yuan will become a serious global alternative to the euro and the dollar in the near future. The currency isn't even freely tradable in international markets. So far, that situation has suited the Chinese government just fine.


Bottom line: Europe's debt problems are without a doubt considerable. But compared to the United States and Japan, the euro-zone states can already point to initial successes in sorting out their finances. In addition, their economies are in better shape. That will help to ensure that the euro remains one of the world's most important, and thus attractive, currencies.
If you don't risk, you don't ever have to lose.
  • #25
  • Nov 30, 2010 8:43am Nov 30, 2010 8:43am
Quoting bug
Here's something on topic from Die Spiegel:
Why the Euro Will Survive the Crisis...
Good article. I don't think the euro's problems are debt or an attack by the dollar or yen, however.

The only thing that can hurt the euro is Europe's political and structural problems -- imho. Planned budget cuts are nice, but the markets must see actual cuts, and that has not really happened yet. More important, while the bail outs buy you time, time is not your friend here. Buying time only works if the non-core economies are growing rapidly to grow out of your problems, and they are not growing. Add to that the 2013 plan to have investors share in the problems (spread the pain between tax payers and investors) and you will soon see the investment community start to dump non-core debt asap, which will raise interest rates and therefore add to the problems. Once that starts, then the other non-core countries will start to fall. Basically, the shorts have two and a half years now to drive these countries into the ground, which they will do as long as they make money doing so.

So again, IMHO, the euro survives with Germany, France and The Netherlands (maybe one or two others) but the rest are screwed/out and on their own. Until and unless one of these poorly run countries steps up and really addess their problems, what I describe here is a certainty, again IMHO.

BTW -- I do not mention the UK because it is not part of the euro.
  • #26
  • Nov 30, 2010 8:59am Nov 30, 2010 8:59am
Quoting GEfx
Good article. I don't think the euro's problems are debt or an attack by the dollar or yen, however.
I don't think so either but there was a subtle message I was trying to get across by posting this. In order to avoid further confusion, let me just spell it out here: Europe and the rest of the world actually need the euro and want to see the EMU stabilized. Kicking a country out of the eurozone is not a solution and it is definitely not something one would assimilate with stability. If Greece, for example, were forced out of the EZ, who would risk their money betting on other countries not being forced out of the EZ? A single country being kicked out would very rapidly be discounted by the markets thus pushing all weak EZ members into the abyss. If such events took place, it would transpire into another sharp asset deflation phase all around the globe.

And remember that European banks still have exposure to GIIPS debt so forcing someone to revert back to their pre-euro currency does no good at all. In their own national interests, Germany, France and other able countries are going to save their banks. Providing bailouts to nation states is just another way of repackaging bank bailouts. The added benefit is that nation state bailouts show their desire to stick to the euro, which I think is very reasonable.
If you don't risk, you don't ever have to lose.
  • #27
  • Nov 30, 2010 9:12am Nov 30, 2010 9:12am
Quoting bug
I don't think so either but there was a subtle message I was trying to get across by posting this. In order to avoid further confusion, let me just spell it out here: Europe and the rest of the world actually need the euro and want to see the EMU stabilized. Kicking a country out of the eurozone is not a solution and it is definitely not something one would assimilate with stability. If Greece, for example, were forced out of the EZ, who would risk their money betting on other countries not being forced out of the EZ? A single country being...
Yep, agree with what you are saying. It is a very difficult and dangerous set of issues that will be ugly to fix. And, as long as the shorts can make money by attacking, it gets even uglier and more dangerous. Which European leader is going to risk their job by being the first to tell the truth? Here in the US, two years ago we stated the Tea Party movement to force change, and that process is still in play and has yet to prove itself, but it was a starting place (mid-term elections resulted in conservatives taking the US House and adding seats in the US Senate). Maybe something similar will take root in Europe. Good talking to you and good trading.
  • #28
  • Nov 30, 2010 9:32am Nov 30, 2010 9:32am
Well there is not much the electorate here in Europe could do. Firstly we don't have pan-European political parties (we have loosely organized social groups that work together in the European Parliament but that's it). But more importantly there isn't much this pan-European party could do since most of the decision are made by a group that consists of a few heads of state, the European Commission and the IMF. Even if such a pan-European party had power like the above mentioned group does right now, it would hardly be capable of invigorating the economies of debt ridden countries.


A sidenote here on the US (you mentioned it and I just couldn't pass the opportunity to say this):
The problem with the tea party in the US is that they've been taken over by a bunch or right wing nutters. I admit that my understanding of US politics is skewed by virtue of me being an European but as far as I know, the whole idea behind the tea party back when it started gathering steam was to stop spending money on stupid things and start putting people in jail (for mortgage fraud, accounting fraud and everything else that went on). Right now it looks to be more about guns, making fun of gays and Sarah 'you-betcha' Palin which might be worth it for some people, but it's not real politics and it hardly changes anything for the better. To tell you the truth, I had some hope in the tea party back in 2009 but now it's just sad.
If you don't risk, you don't ever have to lose.
  • #29
  • Nov 30, 2010 9:47am Nov 30, 2010 9:47am
Quoting bug
Well there is not much the electorate here in Europe could do. Firstly we don't have pan-European political parties (we have loosely organized social groups that work together in the European Parliament but that's it). But more importantly there isn't much this pan-European party could do since most of the decision are made by a group that consists of a few heads of state, the European Commission and the IMF. Even if such a pan-European party had power like the above mentioned group does right now, it would hardly be capable of invigorating the...
Hey Bug, the tea party image has been hijacked by the main stream media here in the US, too. I attended two tea party events this year and can tell you that the main push is fiscal reform in Washington, and a reduction in government's influence and control on our daily life. The things you speak of are fringe issues that the anti-tea party grab onto. But, I can see how you would have the image you have of the movement. Sorry to hear that a pan-European movement is not possible there. We (about 68% of Americans) are opposed to the European socialist model but if you can make it work, good on you! Take care.
  • #30
  • Nov 30, 2010 10:36am Nov 30, 2010 10:36am
Quoting GEfx
Hey Bug, the tea party image has been hijacked by the main stream media here in the US, too. I attended two tea party events this year and can tell you that the main push is fiscal reform in Washington, and a reduction in government's influence and control on our daily life. The things you speak of are fringe issues that the anti-tea party grab onto. But, I can see how you would have the image you have of the movement.
Too bad the media is only focused on the sensational. Anyway, I hope you can get your act together in the US no matter what party takes the lead.

Quoting GEfx
Sorry to hear that a pan-European movement is not possible there. We (about 68% of Americans) are opposed to the European socialist model but if you can make it work, good on you! Take care.
For what it's worth, I'm not sorry for that. I wouldn't want a pan-European political party - I very much prefer nation state based political parties because
a) while I like the idea behind the EU and the many things it has done to make life better in the whole of EU I still prefer sovereign nation states, not a big federalist Europe
and b) a pan-European political party would run into trouble as soon as it faced its first truly controversial issue - imagine people from different parts of the EU under the hat of a single party agreeing on issues like immigration, agricultural policy, banking and foreign policy - it's just not going to happen. This is exactly the problem that Republicans had to face during the 2008 Presidential elections - if they had gotten their act together maybe they could at least have kept some of their seats in Congress.

About the European socialist model. I don't know why Americans think Europeans are students of Marx/Lenin/Stalin and why they think America is much different from the EU. While our ideological background is somewhat different, both the US and EU have a system of social safety nets and very similar government expenditure as a % of GDP.

But enough of US compared to EU. Let's talk about the euro.
If you don't risk, you don't ever have to lose.
  • #31
  • Nov 30, 2010 10:45am Nov 30, 2010 10:45am
I'm posting a link to one of my earlier posts here at FF:
http://www.forexfactory.com/showpost...2&postcount=19
That particular post leads you to an article written by Hans Werner Sinn about the bailout fund set up in May of this year. The report also sheds light on the strengths and weaknesses of the euro.
If you don't risk, you don't ever have to lose.
  • #32
  • Nov 30, 2010 11:03am Nov 30, 2010 11:03am
The stories about the Euro ending as a currency can in my opinion be classified as fairytales.

The strong northern countries will never get rid of the Euro since their new own currensies will be a lot stronger and that would make their products and services a lot more expensive.

On the other side, the weaker southern countries will never want to leave the Euro since their debt will be noted in Euro's while their own new currencies will be valuated very low in comparison.

There will be even tougher rules for participating countries, but that will be it.
With Russia also interested in joining the Euro, it will be very interesting to see what will happen to the currency.
  • #33
  • Nov 30, 2010 4:55pm Nov 30, 2010 4:55pm
Quoting Mercurius
The strong northern countries will never get rid of the Euro since their new own currensies will be a lot stronger and that would make their products and services a lot more expensive.

This is the lead to an article which can be found under the News section of FF home page:
"The risks to the euro are enormous and Germany must decide whether it wants to keep the currency, German economic adviser Peter Bofinger said on German television NTV on Tuesday." I would never say never, but perhaps the time has come to at least review the required actions and costs of re-issuing the DM.
  • #34
  • Nov 30, 2010 4:58pm Nov 30, 2010 4:58pm
Quoting bug
I'm posting a link to one of my earlier posts here at FF:
http://www.forexfactory.com/showpost...2&postcount=19
That particular post leads you to an article written by Hans Werner Sinn about the bailout fund set up in May of this year. The report also sheds light on the strengths and weaknesses of the euro.
Hey bug, thanks for this and I will look at it tonight. Appreciate your thoughts and ideas on this topic. I, too, like trading the euro, but I bet we could also make money trading the DM and Franc -- LOL. Good trading my friend.
  • #35
  • Dec 1, 2010 1:50am Dec 1, 2010 1:50am
Quoting bug
Well there is still one gun left in the drawer that has been unused so far and that is guaranteeing debt and lending money American style (the US FED provided trillions' worth of loans and backstops). The ECB has made it very clear that they are not the Federal Reserve, but rather a pan-European central bank closely modeled after BuBa. But considering the already frustrated European taxpayers not only in Germany but all over the EU, the ECB might be pressured into loosening its monetary policy. This would certainly drive down the value of the euro...
Well, some people seem to be thinking along the same lines as I am. From the FT:
Trichet hints at bond purchase rethink
If you don't risk, you don't ever have to lose.
  • #36
  • Last Post: Dec 1, 2010 4:14pm Dec 1, 2010 4:14pm
Quoting bug
Well, some people seem to be thinking along the same lines as I am. From the FT:
Trichet hints at bond purchase rethink
Hi bug, I just read an article that hinted the ECB will jump on the QE band wagon tomorrow, or announce a program for euro countries to do joint debt issues or maybe actually provide assistance to the non-core countries in selling their debt directly to China. Clearly not the solution, but it does buy some time. May be an interesting day tomorrow.
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