Euro Analysis?

This started over at Credit Slips as comments on discussion concerning a new article in New York Times Magazine about the status of the Euro crisis.  I then posted it to Eurotrib and am now cross-posting here and on The Real Estate Spot.

Interesting article, but what does it mean?

1 and 6. Yes, Greece and Germany will play chicken for awhile and ultimately enter into an agreement full of sound and fury, signifying nothing but a victory for each government's immediate goals. Greece will gain a new round of financing, fudge the austerity measures when it comes time to implement them (Good, austerity is a crock.), and delay once again the day when it defaults on this whole mess. For Merkel, the delay improves her odds of foisting off on someone else the consequences of serial defaults on the EU perimeter and the shocks they will send through Germany.

2 and 4. Given facts such as set out in #2, why is #4 even being raised? The euro zone may break up, the EU may break up, but neither of those would be a collapse of the European economy. At the very least, Germany, France, the UK, and Scandinavia would keep on chugging along.

3. I can't even get past the first sentence. "Since most countries left the gold standard over the last century, a currency's value is based entirely on collective faith." I don't know if that came from Planet Goldbug, Planet Neolib, or some unholy spawn of the two, but it didn't come from Planet Reality.

5. "This would be good news for U.S. consumers, if not for U.S. producers." A minor detail the Gray Lady just doesn't want to deal with. A break-up would mean more cheap stuff for the 1% while costing the other 99% more jobs. As for the rest of this paragraph concerning account transfers to Germany, has anyone at the NYT been paying attention to what has been happening in Greece, and Italy, and Spain?

7. But they end on a strong point. Obvious, but strong. A sovereign currency without a sovereign is, shall we say, problematic, and you need either deeper integration or dissolution. I'm not holding my breath for the former. I expect to see Athens, Rome, and Madrid start taking orders from Brussels bureaucrats when they see Berlin and Paris doing so. Not going to happen.

Latest Financial Industry Comments

Over on Credit Slips, we're discussing the CDS mess in the Greek default.  No one over there thinks we've seen the end or even the beginning of the end.  More like the end of the beginning.  I'm sticking to my position that anyone who was relying on a CDS to cover his position was willfully ignorant and deserves the haircut he'll be getting.  I've added that anyone who really wanted insurance for his investment should have been able to buy something from somewhere, and that if no such insurance were available, that a CDS was the only option, we now know as an absolute fact that the markets are nothing but a crooked casino.

On London Banker's blog, we're discussing how to fix regulation methods.  Following up on another comment, I've said that the touchstone should be whether the financial industry can explain an investment to the regulators.  If it can't, the investment doesn't fly.  After all, if the regulators can't understand it, how can the investors?

The Way We Live Now

I love this book.  It should be required reading.


Do you think federal jobs are a safe bet?  You might want to check with the 9,000 civilian employees the Air Force is showing the door.


Maybe high tech?  Guess again.  AMD, the second-largest microprocessor manufacturer, is shedding 1,400, 12% of its workforce, and its stock is still falling.


George Papandreou made a brilliant move at the G20, threatening to hold a referendum on the Greek bail-out, which would undoubtedly scuttle the proposal (Mish and I actually agree on this, so take special note.).  Papandreou is already back-stroking on this, but the opposition parties may hold him to it.


In spite of 30-year mortgages falling to 4.1%, housing prices continue to sag because no one is buying because no one can.  How can you buy if your job prospects consist of being a part-time greeter at Walmart?  Yet Bloomberg has the temerity to blame the malaise on new regulations.



But then what do you expect from Hizzoner Michael?  He just blamed the mortgage mess entirely on Congress.  Have to protect Wall Street at all costs, eh Mike?  Even Forbes called BS on this.


So what do people consider to be the big answer to this mess?  Gold.  Yes you read that right.  The big, yellow clunker.  I love Paul La Monica's comment about gold having "tangible value".  Really, Paul?  How many fillings and ear studs do you need?  Trust me, children, as I've commented before, if you wake up one day wondering where you're going and what you're doing in that handbasket, you won't need gold, you'll need dirt and lead, i.e. a place to grow your spuds and a loaded weapon to defend them.  Smokes and booze are far more useful for barter than gold can hope to be.


And on top of that, a growing bloc of idiots thinks returning to the gold standard is the way to go.  Yeah, that makes sense.  Everybody is in hock to his highest hair follicles, and the threat of severe deflation grows daily, and we're going to fix it all by hardening the currency.  Reality to geniuses: We tried exactly that in the 1870s and got a quarter-century of rolling recessions.  For most people it was a depression.  Except for the top 1%, who made out like bandits (Ever hear of The Gilded Age?).  Now stop and think about who is really pushing for a gold standard now.  Sheesh, I knew you people were born at night, but I didn't know it was last night.