Iqbal Latif

The euro is a macro-economic weapon of mass destruction

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The euro is a macro-economic weapon of mass
destruction - it simply must be defused. How much louder do the alarm bells need to ring before time is called on this absurd monetary experiment?

There may be “no such thing as an orderly break-up”. But there is a very big difference indeed between embarking on a tough transition to a smaller eurozone with a coherent plan agreed by respective governments on the one hand, and a hugely-damaging systemic meltdown on the other, to be followed by years of pan-European loathing and mutual recrimination. Should Germany sanction the European Central Bank to guarantee the sovereign debts of all and sundry, with “printed money”?

Global equity markets would certainly rally if so, at least for a while. And eurozone bond yields would fall.

Taking this route would contravene European Union treaties, as Merkel well knows.

Far more importantly, once the ECB has bailed-out profligate governments once, the same countries will over-borrow all over again a few years down the line. The markets will eagerly lend to them too, such loans combining a lucrative yield with a de facto ECB guarantee.

The job of any central bank, the ECB included, is to act as “lender of the last resort” to commercial banks in its jurisdiction that are solvent, but in need of temporary liquidity.

Central banks aren’t meant to dish-out free money to governments that have spent themselves into insolvency. By Liam Halligan

7:00PM GMT 19 Nov 2011

Hopefully!

If so ECB will have to have deep pockets for QE1 of Euro land. Europeans Federal Reserve and a Bernanke cannot be created overnight, the political will is missing in Germany.

Imagine if California, New York, Texas, Florida, Illinois refuse to support the Federal Reserve? This is the kind of unequal economic influence of German economic might over PIIGS. Merkel will have to allow ECB a big QE package. It looks like so far she is inclined to save her banks more than Euro. 

Euro will survive

For there's no alternative.

London- Mecca of global law, finance and trade

Europe will never be one land, it is historically and geographically like the Middle East; land of 1000 tales, cultures and folklore. Germans, French and Dutch or Swiss has different tastes.

Compare French Champagne and wine to their eateries like Frog legs, Foie gras and German pints with frankfurters, all this point to a nation diverse in habits, productivity and inclinations.

You can strait jacket a McDonald eating, melting pot of culture into one $. But it is difficult for people who have different significance of having an abode and reflect different ingrained cultures.

Euro strait jacket has helped political unification to avoid bloody last century wars but to bring these diverse cradle of cultures to fuse into one greater culture and productivity centre ignoring Spanish siestas and Greece proclivity of  rosary that most of the Greek men are holding in their hands, sitting outside the kafeneion (cafe in Greece),is only a way of killing time is so . 

For example when Greeks even Spanish and Mediterranean countries like Italy when they go out for dinner, they always pay cash. No cheques and credit cards! And they have always got money enough to pay the bill for their company too. Not being able to pay, would be humiliating beyond belief. None of these habits are part of Northern Europeans culture, paying cash means undeclared rampant black economy. Euro was too steep a demand or multipurpose highly sophisticated and diverse population to be strait jacketed straight into German discipline.

On UK you will hopefully enjoy this piece that I wrote 4 years ago..

UK housing market crisis - London will continue to be the jewel in the crown.

//iqballatif.new.newsvine.com/_news/2008/05/20/1500239-uk-housing-market-crisis-london-will-continue-to-be-the-jewel-in-the-crown?commentId=1821003

Inflation one day will eat all this debt away.

'You cannot make a single currency without economic convergence and economic integration. '

Inflation one day will eat all this debt away. Right now since last few years of this crisis, it is borrowed time that has been the biggest healer. The reason we have escaped from a huge global depression, food stamps and mass unemployment is because of the right decisions were taken to quantitatively ease, purchase securities to save the banks from collapsing.

It is marvel that this huge paper liquidity through QE's have failed to ignite the inflationary spiral. Why, because the unemployment has remained high and demand arrested due to 'liquidity' losses that has been immense.

Overproduction and overextension of last decade from 1997-2007 can only work its way through as time elapses and demographic demands help repair GDP growth on a stabilise trend curve.

As banks have not collapsed and semblance of order has been maintained we are producing far more than what the 'liquidity crunch and banking squeeze' should have possibly inflicted.

Inflation helps reduce the total debt stock over time, by reducing the real value of debt. There is no answer to this debt other than quantitative easing to continue to replace the 'immense liquidity loss.'

Time is a biggest healer, instead of taking a 50% hair cut straight away and hurt the balance sheets it is better to reduce the real obligations by managing inflation just enough and help recapitalise banks adequacy ratios.

There in an invisible hand of building that is working here. A decade of under par growth to pay for the excess of past far above non sustainable trend line growth. This is the policy, and it seems it is working, despite of sweeping levels of QE1 QE2 and QE3 possibly; inflation remains a non issue, but what were the options?

None, none what so ever, to let banks go down like Lehman would have ensued global chaos. Managing crisis in a sustained manner is far more difficult than managing people who lack conventional wisdom, if banks go down and economies suffer, it will be the bottom strata of the so-called 99% who will suffer the most. The white elephants always end up being bailed out.

Those who think this extravagance is caused by banks are wrong, it was caused by everyone of us who went and build and bought as if there will be no tomorrow.

Monetary pandemonium and ceiling high debt can only be handled by helping to ingrain efficiency in global productivity and helping the banks to restore their balance sheets so that a new cycle can be ensured. Maintaining order in face of chaotic disorder was the call of the day us far we have done well, to cave into demand of global disorder by letting the banks go down is foolish and crazy.

Good read.......

What was the real reason that Britain didn't enter the euro zone? A wise choice in hindsight we might say........

Thanks.........