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Wealth & Economics > Euro "could collapse" in the next 18 months

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message 1: by Alex (new)

Alex (asato) Euro 'could fail', says man tipped as US ambassador to EU
http://www.bbc.co.uk/news/business-38...

Thoughts?


message 2: by Uri (new)

Uri Norwich | 33 comments The American Deluge
The man just voicing what any MBA student if the first year of the economic studies knows.
Any artificially created economic system forced into existence in contrudictions with the laws of economics is doomed to fail, sooner or later. It is like to say that the gravity force works in the US and does not work, say in Jamaica. In my book (I literary wrote about it), any ass pulled down with the force of gravity, whether it is a capitalist or a communist ass...


message 3: by Nik (new)

Nik Krasno | 13527 comments Thanks for bringing this, Alex.
After miraculous blindness of high end economists and inability to predict economic crises I'm a little doubtful about their prophesies. BUT ... these guys (if he indeed gets the appointment) can make it happen... They all aware that such statement as his in the interview has direct impact in confidence in the currency and maybe this interview already undermines Euro.. That Euro's stability is not great - it's not a big secret -:)
Moreover, maybe I exaggerate, but the messages I read from this interview are these: the new administration will try to bring UK into its economic orbit (as expected), they'll challenge EU and might rock its stability further (concerted move with Putin?), they might play on a strong dollar and reinstatement on economic barriers (except for those who agree to their terms).... Yeah, these are a little far-fetched from the interview, but align with other moves during post-inauguration week


message 4: by Jen Pattison (new)

Jen Pattison | 409 comments The instability of the euro has been evident for a long time, this is not news to me. It was an idealogical experiment with weak foundations and its collapse is inevitable. Every British expat that I know has most of their money in Britain.


message 5: by Ian (new)

Ian Miller | 9528 comments The real question is, has this man put his money where his mouth is. Has he shorted the Euro?


message 6: by Uri (new)

Uri Norwich | 33 comments Even if he did, we will never know because of conflict of interests due to his position. It is really irrelevant for a trader. The downtrend has been well defined in the past 12 months. Lots of people lost their shirts...it was and is fun to watch how stubborns cling to their socialist ideas...


message 7: by Nik (new)

Nik Krasno | 13527 comments Uri wrote: " Lots of people lost their shirts...it was and is fun to watch how stubborns cling to their socialist ideas....."

Sadly, lots of people constantly lose their shirts.
Which socialist ideas and what's wrong with them?


message 8: by Philip (new)

Philip (phenweb) The largest countries of Europe want the Euro to succeed. this is a political project not an economic one. They have shown they'll do whatever it takes to keep it going.

One of my personal Brexit concerns was that the EU as a whole was being run more and more entirely for the benefit of the 19 Euro members not the 28 current members.

One of the current Brexit concerns, in the UK, is the move of parts of financial institutions to mainland Europe. I believe these companies are using Brexit for cover for what they would have done anyway - to meet the demands of the Euro Zone. These are political demands imposed on financial institutions via regulatory impositions.

The current economic reality of the EU has not changed - Greece and other nation's finances remain complex. Alleged loans from EU Central bank to Greece were immediately transferred to other EuroZone banks to pay off their loans to avoid another financial meltdown of failed primarily German Banks. regardless of the failings of the Greek administrations (and others) this transfer left Greece in even more trouble - there are upcoming repayment dates this year.

Italy is beginning to unravel with constitutional crisis primarily sparked by financial chaos exasperated with earthquake damage.

Ireland seems to be recovering but it is hard to know what the true financial state is in any of these countries. The EU central bank makes it as opaque as possible.

This year we have elections in Germany, The Netherlands and France - all of which may herald significant political change judging by current polls.

Trump's antics may cause further division - I'm sure Putin is rubbing his hands in glee at the thought of more of Ukraine or perhaps the Baltic Eurozone states.


message 9: by Uri (new)

Uri Norwich | 33 comments Nik, your question really surprising, being that you are from the communist block. I suppose they stopped teaching their history, or you did not go to school.

Kudos to Philip, who answered your question very clearly, "Uniting Europe is a political experiment..."
I can add to it.
Nik, the founder of your former country, V.I.Lenin, I belive in 1914, had written an article titled something like "Necessity of creating of the United States of Europe." In short, he laid out his socialist, at the time ideas, which are now at the foundation of the failing union.


message 10: by Nik (new)

Nik Krasno | 13527 comments Notwithstanding my school, which undoubtedly is extremely relevant to our discussion, you might as well elaborate which socialist ideas you dislike -:)

So basically Lenin is behind the EU? That's an interesting interpretation

Not sure you can call a socialist Sweden, Denmark, Finland or Germany a failure. My personal opinion, that Lenin and Marx would've been pretty happy with the system, had they Nordic capitalist countries in front of their eyes. I too like their socialist capitalism -:)
Sure, some EU members experience problems and union's future is uncertain, for it looks like even such a strong economies as German took too big a bite to be able to finance it.. But I don't think one should look on bankrupt Detroit to conclude about entire US economy...

Unfortunately, there are not so many countries, which can currently boast excellent economic situ...


message 11: by Uri (new)

Uri Norwich | 33 comments Nik, poardon my short reply- some of us actually need to make living besides hoping that the books can provide...

About disliking socialist ideas,
- enforced political system without any economic base
-redistribution of wealth
- absurd of tge climate change, that entails economic oppression...
Shall I go on...
And yes, Lenin is the father of Eurounion, since his ideas at its foundation. As far as my resesrch for two books shown, I could not find anyone else. No offense, anyone can dig into it. It is all out there.


message 12: by Nik (new)

Nik Krasno | 13527 comments Sure, Uri, make some money. More important -:)

Dug into it, following your advice, but didn't see Lenin among the founding fathers: https://europa.eu/european-union/abou..., but since you've done the research, I'll take your word for it.

If you can elaborate a little at your downtime the ideas, it'll make it easier to relate and debate, for I'm not sure I quite understand what stands behind 'enforced political system without any economic base' and the other two


message 13: by Philip (new)

Philip (phenweb) Uri wrote: "Nik, poardon my short reply- some of us actually need to make living besides hoping that the books can provide...

About disliking socialist ideas,
- enforced political system without any economic ..."


How about Holy Roman empire or Napoleon both of whom pre-date Lenin but both wanted European superstate - or Roman empire

To call any European country socialist is just throw away comments. Many have elements of socialism and elements of capitalism, communism, fascism or any other ism you care to mention. It depends on your definition of socialism, or socialist. In the definition below you also have to define community. The FBI is a community owned institution - does this make it socialist? How about a state (US term not nation) police force?

OED

A political and economic theory of social organization which advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole.

1.1 Policy or practice based on the political and economic theory of socialism.

1.2 (in Marxist theory) a transitional social state between the overthrow of capitalism and the realization of Communism.


message 14: by Uri (new)

Uri Norwich | 33 comments Hi Nik, Philip,
I sincerely appreciate your input. Finally, got a moment to reply. It was a busy day in the markets. We still have two hours to go, but I am done for today.
I cannot afford spending any time on generalizations and philosophical theories. Perhaps the Roman Empire discussion may be fit for a cocktail party attended by our academia, although it is a valid subject. I am the man of hard numbers, my livelihood depends on. One small example (Philip may relate to it working in the financial industry). If one paid a close attention last Friday and put a hundred dollars in a cement company based in TX, that one today, if sold, could’ve pocketed $122… You can finish the paragraph…
Back in 2014, I had done an extensive research for my book “The American Deluge.”
V.I. Lenin wasn’t the target of my inquiries, but John Maynard Keynes, Friederich Hayek and Lionel Robbins----all of the Lodon School of Economics fame where my protagonist attained his degree. The most prominent of those three is probably Keynes, who had authored “The theory of money and foreign exchanges.” (as a side comment, it is not a required reading in many MBA programs any more, especially Hayek, who would be the antithesis of what Obama stood for). While conducting my research, Lenin’s name kept popping up in many instances.
Anyway, here is the reference to Lenin laying out the foundations of the Euro union.
Sotsial-Demokrat No. 44, August 23, 1915. (I was wrong saying of the top of my head-- 1914). Source: Lenin Collected Works, Progress Publishers, [197[4]], Moscow, Volume 21, pages 339-343.
It is a boring read, unless you were a student in the Soviet University and required pass a quiz. Here are just some excerpts:
“A United States of Europe is the state form of the unification and freedom of nations which we associate with socialism—about the total disappearance of the state, including the democratic.”
“A United States of Europe under capitalism is tantamount to an agreement on the partition of colonies. Under capitalism, however, no other basis and no other principle of division are possible except force.”
This last “beauty” illustrates my previous statement that the European Union is a forced entity, created against any laws of economics that can be only enforced for so long. That leads to the last question: “When to short Euro?” Or Europe in a broad sense could be a better choice…?
Currency shorting is a tricky business and requires a perfect timing (hate to send you back to my book, but after all, it is a book discussion site), instead one can easily short European companies, at a lesser cost and a better risk mitigation.
The American Deluge


message 15: by Ian (new)

Ian Miller | 9528 comments My view is the euro will fail if the current system is not changed. The problem is having a single currency with diverse economic systems, and no "behaviour regulatory authority". Greece has shown up the worst of the problems - in my opinion the Greek people must sure have had enough of suffering just so bigger debts can be racked up to make certain German banks' balance sheet look better. In all probability, Italy is also in trouble, and its troubles are seriously worse because their economy is far bigger.

The idea seemed to be that they needed a "United States of Europe", but the USE should have been formed before the currency. The free movement of people also has become a drain on the economies of the medium rich as the "migrants" send money home - not helped by the sudden influx of Syrians. But if the euro zone cannot fix on common fiscal behaviour, I can't see how the euro can last.


message 16: by Philip (new)

Philip (phenweb) Ian wrote: "My view is the euro will fail if the current system is not changed. The problem is having a single currency with diverse economic systems, and no "behaviour regulatory authority". Greece has shown ..."

To a large extent you need common taxation, borrowing limits, pensions etc. too. Yes there are variances in the USA with local, state and federal taxes. The UK has them as well with local council tax albeit to a lesser degree of divergence than the USA. VAT minimum rates was an attempt by the EU and its predecessors to start a common tax. Business rates and corporate taxation is another variable adding internal EU competition e.g. Ireland 12% unless you are Apple. One of the expressed fears on UK exit is that we might further compete by lowering from current 20%.

Another argument was state (socialist) benefits e.g. UK Child allowance paid to immigrant EU workers at UK rates when the child was still resident in the originating country. Effectively developmental aid for that country. The EU has used central funding distribution to attempt leveling up via infrastructure projects hence net donors and why many relatively newly joined countries have nice new motorways in the constituencies of leading politicians.

The UK is a net contributor and even if there is an argument about how much of that is the total contribution spend is decided by the EU - primarily the commission. The EU will miss that money which is why they want to present a bill to the UK to keep projects going after exit.

Personally I believe the EU will survive the UK leaving and even the collapse of the Euro. It might have to revert to the Common Market or European Community - the Union bit was always a bit hopeful


message 17: by Michael (new)

Michael Fattorosi | 477 comments Ian wrote: "My view is the euro will fail if the current system is not changed. The problem is having a single currency with diverse economic systems, and no "behaviour regulatory authority."

+ 1 -- What Hitler couldnt do with tanks the Germans have done with the Euro, subjugated the rest of Europe.

Its just a matter of time until it fails. You cannot compare 28 or even 19 countries to the 50 states that comprise the United States of America. There is no one European identity comparable to what we have as Americans.

The Italians I know hate the EU and hate the Euro. It has made life more difficult. The Greeks I know hate it more but they are in less of position to leave than Italy, Spain or the UK. If 2 more countries leave I see it falling apart rather quickly.


message 18: by Ian (new)

Ian Miller | 9528 comments Michael is quite correct. Europe bears no resemblance at all to the US. The nearest similar success story to an assembly of states with "democracy" that I know of is Australia.


message 19: by Philip (new)

Philip (phenweb) I agree there is no direct comparison despite the efforts of the pre EU lobby to turn it into a similar state. The trappings of flag, a stolen anthem, and currency (for 19 out of 28) do not cover the language and cultural diversity. The legal systems are very different with most of mainland Europe using Napoleonic derived laws and the UK and others having a less defined legal system.

The court system was another anti-EU pressure with the use of the European Arrest Warrant depositing UK citizens in foreign prisons and legal systems with no effective extradition protections. Yes the UK uses it to pull back Europeans to the UK. Still the UK agreed an effective one-way only extradition treaty with the US much like our trade deal will be.

Despite the warrant the 28 countries have 28 separate legal systems but the European Court of Justice (Not the ECHR) decided that it was the ultimate power regardless of legislation i.e. it tried to act as an EU Supreme Court. The UK had to change its legal system to introduce a Supreme Court to stop the ECJ interfering in domestic matters.

There does seem to be a building resentment of the EU, but will that come to a head in another major country especially one in the Eurozone. That is harder to guess. The political elite in all these countries are so wedded to the project that their criticism is nothing but hot air. They know which side their bread is buttered. All those summits, travel to hotels , etc, are very hard to give up.


message 20: by Nik (new)

Nik Krasno | 13527 comments I wouldn't mourn EU and Euro so quickly, although it may look that Trump and Putin together may try to pull it down, basing on its current problems.. Offering 0%/low tax on trade to non-EU members and 20%/high to EU may do the trick..
In the terms of globalization, it looks like European integration is a sound move. If Trump manages to reverse the trend - sovereign economies may be better.
It's pretty obvious that there are core problems that worry lots of Europeans and need to be tackled. Plus global economic situ isn't marvelous.
Yeah, there are Euro skeptics and they certainly have sound critique, but there are many countries that want to stay in (no wonder because they get so much money). In Hungary with whoever I speak - my impression was that anything big was funded by EU. A friend of mine running a small construction company in France, all of his workers are Polish and he'd have trouble replacing them with locals (unless it's refugees maybe). At that - Hungary, Slovakia and other countries oppose bitterly the influx of refugees. The solution, if possible, would be to find the right balance between economic incentives and preservation of national self-identification.
Addressing the problems and embarking on uniting agenda may steer it clear.. Disintegration would probably be devastating at this point..
It's not based on force - it's based on money, pumped by donor countries into the recipients..

As of the use of currency. Not everyone made the move. Besides, take dollar for example - it's a legal tender and the only currency in a bunch of other places, besides the US:
http://www.investopedia.com/articles/...


message 21: by Ian (new)

Ian Miller | 9528 comments I think one of the problems with the EU is that it is"governed" by appointed politicians. The people in the various countries have no direct say in this, and there are no campaigns on policy. Part of the reason will be the number of languages. Nobody can go and campaign in all of the counties, so there is no unifying force possible for policy acceptable to all. Instead, things get imposed, and sooner or later that becomes unacceptable. The large amounts of money going to Hungary, say, won't impress the Greeks either.

As for the dollar being used in so many places, this is a huge benefit for the US. It is the only country that can print dollars profusely, and know most of the printing will stay out of internal circulation. That is a huge benefit to the US economy and Trump may be unaware of the implications.


message 22: by Nik (new)

Nik Krasno | 13527 comments Ian wrote: "I think one of the problems with the EU is that it is"governed" by appointed politicians. The people in the various countries have no direct say in this, and there are no campaigns on policy. Part ..."

True EU has quite a few problems and differences in fiscal and social policies that need to be bridged, solved or reduced to national level. When the union was so coveted and countries pleading to join, those atop might've felt courted and safe. Now that the problems surfaced and its future became unclear, they might sober up a bit and address the problems, if it's not too late..


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