What will happen to Spain?

Discussion in 'Politics' started by Jason, Feb 25, 2010.

  1. Jason

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    Article in the Wall Street Journal
    The Euro's Final Battleground: Spain - WSJ.com

    "Spain is the real test case for the euro," says Desmond Lachman of the American Enterprise Institute in Washington. "If Spain is in deep trouble, it will be difficult to hold the euro together...and my own view is that Spain is in deep trouble."

    The medecine for Spain is pretty much the same as that anywhere else - austerity. But:

    Mr. Lachman of the American Enterprise Institute is among the pessimists who doubt the government will take this course. He thinks Spain's chronic inability to restart growth will lead it to contemplate a third option: splitting the euro zone asunder by withdrawing from the common currency. That would permit a devaluation that would, at a stroke, increase Spain's competitiveness and allow the economy to grow again.

    The article points out that the "mainstream" view is that no country would pull out of the Euro. But this article is in the Wall Street Journal - it might not be the "mainstream" view but it isn't a fringe view either. And George Soros (in another thread on this board) seems to think that Greece will be treated with a sticking plaster and that it is Spain that is the real problem.
     
  2. midlifebear

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    Yeah, The Wall Street Journal printing a series of "ifs" from the American Enterprise Institute (in Washington). Yup, that's just were I'd go for some "real" analysis regarding world economic policy, especially since it is widely known that the "Brain Trust" currently lounging about the offices of the AEI were the primary movers and shakers behind the last Bush Administration's Economic Policy.

    I'll give Newt Gingrich, Lynne Cheney, Irving Kristol, and John Bolton's moustache some personal calls and get back to you on the medications they are all taking. I've much more faith in the stable personality of José Luis Rodrígue Zapatero whose proven leadership and education makes Gordon Brown look like just so much lint at the bottom of the pockets of some fat man's stretched out suit pants.

    Sorry. Not impressed. In fact, less than impressed.
     
  3. dong20

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    MLB, it seems to me that Jason is indulging his anti EU/Euro side a little more than usual of late. I wonder if he's simply not moved past Lisbon (yet) and that perhaps these 'impending fiscal implosion, 'woe is me', 'the sky [EU/Euro] is falling' threads are some form of cathartic wish fulfillment?

    Truth by told though, my first response was ... broken record, but then I felt that may have seemed unduly terse.:wink:
     
  4. houtx48

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    Wsj=faux news with blue blood background
     
  5. Joll

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    I dunno if I can go through it all over again. :/
     
  6. Jason

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    me neither
     
  7. midlifebear

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    Jason, because I like you I'm starting a LPSG vacation fund so we can buy you a holiday in some fun, sunny place. . . like Belgrade. I'll get back to you on my progress.
     
  8. Drifterwood

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    Let's buy it.
     
  9. swordfishME

    swordfishME Member

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    Can't we just start to fund to help bail out Club Med? :biggrin1:
     
  10. D_Tully Tunnelrat

    D_Tully Tunnelrat New Member

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    Folks you may not like what Jason says about the euro, how he says it, how often, or even whom he quotes, but the reality is that the euro is under heavy attack at present, which has nothing to do with him, but does have real repercussions even for those who live in non-euroland.

    IMHO (and I'm certainly no expert...) Spain will be the euro litmus test. Either the EU steps up, and is given/takes the authority to issues bonds/raise taxes; asks the IMF to do make the loans the EU cannot; or they continue to try to funnel (even more) money to the country, via private banks. If this does not happen, and perhaps even if it does, the euro zone, at it's presently constituted, will be in for a shakeup. The best market outcome is a devaluation of the currency.

    Hedge funds are piling on in this trade, buying Spainish CDS's by the boatload (in the hopes of default). A fund in Texas made 100% on Greek CDS' last year, expect someone to do this with Spain this year. Spanish banks already have the greatest exposure to Greek debt, so they are doubly at risk. There will some big winners in this, and unfortunately a lot of losers, most of whom will unfortunately be regular people just trying to get by in life.

    The EU really missed the boat on the construction of the euro, and in the monitoring of gov. debt loads. If the EU had lead with a political union, followed by a monetary one, this thread would not be here. OTOH they did not do this, because it was a far more difficult task, and it will be a very difficult task to accomplish in the current window of time the market is giving them. For everyone's sake, let's hope the EU can navigate these "Straits of Gibraltar" with both speed and expertise.

    (PS Jason may need, and want a club med vacay, but if you can only afford to send him to the former Yugoslavia, at least choose Duborvnik, rather then Belgrade, as the cost is not much more in euros, and it's a waaay cooler walled medieval city.)
     
  11. justasimpleguy

    justasimpleguy Active Member

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    I'm enjoying that these international bankers are now moving enough money around to crash economies in the EU. I bet alot of people in the developing world are thinking "eat your hearts out, assholes."
     
  12. midlifebear

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    I want of buy Ibiza, instead.
     
  13. BF2K

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    Spain will make it as they are "too big to fail" the Greeks on the otherhand cooked their books to get into the EU and are only a tiny part of EU GDP.
     
  14. Jason

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    Now guys, as long as you don't send me anywhere in the Eurozone!
     
  15. Sergeant_Torpedo

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    Shouting fire again! Maybe you could apply some intellect to solving this perceived "problem".
     
  16. Jason

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    Solutions? Actually quite straightforward. Logically there are two possible solutions, both of which need political leadership. The concept of muddling through is the disaster scenario - and I think there is too much sense among the bankers of Europe to allow this to happen.

    1) A full political and fiscal union within the EU with the EU as a nation state and the former nations with only local powers. This is a coherent solution, and one that many would like. However there is a timetabling problem - even the most enthusastic Europhiles feel this is a decade off, and the problem is now.

    2) A managed dismantling of a failed Euro. I think we are beyond the situation where a single country could leave the Eurozone and the system would stabilise. It needs a transitional period where the ECB manages up to 16 pegged currencies. Initially they would be convertible on a one to one basis. However subsequently they would operate on a floating peg, then free floating with powers devolved to national central banks.

    Of course there can be no prior public discussion of option (2) - it would be worked out behind closed doors and announced as a fait accompli.
     
  17. dandelion

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    More wishful thinking, i see. What we have here is an international conspiracy. The US would like to destroy any currency which challenges the rather weak dollar. A simple matter of national interest, that they would like to see the US controlled dollar become the one world currency. Banks dont care, they just want a target they can attack to make money.

    The real question is why we still allow banks to do this?

    The euro doesn't have a problem. Why do you keep claiming that it does? Because you don't like the EU so want to scare people about it by suggesting extreme solutions to unreal problems?
     
  18. Jason

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    Dandelion, the fact that the (serious) media is full of stories about the Euro demonstrates that it has a problem. We have already had a formal crisis meeting of EU finance ministers over Greece, and the ECB is basically camped out in Athens. Newspapers like FT and WSJ are giving space to articles which are very critical of the Euro.

    I don't agree that we can simply blame banks, speculators or regulators. I want my pension fund invested somewhere safe. I don't want it invested in Greek Euro-denominated bonds because the risk is higher than for German Euro-denominated bonds. Millions of investors react in the same way with the result that Greece has to pay what is in effect a risk premium for Greek bonds. While there are all sorts of issues around banks and regulation agencies this is not what is causing the present problem. The present problem has a very simple cause - a currency union without a fiscal union. It just doesn't work. The speculators will no doubt exploit this weakness. Already there are very large sums being bet against the chance of a Spanish default.

    I don't like the EU for all sorts of reasons - one of which is that it has been stupid enough to create a currency union without a prior or concurrent political union. This is the political equivalent of driving a car into a brick wall.
     
  19. eurotop40

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    As Dandelion says "The US would like to destroy any currency which challenges the rather weak dollar." And some British people are their loyal servants. FT and WSJ do not belong to the Eurozone and therefore do not like the Euro.
     
  20. D_Tully Tunnelrat

    D_Tully Tunnelrat New Member

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    Sorry to say fellas, but disliking the euro has nothing to do with wishing for world dominance of the dollar, or the pound sterling, which may see another run on it here as well (the run on the dollar occurred before the crisis, and there maybe another; and btw you don't see anyone here dissing the Swiss Franc do you?). It has to do with the flaws in the construction of the euro currency, which have already been well documented here, and far more in the press, but don't take their word for it, look at where hedge funds from asia, to paris to singapore are placing their money; it's against the euro. All currencies are flawed, as most are simply paper promises to pay; it just takes the right circumstances to demonstrate this. Right now is the first serious test of the euro, and the leadership has been weak, the prior planning insufficient. As one more example, if you look at history of Greek bonds, they have been in default 50% of the time since 1800. Why did no one in the ECB take this into account before letting them join the Union?
     
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