Just digesting the new deal from France and Germany. Two things stick out.
1. No bondholder to be left behind. France and Germany have reveresed the logic of the third Greek bailout and now have been bullied into paying every bondholder everything. This obviously increases the risk of moral hazard in the global investment game because it suggests that every bondholder, no matter what how big their mistake, will be bailed out by the average citizen. Such an approach continues the scam of each “rescue” being nothing more than professional private investors being bailed out by the little guy.
2. They also want “golden rules” put into our constitution which prevents governments from borrowing above 3% of GDP in recession. This is economic lunacy first – as anyone with a passing knowledge of Leaving Cert economics could tell you – and second, politically would require a referendum here.
Make no mistake, this is the deal which will be presented on Friday and it is less of a fiscal union and more of a fiscal straitjacket where more and more of the debt of private institutions is being passed on to taxpayers. It does nothing to improve the insolvency of debtor countries and little to improve the growth prospects of Europe.
Will come back to this later in the week.
Doesn’t this “deal” also imply that there will be NO risk difference between holding German bonds or Irish bonds because future bondholders will NOT be
burned?
I.e this is a type of Eurobond through the back door?
Stop drinking David and get ready to vote NO.
Fiscal Union is a red herring to buy time to save a large EU bank and their cohorts
The French FIRE Economy (check “itulip” for the definition of the FIRE economy) is demanding number 1. Because France is a country in economic retreat, with no real growth since 1979. When France loses money, France is banjaxed, because France has lost the ability to grow the economy out of the mess that will result. And the result will be that the French will have to ask themselves very serious questions about how they operate. In other words, France is an estabilishment in denial in most respects. Sarkozy is driving an agenda of an estabilishment which has boxed itself into… Read more »
I’m getting sick of this circus, pair of clowns is what they are, Merkozy! They make Jedward look intelligent.
I expect the next shoe to drop to be Belgium. In fact I expect Belgium to become a disaster before Spain. Spain will have a government that has a mandate. However, the new Belgian government is only formed to make sure that the borrowing can continue so as to prolong the one thing that all the elements of the Belgian state can agree upon – the need to keep the state operating, and to keep the salaries of the politicians on the roll. An exercise of superficial nonsense, before an eventual, divorce. This “deal” tells me that the French FIRE… Read more »
I agree with you David. This is awful. This is an absolutely dreadful scenario. German handling of the crisis is like watching an attempt to take a wide angle-shot using a zoom lens; the resultant antics of European politicians resemble a 17th Century French farce. It would be hilarious….except that it really, really is not Srings which are pulled include: – Bundesbank President Waidmann is against the Eurobond idea; Schaueble wanted his deputy Asmunssen to be allied to him; both studied together at University under Axel Weber, who…..is…. opposed to the idea of Eurobonds. -Same Axel Weber as advisor to… Read more »
David McWilliams says; \2put into our constitution which prevents governments from borrowing above 3% of GDP in recession. This is economic lunacy first — as anyone with a passing knowledge of Leaving Cert economics could tell you — and second, politically would require a referendum here.” Why can’t we have 0% defecits? Why should we have defecits at all? Isn’t living beyond our means part of the problem? David, you have often said “you can’t solve the problem of too much debt by adding more debt” I would have thought having a defecit contributes to this problem as it has… Read more »
I wonder if Merkozy are joking – March 2012 before France’s presidential election?
First, the financial system will not last that long.
Second, are they feeding the election in France?
Third, Obama has other plans, of the WWIII type building up right at this moment.
They could indeed be as mesmerized by each other, the Euro, and Obama, rather like a lot of observers, that they simply do not know reality anymore. They may really not realize what Obama is about to do.
They will deny that too.
Read a quote last week
We now have socialism for the rich and capitalism for everyone else.
So here’s a question: what would be the worst possible course of action for the EU leaders and Ireland to tkae in the near future. This is not me asking ‘what’s the worst possible scenario’, simply what the worst decisions you think they could make would be. The thinking being that based on the last 18 months, the worst possible action is invariably the one they have taken.
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