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The Fatal Flaws in the Eurozone and What They Mean for You

Tuesday, September 20, 2011, 8:37 AM

[Today's post marks the debut of our first new contributing editor, Charles Hugh Smith, as part of our recently-announced increased content initiative for the site. Our intent is to provide more frequent, more timely, and more in-depth analysis from both Chris and notable minds that we and our readership respect.  -- Adam]

Europe’s fiscal and debt crises have dominated the financial news for months, and with good reason. The fate of the European Union and its common currency, the euro, hang in the balance. As the world’s largest trading bloc, Europe holds sway over the global economy. If it sinks into recession or devolves, it will drag the rest of the world with it.

As investors, we are not just observers; we are participants in the global economy, and what transpires in Europe will present risks and opportunities for investors around the world.

The issue boils down to this: Is the European Union and the euro salvageable, or is it doomed for structural reasons? The flaws are now painfully apparent, but not necessarily well-understood.

The fear gripping Status Quo analysts and leaders is so strong that even discussing the euro’s demise is taboo, as if even acknowledging the possibility might spark a global loss of faith. As a result, few analysts are willing to acknowledge the fatal weaknesses built into the European Union and its single currency, the euro.

In the first part of this series, we’ll examine the structural flaws built into the euro, and in the second part, we’ll consider the investment consequences of its demise. 

Fatal Flaw #1: Expanded Private Credit, Toothless Fiscal Discipline

We can start with the flaw that has been widely acknowledged: the asymmetry between the benefits of extending credit to member states and the lack of control over those states’ Central State fiscal budgets and structural deficits.

While the European Union consolidated power over the shared currency (euro) and trade, it did not extend control over the member states’ current-account (trade) deficits or budget deficits. While lip-service was paid to fiscal responsibility via a 3% cap on deficit spending, in the real world there were no meaningful E.U.-controlled limits on private or sovereign (central government) borrowing and spending.

In effect, the importing nations within the union (Ireland, Greece, Portugal, Spain, and Italy) were awarded the solid credit ratings and expansive credit limits of their exporting cousins, Germany, The Netherlands, and France. In a real-world analogy, it’s as if a sibling prone to paying life’s expenses with credit was handed a no-limit credit card with a low interest rate, backed by a guarantee from a sober, cash-rich, credit-averse brother/sister.

Rising Risk Leads to Rising Rates

Needless to say, it was highly profitable for the big European and international banks to expand lending to these new, previously marginal borrowers. This led to over-consumption by the importing States and staggering profits for big Eurozone banks. And while the real estate and credit bubble lasted, the citizens of the bubble economies enjoyed the consumerist paradise of "borrow and spend today, and pay the debts tomorrow."

Tomorrow has arrived, but the foundation of the banks’ assets—for example, the market value of housing in Spain—has eroded to the point that both banks and homeowners are insolvent. The heightened risk of default, both by banks and the governments trying to bail them out, has caused interest rates in the debt-burdened countries to rise.

Faced with the rising costs of servicing their debt and deep cuts to government budgets, the citizenry of the profligate member states are rebelling against austerity measures. Meanwhile, taxpayers and voters in the exporting member states such as Finland and Germany are rebelling against the gargantuan costs of bailing out their weaker neighbors.

There is no way to resolve this asymmetry between credit expansion and sovereign fiscal imbalances without sacrificing national autonomy to E.U. bureaucrats, who would presumably gain authority over tax laws and collection in Greece, Italy, Spain, Portugal, and Ireland.

To expect these states to surrender their autonomy for the dubious benefits of servicing their crushing debts to big European banks is an exercise in political fantasy.  It isn’t going to happen.

Fatal Flaw #2: Profits Are Private, Losses Are Public

But beneath this one acknowledged structural imbalance lies even deeper flaws embedded in the model of Neoliberal Capitalism, the "liberalization" of trade and capital flows as a means of opening markets, and enabling free enterprise to take on tasks formerly reserved for government (the Central State) or State-sanctioned corporations.

The key feature of the Neoliberal model borrowed from Classical Capitalism is that the risks of enterprise and the investing of capital are (supposedly) transferred from the Central State to the newly liberalized private sector. But this turns out to be a charade played out for public-relations/perception management purposes. When the expansion of credit and financialization ends (as it must) in the tears of asset bubbles popping and massive losses, then the Central State absorbs the losses, which were supposedly private.

My definition of Neoliberal Capitalism differs significantly from the conventional view. Markets are opened specifically to benefit the Central State and global corporations, and risk is masked by financialization and then ultimately passed onto the taxpayers. In this view, the essence of Neoliberal Capitalism is that profits are privatized but losses are socialized; i.e., passed on to the taxpayers via bailouts, sweetheart loans, State guarantees, the monetization of private losses as newly issued public debt, etc.

The Neoliberal model is superficially a win-win for both global corporations and Central States, as the Central State benefits from the explosion of tax revenues created by financialization and the expansion of credit, and also from the schwag showered on political apparatchiks by the global corporations.

From a Neoliberal perspective, the union consolidated power in a Central State proxy (the E.U.) and provided large State-approved cartels and quasi-monopolies access to new markets—the previously marginalized importing states.

From the point of view of the citizenry, it offered the benefit of breaking down barriers to employment in other Eurozone nations. On the face of it, this was a “win-win” structure for everyone, with the only downside being a sentimental loss of national currencies.

Thus the expansion of the united European economy via the classical Capitalist advantages of freely flowing capital and labor were piggy-backed on the expansion of credit and financialization enabled by the Neoliberal model of the union.

The alliance of the Central State and its intrinsic desire to manage the economy to benefit its fiefdoms and classical free-market Capitalism has always been uneasy. On the surface, the E.U. squared the circle, enabling stability, private-bank credit creation and easier access to new markets for all.

But the fatal flaw in the Neoliberal model has now been revealed. Once the unlimited credit issued by financialization poisons the sovereign states’ balance sheets and cash flows, then there is no mechanism to bail out all the players: the “too big to fail” European banks, the sovereign debtor states, and private-sector borrowers. All three are now hopelessly insolvent, and the conventional fixes of renegotiating the terms and extending additional credit are simply papering over this stark reality.

Fatal Flaw #3: Low Interest Credit Spurred Misallocation of Capital

The financialization unleashed by the E.U. had other poisonous consequences.

Credit at very low rates of interest is treated as “free money,” for that’s what it is, in essence. Recipients of free money quickly become dependent on that flow of credit to pay their expenses, which magically rise in tandem with the access to free money. When access to free money is suddenly withdrawn as the borrower’s ability to service the debt comes into question, the debtor experiences the same painful withdrawal symptoms as a drug addict who goes cold turkey.

Other pernicious effects follow. Free money soon flows to malinvestments whose risks and marginal nature are masked by the asset bubble that inevitably results from massive quantities of free money seeking a speculative return. This systemic misallocation of capital is exemplified by the empty McMansions littering the countryside in Ireland and Spain.

The Neocolonial Model of Financial Exploitation

The E.U.’s implicit guarantee to make good any losses at the State-sanctioned large banks—the Eurozone’s “too big to fail” banks—enabled a financial exploitation that is best understood in a neocolonial model. In effect, the big Eurozone banks “colonized” member states such as Ireland, following a blueprint similar to the one which has long been deployed in developing countries.

This is a colonialism based on the financialization of the smaller economies to the benefit of the big banks and the member state governments, which realize huge increases in tax revenues as credit-based assets bubbles expand.

As with the Neoliberal Colonial Model (NCM) as practiced in the developing world, credit-poor economies are suddenly offered unlimited credit at very low interest rates. It is “an offer that’s too good to refuse,” and the resultant explosion of private credit feeds what appears to be a “virtuous cycle” of rampant consumption and rapidly rising assets such as equities, land, and housing.

Essential to the appeal of this colonialist model is the broad-based access to credit. Everyone and his sister can suddenly afford to speculate in housing, stocks, commodities, etc., and to live a consumption-based lifestyle that was once the exclusive preserve of the upper class and State Elites (in developing nations, often the same group of people).

In the 19th century colonialist model, the immensely profitable consumables being marketed by global cartels were sugar (rum), tea, coffee, and tobacco—all highly addictive, and all complementary: tea goes with sugar, and so on. (For more, please refer to Sidney Mintz’s book, Sweetness and Power)

In the Neoliberal Colonial Model, the addictive substance is credit and the speculative consumerist fever it fosters.

In the E.U., the opportunities to exploit captive markets were even better than those found abroad, for the simple reason that the E.U. itself stood ready to guarantee there would be no messy expropriations of capital by local authorities who decided to throw off the yokes of European capital colonization.

The “too big to fail” Eurozone banks were offered a double bonanza by this implicit guarantee by the E.U. to make everything right. Not only could they leverage to the hilt to fund housing and equities bubbles, but they could loan virtually unlimited sums to the weaker sovereign states or their proxies. This led to over-consumption by the importing States and staggering profits for the TBTF Eurozone banks.

Now the losses resulting from these excesses of rampant exploitation and colonization by the forces of financialization are being unmasked, and a blizzard of simulacrum reforms have been implemented, none of which address the underlying causes of this exploitive financialization.

The European Central Bank (ECB) and the E.U. political leadership are trying to stabilize an intrinsically unstable private-capital/State arrangement—profits are private but losses are public—by shoving the costs of the bad debt and rising interest rates onto the backs of taxpayers. The profits from this Neoliberal exploitation were private, but the costs are being borne by the taxpaying public.

In the insolvent states, taxpayers are seeing services cut while taxes/fees rise, while those in the mercantilist (exporting) economies are being saddled with higher taxes to fund the bank bailouts.

The useful fiction (useful to the banks and their apologists in office) is that it is the insolvent nations that are being bailed out, but in reality it is the big banks that loaned vast sums to these nations which are being bailed out.

In effect, the residents of the E.U. are being forced to bail out private banks. At some point, the citizens of one or another sovereign state will refuse, and the Union will break along the lines of those states committed to saving the banks and those that are willing to throw the banks under the bus as an act of self-preservation.

Fatal Flaw #4: The Imbalance between Exporting and Importing Nations

Another intrinsic source of instability is the imbalance between export powerhouse Germany, which generates huge trade surpluses, and its trading partners in the EU that run large trade and budget deficits— Portugal, Italy, Ireland, Greece, and Spain.

Those outside of Europe may be surprised to learn that Germany's exports are roughly equal to that of China ($1.2 trillion) even though Germany's population of 82 million is a mere 6% of China's 1.3 billion. (Germany and China are the world's top exporter nations, while the U.S. trails as a distant third.)

Germany's emphasis on exports places it in the so-called mercantilist camp, which depends on exports for their growth and profits. Since the inception of the euro, Germany's exports rose an astonishing 65% from 2000 to 2008 while its domestic demand was near zero. Without strong export growth, Germany's economy would have been at a standstill. The Netherlands, which reaped a $33 billion trade surplus from a population of only 16 million residents, is another example of a Eurozone country which runs substantial trade surpluses.

The "consumer" countries, on the other hand, run large current account (trade) deficits and large government deficits. Italy, for instance, has a $55 billion trade deficit and a budget deficit of about $110 billion. Total public debt is a whopping 115.2% of GDP.

Spain, with about half the population of Germany, has a $69 billion annual trade deficit and a staggering $151 billion budget deficit; fully 23% of the government's budget is borrowed.

Though German wages are generous, the German government, industry and labor unions kept a lid on production costs even as exports leaped. As a result, the cost of labor per unit of output—the wages required to produce a widget—rose a mere 5.8% in Germany in the 2000-2009 period, while equivalent costs in Ireland, Greece, Spain, and Italy rose by roughly 30%.

The consequences of these asymmetries in productivity, debt, and deficit spending within the Eurozone are subtle. In effect, the euro gave mercantilist, efficient Germany a structural competitive advantage by locking the importing nations into a currency, making German goods cheaper than domestically produced goods.

Put another way, by holding down production costs and becoming more efficient than their Eurozone neighbors, Germany engineered a de facto devaluation of its own products within the Eurozone at the expense of its importing neighbors.

Fatal Flaw #5: The Euro Removed the Mechanism of Currency Devaluation

The euro had another deceptively pernicious consequence. The overall strength of the currency enabled debtor nations to rapidly expand their borrowing at low rates of interest. In effect, the euro masked the internal weaknesses of debtor nations running unsustainable deficits and those whose economies had become precariously dependent on the bubble in housing (Ireland and Spain) for growth and taxes.

Prior to the advent of the euro, when overconsumption and over-borrowing began hindering an importing, "consumer" economy, the imbalance was corrected by an adjustment in the value of each nation's currency. This currency devaluation would restore the supply-demand and credit/debt balances between mercantilist and consumer nations.

For instance, the Greek drachma would fall in value versus the German mark, effectively raising the cost of German goods to Greeks, who would then buy less German products. The trade deficit would shrink, and lenders would demand higher rates for Greek government bonds, effectively pressuring the government to reduce its borrowing and deficit spending.

But now, with all 16 nations locked into a single currency, devaluing currencies to enable a new equilibrium is impossible. As a result, Germany is faced with the unenviable task of bailing out its "customer nations.” Meanwhile, the residents of Greece, Italy, Spain, Portugal, and Ireland are faced with the unenviable task of cutting government benefits to realign their budgets with the productivity of their underlying national economies.

Germany helped enable the over-borrowing of its profligate neighbors by buying their government bonds; according to BusinessWeek, German banks are on the hook for almost $250 billion in the troubled Eurozone nations' bonds.

This has pushed Germany into a double-bind. If Germany lets its weaker neighbors default on their sovereign debt, German banks will fail, but if Germany becomes the "lender of last resort," then the German taxpayers end up footing the bailout bill.

If public and private debt in the troubled nations keeps rising at current rates, it's possible that even mighty Germany may be unable (or unwilling) to fund an essentially endless bailout. That would create pressure within both Germany and the debtor nations to jettison the single currency as a good idea (in theory), but an ultimately unworkable one in a 16-nation bloc as diverse as the Eurozone.

Fatal Flaw #6: Crushing Private and Public Debts

Banks around the world have a major challenge in the next few years: trillions of dollars in debt must be "rolled over" or refinanced. Globally, banks owe about $5 trillion to bondholders and other creditors that will come due by 2012, according to the Bank for International Settlements (BIS).

But European lenders have a substantial share of that burden: About half of the liabilities—some $2.6 trillion--are in Europe.

The BIS has several fundamental concerns about this stupendous Eurozone debt load. One is that banks desperate for refinancing will compete with governments such as those in Greece and Spain, which must also roll over gigantic sums in the global bond market. Competition for bondholders' favors will result in higher credit costs for business and consumers, with predictable consequences: Higher borrowing costs lead to reduced economic activity.

The BIS's second great concern is the gargantuan sums that have been promised to citizens in Eurozone social welfare programs. As Europe's working-age population shrinks and the number of its retirees rises, the ability of governments to pay the benefits and service the huge debts that have been accumulated is in question.

The choices facing governments with rising social welfare costs and debt costs are bleak. Either cut benefits or raise taxes on a dwindling base of workers--or both.

The bottom line: The flaws in the structure of the European Union and euro cannot be resolved by face-saving compromises and additional bailouts. 

Since the devolution of the Eurozone and the euro is baked in, as investors we need to think through the consequences of a probably messy restructuring of the EU and the euro. In Part II of this report: Positioning Yourself for the Devolution of the Euro, we delve into the most probable series of outcomes for the euro and how investors can position themselves to protect and likely increase the purchasing power of their capital vs. this troubled currency.

Click here to access Part II of this report (free executive summary, enrollment required for full access). 

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33 Comments

augermeister's picture
augermeister
Status: Member (Offline)
Joined: May 16 2009
Posts: 2
Possibly Correct - But More Facts, Less Posturing Please

Hello Chris & Co.,

I enjoy and often agree with what you present. But this article is too loose, and depends too much on expecting that your reader already agrees with your political blanket charaterizations. I haven't got the time to list them all, but there are many, many instances where you ask us to believe something, with no subsantiating, or in some cases wrong facts [allow me to mention just one - re: "Germany and China are the world's top exporter nations, while the U.S. trails as a distant third" - according to Wikipedia the USA is 1% lower than Germany in exports in 2010. 1% is not distant.].

Not that I disagree with a lot of the leanings of your conclusions, just that you don't deliver what is required, a la Roubini, for example, by way of substantiation. You would do yourself well, and would enable your readership to grow into a more rounded understanding of your position, if you would avoid relying on triggering Pavlovian responses to the usual suspects, and deliver more true analysis. Less quantity, more quality. Cut the gratuitous indictments, supply more numbers and connect up the dots.

I started to pick out some examples, but I will refrain as these can easily be seen individually as not proving my point, or [to be honest] would just take to much work to dig up the right stats! But I hope that you will take my point and, starting where you are already, with your [to my mind often valid] point of view that I want to hear more about, discipline your comments to stick with quoted facts and refrain from politically divisive labels. 

OK, I lied, let me point out one example. RE: "In effect, the big Eurozone banks “colonized” member states such as Ireland ..." Steer clear of quoting socio-political, unproven, but popular in some quarters, labels like "The Neocolonial Model of Financial Exploitation". Nobody forced the Irish banks to borrow all that money - they were greedy, unregulated and stupid. As were the Icelandic banks, who at one time had 15X GDP on their books. This certainly did no good to these countries, nor their creditors - right? Why invent fancy terminology when "stupid" does just fine? Good colonialists are supposed to soak the poor, sucker, primitive natives for extended periods and get rich back home. That didn't happen.

Thanks

B

Woodman's picture
Woodman
Status: Diamond Member (Offline)
Joined: Sep 26 2008
Posts: 1025
  The US is very close to

The US is very close to Germany in total exports per this reference:

https://www.cia.gov/library/publications/the-world-factbook/rankorder/2078rank.html

But this export data on a per capita basis from Wikipedia indicates the US ranks only 45th compared to Germany at 15th 

http://en.wikipedia.org/wiki/List_of_countries_by_exports_per_capita

Tom

kom's picture
kom
Status: Member (Offline)
Joined: Sep 22 2011
Posts: 10
The fatal flaws in your political article

Dear Sir,

I would like to say this plain and simple thing: your article its about ideology not economic facts. Your artiicle has some fatal flaws and I wonder where did you get your facts. 

Fact one: Ireland has a large trade... Surplus. Your article its so bad that you write about the surplus of Holland with 16 millions of people and you didnt check the trade balance of Ireland who is almost the same as of Holland with 1/4 of people of this cowntry. Are you really trying to convince your readers that you wrote an economic article insted one political article atacking Europe?

Fact two: Spain hasnt a budget deficit of 151 billions of dollars but 98 billions of euros. I let you calculate to american dollars. The other fact is this: before this financial crisis Spain had fiscal surplus. The fiscal deficit hasnt nothing to do with the euro currency but global economic turmoil started in... USA. Check the facts.

Fact three: Germany imports rose 50% from 2000 until 2008 and not that rubish: " while its domestic demand was near zero. " This is a fatal error from you. You adjust the facts to your ideology and political agenda.

Fact four: Euroland has 17 cowntries not only 16. Check the facts and dont write about what you ignore.

The others facts we do not need to think about them. Its mambo jambo. 

In your article you can do the same general conclusions of European Union to others cowntries like USA except in devaluation currency. You are right. Euroland cowntries are locked between each other and cant export theirs crisis to theirs neighbours. Its one of the best things of Europe. You cant export your crisis using currency tricks. Its a good thing not a bad one. Its the Peace we aim not economic wars.

Sources to you check:

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-16092011-AP/EN/6-16092011-AP-EN.PDF

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-26042011-AP/EN/2-26042011-AP-EN.PDF

http://www.german-business-portal.info/GBP/Navigation/en/Business-Location/foreign-trade-statistics.html

Next time make your homework if you want to write an economic article. In Europe we make allways the homework before writing economic articles. Our economics school system is more advcanced than in USA. Maybe you should come to Europe to have some economics education in one of our good universities.

Best regards.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
Status: Martenson Brigade Member (Offline)
Joined: Jan 4 2009
Posts: 2485
Ummmm, okay.....

kom wrote:

Dear Sir,

I would like to say this plain and simple thing: your article its about ideology not economic facts. Your artiicle has some fatal flaws and I wonder where did you get your facts. 

Fact one: Ireland has a large trade... Surplus. Your article its so bad that you write about the surplus of Holland with 16 millions of people and you didnt check the trade balance of Ireland who is almost the same as of Holland with 1/4 of people of this cowntry. Are you really trying to convince your readers that you wrote an economic article insted one political article atacking Europe?

Fact two: Spain hasnt a budget deficit of 151 billions of dollars but 98 billions of euros. I let you calculate to american dollars. The other fact is this: before this financial crisis Spain had fiscal surplus. The fiscal deficit hasnt nothing to do with the euro currency but global economic turmoil started in... USA. Check the facts.

Fact three: Germany imports rose 50% from 2000 until 2008 and not that rubish: " while its domestic demand was near zero. " This is a fatal error from you. You adjust the facts to your ideology and political agenda.

Fact four: Euroland has 17 cowntries not only 16. Check the facts and dont write about what you ignore.

The others facts we do not need to think about them. Its mambo jambo. 

In your article you can do the same general conclusions of European Union to others cowntries like USA except in devaluation currency. You are right. Euroland cowntries are locked between each other and cant export theirs crisis to theirs neighbours. Its one of the best things of Europe. You cant export your crisis using currency tricks. Its a good thing not a bad one. Its the Peace we aim not economic wars.

Sources to you check:

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/6-16092011-AP/EN/6-16092011-AP-EN.PDF

http://epp.eurostat.ec.europa.eu/cache/ITY_PUBLIC/2-26042011-AP/EN/2-26042011-AP-EN.PDF

http://www.german-business-portal.info/GBP/Navigation/en/Business-Location/foreign-trade-statistics.html

Next time make your homework if you want to write an economic article. In Europe we make allways the homework before writing economic articles. Our economics school system is more advcanced than in USA. Maybe you should come to Europe to have some economics education in one of our good universities.

Best regards.

Dear kom -

Welcome to the site.

Have you watched Crash Course yet?  It does not discriminate by nationality.

Fire and forget doesn't work too well around here.  This may be a colloquialism but I am certain there is somone in one of your good universities who can explain the metaphor.

Take some deep breaths and attempt to observe the forest through the trees.

Welcome again.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1501
So what?

Kom,

Even if every factual claim you are making is true, it does not change one iota the bigger picture painted by the article.  You are picking on insignificant details, which even if true, change nothing.

The Euro in its present form is doomed, no doubt about it.  Even European private bankers agree with that assessment.  The only people still clinging to the delusional hope that there is anyway of saving the Euro are ECB and EU politicians in Brussels trying to salvage overexposed banks by playing more Ponzi games. 

They learned very well from the fraudulent bankers in the US Fed, but not well enough.  The Euro is doomed precisely because they do not have the liberty the US Fed has in debasing the currency.  Therefore, countries that cannot be bailed out, won't be.  Either that, or countries that do not want to participate in bailouts, won't.  That means that either the PIIGS and probably others, leave the Euro, or Germany and a few others leave.  Either way, the Euro in its present form is done, over, finiti, arrivederci.  Either way, you should be happy.  This is a much better way through the mess than what the US appears to be choosing.

As far as Europe "not exporting its problems to others in the name of peace", or however you put it, yes, that would be grand, but that's not how the world works.  The Euro has now sewn the fates of vastly different peoples and cultures together in what will only end very badly.  Instead of preventing war, the Euro may very well be sewing it.  Of course that's just my opinion, but water and vinegar just don't mix well.

They should have stopped at open borders and free trade.  There is no need for, and never has been a need for, a common currency.  Such a thing is ludicrous without a common fiscal and taxing authority, and that is just never going to happen accross a land of so many different deeply-rooted cultures, languages, customs, politics, and even demographics.  Free and open trade with independent currencies, in fact, would be much more stable and would allow each country and its currency to be rewarded according to its own success or failure.  Putting every country into the same bucket and making successful countries pay for the irresponsibility of others, i.e., socialism on a country-basis,  just doesn't work anymore than socialism works on a nation-state-level. 

FB

kom's picture
kom
Status: Member (Offline)
Joined: Sep 22 2011
Posts: 10
 My dear FB, Let me use

My dear FB,

Let me use yours words:

As far as Europe "not exporting its problems to others in the name of peace", or however you put it, yes, that would be grand, but that's not how the world works. 

If all that picture that you believe is true, I can say to you the same words: Its the way the world works. Am I Right? Ponzi scams, saving banks, socialize losses and privatize gains and other populists ideas.

What you should not to tell is that we must believe in theories with flawed facts. Facts lead us to some theories not the other way round. Sorry for you and the author. What the author should do is to check the facts and show me that I am wrong about my criticism. My facts and sources are available to you check the facts. If the facts dont fit your lovely theory, sorry mate. Its the way world works.

But as some allways say: bet your money and we will see it.

Best regards.

PS Maybe some have others opinions. Like this: http://m.leap2020.eu/GEAB-N-57-is-available-Global-systemic-crisis-Fourth-quarter-2011-Implosive-fusion-of-global-financial-assets_a7640.html

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1501
Nothing's Changed

Kom,

Whatever the point of your last post is, which escapes me, does not change the fact that none of the facts you challenged the author of the piece on would change any part of the article's conclusions.  And that, my friend, was my entire point. 

I absolutely agree with your point about facts and theories in general but you have not explained how your facts would change the author's theories/conclusions. 

I am probably wasting my time though, as it appears you are more interested in venting pent up frustrations rather than having a meaningful dialogue. 

Cheery-o, matey!

kom's picture
kom
Status: Member (Offline)
Joined: Sep 22 2011
Posts: 10
 Dear FB, Everything

Dear FB,

Everything changes when the facts are very wrong. I am really sorry about that. Did you read the GEAB page? Read again, please. Maybe you will understand better the point. I am not affiliated with that company but they make very good points.

Or maybe instead you atack my criticism, check careful the facts.

To put an end in your discussion, I will tell you this: some study the facts others create facts and theories.

Best regards.

PS More facts to show how flawed is that analysis:

The Irish economy, measured by GDP, grew by 1.6% in the second quarter of the year, according to the Quarterly National Accounts published this morning.

Using GNP, which strips out foreign multinationals, the economy grew by 1.1%.

The figures indicate a stabilisation of domestic demand as well as continuing export growth in the period April to June.

On a seasonally adjusted basis, consumer spending increased by 0.3% compared with the first three months of this year, while investment rose by 6.4%. Government spending dropped by 0.8%.

http://www.rte.ie/news/2011/0922/economy.html

Lisbon: Portugal's gross domestic product was flat in the second quarter as surging exports managed to offset a slump in domestic demand as austerity bites, data from the National Statistics Institute (INE) showed Thursday.

The second reading of Portugal's GDP for April-June confirmed that output was flat from the previous quarter after two straight quarters of declines that marked the beginning of a recession in the debt-laden country, Western Europe's poorest.

But year-on-year, GDP fell 0.9 per cent, dragged down by a sharp fall in internal demand as the Portuguese face higher taxes and tough spending cuts as the country grapples with the Eurozone debt crisis.

In the first quarter, GDP shrank by a revised 0.5 per cent year-on-year, INE said. The earlier estimate was for a 0.6 per cent contraction.

http://gulfnews.com/business/economy/portugal-s-gdp-flat-as-exports-rise-demand-falls-1.863409

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1501
Drivel

I got about 1/2 through the piece before concluding it's useless drivel.  For someone who cares about facts, you are reading real garbage. 

It does make a few points I agree with, namely that the US is screwed, but nobody is arguing that, at least not here anyway.

The fact is that the EU cannot manage to continue the charade of pretending that debts in peripheral countries don't matter, or pretending that the fact that a  majority of German citizens are disgusted by any more talk of bailing anyone out doesn't have any real political consequences.

Anyway, it's always good to see new people on this site, but I can see this conversation is getting nowhere.  Good luck and best regards,

FB

kom's picture
kom
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 Dear FB, Well, as I

Dear FB,

Well, as I said, I am not afilliated with that company. In fact, I do my own analysis, do you see? And in my opinion, their analysis is better than that one that the author, Martensen, is trying to sell. Well, each company is selling something. I rather like to do my own analysis than paying for, what you said? Garbage?

I stick with my own facts and I will say it again: this analisys is flawed and the facts dont fit the theory. Garbage or not, I rather like to be polite or suggest some economics schools in Europe to the author. Isnt better than the typical arrogance from american school of pretend and teach?

Kind regards

PS Maybe the last two facts/news deny the theory that PIIGS cant export or grow inside the euroland. That is terrible for who create facts and theories and dont study careful the real facts. Its how the world works, right? Its sad but looks so, in some parts of the world. But not here in Europe.

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The Perils of Group-think

Dogs and FB,

I would be a little careful about attacking Kom's comments. Factual rebuttals would be more convincing than aspersions cast about motives.

GEAB doesn't get everything right but it is a serious publication that CM subscribers should be reading as an antidote to the anglo media that is all too easy for us to consume without troubling ourselves too much about alternative narratives.

debu

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Point taken....

debu wrote:

Dogs and FB,

I would be a little careful about attacking Kom's comments. Factual rebuttals would be more convincing than aspersions cast about motives.

GEAB doesn't get everything right but it is a serious publication that CM subscribers should be reading as an antidote to the anglo media that is all too easy for us to consume without troubling ourselves too much about alternative narratives.

debu

debu -

I hear you, but arguing in the margins really doesn't change the validity of the bottom line statement of the OP....

The bottom line: The flaws in the structure of the European Union and euro cannot be resolved by face-saving compromises and additional bailouts. 

The welcome to the site was sincere, as was the question as to whether or not kom has watched Crash Course.

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  debu wrote: Dogs and

debu wrote:

Dogs and FB,

I would be a little careful about attacking Kom's comments. Factual rebuttals would be more convincing than aspersions cast about motives.

GEAB doesn't get everything right but it is a serious publication that CM subscribers should be reading as an antidote to the anglo media that is all too easy for us to consume without troubling ourselves too much about alternative narratives.

debu

My sense of the exchange was that Kom should try to be a little less snarky in his tone. Factual rebuttals would be more convincing without the chronic personal jabs at Dr. M. It was at these snide comments that Dogs' so-called attacks were directed, appropriately so IMHO. He should have been taken to the woodshed.

This blog fosters civil discourse (which allows for civil disagreement) and as a result is a joy to visit, again IMHO. The snippines exhibited by Kom, well, not so pleasant.

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Since you asked.....

debu -

After a fourth go around, I'm inclined to believe that the language barrier may be the major contributor to the apparent disconnect.

kom wrote:

Fact one: Ireland has a large trade... Surplus. Your article its so bad that you write about the surplus of Holland with 16 millions of people and you didnt check the trade balance of Ireland who is almost the same as of Holland with 1/4 of people of this cowntry. Are you really trying to convince your readers that you wrote an economic article insted one political article atacking Europe?

From the OP:  The Netherlands, which reaped a $33 billion trade surplus from a population of only 16 million residents, is another example of a Eurozone country which runs substantial trade surpluses.

Key words being "is another example".  I don't think this was intended to be an inclusive list of every country's export/import balance.  rather, it was intended to be illustrative of the fact that there is an imbalance between countries in the EU and that even the countries with a favorable trade balance are almost entirely dependent upon exports for economic growth.  I read this as commentary on the fragility of such a dependency.

Does there even have to be a discussion about Chris writing an article to "attack Europe"?

kom wrote:

Fact two: Spain hasnt a budget deficit of 151 billions of dollars but 98 billions of euros. I let you calculate to american dollars. The other fact is this: before this financial crisis Spain had fiscal surplus. The fiscal deficit hasnt nothing to do with the euro currency but global economic turmoil started in... USA. Check the facts.

Okay, I did the math using today's conversion values.  98 billion euros converts to "only" 132 billion dollars.  If I was a Spaniard I would feel so much better.  That's like arguing the severity of perforating the right femoral vein or the left.  Whether or not Spain had a surplus is a point moot to the article.  The Spanish deficit is real and it exists....along with all of the concurrent problems as its impact weaves in and out of the EU.  What is the point of "Yeah, but he started it"?

kom wrote:

Fact three: Germany imports rose 50% from 2000 until 2008 and not that rubish: " while its domestic demand was near zero. " This is a fatal error from you. You adjust the facts to your ideology and political agenda.

From the OP:  Germany's exports rose an astonishing 65% from 2000 to 2008 while its domestic demand was near zero.

Again, I think the language barrier comes into play here.  I read this as domestic demand for goods produced within Germany, not imports.  This again underscores Germany's reliance on exports for their economic growth.  So now kom argues that Germany's imports ROSE 50% from 2000 to 2008?!?!?  Ummm, maybe it's just me, but doesn't that spill a lot of wind from the sails of exports rising 65% in the same period. 

What I'm hearing in that debate is this:  (I took some literary license)

CM:  "Germany doesn't have a lot of domestic demand so they are almost entirely dependent on exports for economic growth, and that is a pretty fragile situation."

kom:  "Yeah, but you didn't say anything about Germany's imports.  They rose almost as much as their exports.  Chris, you did not mention a fact that underscores your point even more.  Because of Germany's imports, their situation is even more fragile."

kom wrote:

Fact four: Euroland has 17 cowntries not only 16. Check the facts and dont write about what you ignore.

16 or 17?  Other than a "5.2 for artistic impression from the East German judge", does it matter to the overall point the OP was trying to illustrate?

kom wrote:

The others facts we do not need to think about them. Its mambo jambo. 

What other facts?  The crushing private and public debt and the legitimacy of the BIS concern for the accompanying debt load?  Or was it the fact that the creation of the euro fostered an environment making currency devaluation next to impossible compared to times prior to the euro when a country's imbalances were self-levelling via currency valuation measures - specific to each country and its relationship to another?  Combine just these two facts and the situation is pretty dire at best.

'Mambo jambo'???  I don't think so.

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its an

international laguage thing. This is what was meant to be said: Jumbo Mambo 

robie, a little levity

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 Dear Dogs, I will show

Dear Dogs,

I will show you how bad is the flawed analysis in your same sentence:

Again, I think the language barrier comes into play here.  I read this as domestic demand for goods produced within Germany, not imports.  This again underscores Germany's reliance on exports for their economic growth.  So now kom argues that Germany's imports ROSE 50% from 2000 to 2008?!?!?  Ummm, maybe it's just me, but doesn't that spill a lot of wind from the sails of exports rising 65% in the same period. 

This is not barrier language it is rubish. if you are discussing international trade you use imports and exports. Not internal demand. Is this economics analysis? No, its political agenda. Rubish. If the author wants to use german internal demand he should use the apropriate economic indicators not discussing the balance of trade. This isnt economics. This is rubish and using tricks in economic indicators to fool his readers.

I wonder if the author uses that kind analysis discussing the probems between states inside USA. How much is the internal demand in Minnesota and in California? How much is the balance of trade between California and Minnesota? How can California devaluate his dollar to the dollar of Minnesota? Or between the others states in USA? I never read this kind economic analysis concerning different levels of trade and internal demand in USA. Why? And why using that for the EU?

If the author wants to discuss inbalances inside the Eurozone, why he doesnt study the trade between eurozone members? Why using global balance of trade of each cowntry as if the surplus of Germany is achieved jeoparzing the PIIGS surplus? No, the author didndt study the inbalances between euromembers but uses bad economic indicators to try foool his readers.

But I will stick with my own opinions. When this kind of analysis uses neoliberal and others political words like colonialism and so on, I say this isnt economic analysis. Its political analysis. Unless the tone of the analysis changes and starts studying the european economies and dont use political stereotypes.

Best ragards.

PS The growth in Ireland rose and was better than Germany in second quarter. Any explanation of the author to this astonishing fact? This fact denies all his theories. And the more surprising fact that other PIIGS, Portugal, stopped the fall in his GDP because... Exports!!!!!!! Can the the author explain that fact who denies his theories? How his theories can explain this strange fact. Exports off-setted the fall in Portugals internal demand fall?

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Mr. Chairman.....

kom wrote:

Dear Dogs,

I will show you how bad is the flawed analysis in your same sentence:

Again, I think the language barrier comes into play here.  I read this as domestic demand for goods produced within Germany, not imports.  This again underscores Germany's reliance on exports for their economic growth.  So now kom argues that Germany's imports ROSE 50% from 2000 to 2008?!?!?  Ummm, maybe it's just me, but doesn't that spill a lot of wind from the sails of exports rising 65% in the same period. 

This is not barrier language it is rubish. if you are discussing international trade you use imports and exports. Not internal demand. Is this economics analysis? No, its political agenda. Rubish. If the author wants to use german internal demand he should use the apropriate economic indicators not discussing the balance of trade. This isnt economics. This is rubish and using tricks in economic indicators to fool his readers.

I wonder if the author uses that kind analysis discussing the probems between states inside USA. How much is the internal demand in Minnesota and in California? How much is the balance of trade between California and Minnesota? How can California devaluate his dollar to the dollar of Minnesota? Or between the others states in USA? I never read this kind economic analysis concerning different levels of trade and internal demand in USA. Why? And why using that for the EU?

If the author wants to discuss inbalances inside the Eurozone, why he doesnt study the trade between eurozone members? Why using global balance of trade of each cowntry as if the surplus of Germany is achieved jeoparzing the PIIGS surplus? No, the author didndt study the inbalances between euromembers but uses bad economic indicators to try foool his readers.

But I will stick with my own opinions. When this kind of analysis uses neoliberal and others political words like colonialism and so on, I say this isnt economic analysis. Its political analysis. Unless the tone of the analysis changes and starts studying the european economies and dont use political stereotypes.

Best ragards.

PS The growth in Ireland rose and was better than Germany in second quarter. Any explanation of the author to this astonishing fact? This fact denies all his theories. And the more surprising fact that other PIIGS, Portugal, stopped the fall in his GDP because... Exports!!!!!!! Can the the author explain that fact who denies his theories? How his theories can explain this strange fact. Exports off-setted the fall in Portugals internal demand fall?

I yield the remainder of my time to the gentleman or lady from their respective region of CM.com who enjoys beating their head against a wall.

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Dogs_In_A_Pile wrote: I

Dogs_In_A_Pile wrote:

I yield the remainder of my time to the gentleman or lady from their respective region of CM.com who enjoys beating their head against a wall.

Good choice, dogs.  ... dons

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Good analysis

Augermeister and Kom (posts 1 & 3) both made valid points. But I am still impressed with CHS’s high level analysis and the logic of his conclusions. He certainly helped my understanding of the issues, and I found nothing to disagree with based on my understanding of the situation. I think it is excellent work.

Travlin

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Travlin

Travlin wrote:

Augermeister and Kom (posts 1 & 3) both made valid points. But I am still impressed with CHS’s high level analysis and the logic of his conclusions. 

Concur.  At the funeral, it can be debated whether or not that flower arrangement on the coffin is made up of fuchsia or purple flowers -- but the fact remains that there's still a dead body inside.  

Viva -- Sager

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kom
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 Dear Sager,   I dont want

Dear Sager,

I dont want to be unpolite, but the funeral of who?

At the funeral, it can be debated whether or not that flower arrangement on the coffin is made up of fuchsia or purple flowers -- but the fact remains that there's still a dead body inside

My funeral? Yours? Dexter Morgan? I would like to tell you that it was GS who sent mr. Geithner to Europe to try saving his own bets. Do you realise who will die if some bets will loose all his shirt if Europe doesnt do what some financial players want? If you dont understand what am I talking me about, read GEAB and maybe you understand where the family is very worried with the terminal patient.

My condolences.

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Why don't we substitute Germany with US and PIIGS with China...

...Germany is faced with the unenviable task of bailing out its "customer nations.” Meanwhile, the residents of Greece, Italy, Spain, Portugal, and Ireland are faced with the unenviable task of cutting government benefits to realign their budgets with the productivity of their underlying national economies.

CHINA is faced with the unenviable task of bailing out its "customer nations." Meanwhile, the residents of US are faced with the unenviable task of cutting government benefits (& printing paper $?) to realign their budgets with the productivity of it's underlying national economy...

Seems like all of us are stuck between a rock and a hard place.

-therockpit

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Kom

It is my opinion that sooner or later most of the world's economies are going to end up in that coffin. The color of the flowers on top is -- again, in my opinion -- not important. Viva -- Sager

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kom wrote:  Dear Dogs,   I

kom wrote:

Dear Dogs,

I will show you how bad is the flawed analysis in your same sentence:

Again, I think the language barrier comes into play here.  I read this as domestic demand for goods produced within Germany, not imports.  This again underscores Germany's reliance on exports for their economic growth.  So now kom argues that Germany's imports ROSE 50% from 2000 to 2008?!?!?  Ummm, maybe it's just me, but doesn't that spill a lot of wind from the sails of exports rising 65% in the same period. 

This is not barrier language it is rubish. if you are discussing international trade you use imports and exports. Not internal demand. Is this economics analysis? No, its political agenda. Rubish. If the author wants to use german internal demand he should use the apropriate economic indicators not discussing the balance of trade. This isnt economics. This is rubish and using tricks in economic indicators to fool his readers.

I wonder if the author uses that kind analysis discussing the probems between states inside USA. How much is the internal demand in Minnesota and in California? How much is the balance of trade between California and Minnesota? How can California devaluate his dollar to the dollar of Minnesota? Or between the others states in USA? I never read this kind economic analysis concerning different levels of trade and internal demand in USA. Why? And why using that for the EU?

If the author wants to discuss inbalances inside the Eurozone, why he doesnt study the trade between eurozone members? Why using global balance of trade of each cowntry as if the surplus of Germany is achieved jeoparzing the PIIGS surplus? No, the author didndt study the inbalances between euromembers but uses bad economic indicators to try foool his readers.

But I will stick with my own opinions. When this kind of analysis uses neoliberal and others political words like colonialism and so on, I say this isnt economic analysis. Its political analysis. Unless the tone of the analysis changes and starts studying the european economies and dont use political stereotypes.

Best ragards.

PS The growth in Ireland rose and was better than Germany in second quarter. Any explanation of the author to this astonishing fact? This fact denies all his theories. And the more surprising fact that other PIIGS, Portugal, stopped the fall in his GDP because... Exports!!!!!!! Can the the author explain that fact who denies his theories? How his theories can explain this strange fact. Exports off-setted the fall in Portugals internal demand fall?

American is federation of states.  If one state starts to do badly, then persons move to another state; e.g. out of Michigan.   State to state trade is not tracked since America is one people and the whole country is the land where one lives.  For example, I could move from where I live to another state this day and that would be it.  Can you do that in Euro?

Regarding imports, assuming imports are consumed in the importing country, then imports are roughly PART OF internal consumption.  Therefore, if internal consumption is flat (even though imports are rising) and exports are materially growing each year, the Germany's central bank will be collecting too much foreign exchange.  This leads to shoddy loan standards as the banks want to put the money to work where ever.   I woud think in this environment the German People who do the work will not want to now bailout other Euro nation(s).  

If we step back even further we see that this is not really a Euro versus America scenario.  Each zone uses the same tricks and shuffles money back and forth.   It seems the Euro zone will implode first simply because it is not a federation of states and America is so that the US can kick the can a little longer than Euro, leveraging the reserve currency.

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kugscheese wrote:If we step

kugscheese wrote:
If we step back even further we see that this is not really a Euro versus America scenario. Each zone uses the same tricks and shuffles money back and forth. It seems the Euro zone will implode first simply because it is not a federation of states and America is so that the US can kick the can a little longer than Euro, leveraging the reserve currency.

My feelings exactly.  This isn't a competition between the US and the EU, or Euro-bashing as Kom appears to feel it is.  Both patients are terminal and it is only a matter of time.  One patient, the US, has the advantage of its states not only sharing the same currency, language, and culture, but also the same central fiscal and taxing authority. 

That last quality is the essential difference between the two systems. 

Without a central taxing and fiscal authority, the EU has no chance of solving the PIIGS problems except by letting the door hit them on the way out.  And that will mean it won't be the same EU anymore and it will mean major haircuts and major EU banks.  US banks will definietly take huige haircuts as well for that matter.  In fact, this could send the world into a tailspin bigger than anything that's ever been seen before.  With the way the financial system is levered these days, we could be looking at unprecedented financial chaos. 

As Dr. M says, keep 3 month's cash and 3 month's food within reach, at the bare minimum!

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kom
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 Dear

Dear KugsCheese,

American is federation of states.  If one state starts to do badly, then persons move to another state; e.g. out of Michigan.   State to state trade is not tracked since America is one people and the whole country is the land where one lives.  For example, I could move from where I live to another state this day and that would be it.  Can you do that in Euro?

I wish to put this very bold: Can you do that in Euro?

Do you really want my answer? Or do you want to pretend to be smart?

Look, my friend, come to Europe, educate yourself in a true and well managed school and later try to put me some real and valuable questions.

Best regards

PS When the ignorance is so rampant the only choice is closing the eyes and forget who pretend to be more smart than others. Not only pretending to be more smart but to teach the barbarians europeans how to manage their own problems.

The European Union's (EU) Internal Market (sometimes known as the Single Market, formerly the Common Market) seeks to guarantee the free movement of goodscapitalservices, and people – the EU's four freedoms – within the EU's 27 member states.[1]

http://en.wikipedia.org/wiki/Internal_Market_(European_Union)

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kom
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 Dear FB,Without a

Dear FB,

Without a central taxing and fiscal authority, the EU has no chance of solving the PIIGS problems except by letting the door hit them on the way out.

I agree at certain point with this view. But let me ask something. All the fiscal system in USA applies to every state? Is it the same to every state? Or every state has their own fiscality? Thanks in advance for your answer. Because that answer applies to EU.

But your question is very important because is one of the great flaws of the Euro. However, this crisis teached us europeans that we cant support a common currency if every state will not loose some sovereignty. And some sanctions are not applied when some state fails do acompply the european rules.

In the begining of the euro project some politicians believed that the markets could realise the differences betweeen well managed countries and bad managed coutries through interests rates demanded to each country. But they discovered that markets tend to be right most of time but they failed to evaluate the risk and the fiscal management of each country. The markets failed to properly evaluate risk of each country and after the financial crisis markets overreact evaluating the same countries and the risks. We discovered that markets are not the best risk evaluator all the time and they fail sometimes. So, europeans must to study one way to let markets evaluate themselve the risks of each country and at same time to prevent the same failures of the markets. We dont have clear answers to the questions and we are trying to know wich best solutions are.

So, today, europeans are discussing one way to put pressure on each country, through the markets and new Treaties. The Greece example will teach us a lot of our failures, not only political but the way as the markets work and evaluate risks in the financial systems and the credit markets cross country.

As you see, we, europeans, are working hard to understand the true role of the market failures in this process and trying to seacrh the best solution. EU made some changes and they are working well in Ireland and Portugal. The Greek problem looks more difficult because the lack of good leadership in Greece. Why is bad this leadership? Because they believe that they can avoid economic reforms through defaults. Well, EU wants Greece better managed not to save banks. But to be better well managed, Greeks must to understand that austerity measures are not the sanction but the cure for their own problems. This lack of understanding the necessity of economic reforms by greeks politicians is the worst enemy now. EU is not a Federal State who can send federal troops and bureaucrats to manage Greece. EU is not a dictatorship but a peculiar union where each country is treated as equal. That means more discussion and more hard working politics.

Best reagrds

PS I suggest you to start reading some working papers from european politicians and academics about this subject:

http://www.bportugal.pt/pt-PT/OBancoeoEurosistema/IntervencoesPublicas/Lists/FolderDeListaComLinks/Attachments/104/intervpub20100910.pdf 

This former academic and euro expert is now the "treasury secretary" in Portugal. He is politician now because they need to fix their problems and to try fix euro currency flaws and introduce new laws and treaties to solve our common problems. As you see, european politicians study very careful the problems and dont to try to be more smart than others. They can be more slowly in their decision making process but arent formers bankers who rule politicians. This is only an example how europeans politicians are very well educated and they study carefully our problems, not to save banks but to save our people. We are in Europe, do you see?

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ao
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calling kom

kom wrote:

Look, my friend, come to Europe, educate yourself in a true and well managed school and later try to put me some real and valuable questions.

kom,

My son will be studying overseas next year (in Europe).  Could you recommend a true and well managed school of economics for a university student?

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kom
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 Dear FB,   Sorry, but the

Dear FB,

Sorry, but the link I wish to give you about euro flaws is that one:

http://www.bportugal.pt/pt-PT/OBancoeoEurosistema/IntervencoesPublicas/Lists/FolderDeListaComLinks/Attachments/104/intervpub20100910.pdf

Sorry about my error.

Best regards.

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kom
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 Dear AO,   I think its

Dear AO,

I think its better for you son he looks a good school in Europe. Not you, let him find by his own means. However, some Dutch or Swiss schools are very good. But depends also of your son desire and the expertise he wishes to study.

But as I said: let him search what he desires and have passion for.

Best regards

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ao
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kom wrote:  Dear AO,   I

kom wrote:

Dear AO,

I think its better for you son he looks a good school in Europe. Not you, let him find by his own means. However, some Dutch or Swiss schools are very good. But depends also of your son desire and the expertise he wishes to study.

But as I said: let him search what he desires and have passion for.

Best regards

kom,

Thank you for your prompt reply.  I'm writing for him since he's interested in a select few to review and short of time at the moment.  He's going to select the school, not me, but we reasoned that since you are in Europe and express familiarity with these schools, you must know which are the best and can save him some time in his search.  You would certainly know better than us.  Can you recommend the names of specific Dutch and Swiss schools?

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Kudos to Mr. Smith!!

What a way to make an entrance Mr. Charles Hugh Smith!  As paraphrased from the GEAB link, it's the discussion that leads to the solution. No matter how one feels about this article, to ignite a great debate is an accomplishment.  Critical thinking is alway necessary when digesting information about the current Europe / US crisis.  Regardless of the stats that need to be adjusted, it is important information in a timely manner from the GEAB and this article.  The details can be debated, but ultimately we agree on the bigger details.  Taxpayers in the US had to pay for the mistakes of the private banks.  Now, Europe taxpayers are being asked to pay for the mistakes of the private banks, whether it is the austerity measures in Greece of higher taxes or German citizens footing the bill for the bail out. 

I hope for the EU's sake, they do find a path to save Euroland while taking the banks to task.  We obviously saw no justice here in the US in terms of the ones who got rich creating this crisis. If they do find that path, it will give me hope that the public citizens here in the US can stop listening to "the sky is falling" rhetoric of Washington, Wall street and private banks that ultimately just covers their own ass.

I understand the anger KOM feels towards the US.  Who here has not felt this same anger? This article or this forum is not the enemy.  Just as no one forced the Irish banks to take the money. They were "greedy, unregulated and stupid".  No one forced the EU to follow  the US policy of private banks extending unlimited credit to the uncreditworthy. It was pointed out three years ago when the US housing market tanked and the CDS's issued by banks were deemed worthless that the "Emperor had no clothes". Blame Wall street...I do. It doesn't change the fact the EU willingly followed the US down the same path to insolvency.

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KugsCheese
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Kom

kom wrote:

Dear KugsCheese,

American is federation of states.  If one state starts to do badly, then persons move to another state; e.g. out of Michigan.   State to state trade is not tracked since America is one people and the whole country is the land where one lives.  For example, I could move from where I live to another state this day and that would be it.  Can you do that in Euro?

I wish to put this very bold: Can you do that in Euro?

Do you really want my answer? Or do you want to pretend to be smart?

Look, my friend, come to Europe, educate yourself in a true and well managed school and later try to put me some real and valuable questions.

Best regards

PS When the ignorance is so rampant the only choice is closing the eyes and forget who pretend to be more smart than others. Not only pretending to be more smart but to teach the barbarians europeans how to manage their own problems.

The European Union's (EU) Internal Market (sometimes known as the Single Market, formerly the Common Market) seeks to guarantee the free movement of goodscapitalservices, and people – the EU's four freedoms – within the EU's 27 member states.[1]

http://en.wikipedia.org/wiki/Internal_Market_(European_Union)

Kom, your wikipedia link answers the questions:

Free movement of workers:
Main article: Freedom of movement for workers
Workers have the right to move to a different Member State, to look for work and be employed under the same conditions as nationals of that State (subject to a number of reserved areas greatly varying according to country: this means in many instances nationals of country A exercising a profession in country B the equivalent of which a national of country B would not be authorised to exercise in country A), number and benefit from the same social and tax advantages. This right has been extended by the Court of Justice to family members that accompany the worker, although they derive their rights from the main holder. Family members from non-EU states also have these rights. To claim these rights, family members must complete specific paperwork. In the United Kingdom, for example, the relevant document is the EEA family permit.
 

I understand that labor movement has been a goal but a challenge; I do read The Economist.   The reason this is a challenge is due to the taxation being national and monetary policy being supranational. 

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