Eurozone madness: Why the Germans will look for a graceful exit

Mekon van Rompuy speaks

OFFICIAL: ECB BALANCE SHEET NOW BIGGER THAN THE US FED’S.

The ECB’s decision to offer banks unlimited three-year loans and the central bank’s purchase of sovereign bonds has helped grow the EU central bank’s balance sheet to $3.5 trillion. The Federal Reserve’s balance sheet has averaged $2.86 trillion since the end of the central bank’s latest asset purchase program in June. There is a growing feeling in Germany that the time has come to cut its losses.

For those understandably uninterested in the surreal accountancy that is banking, the bigger the balance sheet, the worse things are. Given the relative sizes of US and eurozone gdp, the numbers above and below are astonishing. I wrote briefly on the liabilities towards the end of a Sunday Slogpost, but a look in more detail rewards the investor.

The ECB’s balance sheet is now 30% of eurozone gdp. Imagine what that would mean in terms of the Bank of England’s balance sheet. Mervyn King would have a fit. A lot of the direct exposure of the Central Bank stems from the three-year tender last month at a generous 1% interest, upon which almost every bank in the zone fed until €489 billion of the central bank’s cash had disappeared in 36 hours. This may be stating the bleeding obvious, but what this means is that the ECB is now increasingly responsible for both Sovereign and private bank debt. Central Banks represent the citizen taxpayer: they’re not supposed to bail everyone and everything out.

This morning, Barclays released a staggeringly myopic note to say that ‘while the ECB would be hit for 50 billion euros by a Greek default, the effect of the same in Italy and Spain would be relatively benign’. This is utter bollocks. A year ago, the ECB wasn’t into Athens for anything like 50 billion. But gradually, as the bonds get junkier and the markets don’t want them at any price, Draghi the Italian Stallion will have to step in and hoover up the residue. In doing that, he will pay in euros; this will increase liquidity in the system, but must by definition corrode the currency….and keep on growing the ECB balance sheet.

“Folks keep saying this is nothing like QE,” said The Slog’s trusted New York mole late last night, “but that’s BS. Draghi has given the banks a green light to unload toxic sh*t onto the ECB, and my guess would be that’s exactly what they’ve done. Nobody believes any more that QE is about economic liquidity….it’s about banks dumping their bad bets at the taxpayer’s expense.”

Anyway, I’ve been doing some sums this morning. My back-of-Sunday-Times property section calculation is that if one adds ECB liabilities among ClubMed sovereigns to any collateral insurance stuff in the woodwork – and then does the same for its private banking interventions – that probably adds up to a total investment of around 1.25 trillion euros….which at today’s prices and taking account of currency fluctuations, is worth, oh – roughly, nothing.

In this context, leading Japanese nonsense poet and all-round alien MekonVan Rompuy added a brief moment of light, slapstick relief today. He gave a press conference after meeting Italian ‘Prime Minister’ Mario Monti this morning, in which he called for massive economic stimulation to pull the EU out of its current situation – viz, a vortex accelerating down towards total slump. The all-ruling Mekon did not, however, expand on how the ClubMed member States could be massively stimulated while at the same time being suicidally austere…or indeed what the source of all the money required so to do might be. But he did say this at the end of his address, and I quote it below word for word from the transcript:

“Market players and rating agencies sometimes see our responses as insufficient or incomplete. Yet real progress has been made on reshaping the euro area, whose fundamentals are on average sound”

Greece has been given up for dead by the IMF. The EFSF has not attracted a single external investor. Italy’s borrowing costs are described as ‘unsustainable’. 14 of the 17 eurozone countries have been credit-downgraded. The Athens haircut needs are now over 60%, with no takers. Spain’s entire property banking sector is hanging by a thread. Portugal is living from hand to mouth. France is massively exposed to Greek and Italian debt. Germany’s growth hit the buffers last month. S&P’s last FAQ release accompanying its downgrades described the Merkozy austerity diagnosis as wrong, and the eurozone structure as fatally flawed. EU State insurance liabilities exceed 30 trillion euros. The exposure of the ECB to EU sovereign debt – even without collateral insurance liabilities – is in excess of 700 billion euros. There is a wide strategic chasm between the two founding members of the bloc. It’s fourth biggest economy is in deep discord with both of them. And Hungary is on the verge of bankruptcy.

But it’s alright really, because Herman the Mekon says the fundamentals are on average sound. So let us leave the Belgian bard on his hovering space-platform now, and examine that recurring rumour which just will not go away: Germany’s return to the Mark.

In truth, I’m becoming increasingly convinced – a hint here, a wink there – that Berlin is up to something. But I doubt if what emerges will be a simple euro-exit followed the next day by lots of dusty Deutschmarks back in circulation. Second only to their hyper-inflation OCD is the Germans’ desire to retain their ‘Good European’ image. But the growing influence of Frankfurt and the CDU’s non-Merkelist leadership has convinced me that something will be done.

Far more likely, I fancy, is what some currency wags are increasingly referring to as ‘Mark II’. This would be the sometimes-dubbed ‘Nordeuro’, as part of a spin-relaunched eurozone to be strictly Anglo-Saxon Lutherans only. And no, the French would not be declared honorary Huguenots.

One of the reasons I think this, is the evidence of a flap going on among French diplomats to find out what (if any) internal Berlin-Bankfurt discussions are taking place behind closed doors – the Sarkozy Elysees has been paranoid on this subject for over six weeks now. But the main determinant in favour of a German quasi-defection is the shift in both the balance of Central Bank power, and position of the ‘guarantor of last resort’ spotlight since mid December.

The word coming back from both German bankers and CDUers is that they are intent on persuading the German Chancellor of their increasingly well-grounded fears….and so Germany must somehow avoid being in the existing eurozone when it goes bang in an exceedingly messy manner.

But certainly, at the moment nobody is leaking anything substantive on this front. All of which makes me even more suspicious that something big is being prepared.

The problem with the eurozone – and increasingly with the EU – is, as I’ve blogged before, there simply isn’t enough money to sort it out. And so whatever anyone tries, fails. Or put another way: whatever school of thought is in the ascendancy, their plan will be flawed.

‘ECB’s Tricks Won’t Solve the Crisis’ headlines Der Spiegel today. But the truth is that, be it Merkel’s Wagnerian morality number or Draghi’s let loose the dogs of QE, neither can succeed. The only solution – ever – was controlled lending and debt forgiveness in concert. But as nobody is interested in that one, Europe must continue its descent into that dark place where not even Japanese doggerel can relieve the horror.

I think the chances of German business, politics and banking allowing their Fatherland to wind up in that place are very slim to the point of non-existence. Something will happen. We must simply keep hunting out the signs.

115 thoughts on “Eurozone madness: Why the Germans will look for a graceful exit

  1. “We must simply keep hunting out the signs.”

    I read this three times before I was satisfied that it did not say what I thought it was saying ‘….hunting out the sins.” Which on my preverse assessment would have been even more appropriate.

      • We won the first one by almost bankrupting ourselves and ended up by sheer good fortune on the winning side in the second. This could hardly be described as a victory, totally bankrupt with a rapidly decaying empire and completely subservient to the United States.

  2. Once Germany steps out of the Banksters’ store,
    the remaining bulk of the Eurocrisis zone is bound to repeat the hyper-Inflation maneuver of the late Weimar republic, where this time round the financial gains of the GIPSI real-estate bubbles of late, principle and interest alike, substitute for the uncapped reparations sham of yore.

  3. In the event of it all going pear shaped, who picks up the bill?

    The UK has a share/capital key of 14.5172 % in the ECB and has paid in Euros 58,580,453.65 in capital. Germany’s share is 18.9373% and paid up capital of 1,406,533,694.10 Euros.

    Does anyone know what the UK’s liability to the ECB’s debts would be in the event of a Eurozone collapse?

    • AFAIK the ECB is specifically a creature of the Eurozone which the UK is not a member of. If that is right, our liability would be zero.

      • I questioned this before, and haven’t yet got an answer either.

        UK is subscribed to €1.4bn by key, but have paid in €58m.

        I guess if ECB get’s in real difficulty, they could call up our remaining subscribed capital (ie. almost €1.4bn, but as I understand it we would not be liable for any loses above that.

        Maybe an accountant on here can confirm the normal process, I too would love to know!

      • from http://www.ecb.int/ecb/orga/capital/html/index.en.html

        The net profits and losses of the ECB are allocated among the euro area NCBs in accordance with Article 33 of the Statute of the European System of Central Banks and of the European Central Bank.

        The non-euro area NCBs are not entitled to receive any share of the distributable profits of the ECB, nor are they liable to fund any losses of the ECB

      • This depends on your definition of exposure!

        The Bank of England has €58,580,453.65 of ECB capital stock as of 1 January 2011, and is liable for 14.5172% of the ECB.

  4. Top notch as always JW.
    Can’t help but wonder if that Hadron collider ‘ Hips and bosoms’ thingy has side swiped us into a parallel universe, as this all seems so unbelievably fictional……although you’d be challenged to make it up, as no-one would view it as credible!!
    Gollam van Rumpey just WILL NOT let go of his precious…….

  5. The more you look at the numbers the more you realise that default is inevitable . Greek default seemed unthinkeable only 2.5 years ago . Italian debt is unsustainable due to both it’s size and it’s cost . The way things are accelerating means that some sort of incident in Italy is highly likely . 1.175 trillion euros says it will have catastrophic repercussions for us all .

      • “Perhaps the Bank of Mafiosa will take over, they seem to be well funded.”

        Joking aside though Joanna, given the power of the Russian, how shall I say, elite and the Mafia, you do have to wonder when they will start leaving horses heads under duvets. Surely some of their investments are being effected by now?

    • @Saloon Door

      ordinary working people in Germany were aware of the plight of Greece while the professional ratings agencies were still drinking champagne on 6th Avenue and talking the world up. Bildzeitung might be the equivalent in terms to the British Sun – but look at the length and quality of some of its articles and it is the equal of the Daily Telegraph. As to the likes of Die Zeit which has five page articles … is there a British equivalent outside a paywall?

    • @Laurence

      the problem is that many banks have too many off-balance sheet reckonings. Especially in the UK where this sort of thing is easy to practise and not well policed. Without this information, there is a great deal of information that is unknown – and much of this will have to do with the eurozone bonds (naked CDSs and suchlike).

  6. John, I have been quietly thinking along those lines myself, but then I wondered how could they pull it off? Or in other words… what will be the back breaker of the camel?
    My understanding and interpretation of this:

    “Market players and rating agencies sometimes see our responses as insufficient or incomplete. Yet real progress has been made on reshaping the euro area, whose fundamentals are on average sound”

    We know what is going on but, we cannot admit it to anyone because you would not understand, but don’t worry, we can do nothing about it , but it is our job to tell you that nothing can be done, by us, or indeed anyone, but that does not make the slightest bit of difference to us. We have progressed in so far as the unprogression will take us, however, other people who also do not understand, have commented with nice words.

    Or by a 7 year old child… People who have a clue and who are very clever have sussed and commentred on the fking uselesness of the EU SPOKESPEOPLE on ANY damn subject concerning the ‘Econonmy’. This does not affect my salary in the slightest, or any other member, so we have made progress because we have said so. Progress is not ‘evidenced based’ due to lack of responibility, or the will to care.

    “elbow” now can you tell the difference from the ‘other’ bit of anatomy?

    • Hard to say if the Euro could survive without the Germans… the resulting devaluation of the Euro would be a welcome reprieve for the Club med members and could save them (except for Greece, Greece is fu**ed).

      • @Mark

        which is why any exit strategy is a last resort. Speculators would circle like vampires. Sorry, vultures.

  7. kfc, we have to believe that any withdrawal/default has been very carefully planned, otherwise the truly awful prospect of being ruled by ijits would be upon us.
    This whole can kicking thing has bought plenty of time to go to plan…umm…q, so it shouldn’t be entirely mad. I think all the recent plethora of utter b*****ks, sorry, reassurance, points to the ‘don’t let them know until….’. But then, I am a cup half full gal!
    If as you suspect, it is ijits rule ok, then Draghi’s dogs of QE might end up as hounds, and he the fox, along with all the other techno’s.

      • No such thing as an orderly default…

        They are always forced by circumstances and therefore can’t really be controlled.

        Greece will default sooner rather than later, when they do France is going to be up shit creek without a paddle.

  8. They that have sown this ill wind, have ensured that we shall reap the coming economic and social whirlwind. If you have the stomach for it; sit back and enjoy the show!

  9. If something is going on, it looks like the ‘men in suits’ in Germany are taking control of the mess away from Merkel and turning her into a political mouthpiece. She has shown herself incapable of tabling any solution which both deals with the EZ crises and protects Germany (apols in advance to Gemz).

    Not before time methinks. This cannot be allowed to go on.

    As for Draghi, well, we knew he was itching to start the printing presses. Right?

    • @BT
      ‘men in suits’ in Germany. Do they have a solution then? I don’t think so.
      As far as I can see, the only “solution” is, to them, “unthinkable”
      So where now?

      • The Germans are starting to wake up to the fact that they are now the sole backers of the Euro…

        If Draghi fires up the presses in a really visible way then the Germans may leave.

      • @kfc: Well, as MG says and as JW says in his original post, the German men in suits may be planning to quit the euro having taken a look into the abyss at Germany’s EZ exposure. Merkel has been in denial.

    • BT, my understanding is that the printing presses have been going full pelt for weeks (or rather, the electronic transfers of made-up monies).
      Why call it a spade when you can call it a shovel?
      Who else would be buying sovereign bonds…….seriously……WHO ?

      • George Soros picked up many EU bonds at a deep discount from bankrupt MFGlobal. I’m sure he’s counting on the credit default swaps proceeds filling his private (family only) hedge fund’s coffers. Soros is a major billionaire and financier of the US Democrat Party. His hedge fund is exclusively a family affair now because the financial regulations Congress passed (Dodd-Frank) as a result of the bank debacle of 2008 required increased transparency of the hedge funds so rather than succumb to financial regulation Soros returned his clients’ money and never identified them.

      • @Joanna: “…my understanding is that the printing presses have been going full pelt for weeks”

        You may well be right. Both @kfc and myself have long suspected that Draghi’s been quietly printing (possibly by another name so as not to upset the Germans or more likely to give Merkel some plausible denial). But afaik there’s been no official statement on this and MSM are out of the loop. So we’re left wondering where he’s getting all the money from to buy sovereign bonds and the €489 billion he lent to eurobanks at 1%.

    • @BT
      Merkel has shown that she is incapable of tabling a solution that the banks will accept. That is her major problem. She wants them to accept their part in the solution.

      The problem for her is that the banks will not accept this, and want all their money back, however intemperately lent out.

      From what I can see, she is standing for the rights of a capitalist country that expects banks to be responsible for what they do. I agree that they bailed them out in 2008 or whenever, but to do so again is another matter. This is exactly the problem that is faced in Britain, and Cameron turns turtle and lets the presses roll, cost what it will for he cares not a whit for his taxpayers.

      Merkel does – and gets the ire of all the socialist leaning readers of the Slog to boot. Are there any capitalists left here? Have you all gone soft?

      • @Gemz: Methinks you are muddling things a little. The capitalist solution to the Greek problem is not for the banks to take a huge loss (using polite terms like “debt forgiveness” and “haircuts”) but for the borrower to repay its debts _or_ declare itself bankrupt. That might mean a few banks going down but that is what happens under true capitalism. The idea you suggest that the banks should pay for the irresponsibility of their borrowers is socialist in nature, not capitalist.

        My point about Merkel is that she has danced on pinheads for nearly two years and failed to take decisive action to deal with the crises. Her INactions (and also some of her actions – like lying at a press conference about haircuts) have allowed the crises to deepen hugely.

        Time is running out…

      • @BT

        is it not the job of a publicly limited company to provide the wherewithal to pay a dividend to its shareholders?

        No? Or yes?

        I thought so.

        Now let us get something straight here, and it is often forgotten by the right wingers. The fact is that an institution that lends money is responsible to its shareholders for lending that money. That means they take due care that it is lent in the appropriate manner, and checks as to the verity of its borrowers are undertaken.

        In Britain I knew of no few number of self-employed carpenters who had bought a house and had falsely claimed the value of their incomes, since there were no credit checks. That there are few in the UK as I write, means that this sort of fraud can continue. Now to me this is a problem of a bank that is disregarding its duties to its shareholders: for they did not take due care to ensure that the loan would be repaid.

        So don’t blather on about leftie-commie slackness when the rightie banks took them for a ride. In short, they were complicit. Had the banks any moral backbone at all, they would have stood up and said “this is not good enough” and looked after the interests of their shareholders.

      • @BT

        The problem in Germany is that there are a great number of taxpayers who agree with Merkel’s standpoint. If only that she will not allow their money to be frittered away on profligate banks who should have known better.

        I have made my case against the banks, and their incompetence. This is a view shared by the majority of Germans, of most political shades.

      • @BT One final note: Socialist Housing Policies.

        In a socialist society all housing is state owned. There are no purchasers and no owners. Everything is rented on a strictly controlled basis. So for you to say that a policy aimed at allowing people to own property is not socialist in any manner. Frankly, it was pseudo-liberal fraud.

        Look at a country like Sweden where 50% of the houses are state owned in one form or another. There are strict controls on rents up to around SEK 7000, any rent as determined by the laws in force. That is set by a calculation of a few architectural details such as floor area, provision of triple glazing and bathing facilities. These apply to private and public sector housing alike. If you want to avoid this, rent your home for more than SEK 7000 but be warned that there are still controls on how much one may ask for a square metre. That, sir, is how socialism works, and has little or nothing to do with owner occupiers.

  10. Not knowing a great deal about German politics, but it must be quite interesting at the moment being a fly on the wall in meetings where the ballooning ECB balance sheet is discussed. If they really are the ones that have to stand behind all those liabilities maybe the Germans are already in too deep? Perhaps they can’t simply take their winnings and walk away from the table? But at this rate – and with the world now appearing to see the real EZ problem – it is either double or quits for the Germans – and needs a decision pretty soon if they are to keep any option at all.

    • @Marc

      the problem for the ECB is who is going to pay for their little forays into the world of mega-banking. I doubt if Merkel will stump up her taxpayer’s money. Who else might? The Americans perhaps, they have a history of printing large amounts without any real thought as to where it might fall and what damage it might do.

      • Gemz – The printed money that you mention, do you mean the Marshal Aid Dollars the US very generously gave to a totally defeated country that had just committed the most sickening and appalling genocide in world history? Is that the money you were referring to? Please do explain.

  11. If I had to hazard a guess, I would say there is a lot of nail biting going on behind closed doors, because they can’t think the “unthinkable” The Germans are not known for their flexibility, are they?
    It’s like JW has always said, it’s a slow motion train crash all the way to the buffers.
    Greek officials on their way to the US for talks with the IMF, wouldn’t that be better phrased
    Greek officials take enormous begging bowl to the IMF in America?

    • @KFC

      I am getting cross with you. Just because the Germans don’t blow with the wind like a British politician does not mean that when they need to they cannot move. Believe me, the options will have been discussed. They will move when needed, and when they judge the time is right. What they won’t do is bend over forwards and accept all the banks can give them as does Cameron.

      I want to remind you that it is the private banks who are holding up the talks here: it is not the Germans who are the only ones who are sticking to their guns. They have offered a great deal to the private institutions – yet these very same simply say “if they offer this much they will offer more, just like the Yanks” – but the Germans are not the Americans. The Germans still have some taxpayers left. The Germans can still climb out of this crisis yet, even with a Greek default.

      Whether Britain can is quite another matter.

  12. This is tragic but I’m unclear as what caused it. Hubris? Fantacies of OneWorldism where everything is always sweetness and light? Psycopathy on the part of people who are fundamentally incompetent? Does it matter?

    • @Mary W

      Like you I am uncertain as to the cause but I would submit that the labels you suggest as responsible are probable and almost acceptable. The final analysis however is that ‘Greed’ is the motivator. On that basis I don’t really care who is owed what.

      Any transaction which is based on a purely electronic function could probably be null and voided.

      The question is, ‘should it be’?

  13. Seeing as theres a new global financial system pending (and no its not the bad guys version) that over 130 countries have signed up to my guess is that all the euro players are well aware of it and the can kicking nonsense will continue until its ready to break cover sometime in March apparently.

      • I presume Phil A means this, if the link works:

        George Soros looks to establish new global finance system

        From the RT site.

      • @”just a housewife” and @kfc:

        I got this far into the RT.com article and a shudder of fear ran down my spine:

        “…former British Prime Minister Gordon Brown told the conference.”

        OMG: Surely the world does NOT need the Marxist maniac Brown to be involved in any aspect of designing a new global financial system?
        Hasn’t he already done enough damage?

        When I’ve kooled down, I’ll read the article and watch the video :-)

      • @kfc: Well, the video interview manages to get through nearly 25 mins of banter without actually providing one single nugget of what this new global finc system is about and exactly who is behind it. Referring to the problems of the current system and how it will solve them isn’t very helpful. It has all the hallmarks of something that faceless people want to foist upon the citizenry by self-appointed experts. It needs to be publicly debated with winners and losers clearly identified before sign-off. He casually refers to “cancellation of debt” but this has huge implications on the value of peoples’ wealth etc. (see Greek bond holders’ dilemma etc).

        And I come back to my earlier comment below that any new finc system which has input from Gordon Brown will be socialist in nature and doomed to fail because the man is an innumerate international socialist and unfit to contribute in any such debate.

  14. If Germany does “come off the top” of the Euro rather than have it collapse through Greece “falling out the bottom” the effect will be the same: an almighty great mess, runs on banks as they fall over, riots in streets and the like AND Germany will get the blame. They truly are between a rock and a hard place but the more that becomes apparent, the more obvious it becomes that they will need to preserve Germany above the whole EZ project.

    • @Confused

      Germany gets the blame whatever happens. That was understood a long time ago. What is important here is not what the newspapers think, but what Germany’s Mittelstand do. They are responsible for the resurgence of Germany’s industrial growth in latter years – in strong contrast to Britain’s ailing industrial sector.

      Please remember that it will take one winter of a depression to bring Germany’s exports down to the level of Britain’s, and conversely a huge increase in production and productivity for Britain to even approach what the German Mittelstand has achieved.

      • Massive currency manipulation through the Euro helped their exports. That advantage is about to be lost.

      • @Soap

        which you regularly complain about – yet I repeat myself when I state that it was not what the Germans wanted for their industry or currency. A stable currency is far more important to a well established industry than a low one. When you sell overseas to places like China and Japan stability beats anything going, even if it is relatively high.

        I guess being British you understand exports only in terms of how you can devalue your currency rather than improve your efficiency. The stuff the Germans sell on price is being made in China – VW works etc – but not for sale in Europe: for sale in China.

      • Gemz. You really hate the Brits don’t you. Not that it bothers me particularly but the fact that every one of your posts has at least one dig at the U.K. shows a pretty sad mentality. Need someone to blame I suppose. But it’s a fact that the currency manipulation which is what the Euro basically is for the Germans (intentional or not) has been a large factor in their success. It’s not only kept their prices artificially low, which even a child must understand will increase demand, it has made their main trade partners less competitive, leading to the massive boom of German exports into Europe. I know this doesn’t sit well in your head but it happens to be fact. have a look at some figures for German exports, look when the boom started. It was at the introduction of the Euro. And as others flat lined, they took up the slack. I recommend a site called trading economics. Go have a look. Not given on that site but available elsewhere you can also find out that British exports as a percentage of gdp were actually higher than German until the Euro. I hate to break it to you but they really are not the master race. And yes I have lived there and yers I have German friends and in fact family (through marriage), so no I don’t hate Germany, I’m just bored of hearing all this nonsense.

        Anyway I’m not going to post any more because I seem to get myself drawn into endless pointless arguments.

      • @Soap

        [rant] I do not hate the Brits: I married one and lived together for two and a half decades – and there are many Brits who I truly admire, most of them craftsmen. I will state that there are people I despise: people who say one thing and do another. Like trolls, like British politicians and like bankers.

        I think the latter two we can say that we are in agreement, can we?

        The fact that successive generations of British politicians have serially devalued its currency and denuded the landscape of capital producing industries is what galls me. The lack of fiscal restraint and the lack of proper prudent fiscal regulation is also irritating to me. [/rant]

        I don’t care two hoots about the euro or its value or what certain private industries did in order to exploit a situation that was handed them. I will take you to task here when you say “you can also find out that British exports as a percentage of gdp were actually higher than German until the Euro” – now answer me this: how has devaluing sterling by 30% helped British exports? By your measures, British exports should have been booming just like Germany’s. So why aren’t they? It isn’t as if your products aren’t any good – but believe me, and I have tried, just try getting them to export to you!

        If you want to know, when I still ran my decorating business, I used exclusively British paints. Why? Because they beat the pants off the competition – on all points bar none. So when it came to my local paint stockist to get them to export to him – what did we get? Deals developed for the British market and measured for British decorating firms. I know because I ran one of them too. I also know the Dutch market, and the deal specified would have left this Dutch business with a lot of unsold paint on their hands. The salesman could or would not change his deals, and a small business like Wim’s could not take that sort of hit. The deal went down.

        Now take a German salesman … but hey! To quote KFC “The Germans are not known for their flexibility, are they?” – except when it comes to discussing business terms, banking deals, political agreements … and a great deal more besides. Yet they are inflexible and the practical, flexible Brits lose deals because they cannot change a few details on a sales contract to suit a different culture. Do you see my point?

      • God having said I will say no more, I just can’t resist one more comment. Gemz, go to the website I mentioned, or one of your choice. British exports are booming in relative terms. Look up British Exports from jan 08. Then look up currency valuation from Jan 08, and then notice the direct correlation. Then look at the German export figures from the time they went on an undervalued (for them) Euro. Again see the direct correlation. Exactly the same pattern in fact. You might not like it, bit they are cold hard facts.

      • @Soapy

        “You might not like it, bit they are cold hard facts.”

        Yes, Britain is exporting its way out of trouble. I agree with you about cold, hard facts. Yet there are so many cold hard facts available, that you can quote one set, and I another – and we can both be correct using cold hard facts. That is the problem with statistical facts: they are easy to manipulate. When I first came here I thought this site was about exposing such things.

        I can understand your feelings about Britain’s exports, after all, Britain now has an export surplus and Germany is truly jealous that Britain has used its freely floating currency to achieve this. Britain now no longer needs to print money to get itself out of difficulty as the economy is now sensible and stable and growing tax revenues mean that the high streets in Britain are again thriving. Businesses like Peacocks are seeing improved profits and are taking on new staff.

        I think you are entirely right in your assertion that the facts show that Britain’s exports are in fact booming. That they are at around 25% of those of Germany is neither here nor there: at least you have a trade surplus. That is the most important issue here as it means Britain is out of the woods in economic terms.

  15. All this talk of can kicking reminds me of an experiment a mate and mine once did. In the centre of Palmerston North in New Zealand there is a large (18 acre) town park surrounded by streets and shops. Its called ‘the square’ Its quite a long walk all the way around it. If you kick a coke can as you walk, you can only get about 1/2 way around until the coke can has disintegrated to such a state you are no longer able to kick it successfully. So there you go, just goes to prove you can only kick a can so far.

    • After the French downgrade many experts predicted it would happen. It sure will put the kosh on the EFSF. The crises deepens…..

  16. But in the absence of any suggestions from JW’s learned readers, here’s what I think.

    The Greek’s are lazy bums who won’t work, or if they work they pretend not to so as to avoid paying tax. Then they demand a huge pension or a government job punching tickets on the Athens subway at an annual salary of $96,000 a year. This leaves the government short of cash, obviously, so they borrow it, since the morons that run banks don’t care that the Greeks will never repay, since they’ve insured the debt by way of a credit default swap with JP Morgan or some other damn fool American bank, run by morons who don’t care if their CDS’s go toes up because they know Wacky Benacky has a printing press and will bail them out without limit.

    So here’s what I suggest be done. The ECB should print all the Euros required to pay off all the stupid debts run up by hopeless places like Greece and Italy, etc. Then they should say, “That’s it, you morons. No more of this nonsense. Anyone stupid enough to lend to those Greek morons can damn well go broke when the Greeks refuse to repay. What’s more, any of you morons too big to fail is gonna be broken up.”

    Is this a reasonable approach?

    • I think you are over-estimating a few of JW’s readers…I am not in any way learned re the crap that is going on…., and I don’t like being bunged in with any type of group/nationality etc. I am me.
      I am simply trying, by following a million threads, to try and make sense of non-sensical rubbish that seems to be getting more scary by the week.
      If you suggest that giving a load of made up money to a country such as Greece, (who, according to you, the entire population are guilty of being part of its downfall), will help in telling the whole populace to then b***er off….hmmm, not getting it.
      Sorry…..

      • It seems the banks gave a lot of real money to Greece, but can’t get it back. And it appears that there’s no way of getting it back short of selling off the Greeks in slavery to the Egyptians or the Babylonians. This means defaults not only by the Greek and other governments but by banks that lent to bankrupt governments. But banks cannot be allowed to go broke because it would lead to a depression, so the losses have to be made good at the expense of society at large, i.e., by printing money.

        But sure, its best not to print more money than necessary, as Will, see below, points out.

      • I agree Joanna, it’s pretty obvious to anyone except a moron that the people of the UK are not all the same, so why should the Greeks be all the same, or anyone else for that matter. I can prove that Greeks work longer hours than Germans: although they are probably not as productive, but what’s the point morons love stereotypes.

        I have a cousin in Australia who is a moron, he thinks that the English are all whingers, lazy, poofs, that think they still run the World, are snobby, don’t know how to handle women etc etc etc.

        For one stereotype to be correct, they would all have to be, but the morons could have a wonderful time if we put them all together in a big hall, like a village idiots convention, & see which one would come out alive, probably the super efficient German, the one, yes you guessed it, with no sense of humour.

        I will get an e-mail from Dennis when the shit hits the fan in the UK, I hope by that time the Aussie property bubble has burst, so I can throw something back at my beer swilling, smelly, foul mouthed, misogynist cousin, who I have to say, is not at all like the rest of the family.

      • @Can Speccy

        “It seems the banks gave a lot of real money to Greece, but can’t get it back.” The Dutch bank ING has today said that it has reduced its position on Greece by €4bn. Sorry, can’t find the link.

      • @Gemz,
        “Frankly, you need to do better: I am not impressed by this side-stepping of the issue.”

        OK, here’s what I really think. The North Germans continue to be driven by the protestant work ethic and although they have made the Ruhr into a playground, albeit with too much smog, they nevertheless go on working and saving like crazy. As a result Germany, is now the last significant Western nation with any long-term economic viability.

    • @CanSpeccy.. The Greek’s are lazy bums who won’t work…and the Germans scuttle off to Greece in their droves every year to be… lazy…maybe. I’ve spent a lot of time in Greece. The people are friendly and welcoming. The sun shines, the islands sparkle, and the sea is warm. It was the Greek politicos, banks and Goldman Sachs that sold them the pile of shite they’re in now. Greeks are not Germans, and never will be, but the EU prats can’t have that, can they.

      The rest of your comment I more or less agree with..

      • “The sun shines, the islands sparkle, and the sea is warm. ”

        Yes, one can understand why they don’t work if they can help it! Whereas, the Germans, well what else is there to do in Koeln?

        But, sure, there’s no evidence that I’m aware of that Greeks are more self-serving than any other people. It appears though, that their government (the one before last, I think) outrageously bought votes with borrowed money that could not be repaid.

        But as you indicate, the trickier bankers involved were apparentlycomplicit in the swindle, expecting to avoid the fallout with their tricky paper work, and the confidence that the Fed or some other representative of the people would bail them out, as has proved to be the case thus far.

      • Gemz:
        Die Deutschen haben ein Geschenk für die Schaffung einer zivilisierten urbanen Umfeld.

        Although I understand that the air quality of Cologne leaves something still to be desired.

      • (Sorry, my comment seems to have evaporated into the ether).

        Can Speccy: you gave reasonings based on a clear falsification of the facts. I gave you plenty of evidence that there is plenty to do in the city of Cologne and that people are enjoying it.

        This is upheld by the fact that you counter me with an argument that could be placed at the door of any urban conglomeration on the planet. Frankly, you need to do better: I am not impressed by this side-stepping of the issue.

  17. How could intelligent (EU heads of government) appoint idiots like Herman Van Rompuy and Catherine Ashton (where is she btw) to any post? Ah I think I see the problem!

  18. I think the German game is becoming clear..ha ha.., they are not going to print in order to throw good money after bad like the FED. They will force the defaults, and then allow controlled printing from a healthier base to recapitalize the system.

    • @Will

      I agree with you. There is no point in throwing good money away in the way that the US or the UK seem happy to do. A Greek default will be painful – even to German banks, the Dutch ING has offloaded its Greek bonds to the level of €2bn at what loss was not detailed, though recent articles have pointed to Greek bonds trading at 30ct in the euro.

      It will clear the air for sure. What it will mean for the average Greek on the street is another matter. Perhaps they will be on the streets in tents instead of demonstrating to keep their jobs as train drivers?

  19. Bernanke’s printing, Draghi’s printing, Germany may well soon be doing their own printing. So I’m taking a leaf out of the book of the so called “finest financial minds in the world” and I’m printing my own money as well.

    It looks and mostly feels like euros, and its equally as worthless. The difference is that when it all becomes toilet paper, mine will give a quality, clean wipe because its printed on luxurious heavy gauge tesco finest paper!

  20. Time for a long overdue increase in sterling interest rates as the market wakes up to the UK’s similarity with Clubmed.MarK has been printing for years and inflation is round the corner.

    • “Inflation is round the corner”

      Isn’t that what every central banker and every government has been working for? How else are we to compete with billions of Asians earning only pennies per hour?

      That’s why Ron Paul has everything he’s got invested in gold and silver mines! Obviously, even he doesn’t expect to be elected, or if elected, able to transform the dollar into sound money.

    • @ william

      Couldn’t agree more. But Swerving Merv is never going to go for a sound money policy and higher rates. The housing bubble would go bang overnight, with a devastating effect on the banks. The B of E will QE till doomsday to keep rates where they are, asset prices high (housing) and inflate away the debt pile. We are in one hell of a mess..

      • @kfc1404
        “There’s a bit of a problem with trying to keep house prices inflated while exerting a downward pressure on wages……”

        Not really. Wages are sticky downward, so you devalue the currency, thereby lowering real wages. Under different circumstances, labour would demand compensatory pay increases. But in a globalized economy where your competing with four billion Asians, labor’s bargaining power is to slight to counteract the trend.

        Also, lowering wages through inflation is more fair than any other way since it affects nearly everyone, except the bankers, of course.

  21. @ kfc1404 There’s a bit of a problem with trying to keep house prices inflated while exerting a downward pressure on wages……

    Agreed, but it’s on a knife edge. Even a small rise in rates would put thousands into negative equity and more on the street. They’ve got to print to keep them where they are to debase the currency and inflate. Watch this space, I think things will get rather precarious…

  22. @will lefeurve.Higher rates=sound money=lower southern house prices=2 percent inflation=the remit of the MPC,in the first place.Mark or Merv is and has been a disaster.The longer this government permits one of the founder members of the Havana 3 to stay in place(so called after Peter Mandelson,’Pavlov’,recruited ‘Garry’,one Gordon Brown,at a conference in Havana in 1979 to destroy the prosperity of the UK,aided and abetted by the crypto Marxist from King’s Cambridge), the country is proverbially you know the rest.Sacrificing my stepson’s insane purchase of a dud house in Fulham for north of £625k would be a fair price to pay for restoring financial normality to 62 m people or so.n

    • @ william

      I can’t argue with that. If the powers that be can’t hold this pack of cards up with the tools they are deploying at the moment…look out, because the shite will destroy the fan for sure.

  23. You do realise all you are doing here is giving slog a smug grin on how much chat is going on in his comment threads. Smugly grinning arent you John? I’ve sent him an arch Blairite as a new reader hopefully. Nice lady though, despite Blair fannage

  24. “Second only to their hyper-inflation OCD is the Germans’ desire to retain their ‘Good European’ image. But the growing influence of Frankfurt and the CDU’s non-Merkelist leadership has convinced me that something will be done.”

    Mark II -> euro collapse -> easier debt payment for the periphery as implicit Lira to Euro spread is lower and very easy for Germany as Mark to Euro spread will be very high.

    If Madame Merklash is worried about reputation then they can repair that by doing a German Marshall plan afterwards.

  25. Excellent article JW. I hope that your mole(s) are getting getting a grip on the situation because Merkel/Schauble sure ain’t and do not look like they can.

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