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01 Nov 11 14:40
Date Joined: 03 Feb 05
| Topic/replies: 6,745 | Blogger: Menelaus's blog
a. the ECB easing (not just lowering rates which I think Draghi is about to do but actually printing money - he was hoping for a little more time before dropping rates so he wouldn't have to spit on the face of Trichet's failed legacy, but at this point the markets won't give him that kind of time and it would be too little too late)

b. Germany pulls out of the euro

The ECB needs to inject massive liquidity into the system and it needs to do it NOW, otherwise the speed at which things are unravelling, we'll get to find out in real time what getting sucked into a deflationary vortex really looks like.

My bet, the euro is headed to parity with the USD.  If Germany pulls out, a lot lower.

If you're not already short euro, you can play this through reverse euro index ETFs. Either DRR (Market Vectors double short) or EUO (ProShares double short) will do the job.
Pause Switch to Standard View Which will come first?
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Report d13phe November 1, 2011 3:19 PM GMT
Can Germany afford to pull out of the Euro Confused

Their export market which is a huge part of their economy would surely take an absolute battering because of how strong the Mark would be.
Report Menelaus November 1, 2011 4:18 PM GMT
Excellent and fair question. The main beneficiary of the ill conceived euro concept has been Germany, the rest just simply piled on debt.So why would Germany want to give that up, go to a strong DM and disadvantage their mercantilist economic policies?

In my opinion, they either do it themselves, or the market will do it for them. The peripherals who have drowned in debt are now imploding. Even the dumbest "investors" eventually catch on that chasing high alpha on debt that has no chance of ever getting paid back is not the smartest thing to do, especially now that CDSs can be made to never pay out because haircuts are deemed "voluntary". Greece is the start. Italy will be a lot worse and France can not avoid the attention of the markets indefinitely. Germany has to weigh the cost of exiting the euro versus bearing the massive cost of rescuing the euro, or STFU and allow the ECB to inject massive liquidity to stop the deflation carnage we're now watching or leave the euro.

The choices are simple. There are no easy solutions. My expectation is that the next domino to fall in place will be the ECB easing.
Report d13phe November 1, 2011 4:35 PM GMT
I think the ECB are banking on being bailed out by the East.

I cannot wait to see what price China pay though.

A little off topic but Niall Ferguson believes we are seeing a cyclical shift of wealth and power from the West to the East.  I am not sure he will be too wrong.
Report cricketjon November 1, 2011 4:47 PM GMT
China are playing the long game, have done for 50 years, maybe much longer and will continue to do so. They are not interested in assisting at the moment ( translation: why pay 7 pence in the pound when you can pay 3)

The West have been playing the short game, have done for 50 years, maybe much longer thus creating a situation where the Day of Reckoning becomes a "when" as opposed to "if"
Report J2BLUE. November 1, 2011 5:18 PM GMT
Menelaus have you seen this?

Apologies to anyone if they've posted this here. I read so much I can't remember where I first saw it.
Report Menelaus November 1, 2011 5:26 PM GMT
China won't assist the EZ unless they exact a heavy price. China wants military technology, nuclear technology, fuel cell technology and access to european corporates (ownership). They also want political support on issues such as human right violations, currency manipulation, and their status concerning enhancing their power and influence at the IMF, WTO and the UN. Complicating matters even further is the realization that China would rather save their ammunition in preventing their own economy's hard landing. Interesting times.

Wealth/power transfer to the East has been taking place for twenty years now, ever since our bought-and-paid politicians in the West foisted the "free trade" and "globalization" hoax on their clueless citizens. A little late for Mr Ferguson to write about it now in my opinion(two years ago actually), the horse has already left the barn.
Report Menelaus November 1, 2011 5:28 PM GMT
No J2BLUE I haven't seen it. I will take the time to read it. Thanks for posting.
Report Mrben November 2, 2011 1:05 AM GMT
the thread cannot be taken seriously. Surely its a gee - up?
Report Muqbil November 2, 2011 11:18 AM GMT
China's collapse will be far more spectacular than the implosion of the west. Bubble economies are not sustainable, China have created the biggest bubble in the history of bubbles.

(all imho of course).
Report CDarwin November 2, 2011 4:25 PM GMT
Surely the only option, from the point of view of the politicians and their electorates, is debt monetisation - the ECB will buy the bonds of Italy, Spain etc etc and they will stay buying them. Isnt this effectively what the Fed, BoE, BoJ etc are doing anyway!

~And no one can really know how high the house of cards can get stacked before it collapses, or when, or exactly how the collapse will take shape.

Central banks that issue fiat currency have limitless firepower and the markets know this.
Report Mrben November 3, 2011 2:22 AM GMT
Muqbil, your closer to the truth than you realize.

Report Menelaus November 9, 2011 12:30 PM GMT
The choice is simple a) or b). The bond markets are simply forcing the eurocrats to decide very soon.
Report xmoneyx November 9, 2011 12:59 PM GMT
the FRENCH will do the DIRTY DEED

payback for world war 1/2
Report bobby2424 November 9, 2011 5:24 PM GMT
The ECB will not print money. As there are too many Germans in the ECB. They will be aware of German hyperinflation from the 1930's.
Report Menelaus November 15, 2011 12:40 PM GMT
The bond market is screaming to Draghi and Merkel "get on with it".

They will. No choice.

(bobby, the ECB is already printing, it's just that they haven't told you about it yet. Where do you think the money is coming from to intervene in the bond market every day trying to bring Italian yields down? They need to turn the printers on at high speed however before this whole house of cards called eurozone collapses. They will.)
Report Menelaus December 20, 2011 6:18 PM GMT
...and the winner is...

a. the ECB easing

(...and pleeeease, no one post "How?", I just don't have the time to explain this financial chicanery anymore.... Angry )
Report melv December 20, 2011 7:32 PM GMT
China are playing the long game, have done for 50 years, maybe much longer and will continue to do so.

I bet you all heard about the Chinese diplomat who was asked on french TV wether the French revolution had any effect on Chinese history.

His reply was "Too early to tell."
Report melv December 20, 2011 7:36 PM GMT
If the ECB devalues the Euro then Europe will compete our paltry exports out of existence.

There will however be loads of high quality and dirt cheap food and drink in Tesco's.
Report Menelaus December 20, 2011 9:14 PM GMT
"Printing" is not about exports, it's about keeping the banking sector afloat and the status quo intact.

Eliminate the words "dirt cheap" from your vocabulary. WHY????

Because they are ALL printing.
Report FINE AS FROG HAIR December 20, 2011 9:39 PM GMT
If only Menelaus would stop at "--keeping the banking sector afloat -- ".
He just has to add the paranoia bit every time.
So very, very boring and predictable.
Btw I would just love to hear how we would operate without a viable banking sector.
Note I'm not saying they shouldn't take haircuts, should be bailed out without restraint, I simply saying that they are a necessary factor in our economic structure, and should take pre-eminence in any and all restructuring programmes.
First fix the banks and the other dominoes should at least have a chance of falling into place.
Destroy people's savings, eliminate all crdit avenues as you will have unmitigated social disaster.
Report FINE AS FROG HAIR December 20, 2011 9:40 PM GMT
"-- eliminate all credit avenues and you--- "
Report Menelaus December 21, 2011 12:22 AM GMT
I don't know about you chaps but when I heard the sirens go off I run for cover. I'll come out for air when he tires posting drivel......oh, wait, hell, I'll be down here for ever. Laugh
Report FINE AS FROG HAIR December 21, 2011 2:08 AM GMT
We can hope then that you have no internet access there. Perfect.
Report Muqbil December 21, 2011 12:11 PM GMT
Will the need for a structured banking system still exist if the world is thrown back into the dark ages? Once China's house of cards starts falling down, the world could become a messy plaice.
Report Menelaus December 21, 2011 1:21 PM GMT
Nothing wrong with a banking system PROVIDED banks are a utility, not the "heads-I-win tails-you-lose" gambling casinos we have allowed them to become. That way they can indeed serve their intended purpose of supporting the REAL productive, goods and services producing economy, not suck the life out of it with outrageous bonus schemes and insane risk taking, with the full knowledge that the public will pick up the tab when they eventually feck up.
Report FINE AS FROG HAIR December 21, 2011 1:38 PM GMT
At last Menelaus has seemingly said something constructive and correct.
The banks should be bailed out but not unconditionally as they currently are being.
That is something I wholeheartedly agree with, if that in fact is the essence of Menelaus' point.
Report FINE AS FROG HAIR December 21, 2011 1:40 PM GMT
Btw Menelaus not too long ago bragged about himself being the recent recipient of a 6 figure bonus ( just for being an economist ? ).
A strange dichotomy, to say the least.
Report FINE AS FROG HAIR December 21, 2011 2:17 PM GMT
You know I think I might just be on the road to understanding the motives behind Menelaus' incessant negative postings.
Whilst he is clearly a member of the banking community he is deriding, and he has received some sort of bonus reward for past and current work efforts, it would appear from his last post he has not really been a great beneficiary of all the insane, ill gotten bonus rewards that have been given out.
He has missed out somehow, and he's p!ssed off to say the least.
He now wants retribution, he wants to get even with all the greedy ones who have excluded him from the party.
He is envious and has a blood lust for revenge.
So he wants the whole system to come crashing down, so that he can start again in the ruins, and this time around come out on top of the heap.
Far fetched ? Perhaps.But at least it's some sort of reason for his apparent disdain for the people he works with every day presumably .
A bit selfish if true though mate ?
Report Menelaus December 21, 2011 3:01 PM GMT
Wow, I think we dropped less ordnance when we levelled Dresden during WWII then Botty/Froggy is destroying this forum with LaughSillyLaugh
Report FINE AS FROG HAIR December 21, 2011 6:49 PM GMT
From the sound of things you post on here, I think you might rather like to take out Germany once again ?
You certainly do not sound like any sort of fan of Merkel.
However, she looks as if she might be your type. You know the academic, dowdy look. But probably a bit too bright for your liking. Might be a bit too clever and argumentative.
Report cush December 22, 2011 12:19 AM GMT
If you have inflation, then the equal and opposite reaction is deflation, isn't it?  There have been far too many people enjoying the ride up, without considering what the opposite side of it could be.

Maybe, you only talk about the horror of a deflationary vortex, because you have become accustomed to a, comfortable, inflationary vortex. A vortex that you thought would never end?

You are living in a bubble and bubble's can burst at any moment. The fact that a bubble has existed for a certain period of time does not mean that it can never burst.
Report cush December 22, 2011 12:56 AM GMT
You have to understand that your action's over your lifetime, mark you out, for what you really are.

Very few people can really hide, from that sort of scrutiny.
Report FINE AS FROG HAIR December 22, 2011 1:07 AM GMT
I presume you're talking to me cush ?
If so, then tbh I'm not worried simply because I believe in the innate creativity and resilience of man.
A few years of austerity would not be of concern to me.
Even Menelaus' horror picture of hyper inflation would not overly concern me, unless it results in world wars or class wars.
I'm certainly not hiding, in any form or manner, from any scutiny of my past actions.
Are you somehow ?
Report FINE AS FROG HAIR December 22, 2011 1:19 AM GMT
You know it's interesting to note that current surveys in Italy in reaction to the recent austerity measures enacted, show a populace in general grudging acceptance of them.
But only if there are similar measures enacted at the upper levels of society, in particular the salaries and benefits of the politicians.
In Italy they are outrageously out of sync with the ordinary persons' income and benefit levels.
And so if sacrifice does not start at the top and filter down, then I do fear what the repurcussions might be.
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