Essentially Europeans are mishandling their banking crisis with squabbles and a lack of conviction to fix the problems with decisive measures.
If you enjoy the content at iBankCoin, please follow us on Twitter
© Copyright 2007-2024 iBankCoin All rights reserved under penalty of bodily harm. DISCLAIMER: This is a personal web site, reflecting the opinions of its author(s). It is not a production of my employer, and it is unaffiliated with any FINRA broker/dealer. Statements on this site do not represent the views or policies of anyone other than myself. The information on this site is provided for discussion purposes only, and are not investing recommendations. Under no circumstances does this information represent a recommendation to buy or sell securities. DATA INFORMATION IS PROVIDED TO THE USERS "AS IS." NEITHER iBankCoin, NOR ITS AFFILIATES, NOR ANY THIRD PARTY DATA PROVIDER MAKE ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND REGARDING THE DATA INFORMATION, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE. Privacy Policy
in and among all of the crashing and HFT screwups and panic… we haven’t seen a radical rise in the dollar, which isn’t an impossibiliy and would probably send the market to new lows.
there remain more downside catalysts than upside, and ultimately it will take intelligent government action to turn the markets around for another sustained rally. fiscal stimulus in the US, a meaningful fix in europe. for the US the logical thing is infrastructure spending.
Europe could, at zero cost to european taxpayers and zero creation of new euros in the end, end their crisis by taking these steps:
1. the European central bank buys bonds ont he market for all the troubled countries, in some cases they could buy at meaningful discounts, up to some target interest rate.
2. The ECB takes the principal it spent to buy that debt and adds 2% interest to it, and thats what those countries pay on that amount of their debt.
3. the ECB announces its intent to do the same thing in the future if rates rise above its target, without any dollar limit.
This costs nothing, Germany, france, finland don’t have to “wire some money over”, its just QE with intent to retire the discount the ECB gets on the market and set low rates.
Basically, US fiscal stimulus and ECB sets rates for the whole eurozone. It’d reduce the US’s deficit in even the intermediate term, and Europe could go to bed.
But until intelligent government action is taken, I’,m sitting around. There are a host of stocks that are dirt cheap, paying big yields, and so forth. Alot of things that look like good long term buys…
but most of the cheap stocks ar ethe same ones that will get killed the most if we crash significantly further.
@checklist,
in order for that to happen every member plus foreign bond holders must forgive previous interest that is expected to accrue.
This is a problem.
the second problem is actual growth of these economies to actually pay back the monies.
Unfortunately it is not a simple problem and getting everyone to agree is the largest obstacle at this point.
it’d be profitable for the “strong” countries, cronk. pay out the interest taken in by the ECB to them according to GDP.
It ends the risk of default (because interest payments drop), its a benefit to “strong” german taxpayers, it helps stimulate economies over there because austerity needs to be less severe.
it asks for no forgiveness of itnerest, it just has the ECB buy on the market (from willing sellers) and then set future interest rates. Simple enough…
not to mention the profit of avoiding a continent wide recession…
I’m arguing that its going to happen, I’m just observing that it could be accomplished that simply.
@checklist,
it is simple and will most likely happen in the end, but some one has to take a haircut…no ?
That haircut is far better than outright default. But this is why collateral is being asked for.
Growth would be better with less austerity, but how much ?
These economies have fleeing populations, little competitive labor edge, and a population that expects too much of their government.
Some economies have little or no entrepreneurial spirit for they have been largely agricultural type economies. Then they got into more debt above and beyond socialism by over building for tourism type economies.
The Euro in general was a bad idea. Each individual economy was better off on their own.
Some will argue that the creation of the union was to create precisely the current scenario in order to consolidate rule or control over a larger body of countries….