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Again, I prefer Merkel or Putin, any day, over HOBOma.
Thx for good read Fly.
Betting against the stubbornness of a German is not a high probability bet.
Great read. He makes a lot of valid points. Thx.
Wow. So is Schott saying that fiscal austerity by itself will cure europe’s problems? That is to stupid to even argue about. Secondly what ticking time bomb is he talking about with the US. The US and Europe are two totally different situations. The fact he fails to see that is scary.
Yeah, the article fails to mention any of the negatives. Actually, pretty impressive that the writer was able to spin it into a positive. I’m not buying it.
The point is, pay now, or pay later. If Europe pays now, when it is ‘Merica’s turn to pay, we will be paying Europe.
This problem isn’t going away. It is just going to get worse, the longer the final reckoning is prolonged.
I agree with that thought. But, under these circumstances, surviving a 10 trillion eu writedown seems impossible 😉
I do think the situation is much different than in the US. Like fake amish said, our economy is so dependent on the government it would cripple us.
Tough call. I guess ten years from now we’ll see what was the better choice.
Yes just look at the problems austerity and defaulting on dumb loans makes, Iceland did it 2 years ago and is already being upgraded by Standard and Poors.
England, which enacted harsh austerity, has low 10 year yields.
Clearly printing more money to prevent sophisticated private investors who should have, and likely did, know better is obviously the solution. Moral hazard is something made up by people who hate freedom.
Everyone knows free-markets only work when the markets are going up, otherwise they are broken and we need intervention and still call it a “free-market philosophy.”
Exactly. Printing at this point is like drinking salt-water when you are dying of thirst.
im just a dumbass. but do you really think amerika can handle no more mail box money? austerity would have been easy twenty years ago. but the entire system now is based on foodstamps and unemployment checks and sec 8 housing and gov clinics and war and most importantly gov jobs. there is no economy to fall back on. but… i am a dumbass.
“Let them eat cake”
Or in this case, imagine eating cake.
thats the problem. the cake is a mirage without the printing press. starbucks is full of gov employees paying 7$ for a cup of fucking coffee. no start up self employed business man would buy that shit. its foolish. let them eat cake and be careful what you wish for. not everyone can have a lemonade stand. gotta have customers.
Fake, it really doesn’t matter. It will happen. No doubt. 100%. It is either that we wait longer, and allow it to get either worse, or we act soon and mitigate the damage while we still can.
Exactly, its not a if it is a when.
Wood, I have been looking for papers that discuss global leverage, specifically if it is possible for net global leverage to be greater than 1. Any ideas where to look?
Hmmm. That is a fantastic question. I don’t think it is possible for net global leverage to be greater than 1, unless we are borrowing from Mars. Don’t know though, for sure. I have no ideas where to look. I always just google, google, and more google.
Didn’t we prove we are trading with mars with a magical global 380 billion trade imbalance?
My first thoughts too were that it couldn’t be larger than one either. Then there was an article in the economist that suggested global net exports may be much larger than global net imports. They admit this could be caused by flawed data collection methods but it got me thinking about leverage.
wood i agree it will happen. and it is inevitable. but to end like this? with germans who by the way run an even bigger socialist ponzi then amerika does. just calling it quits. now? why? it makes no sense. the entire world is run on ignorance and the power to print the control of it. austerity is the end of power. i just dont see it.
Germans run a social ponzi but have one of the largest foreign account reserves and trade surplus? Right… they are being asked to bailout all of Europe because they don’t have money lol
try having a military. the german utopia is based on protect me. the amerikan war machine is an abomination. but you think germany would have anything without it? good luck with that idea.
Are you selectively ignoring the fact that this entire debacle/failure of capitalism was (likely) engineered by the bubble masters in the United States? You can’t tell me that the majority of this derivative exposure isn’t the Goldman’s selling unregulated assets.
This is where I can’t stand arguing with (selective) Americans. Why does everything have to come down to “but we have a military”. I’ve got a big dick, but I don’t end every argument/discussion I have at work with “I’m right simply because I have a big dick”. I know this is the fundamental basis of American learning, teaching, and history, but its time to change. Modifying the very morals your country has observed doesn’t make you communist or socialist, it makes you a humanist within a capitalist system. Germany doesn’t need a massive army because they focus on self, not attempting to control the entire world if they disagree with their society’s morals – which are fundamentally flawed.
I apologize to most Americans for my tone, but sometimes frustration reigns supreme.
That’s an intersting interpretation, however, its flawed. Successful economies are produced by international trade (i.e., exploitation of comparative advantages– cf. Ricardo) that is in turn protected by rule of law agreements.
Rule of law does not exist in international trade without strong militaries willing to enforce it. There will always be bad actors looking to take shortcuts to benefit themselves or their nation states. To think that Germany somehow escapes this verity by in essence outsourcing its security needs to the US defense umbrella is tragically naive.
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you all MUST watch this kyle bass presentation. Not only is he brilliant but he has his money where his mouth is. He goes through all the math on US, EU and Japan and it’s fuckin awesome that he does so in public fashion. When I grow up I want to be this guy. He’s a true boss.
http://www.youtube.com/watch?v=WWgtzwqWh60
I hope you guys aren’t managing your book based on Schiff’s analysis. The guy’s been saying the same thing for 20 years.
The point is the US will never have a day of reckoning unless the entire world is in flames. At that point who cares about US debt? You will be too busy trying to kill your nieighbor to get his supplies. I keep hearing about this “day of reckoning” for the US yet no one explains the mechanics at all. It is just some ominous sounding threat people like to repeat. And didn’t iceland default by inflation? The exact opposite of austerity. Austerity is equivalent to a voluntary depression with spiraling lower tax revenues. The system in europe needs major changes due to trade imbalances. Default and austerity is a short term fix. The imbalances will remain.