The € EURO thread

[Toro]

Not true.

It is true that the Maastricht Treaty has been shredded by the likes of France and Germany, but that's not the fundamental problem. The fundamental problem is that there is no mechanism to counter-balance economic pressures within the eurozone.

For a currency union to work, when one region is economically depressed and another reason is booming, there must be some transfer between regions. In a well-functioning currency union, labour would flow freely from the depressed region to the booming region, and/or money flowing from the booming region to the depressed region.

The EU has a free market in labour but in practice, there are significant cultural barriers to the mass movement of labour from one region to another. A third of Greece is not going to move to Germany for example. And apart from the CAP and some infrastructure spending, there isn't much in the way of transfers from the rich to the poor areas, at least not in the scale required. Social programs that could alleviate the depressed region are funded mainly by national governments, not from Brussels, when what is needed is for the Germans to fund the Spanish unemployed.

This is why the eurozone was destined to fail. Economically weak regions need to be subsidized by the strong areas. Or the economically weak areas have to become more productive and efficient. The problem is thus a political one, not an economic one. But you have to either convince the northern countries to subsidize the southern countries forever, or the southern countries have to become more like the north, which is highly unlikely.

The capital transfer is happening independent from € and EU has mechanisms (funds) to support poorer regions within the EU. Long before € was introduced.
It equals € 347 billion for current budget period of the EU.
Structural Funds and Cohesion Fund - Wikipedia, the free encyclopedia

German economy has been 2nd biggest capital exporter in world since 1990's after China. Only 24% of what has been generated in Germany has been reinvested in Germany. The rest went to foreign countries, also to the southern EU countries. Germany had the 2nd lowest growth within the EU since 90's and between 1998-2005 wages in Germany decreased in relation to the EU by 18%. The wages didn't really decrease but the wages elsewhere in EU skyrocketed.
Source is from IFO, which makes tax estimates for German Finance Ministry for next fiscal years.

In the meantime, Germany introduced some very painfully reforms and catapulted a 2-3rd world country (East-Germany) into a situation where infrastructure is even better than in West-Germany.
Countries like Greece meanwhile were on a big siesta could refinance with much lower costs on the markets (€) and overplayed (debt) by continuously violating the stability pact (Maastricht).
Now they're bankrupt, money is re-entering Germany with very positive effects (lowest unemployment since re-union with East-G.) and now those unproductive countries call for bailouts, Eurobonds.

I live in Germany and there is strong opposition to such kind of adventures and people think, that the other countries should go into austerity and make reforms, just like Germany did.
It is clear, that the German economic-system is one of most successful if not most successful in whole Western world. Like in evolution the fittest survive and there's no reason to continue uncompetitive habits and systems - and clearly not bailing them out for them to continue the same way.

€60 billion a year isn't enough to mitigate the pressure in the south.

Germany an exporter of capital is what one would expect from a country that runs a trade surplus with its partners. Half of Germany's exports go to the rest of Europe, which is no surprise because Germany is more productive than the south. When countries use the same currency, the relative price of the more productive country falls and the relative price of the less productive country rises. This is the fundamental problem with the eurozone. The more productive economy is more competitive and the less productive economy is less competitive. Thus, the productive north sells more than the unproductive south. To alleviate the pressures in the south, either capital has to come in or labour has to go out.

Equity capital flows are not a problem - the investor takes the loss if it goes sour. Debt isn't a problem either if the lender is willing to take a haircut on their debt. But the Germans and French banks don't want to take the requisite haircuts because they risk insolvency. They want their money back. Well, that's not going to happen. Banks have already started to take haircuts on Greek bonds and eventually will on lending to Italy and Spain.

Capital came into the south primarily through lending. German banks had excess capital deposited by German companies making lots of money selling to their European neighbors. German banks then lent it outside of Germany because their home market is stagnant - the population isn't growing and consumption is relatively weak. Much of that money went into funding a speculative boom in Spanish real estate. For a time, more homes were built in Spain than were built in France and Germany combined, which is nuts given that Spain has a population a third that of the two. But, like housing bubbles around the world, it went bust, and the banks are holding a lot of bad loans they don't want to recognize.

This situation is untenable. For a currency union to work, there must be sufficient funds transferred into the depressed region, or a sufficient amount of labour must leave. Even if all the debt is wiped out, the fundamental problem is not solved because it will happen again (unless German and French banks want to continuously underwrite bad loans to the south).

The euro will not survive as is. I believe it will survive in some form but either members will leave or there will be a tighter political union. The problem goes away if there is a tighter political union that facilitates the flow of capital from the north to the south. But it is hard to see that happening.

 

[Toro]

Portugal cut to junk.

Fitch cuts Portugal credit rating to junk status - MarketWatch

 

[ekrem]

€60 billion a year isn't enough to mitigate the pressure in the south.

Germany an exporter of capital is what one would expect from a country that runs a trade surplus with its partners. Half of Germany's exports go to the rest of Europe, which is no surprise because Germany is more productive than the south. When countries use the same currency, the relative price of the more productive country falls and the relative price of the less productive country rises. This is the fundamental problem with the eurozone. The more productive economy is more competitive and the less productive economy is less competitive. Thus, the productive north sells more than the unproductive south. To alleviate the pressures in the south, either capital has to come in or labour has to go out.

Since € was introduced the relative share of €-countries within Germany's foreign trade-volume decreased to 41% from 43%.
There's a misconception that Germany is only a leading exporter because of the €-system. No, it does well generally on the world-market.
After Finland Germany has the lowest interconnectedness-rate within the €-system when it comes to intra-€ trade.

(Prof from University Frankfurt writing for Frankfurter A. Zeitung).
Krise der Währungsunion: Der Euro ist nicht unser Schicksal - Europas Schuldenkrise - FAZ

 

[ekrem]

Germany is world's 2nd largest exporter. It exports more then USA.
Germany has the world's 3rd largest trade-volume.
List of countries by exports - Wikipedia, the free encyclopedia
All with just 82 Million people.

In sectors like Machine and Engineering it has a world-market share near 20%.

http://www.gtai.com/fileadmin/user_...Overview_MachineryEquipment_June2011_GTAI.pdf

 

[Trajan]

The average Italian is wealthier than the average German.
They should tax their people, they don't need bailouts or securities from Germany.

uhm, hello, the Italians have the largest underground economy in the EU already, rasikng rates won't work, they need to revamp the tax code and get more people paying less than the present rates, over time that will correct the underground economy, and increase revenue.

 

[ekrem]

Real wages in Greece have risen by 40% between 2000-2008:
Reallöhne: Griechen mit größtem Plus der EU-Staaten - Ausland - Politik - Wirtschaftswoche

Real wages in Germany, where red line represents real-wages and 2006 the basis of 100 points:
Since 1991

Between 2000-2008:
Germany is the only country where real wages decreased.

Now people are speaking of a "golden decade" for exports.
So, what's so special about the other €-countries that justifies wage-increases and government-spending on unproductive models and debt?

 

[Trajan]

Real wages in Greece have risen by 40% between 2000-2008:
Reallöhne: Griechen mit größtem Plus der EU-Staaten - Ausland - Politik - Wirtschaftswoche

Real wages in Germany, where red line represents real-wages and 2006 the basis of 100 points:
Since 1991

Between 2000-2008:
Germany is the only country where real wages decreased.

Now people are speaking of a "golden decade" for exports.
So, what's so special about the other €-countries that justifies wage-increases and government-spending on unproductive models and debt?

this is; > The € EURO thread

what is the point you are trying to make?

 

[Toro]

I'm reading this piece with data from ECB on banks. In the US, the loan to deposit ratio is 73%. In the eurozone, it is 108%. Deposits as a percentage of bank financing in the eurozone is 54%. It is 76% in the US. The ratio in the US has fallen by 20 points since the financial crisis. This is because the US banks have deleveraged and decreased their reliance on wholesale financing, i.e. the capital and interbank markets.

 

[ekrem]

this is; > The € EURO thread

what is the point you are trying to make?

The € is under stress. The reason is the debt-situation of the €-countries and disproportional spending (debt) in relation to actual economic situation.
I asked what justifies this kind of real wage increases in those countries with such kind of problems without any significant performance either in productivity or exports. And as counter example I showed the situation in Germany, the country which is ultimately to save the €.

Germans have stagnant real wages, and had painful reforms. Yet, they didn't go onto streets and demonstrated like the crisis-countries now do who take it as granted to be bailed out and who are not really willing to go the way of austerity,. but are expecting for German bailout.

I think my points are relevant, so what's the point you're trying to make ?

 

[Trajan]

this is; > The € EURO thread

what is the point you are trying to make?

The € is under stress. The reason is the debt-situation of the €-countries and disproportional spending (debt) in relation to actual economic situation.
I asked what justifies this kind of real wage increases in those countries with such kind of problems without any significant performance either in productivity or exports. And as counter example I showed the situation in Germany, the country which is ultimately to save the €.

Germans have stagnant real wages, and had painful reforms. Yet, they didn't go onto streets and demonstrated like the crisis-countries now do who take it as granted to be bailed out and who are not really willing to go the way of austerity,. but are expecting for German bailout.

I think my points are relevant, so what's the point you're trying to make ?

The € is under stress. The reason is the debt-situation of the €-countries and disproportional spending (debt) in relation to actual economic situation.

*shrugs* ...you should have just said so.

my point is this was all preordained, due to the political nature of the Euro at its inception and the hide the salami what institutions are flat on their asses is just stringing the pain out.

the euro was dead the day it was created, the funeral is coming, it should be tomorrow.

 

[Toro]

Ekrem is correct. Real wages have risen too much in the south relative to the north. The EU does not have the institutions to address the imbalances that have arisen. That's the political problem you correctly identified.

 

[Trajan]

Ekrem is correct. Real wages have risen too much in the south relative to the north, and the EU does not have the institutions to address the imbalances that have arisen.

uhm....ok. Oh and pension costs..lets not forget those.


oh, and, who are you talking too btw?

 

[Trajan]

* NOVEMBER 25, 2011

Options Dwindle for Euro Crisis



The biggest question in Europe isn't what it was a few weeks ago. It is no longer just whether any of the 17 governments in the euro zone will default on its debts; increasingly it is whether the euro zone will survive in its current form at all.

On Thursday, it emerged that the European Central Bank is considering a dramatic extension of its longest loans to commercial banks, to stave off a potential collapse of the bloc's banking system.

Meanwhile, leaders of the Continent's three largest economies met and pledged to work toward the closer political and economic integration most analysts say is needed—but with no specifics, meaning the pace for such efforts still lags behind the market's demand.

Germany's failure to sell almost 40% of a €6 billion ($8 billion) bond issue at an auction Wednesday is, many analysts say, symptomatic of this new phase of the crisis, with investors beginning to question even the bloc's safest harbors.

Some experts think the poor auction result has been over-interpreted; they note that German yields remain at historic and healthy lows and that demand for them may momentarily be weakened by the recent flight to them from the increasingly risky bonds of their southern neighbors.

But on Thursday, concern over German bonds drove their yields up to near-convergence with the U.K.'s sovereign debt, which has no clear advantage beyond not being in euros. In recent weeks, borrowing costs for financially strong euro-zone governments such as the Netherlands and Finland have increased. Other high-rated European bonds—such as those for the European Financial Stability Facility—have struggled to find buyers.

If the first phase of the crisis saw investors fleeing from the periphery of the currency union to its core, the second has them fleeing the euro area altogether.

more at-
Options Dwindle for Euro Crisis - WSJ.com

 

[ekrem]

the euro was dead the day it was created, the funeral is coming, it should be tomorrow.

Behind the EU and € are not only economic interests but enormous strategic interests.
It's not dead because you wish it to be dead.

Forget Greece, read about corruption in Romania and Bulgaria who are already EU members and should one day enter €-zone. There's significant mentality differences in some parts of Europe.
States need to be organized in an effective way and they need to increase tax revenues, EU has major plans from common defense policy (Army) to achieving the switch to green energy. All which needs money.
No dolce-vita or corruption, and for this to happen there is no path other than centralization.

German Finance Minister:

“We can only achieve a political union if we have a crisis,”

http://www.nytimes.com/2011/11/19/w...opes-crisis.html?_r=4&pagewanted=2&ref=global

I wouldn't bet on €'s "funeral". It's more likely, that €-zone will transform from a union of equals to a union controlled by the heavyweights. If the smaller states don't like it, they'll have to leave €, go bankrupt and will be bought anyway by the heavyweights.
In some parts of €-zone they already can't pay the social benefits without next payment tranches from EU-IMF, and their governments have been replaced by technocrats who do as they're told to do.

 

[ekrem]

Germany's failure to sell almost 40% of a €6 billion ($8 billion) bond issue at an auction Wednesday is, many analysts say, symptomatic of this new phase of the crisis, with investors beginning to question even the bloc's safest harbors.

Options Dwindle for Euro Crisis - WSJ.com

Since €'s introduction it has happened 12 times already, that Germany couldn't sell her bonds completely. On 4 occasions Germany sold less than 65% of the volume it paced for sale. The 10-year interest was very low, lower than inflation.
At a higher interest there would've been more demand.

I posted it also in another thread:
Germany also brought 3-month bonds to the market this month.
0.08% interest.
Krisenprofiteur: Deutschland*kann sich fast umsonst verschulden - SPIEGEL ONLINE - Nachrichten - Wirtschaft

Why should investors continue to buy such kind of bonds when they can buy other European bonds with much higher interest for which ECB&Germany indirectly stand as security (Greek bailout).

 

[Political Junky]

The euro is down to $1.33.

 

[PeteEU]

It is a problem for the same reason why it is a problem in Italy and Greece - the Spanish economy is not productive enough to grow at a fast enough rate to outgrow its debt.

The fact that Spain's debt would "only" be 80% of GDP isn't particularly relevant. There is no magical threshold that a nation crosses when it suddenly becomes a problem. Countries have defaulted when debt to GDP was 60%. At other times, countries have not defaulted until debt has reached 130%. Reinhardt and Rogoff have estimated that on average, a nation becomes vulnerable when debt hits 90%, but default can occur at much lower or much higher levels. Japan is much higher and they have not defaulted. It depends on the vagaries of the market. And when the market stresses, the first to go are the weakest. Spain is highly-indebted weak economy that uses a German currency. That is a bad recipe.

And you dont get it...it is relevant the % of GDP numbers. They are the numbers being used to drive markets and countries into the ground by the media and the big financial institutions because they are easily digestible by the Joe Public. And the longer the crisis goes on because of lack of consumer demand and out right depression in the consumer mind, the more money some people are making....

Also we are still in the economic crisis started in 2008! The Spanish economy is weak, just like pretty much every economy because of the ramifications from the 2008 US sub-prime crash. Spain grew 4% or so in 2007 and had a massive budget surplus! Granted that was on the backs of the building boom, but still it grew.

The problem is people like you seem to think that Spanish, Italian and so on economies will be flat lining and not growing at all forever. How realistic is that? Already the crisis has brought key changes in Spanish labour and business law, and with the new conservative government I suspect even more are on the way.

Left-wingers whine about the market and don't understand it. It wasn't an issue for the past 20 years because the market did not perceive it to be an issue. It's not surprising that it is happening now because the market is figuring out the illogic of the eurozone as constructed. It didn't matter when debts were lower and growth was higher. It is happening now because the market has decided to make it an issue now.

And right wingers think the markets are the best thing since swiss chocolate... which is also a load of bullshit as we have seen time and time again when the supposed "free markets" have screwed up.

The market fear on debt is highly biased towards certain nations and areas of the world and that is solely due to the Anglo-American influence on the financial world. Look at yesterday... Thanksgiving in the US.. the world markets are still up and running, but the financial TV stations (owned by Americans) cant be bothered to show European market moves but show repeats of documentaries of mostly US companies and thanksgiving shows... who the FUCK cares about some stupid American holiday... the markets are open and should be reported from.

The illogical part is the markets, they do not behave as they should because of huge bias towards the Anglo-American sphere of influence. For the love of god, the UK and US have massive deficits and zero plans to fix them and their debts are rising faster than anyone else (even Greece) and they still have some of the lowest yields out there... how logical is that?

In times of stress, the first to get cut off from the capital markets are the weakest credits. We are in a time of stress because European banks have too little equity and European countries have too much debt and not enough growth. When things are good, the cracks can be papered over. When things turn bad, those cracks get exposed. Overlay that with the internal illogic of the eurozone and you have a sovereign debt crisis.

Hog wash excuses for a broken market. European banks have plenty of equity on average, not to mention they will always have the backing of the national government when it comes to peoples money in the banks, and as for European countries having too much debt and not enough growth.. then answer me this..

Why is the UK having some of the lowest yields on the books, and yet its growth is basically negative since the only thing that made the UK economy grow last quarter was government spending.. and its deficit is at record highs as is its lending...

And you forget yet again.. we are in an economic crisis thanks to the 2008 US sub-prime crash and in crisis there is no growth since the average person does not have the money or/and faith to go out and consume, which like it or not is a huge portion of most economies.

The euro as designed was destined to fail. The math and logic of it - despite the protestations of dreamy-eyed idealists - does not work. It is fundamentally flawed economically.

No, it is flawed politically. The political aspects were not put in place for it to act like it should on an economic scale. That is fixable if the will is there. And dont bring math and logic into a political discussion, since you will loose every time. The Euro does work up to a point and it is up to the dreamy-eyed idealists to take it to the next level... question is if they are willing to do that. Considering the benefits of the Euro, then I hope they do and ignore the Anglo-American "experts" who are against the Euro and who have a vested interest in seeing it go away... world economic domination.

It can work if the more productive north decides to subsidize the less productive south forever, or if the south becomes as productive as the north (and that's not going to happen). So if the German, Dutch and Finnish taxpayer wants to send their money south forever, or if the Spanish, Italians and Greeks want to be as productive as the north, then the euro experiment can work. Otherwise, it will fail as is. And it is failing now.

Sorry but this text book bulllshit that has no sense of reality. The very idea that Germany and the other northern "non Eurozone" countries some how have been "bailing-out" the South for a long while is utter bullshit. If you had any clue on the Italian bond market, and on the situation in Spain then you would know otherwise.

The problem in Spain is the labour market. It is very un-flexable. In Italy it is closed industries, that does not allow new members and hence competition. But like it or not, Northern Italy is competitive and productive as Germany even with this handicap. Fix these issue and you will change everything, something that the doom and gloom right wingers in the UK and US funny enough forget to mention.

BofA is undercapitalized, but the American banks - including BofA - have raised hundreds of billions of dollars in equity and have removed hundreds of billions of dollars of bad assets off their books. They are far, far better off than the European banks today. This is not seriously debated by anyone.

Yes they have the ability to dump their bad assets on the US tax payer... If it had not been for Fannie and Freddie, then the US banks would be in a real shitter.

The European banks, for the most part, denied there was a problem, and resisted raising equity. Now, they are woefully undercapitalized. Dexia is done. The Landesbanks in Germany are essentially insolvent. The Spanish banks are bouyed by their Latin American assets but have their heads in the sand regarding their domestic market. The Greek banks will be on life support.

The Spanish banks dont have their head in the sand.. quite the opposite. As for the rest. utter bullshit propoganda. Dexia is gone.. so fucking what? America looses banks almost daily lol. And Dexia is not gone per-say but sold off... that is how the markets work.. Landesbanks in Germany are insolvent? HAHHAHA. You do know what Landesbanks are right? Are you saying that the German state is now insolvent?

And Italian banks are dumping their Italian bonds.

And this shows you have no clue on what is going on.

European banks have been playing Pretend for some time now. They have refused to shop their pools of assets because it would have required them taking marks on the loan books, which would have demonstrated they are woefully undercapitalized. So they pretended there wasn't a problem. Now the market is forcing them to dump their assets and shrink their balance sheets, and the banks hoping to buy enough time to find a solution. They have to because they are shopping their best assets. The best assets will get sold and the shittiest assets will get dumped on to the balance sheets of the states.

You do realise that you can exchange European with American right? You claim we have been ignoring our problems, when America is the country with a clusterfuck political system that cant agree on anything, has a huge deficit, massive debt on every level of government, and a massive personal debt of its citizens, and you say we are ignoring our problems? They are small compared to the hole the US is in and is ignoring totally by shifting focus to Europe and random war.... at least our personal debt levels in Europe are pathetically low (minus the UK) when compared to the US.... and yes that is important... very important even with our government debt levels.

I'm not the one claiming sainthood. But we've gone through the fire, we've taken our medicine, and we aren't blaming anyone else.

What medicine lol? Nothing has changed in the US. No new regulations to prevent the crap happening again, no break up of the "too big to fail" banks (they have in fact gotten bigger and even more dangerous), zero consequences for those who created and caused the crisis and more and more secret subsidy payments to the banking sector via tax breaks, and Fannie and Freddie. So what "medicine" did you exactly take... kicking more people out on the street, making more people poor in the US?

You're the one blaming your problems on others, brushing Europe's internal problems aside as if they are easily solvable - "Oh, Italy will be fine once it liberalizes its labour markets." Yeah, good luck with that. Your banks are woefully undercapitalized and they resist doing anything about it. Don't blame others if you got sold. You sucked up the easy credit. You bought the store. That's on you.

Oh it is on us, but we did not start the cheap credit craze nor the current economic crisis... that is what we blame rightfully on the US.

And yes it is easy to fix if given time. I have seen it done in Denmark and am seeing it being done in Spain. 5 years ago changes to the Spanish labour market laws would have been political suicide for any side of the political spectrum, but now both sides and the unions even are talking about it and have implemented changes. It can be done. What you want is changes over night, and that is impossible even for the US.... well especially the US. You have trillions you need to cut from your budget and yet you cant even agree on basic common sense cuts without making it into a political clusterfuck of a political ideology fight.

Yeah, right. Get back to us when the IMF is involved in bailing out America like it is in Europe.

The IMF wont bail-out the US.. cant afford it. Which is in part why the world seems to ignore for now the big elephant in the room and its problems.

The sad thing is, when Europe fixes its problems, then we still have to deal with the collapse of the US... guess we got to take one problem at a time.

 

[editec]

One of the better discussion happening on this board.

Thanks for your input boys.

Clearly you're paying closer attention to the machinations of Europes debt crises than I am and I appreciate your POVs about it.

and its pretty much 'contention' free

Well there's differences of opinion regarding the issues at hand but at least the debate is about the issue, and it hasn't devolved into two or three clueless people trading personal insults.

If I can weight in here about this issue?

We have too much paper that represents assets that were overvalued.

SOMEBODY is going to have to take a haricut sooner or later.

If, as has been suggested, the Euro banks refuse to acknowedge that the debt insturments they are holding ar over valued?

The market is going to take them to school.

 

[Toro]

Ekrem is correct. Real wages have risen too much in the south relative to the north, and the EU does not have the institutions to address the imbalances that have arisen.

uhm....ok. Oh and pension costs..lets not forget those.


oh, and, who are you talking too btw?

I'm talking to both of you. You both have hit the problem correctly.

Ekrem is correct because he has boiled down the fundamental problem in one sentence - southern wages are too high relative to their productivity. You've hit the political problem since the eurozone as originally configured did not create the institutions to deal with the imbalances within the eurozone.

 

[Toro]

And you dont get it...it is relevant the % of GDP numbers. They are the numbers being used to drive markets and countries into the ground by the media and the big financial institutions because they are easily digestible by the Joe Public. And the longer the crisis goes on because of lack of consumer demand and out right depression in the consumer mind, the more money some people are making....

Weird conspiracy theories about the press and financial companies conspiring to drive countries into the ground undermines your credibility, just as it does when you evoke the same conspiracy theories about ratings agencies.

It appears that you either did not read or you did not comprehend what I wrote since I cited debt levels to GDP. There is no magical threshold at which countries run into financial stress. Some countries have defaulted at 60% debt to GDP, others not until 130% or higher. The European countries are in the danger zone. The fact that they have gone a long time with high debt levels is not relevant. What is relevant is that it becomes an issue when financial markets are under duress.

Also we are still in the economic crisis started in 2008! The Spanish economy is weak, just like pretty much every economy because of the ramifications from the 2008 US sub-prime crash. Spain grew 4% or so in 2007 and had a massive budget surplus! Granted that was on the backs of the building boom, but still it grew.

The problem is people like you seem to think that Spanish, Italian and so on economies will be flat lining and not growing at all forever. How realistic is that? Already the crisis has brought key changes in Spanish labour and business law, and with the new conservative government I suspect even more are on the way.

Spain grew as strong as it did because it had a massive building boom. Spain had its own housing bubble. Spain feasted on easy credit. Spain crashed because of Spain, not because of the US. Germany didn't crash because of the US because Germany didn't have the structural imbalances Spain had. But Spain did have the structural imbalances, so it crashed. That had nothing to do with the US.

And nobody said that they didn't expect the Italian and Spanish economies to not grow forever.

The illogical part is the markets, they do not behave as they should because of huge bias towards the Anglo-American sphere of influence. For the love of god, the UK and US have massive deficits and zero plans to fix them and their debts are rising faster than anyone else (even Greece) and they still have some of the lowest yields out there... how logical is that?

Until a few days ago, Germany had lower yields than the US. Japan has lower yields than the US. That's partly because Japan has its own currency and the ECB is an extension of the Bundesbank. Yields are rising in Europe because the rot is spreading from the periphery to the core as markets perceive that French and German governments will eventually have to bail out the PIIGS. The euro is like the old gold standard to the peripheral nations. Investors see defaults and no ability to affect monetary policy.

It's not surprising that US yields are low. The US is the biggest, strongest economy in the world and the dollar is the reserve currency, so this is where investors flee for safety. But you make the mistake in assuming this is not logical because yields are low in the US right now. They might not be in the future. Financial crises start at the weakest links then spread out. There could be a dollar crisis and spike in Treasury yields in the future.

Hog wash excuses for a broken market. European banks have plenty of equity on average,

No, they do not. You are wrong.

not to mention they will always have the backing of the national government when it comes to peoples money in the banks,

But you are probably right here. I expect that if there are bank failures, then the European governments will back stop them. But it is unknown what is going to happen, so investors sell first and banks stop lending to each other, or do so at higher prices, which is what is happening now.

and as for European countries having too much debt and not enough growth.. then answer me this..

Why is the UK having some of the lowest yields on the books, and yet its growth is basically negative since the only thing that made the UK economy grow last quarter was government spending.. and its deficit is at record highs as is its lending...

For two reasons. First, when growth is low, interest rates fall as demand for credit declines. That is standard. The second reason is because the UK uses its own currency. The problem in the eurozone is not just the risk of default but also the inability of nations to be able to respond their own problems. The logic of the eurozone does not work because the PIIGS are subject to German monetary policy. This makes it more likely that the haircuts bondholders would endure would be even greater than if they had their own currencies because they will need to reduce their debts by even more to grow than if they had their own currencies.

And again, you are making the mistake by looking at what is happening right now. British interest rates may be much higher in the future if investors think Britain will default.

No, it is flawed politically. The political aspects were not put in place for it to act like it should on an economic scale. That is fixable if the will is there. And dont bring math and logic into a political discussion, since you will loose every time. The Euro does work up to a point and it is up to the dreamy-eyed idealists to take it to the next level... question is if they are willing to do that. Considering the benefits of the Euro, then I hope they do and ignore the Anglo-American "experts" who are against the Euro and who have a vested interest in seeing it go away... world economic domination.

Your arguments would have more credence if you didn't think everyone was out to get you.

As I have repeatedly said in this thread, the eurozone can work if the more productive nations are willing to subsidize the less productive nations, or if the less productive nations become more productive. This is primarily a political problem. But to ignore the math is to ignore reality. The math doesn't work for the eurozone as currently configured. The graves are filled with dreamy idealists.

Sorry but this text book bulllshit that has no sense of reality. The very idea that Germany and the other northern "non Eurozone" countries some how have been "bailing-out" the South for a long while is utter bullshit. If you had any clue on the Italian bond market, and on the situation in Spain then you would know otherwise.

The problem in Spain is the labour market. It is very un-flexable. In Italy it is closed industries, that does not allow new members and hence competition. But like it or not, Northern Italy is competitive and productive as Germany even with this handicap. Fix these issue and you will change everything, something that the doom and gloom right wingers in the UK and US funny enough forget to mention.

Again, you either did not read what I said or did not comprehend it. So I will post it again.

It can work if the more productive north decides to subsidize the less productive south forever, or if the south becomes as productive as the north (and that's not going to happen). So if the German, Dutch and Finnish taxpayer wants to send their money south forever, or if the Spanish, Italians and Greeks want to be as productive as the north, then the euro experiment can work. Otherwise, it will fail as is. And it is failing now.

I don't know if English is your first language or not, but I have highlighted the tenses. I did not say that the north has been bailing out the south, as you claim. I said that the eurozone can work if the north decides to send resources to the south. One is past tense, one is future tense.

The eurozone can also work if the south becomes as productive as the north. I agree with you regarding Spanish labour laws and Italian industries. Those are examples of countries becoming more efficient. Will those reforms occur, and will they be enough? I don't know. I doubt it but maybe I'm wrong.

As for the Italian bond market, I know a little bit about it. I know that the €1.9 trillion dollar BTP market is primarily a domestic one. So your bent of this being some Anglo-American conspiracy is pretty silly since it is the Italians who dominate that market.

Yes they have the ability to dump their bad assets on the US tax payer... If it had not been for Fannie and Freddie, then the US banks would be in a real shitter.

They also dumped their shitty loans onto the FDIC, the Fed, and an alphabet soup of programs designed to offload bad loans to investors, and the SEC suspended mark to market accounting. But they were also required to raise hundreds of billions of dollars in capital, sell assets, and recapitalize. For the most part, they did. But this did not happen on the same scale in Europe. So today, European banks are weaker than American banks in general. Of course you can always find one off examples, i.e. BofA, but in aggregate, American banks are stronger.

The Spanish banks dont have their head in the sand.. quite the opposite. As for the rest. utter bullshit propoganda. Dexia is gone.. so fucking what? America looses banks almost daily lol. And Dexia is not gone per-say but sold off... that is how the markets work.. Landesbanks in Germany are insolvent? HAHHAHA. You do know what Landesbanks are right? Are you saying that the German state is now insolvent?

... And this shows you have no clue on what is going on.

Actually, almost all of the people whom we have hired to do the work for us are European. They have been into most of the European central banks and regulatory authorities. We have people on the ground in Spain, France and Germany digging deep into the banks.

And yes, based on their work, the Landesbanks are effectively insolvent if you mark their books to market. The German banks, in aggregate, are the most undercapitalized in the developed world. Of course, surely you understand that doesn't mean the German state is insolvent, since the state can raise taxes and recapitalize the banks. If you're a dreamy euro idealist, this fact facilitates Germany eventually cutting a deal because it's banks aren't strong enough to withstand a tremendous shock to the eurozone system.

What medicine lol? Nothing has changed in the US. No new regulations to prevent the crap happening again, no break up of the "too big to fail" banks (they have in fact gotten bigger and even more dangerous), zero consequences for those who created and caused the crisis and more and more secret subsidy payments to the banking sector via tax breaks, and Fannie and Freddie. So what "medicine" did you exactly take... kicking more people out on the street, making more people poor in the US?

The medicine we took was the write down hundreds of billions of dollars worth of loans, took massive losses, sold assets and raised hundreds of billions of dollars in equity, eviscerating shareholders. That hasn't happened in Europe yet. But it will.

I wish I could disagree with you that things have otherwise fundamentally changed, but I can't.