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New translation, the Magna Carta

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capitalism without bankruptcy is like catholicism without hell

Worth a scan. Why am I always surprised when someone talks even approximate sense?!

“The global debt crisis, of course, is nothing new.

“Since the dawn of time, men have been lending other men money (or other things of value) and not getting them back.”

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will spain’s right wing have the cajones to dump the euro?

“Too much virtue has become a collective vice...”

“The Rajoy team hopes this will be a replay of 1996 when the party took over a prostrate economy from the socialists, and unemployment was almost as high. It tightened then with Prussian discipline, stunning Europe by meeting the entry terms for EMU.”

another socialist government destroyed - in spain

I don’t think Spain is in a particularly bad place - Spain now has a right-wing government with a very strong mandate.

This may amuse: Eurozone debt web: Who owes what to whom?

  Foreign debt per person Govt debt to GDP
Spain: €41,366 67%
France: €66,508 87%
Portugal: €38,081 106%
Ireland: €390,969 109%
Italy: €32,875 121%
Greece: €38,073 166%
Japan: €15,934 233%
Germany: €50,659 83%
USA: €35,156 100%
UK: €117,580 81%

related material
EMU (European Monetary Union) and inflation – a civil liberty issue

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could the euro chaos bring down the german economy?

“...But now they seem to be taking their money out of EMU altogether. US Treasury (TICS) data shows that the money is going into US Treasury bonds as the ultimate safe-haven.”

“Germany's exposure to the crisis is already huge, and the strains can only get worse as the eurozone tips back into recession. The Bundesbank is so far liable for €465bn in "Target2" payments to the central banks of Club Med and Ireland for bank support. Hans Werner Sinn from the IFO Institute said this is a form of back-door eurobonds that leaves German taxpayers on the hook. "The current system is dangerous. It is prone to a gigantic build-up of external debts," he said.

“The Bundesbank is final guarantor behind €180bn in bond purchases by the European Central Bank, a figure still rising fast as the ECB buys Italian and Spanish debt.

“On top of this, Germany is liable for its €211bn share of Europe's EFSF rescue fund, as well the original Greek loan package. If the eurozone broke up in acrimony with a clutch of sovereign defaults and a 1930s-style slump – already a "non-negligeable risk" – the losses could push German debt towards 120pc of GDP.”

Marker at abelard.org

I was also interested in this article. Liam Halligan is fingering the same mechanism that I started cataloguing nearly fifteen years ago.

“Far more importantly, once the ECB has bailed-out profligate governments once, the same countries will over-borrow all over again a few years down the line. The markets will eagerly lend to them too, such loans combining a lucrative yield with a de facto ECB guarantee.”

elated material
EMU (European Monetary Union) and inflation – a civil liberty issue

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buffet plunging into the stock market, big time

“Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) invested $23.9 billion in the third quarter, the most in at least 15 years, as he accelerated stock purchases and broadened the portfolio beyond consumer and financial-company holdings.

“Berkshire bought almost $7 billion of equity securities in the three months ended Sept. 30, compared with $3.62 billion in the second quarter and $834 million in the first, the Omaha, Nebraska-based company said Nov. 4 in a filing. Stockholdings labeled “commercial, industrial and other” soared 62 percent in the three months to $17.4 billion on a cost basis, surpassing equity investments in financial and consumer-product firms.”

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will the efsf fund need its own bailout?

“The spreads on EFSF 5-year bonds have already tripled to 151 above German debt, leaving Japan and other early buyers nursing a big loss. The fund suffered a failed auction last week, cutting the issue from €5bn to €3bn on lack of demand.

“Gary Jenkins from Evolution Securities said the “frightening” development is that the EFSF is itself being shut out of the capital markets. “If it continues to perform like that then the bailout fund might need a bail out,” he said.”

And a toy to play with - just how deep is the euromess.

Finally, a tongue-in-cheek explanation:


2:49 mins

end note

EFSF
European Financial Stability Facility

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the dangerous economic delusions of france and germany

“Mr Draghi will have to bide his time. A former Goldman Sachs banker who learned his economics under Robort Solow at MIT, he is a New Keynesian soulmate of the Fed's Ben Bernanke, rather than the "hard money" doctrines of Jean-Claude Trichet.”

France and Germany are making similar error to those causing the great depression.

“When the facts change, I change my mind. What do you do, sir?
    Reply to a criticism during the Great Depression of having changed his position on monetary policy, as quoted in Lost Prophets: An Insider's History of the Modern Economists (1994) by Alfred L. Malabre, p. 220

Marker at abelard.org

"Just as worrying, the spread between French bonds and German Bunds
reached a post EMU-high of 130 basis points earlier in the day. France
has been hit by a trifecta of worries: French banks' €400bn exposure
to Italy; a recession that will almost certainly cost the country its
AAA rating, and perhaps two notches according to Standard & Poor's;
and plans to leverage the EU's bail-out fund EFSF to €1 trillion by
using it as a "first loss" insurer. "What people are worried about is
the contingent liability for France of bailing out the eurozone," said
Jacques Cailloux from RBS" [Quoted from telegraph.co.uk]

Germany and France were bailed out by America after the last great war. Now they hope to get at least one euro on the euro, or perhaps even more if the economies become deflationary.

Germany has had close to a free ride on its defences, while it was helped to rebuild its economy.

Germany cannot run a surplus unless others run deficits.

France tried to deflate its economy during the 1930s as a matter of vanity. Even then, Keynes warned that to continually squeeze the poor in favour of the rentiers was a foolish policy.

“Thus inflation is unjust and deflation is inexpedient. Of the two perhaps deflation is, if we rule out exaggerated inflations such as that of Germany, the worse; because it is worse, in an impoverished world, to provoke unemployment than to disappoint the rentier. But it is necessary that we should weigh one evil against the other. It is easier to agree that both are evils to be shunned.[...].”
[Essays in Persuasion, p. 75 - Social consequences of the changes in the value of money, 1923]

Buying East Germany may have been accepted, but buying Greece or Italy is unlikely to go down quite so comfortably.

Lost Prophets: An Insider's History of the Modern Economists by Alfred L. Malabre
Lost Prophets: An Insider's History of the Modern Economists by Alfred L. Malabre

£24.94 [amazon.co.uk]
Beard Books,U.S., pbk, 2003
ISBN-10: 1587981807
ISBN-13: 978-1587981807

$34.95 [amazon.com]
Beard Books, pbk, 1994)

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on the eurozone financial shenanigans

is the real problem greece - or is it germany?

Is there any other fossil media writer who actually understands what is collapsing the euro chaos?

“Albert Edwards from Société Générale said the ECB will have to act, over a German veto if necessary. "The increasingly frenzied attempts of eurozone governments to persuade financial markets that they can draw a line under this crisis will ultimately fail."

“The impending threat of a euro break-up will force the ECB to begin printing money, very reluctantly joining the global QE party. The question is whether Germany will leave the eurozone in the face of such monetary debauchery," he said.”

Marker at abelard.org

It is not a loss of sovereignty to leave government financial decisions to Germany

The lefty’s spin is now well underway.

Meanwhile, the ECB sets about printing money while pretending not to.

If they meant what they say (they don’t!) they would be making the same errors made in the Great Depression, especially by France - generating a deflationary currency. That would mean debt rising as the currency strengthened.

And so Britain is missing the bus again. We are to have a two-speed Europe 17 countries ruled from Germany, and an outer rim - perhaps we should call it EFTA.

Marker at abelard.org

the chinese want to buy the inner core at sale prices

“French President Nicolas Sarkozy said he would call his Chinese counter-part Hu Jintao on Thursday to garner support.

“Beijing will almost certainly impose terms, renewing its demand for open-door access for Chinese state firms investing in EU industry and for an end to Europe's veto on "full market status" for China under global trade laws.”

Will the following volunteers step forward?

“The summit has sketched bigger haircut for banks and private holders of Greece's €346bn debt, though it may not prove to be Mrs Merkel's 60pc target. The banking lobby has proposed a last-minute compromise to head off a hard default. So long as the deal is "voluntary", it does not trigger credit default swaps and is easier to control.”

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it ain’t the fault of central bankers

The complainers have the wrong target. It isn’t central bankers who pressured the banks to make cheap loans to the impecunious.

It isn’t central banks who forced the incompetent to borrow beyond their ability to repay and control their own debts.

It isn’t central bankers who run the government cartel schools which don’t teach basic economics.

It isn’t central bankers who try to buy votes with borrowed money.

It isn’t even the central bankers who make Far Eastern cultures save to the extent that money gets cheap in a globalized economy.

Meanwhile printing money does not ‘keep interest rates’ low, the market does that by supply and demand. Printing money forces interest rates up, not down. As lenders seek compensation for the inevitable ensuing inflationary effects.

I get a mite peeved by the whining at central bankers, who then do the best they can to help the country to make painful adjustments.

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