Central Banks Plan for Possible Euro Breakup as Merkel Focuses on Wrong Issues

The denial about the existential nature of the Eurozone crisis seems to be lifting. The press has featured reports of companies and banks doing contingency planning for the possibility of a Euro dissolution or exits by some member states.

In keeping, the Wall Street Journal tonight reports that even central banks are starting to contemplate what had heretofore been unthinkable:

The first signs are surfacing that central banks are thinking about how to resuscitate currencies based on bank notes that haven’t been printed since the first euros went into circulation in January 2002….

The central banks’ planning is preliminary,…

But the fact central bankers are even studying the possibility, which until this fall was considered unthinkable, underscores how swiftly conditions have deteriorated…

J.P. Morgan Chase & Co. put out a report Wednesday that advised investors and companies to hedge against a collapse of the euro zone—though the bank said the likelihood of that happening was just 20%. It said many corporate clients were buying currency derivatives to place bets against the euro.

It has been surprising to watch the disconnect between market action and the news coming out of the negotiations. The thing that needs to happen short term as a stopgap is for the ECB to monetize periphery country debt in a serious way. That would buy Europe the time to sort its house out, and in particular, determine how to address the large internal imbalance. Yet the Eurocrats seem to believe the answer lies in even harsher austerity, which is guaranteed to fail to lower debt to GDP ratios. And the news stories of the day show Merkel to be out of touch with priorities, talking about the need for treaty amendments to create a fiscal union, when that is not on the critical path. It has hit the point where the normally voluble Ambrose Evans-Pritchard has been reduced to terse, disgusted-sounding posts, apparently unable to suppress his distaste for what he is witnessing.

I don’t believe in making market calls, but given the big contraction in Italian bond yields on a thin gruel of news, professional investors seem keen to seize on any shred of good news to goose markets, especially since the year end is nigh. Even if the hoped for Yet Another Big Eurozone Rescue Plan of Friday turns out to be underwhelming, market participants are certain to try to seize on any cause for cheer. And with trading volumes thinning as the year closes, they may be able to keep the levitation game going for a while longer.

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    1. Stephen Nightingale

      Just another German scam. Who stands to benefit from the resurrection of 17 mothballed currencies? Note where the best banknote printing presses are manufactured:

      “We took a close look at all the various press manufacturers,” says Ao Huicheng, chairman of the Board of CBPM. “Ultimately, we are delighted to see (Heidelberger Druckmaschinen AG) Heidelberg won the bid. And we are looking forward to a close partnership with the world market leader for sheetfed offset presses.”

  1. Francois T

    “Yet the Eurocrats seem to believe the answer lies in even harsher austerity, which is guaranteed to fail to lower debt to GDP ratios”

    Whaaaat? On what planet do these idiots live for Pete’s sake. Can’t they even SEE the accumulated evidence of Ireland and the UK already?

    Truth is, I shouldn’t be surprised by the cluelessness, since I just read another phenomenal example by the Bully Numero Uno on Wall Street, a.k.a. Jamie “Da Bandit” Dimon.


  2. 2little2late

    I’m hit with my country-bumpkiness when I read that collapse may be immanent, and instead of thoughts of buying currency derivatives I’m simply glad I have a store of heirloom seeds, acreage, and a dependable spring. It may yet pay to be a simpleton in more ways than I’ve counted.

    1. psychohistorian

      Your bigger question going forward is if you have the ability to defend your “safety”.

      Good luck, whatever happens.

  3. psychohistorian

    I wonder if the EU public really understands that their social safety net is at risk as part of the results of this Shock Doctrine event.

    If they break up it will be like shooting fish in barrel, so to speak, by the global inherited rich and their financial puppets. All investment will be tied to wages racing to the bottom in a world in which consumption is shrinking.

    This could become a genocidal game of musical chairs where the chairs are jobs and now more than one or two will be taken away at a time.

    As I keep repeating, hoping more of the countries in our world get the message:
    Laugh the global inherited rich out of control of “Western Democracies” and into rooms at the Hague where they can be prosecuted for our social degradation. Inheritance and accumulated wealth, property and power need to be dealt with or say good by to big chunks of humanity.

    1. Black Smith

      Fox News reports Europe’s social safety net causing the breakup of the Euro in 5… 4… 3…

    2. Maju

      Obviously all this crisis is major existential threat to the European lifestyle. But I don’t think that the citizenry still understands this well enough: they still expect (hope) that their leaders will solve the problems as they used to do in the past.

      What I do not know is if the banksters want to actually break up the EU, cause massive bankruptcies and lose a major global market. If the EU collapses it will not just hurt Europeans, you know.

      Much less I imagine that they are ready to face the more-than-likely revolutionary challenges that are already arising from this destruction.

      I sincerely feel that the global elites do not have any plan worth that name: they are just plundering while they can and this lack of strategy is actually forcing our civilization into a deep and radical revolutionary phase.

      1. Flying Kiwi

        “they still expect (hope) that their leaders will solve the problems as they used to do in the past.”

        As they expected (hoped) in 1914, 1929 and 1939.

        “I sincerely feel that the global elites do not have any plan worth that name: they are just plundering while they can”

        They are like a cancer that just sees another functioning organ beyond the one its sucking dry and invades it for more sustenance without ever wondering how many functioning organs the host has left to sustain it.

      2. SidFinster

        For better or worse, the citizens of western Europe largely trust their government institutions.

        1. Amateur Socialist

          Not just trust, they actually believe they still exert some control. As Michael Moore observed in his film “Sicko” in the US, people fear government, but in western europe the governments fear the electorate. I don’t think that has completely changed since the film was produced.

      3. rotter

        Anyone who dosent want to sit by and do nothing while the people of the Western World are reduced to pre – 1860 levels of servitude,(but this time WITHOUT a “new world” to exploit, or any kind of “social contract” for a claim on our masters hence “libertarianism”), should be actively seeking to join a radical Internationalist, Anti-Capitalist organization. Capitalism is the gleaming engine of upward wealth redistribution and soon,the most severe political oppresion. The Revolution must be international in scope.

      1. Moneta

        Here in Canada, the average person does not even pay enough taxes during his or her lifetime to cover his or her education costs from 5-20. Never mind health care, infra, etc.

        How has this been possible? The boomer bulge and leverage of course.

        The whole system makes no sense and reality will catch up to us on this side of the ocean too.

        The elite is taking what it can because it knows there is not enough for the 100% the way our economy has been structured. But there is more than enough for the 1%.

        1. LAS

          So many people live vicariously imagining about what life would be like if they were in the 1%, believing there was some finite probability they could actually enter those ranks. The entire society seems to get great entertainment value out of having a 1%. Now we see the price of this foolish daydream.

          1. citizendave

            So many people live vicariously imagining about what life would be like if they were in the 1% — LAS

            I wonder if we are imagining what life would be like if we were rich, or if we are actually imagining what life would be like if we didn’t face the ever-present reality of “work or die”.

            How much of the global economy is actually necessary? Do the unnecessary aspects become possible via capital? A diabolical capitalist would want to devise a system that forces all able-bodied people to devote their entire lives to working to pay the cost of living, in debt until death. The more successful people get to enjoy the fruits of the modern, but unnecessary, capital-infused economy. The less successful people get a bleak struggle to survive, which leads a body to dream of a better life. It leads to buying lottery tickets, drinking too much alcohol, ingesting various medicinal plants — and dreaming of having enough money to avoid the necessity of going to work every day.

            If I were rich, I wouldn’t need a job, and I wouldn’t need to endure neurotic, tyrannical bosses, or co-workers who are mean or ignorant, or risk my life driving to work in a storm to avoid losing my stupid job.

            The requirement to work to pay the cost of living is more a function of sustaining the capitalist economy, than it is necessary, the way eating, drinking water, and breathing are necessary. Living together in a society leads to certain communal necessities, such as fire and police protection, and national defense. And we humans do have noble aspirations, such as improving health, and exploring and understanding the universe. Could we pursue science, and the finer things in life, without the worst abuses of our capitalist system?

            We work to fill the coffers of the rich, while enduring mind-numbing jobs, working until we drop because we’ll never be able to afford to retire. Could some of us, even most of us, live simple lives without remunerative work?

            Could we rearrange our economies so that millions of us could be unemployed for extensive periods, perhaps extending to an entire lifetime, without the dire financial stress that currently accompanies being unemployed? I don’t mind working to feed myself and my family, and I don’t mind working to help my neighbors when they need it. But I’m not at all happy about working to feed the rich.

      2. F. Beard

        No matter what they do, there will be pain. Moneta

        Why? Steve Keen’s general bailout would fix everyone from the bottom up (including savers and the banks). And fundamental reform could prevent the problem from recurring.

        1. Moneta

          One of the big problems we are encountering is one of mega cycles where everyone does the same thing at the same time.

          Everyone buys a house…. so we get an oversupply of real estate brokers with many bad ones. A huge number of people need to get the kitchen redone all at the same time, so we end up with a bubble in cabinet making.

          If everyone gets a big fat cheque, everyone will do the same thing at the same at just create a new bubble.

          And even if we fix anything, the cyles will come back because there will always be a good percentage of the population that wants to be more equal than others.

    3. Calgacus

      I wonder if the EU public really understands that their social safety net is at risk as part of the results of this Shock Doctrine event.

      If they break up it will be like shooting fish in barrel, so to speak, by the global inherited rich and their financial puppets. All investment will be tied to wages racing to the bottom in a world in which consumption is shrinking.

      I don’t think many of them do understand this. The Euro always was a device intended to destroy Europe’s very valuable social safety nets.

      But you have things backwards. It’s already like shooting fish in a barrel, the race to the bottom is on and enforced by the ECB. The Euro is like a mutual defense agreement to replace your national army with … NOTHING. The eurozone states should say we want either Eurozone Army – a common expansionary fiscal policy, whether run by the ECB or not, or we go back to having our own currency, our own army. Might not be as good or strong as a United Europe, but still a lot better than the anarchy of today’s Euro, that leaves all Europeans financially defenseless.

  4. Jackrabbit

    Central Bank contingency planning is to be expected.

    MSM Trumpeting of Central Bank contingency planning seems supportive of the effort to frighten Europeans into a closer union.

    It is so reminiscent of TARP. Paulsen needed $700 billion ASAP with no strings attached of any kind (no judicial review!) or the world would end. OMG, there was no other way.

    And, as long as the focus is on profligate PIIGS; uncooperative BRICs; and flaws in the monetary union, etc., the bankers will escape any real consequences.

  5. nun yerbizness

    so now it is okay to be “distracted by Europe”, I mean now that you’ve slagged all over President Obama.

    some one hasn’t been paying attention—the british and german press have been writing about this for more nearly two months

    maybe those who post here demanding banks “end up in ashes” may still get their wish

    god help the rest of us

    just remember that first hand accounts from those having experienced the world turning to shit, lived to tell and written about it over the past several centuries all remark on how quickly things go from being bad to being mind boggling intolerably no one will possibly get out alive bad.

    1. Paul Tioxon

      Speaking of going from bad to shit faster than you can say Obama is Hitler, there is a great little scene in a movie about torture being used by the US government to stop nukes from going off in Cleveland, or Philly or LA or somewhere. Anyway, the numero uno torture honcho is secreted away with his wife and family. He gets dragged out of retirement to do what he does best, torture people until they spill their guts.

      There is a lot a sanctimonious moralizing about right and wrong as if we volunteered to be born into the world and actually had a say about how it’s run and have the luxury to be really, really good people without a spot of blood anywhere on us. Anyway, one of the characters asks the wife of the torturer how the hell she can live with this guy, much less marry him, have his kids, etc? Knowing that gouges out eyeballs with blowtorches and stuff like that. She says, he used to be his nurse when she met him during the Bosnian intervention. She says normal people, her neighbors, one day just starting killing her people, whichever side she was on, I guess Moslem. The good people she grew up with walked into her house and raped and killed all the woman and beat and killed all the men, right in front of her and she was still a little girl. I think they attacked her too, but it was pretty startling to think one day we are all on board with being Eagle Fans or Yanked Fans and the next day, you are slaughtered by your neighbors because they panic and think the social order has totally collapsed and they have to do what they have to do in order to survive.

      And when I think of the entire period of unspeakable cruelty during that war in Bosnia, and how they are still prosecuting war criminals, I remember the 1984 Winter Olympics at Sarajevo on TV and how wonderful life must be for the people who live there. Then, it all went to shit, it rained blood and shit there.


    2. Parvaneh Ferhadi

      Yeah, you can thank the bankers, economists and polticians who created this sh!tty financial world which was destined to fail from the beginning. Many people saw it coming, still bankers, economists and politicians think it needs to be like that because they can’t get out of their “capitalism is the best thing ever” attitude. They still think they are walking on safe ground, when if fact they have nothing beneath their feet than the abyss, and they still can let go of their failed system. They had three years to come up with an alternative system, they did nothing except to pump money to their cronies.

      But of course, you can blame it all on those few people who dare to say “No” to them.

  6. Paul Tioxon

    The US Treasury’s printing presses sold to the Shah of Iran, and reportedly also on loan in the Beqaa Valley of Lebanon from their Civil War in the 80’s may yet make a comeback further adding to the economic stimulus to Lebanon in addition to rebuilding itself after it was bombed backed into the stone age in 2006. Somethings just happen for a reason, and not chance.

  7. Parvaneh Ferhadi

    The problem is not with the government or its debt, its with the financial system, which requires (exponential) growth or ceases to exist.
    Hence, no changes to EU contracts, ECB money printing will solve the problem. Unless you solve that issue.

    1. LeonovaBalletRusse

      Yves, your immediate suggestion makes perfect sense.

      Connect this *unraveling event* with the Shock Doctrine globally, with the link I’ve been drawing your attention to re Rothbard Memo in 1961 (from Tao Jonesing on Pilkington thread yesterday):
      http://www.libertarianpapers.org/articles/2009/lp-1-3.pdf — 14 pp. in print @ 100%:

      Does it connect for you, Yves? Is this part of “ECONNED?”

      1. Parvaneh Ferhadi

        Euh, I’m not Yves.
        However, I only read quickly through it and one thing that sticks out is his repeated reference to the need of building a “hard core” of like-minded people while insisting on them been “liberarian-individualistic”.
        A hard-core of like-minded people would have to think and act alike,thereby ceasing to be individualistic. In other words, he advocates a strong and tight collective to avance individualism-libertarianims.
        Seems kind of contradictory.

        1. F. Beard

          Scratch many “libertarians” and you will find a banker or a banker wanna-be underneath. Bankers hate that governments can create money; they think only they should be allowed to do so. Even Rothbard, whom I generally liked, was a gold-bug.

          1. Ransome

            The memo confirms a prediction that libertarian Fisher will replace Bernanke. The question is how soon. The metric will be on the focus of attacks, personal or institutional. It would be quite a coup.

        2. Moneta

          That’s why the mini-series on libertarianism was an eye opener.

          The soft core libertarians, usually full of contradictions, who knew nothing of the theory, will now be forced to better reflect on their position.

          1. Anonymous Comment

            For the sake of peace on the chat boards… evidently you are unaware that although you ‘addressed Yves’, you ‘replied’ to Parvenah.

            Take it easy with the insults, k. You might find sometimes that you are the one who made a mistake. And perhaps you will be glad that you were not insulted for having done so.

    2. Typing Monkey

      The problem is not with the government or its debt, its with the financial system, which requires (exponential) growth or ceases to exist.

      Umm…I would argue that the problem with the existing (and ever-increasing) debt is that it requires indefinite exponential economic growth to pay it off.

      And that which can’t continue, won’t…

      1. Parvaneh Ferhadi

        Yes, exactly. It won’t. And that’s the point we are at. I tried to place a comment several times explaining why this is so, but someone the system swallowed it.
        It has to do with that the required economic growth is not possible, or not possible to the extend required to keep up with the growing debt, in a world of dwindling resources.

  8. F. Beard

    The thing that needs to happen short term as a stopgap is for the ECB to monetize periphery country debt in a serious way. That would buy Europe the time to sort its house out, and in particular, determine how to address the large internal imbalance. Yves Smith

    Yep but the true solution to the internal imbalances is a return to individual currencies. But that’s not the way to “666” so of course some oppose it.

    Yet the Eurocrats seem to believe the answer lies in even harsher austerity, Yves Smith

    Who cares so long as the bond holders get their usury? The banks created those loans from honest thin-air; don’t they deserve to be repaid? Of course they do. NOT!

    which is guaranteed to fail to lower debt to GDP ratios. Yves Smith

    The only good thing about banks is that they are self-destructive.

  9. Maju

    I think that what central banks are doing is normal: states should have a “plan B” ready for the even the euro collapses “overnight”, specially with all the hysteria.

    However I do not think this is likely at all: the euro has not even significantly fallen in value in relation with the dollar since the crisis began. I’ll believe the euro is collapsing when its market value drops under that of the US dollar (as this happened already and the euro was fine).

    As of today, the euro is still above 1.30 dollars, what looks very healthy, even too healthy for my taste.

    1. Typing Monkey

      I think that the ability of the Euroland banks to access dollars is more immediately relevant.

      The Euro will likely start dropping once the ECB does what everybody expects it to do and starts printing like a US central bank.


    2. Yves Smith Post author

      1. Currencies can trade away from fundamentals longer than any “asset”

      2. If you accept the JPM view that a Euro breakup is 20%, what is left? If Germany stays in and some periphery nations leave, the rump Euro is STRONGER. That is why some hedgies I know have been reluctant to short the Euro.

  10. Typing Monkey

    Even if the hoped for Yet Another Big Eurozone Rescue Plan of Friday turns out to be underwhelming, market participants are certain to try to seize on any cause for cheer. And with trading volumes thinning as the year closes, they may be able to keep the levitation game going for a while longer.

    I don’t think you can generalize quite to the extent that you are. A CDS on Greece traded at 9950, and those on Portugal have not declined with the rest of them. Even the CDS on other European countries (and swaps rates, and bond yields, for that matter) are basically just trading at levels from a few weeks ago. The pullback may seem big from a numerical perspective, but we are still well into the “panic” territory (at least for now).

    In any case, I’d keep an eye on Portugal…

    1. Yves Smith Post author

      1. I was really referring to the big move in Italian bond yields, although that has reversed today. And I agree, over 6% for Italy is not good. But the amplitude of the move was on awfully thin justification. I was really surprised at that, and it suggests to me that we could see similar behavior in the short term.

      2. Money managers have every reason to try to keep things on as even a keel as they can through year end.

      1. psychohistorian

        Yves said:
        “Money managers have every reason to try to keep things on as even a keel as they can through year end.”

        I’m sorry but this sounds like rearranging the deck chairs on the Titanic. I think that the end of 2011 as a goal post is irrelevant in our current situation.

        1. Yves Smith Post author

          Go look at the markets in the second half of December 2008. Trust me, major major tape painting, and then we saw things get wobbly again in early January.

          It has been done, and it could be done again.

          1. Hubert

            Agree. Seems to be the late “bonus trade” for 2011.
            Re: “weak justification” – yes, very weak, so I guess the justification will be provided after the move, as so often. It would be naive to think that all the insider knowledge about what Merkozy and Geithner are going to do is out there for us to read here and now. In the US it took a Bloomberg reporter three years to find out. He did not even live as long …..

        2. nun yerbizness

          the rearranging of the deck chairs on the Titanic has been going on now for nearly three years.

          I’ve stopped counting the number of summits, high level talks and emergency meetings since late 09.

          non have them have delivered anything other than another weeks time until the next summit, emergency meeting and high level talk.

          it is the same game of I’ll show you mine if you show me yours that was played by Wall Street from the day Bear Sterns was forced into receivership—or whatever that was—and the day Lehman Bros. was pushed out the window, or did they jump?

          “Germany Buys Itself First-Class Ticket on Titanic”
          By Mark Gilbert, Lukanyo Mnyanda and Emma Charlton – Nov 24, 2011 4:18 AM


    1. They didn't leave me a choice

      Why /should/ europe be “one house”? Haven’t we had enough of these megalomaniacal continent wide projects already? What this world needs is for its other superstates, Russia, China, India, USA, Canada and Brazil to break apart too. They are all too big to govern, and thus too big to survive. The sooner everybody realises this the better.

      Note that I do not have anything against voluntary cooperation between states, but when you try to smash a ton of disparate areas and living conditions together in a union you inevitably end up with massive corruption and imperialistic desires on the part of the 1% that rules those too big not to fail shitholes.

      The thing is, you just cannot have a vibrant democracy under conditions where you have dozens of millions of people living under the same government. It is simply flat out impossible. The EU project was madness from the beginning, and it’s high time for it to meet its demise.

      1. digi_owl

        hear hear, damn glad my fellow contrymen had the wherewithal to vote no to joining the EU twice. Now to do something about that damned agreement that has made us a member i all but name…

      2. nun yerbizness

        by all means

        lets create a few more failed states

        let germany’s neo-nazis have their own state

        yeah, that’s the ticket

          1. They didn't leave me a choice

            Reflecting yourself on a mirror there I see.

            Riddle me this then, dear youtube commenter, how will dismantling too big to not fail states into smaller components create failed states? What does your flippant german neo nazi comment even mean? That every grouping of people should have their own state? That somehow such a group could take over one of the smaller states? Maybe expulse normal population of the area in the process?

            Really now, do you have any meaningful points that I could address in that post of yours that I /could/ have addressed?

          2. nun yerbizness



            try Der Spiegle!

            in the age of the internet it is remarkable and discouraging that so many are so willing to remain willfully ignorant—riddle that.

            Neo-Nazi Politics
            Germany Preparing Renewed Effort to Ban the NPD

            Hundreds of Confiscated Weapons
            Report Indicates German Right Wing Is Well Armed

            Alleged Terrorist Accomplice
            New Suspect Arrested in Neo-Nazi Investigation


            ‘An Attack on Democracy’
            German Parliament Condemns Neo-Nazi Terror


            Blind to Extremism
            How Germany Overlooked the Threat from the Right


            The World from Berlin
            Berlin’s Reaction to Neo-Nazi Terror ‘Is Too Late’
            11/23/2011 The World from BerlinBerlin’s Reaction to Neo-Nazi Terror ‘Is Too Late’

            Latent Racism
            Neo-Nazi Killings Expose Broad German Xenophobia


          3. They didn't leave me a choice

            Your logic has two massive, gaping holes in it.

            1) Even if the german right wing is as dangerous as you try to make it out to be, (Those articles sound like very classic fearmongering to me.) there is no logical reason why they should under current circumstances be able to control germany. Quite frankly if you’re worried about the far right, worry about it in some country that’s doing far worse economically than germany. (Yes, I know the arguments here about how their growth is on a poor footing and has been funded by a vendor financing scheme. I still doubt that their economy will enter a freefall if an orderly dissolving of the eurozone is achieved.) Hell, don’t they have a bona fide fascist as the minister responsible for the economy in Greece, put in his place by the oppressive and antidemocratic EU. (With the pushing of IMF, no doubt.)

            2) You have provided no logical link between dissolving EU and the said right wing extremists in Germany somehow taking over. Just because (And I have, again, some doubts about the potency of those right wingers you’ve claimed via spiegel.) those forces exist, does not mean that they can just go ahead and take over everything in germany. History may be cyclical, but it does not mean that everything that happened in the previous great depression happens again. (Though again, the brilliant idiots that constitute the 1% certainly try hard with their bondholder maximalist policies.)

      3. bigsurtree

        The loss of languages and diversity of thought over the last 500 years has seriously diminished human potential.
        Intellectual homogenization is self destructive, cripples divergent thinking and makes the possible impossible.
        The amount of time “authorities” think about money and the colories burned worrying about it is amazing. Usually it’s about how to pay soldiers when you get down to the nitty gritty. The world we live in today walks over the same fossil footprints laid down 10,000 years ago, the impressions of patriarchal priests with their scribes, concubines and slaves.

      4. LeonovaBalletRusse

        What about the Anglo-American *sole superpower*? Should that also be broken apart in your opinion?

      5. cirsium

        well said, they didn’t leave me a choice. The EU is a textbook example of a criminogenic environment.

  11. Twrbells

    Is anyone else annoyed that the WSJ wrote ‘England’ next to a picture of the British flag? And I believe the NY Times still occasionally refers to the prime minister of the UK as the prime minister of England!

    1. digi_owl

      I kinda did a double take on it, but then i keep mixing the two from time to time myself. Just need to make sure i never do so in the physical presence of a Scotsman or such…

    2. Stephen Nightingale

      They’re just rehearsing the time when Alex Salmond takes Scotland out of the Union. Should be happening soon, now the Act of Union Beeches planted on North Berwick Law on the occasion of the Union in 1707 are reaching their end of life. http://www.geolocation.ws/v/W/4d65d40c8786560f3d00dea8/act-of-union-beeches-group-of-beech/en

      The good First Minister of Scotland WAS talking about getting out of Sterling and joining the Euro. The way things are going he might end up joining the Icelandic Crown …

      1. cirsium

        when Scotland does regain its independence, it should have its own currency – the Scottish Merk.

      1. Stephen Nightingale

        If your mitochondrial and Y-line DNA are related to one of those groups that can trace its coming to the island to the Mesolithic period, then you’re British. I’ve got my certificate to prove it. Cheddar Man (Our Otzi) was among my ancestors.

        If you hold a UK passport on the basis of a more recent arrival then you are colloquially known as a “British Citizen”. Which is not to be confused with the above.

  12. digi_owl

    I was surprised from day one that the euro involved replacing multiple national currencies. I could see it operate as a inter-european trade currency for corporations and such, so that a factory could offer their capacity for as sub-contractor in euro rather then or alongside the national currency.

    1. LeonovaBalletRusse

      “for corporations and such” — that was the point, with the supranational Global CorporateMonopolyFinance State in mind.

  13. Schofield

    This Euro mess is entirely down to a failure to understand money. Imagine how human groups managed without money. They decided action collectively and commands were issued. Money embeds commands. Engage in austerity cuts and the number of commands is reduced whilst the number of people idle and not undertaking commands increases.

  14. Myr

    “The thing that needs to happen short term as a stopgap is for the ECB to monetize periphery country debt in a serious way. That would buy Europe the time to sort its house out, and in particular, determine how to address the large internal imbalance.”

    So, you are recommending that the ECB violate the law and their Constitution. I wonder how you feel when Republicans break the law here in the name of “doing what needs to be done.” I’m sure you have some rationalization for your position. So does Dick Cheney.

    1. Hugh

      It is hysterical how kleptocratic elites will cite the sanctity of the law, which they wrote, to justify and defend their right to loot, but any mention of the law evaporates into the ether when the law contravenes their purposes.

      Anyone remember how union contracts got trashed in the automaker bailouts at much the same time that CEOs and top management were demanding unwarranted bonuses in the face of the meltdown because of the absolute inviolability of their contracts? The case here is much the same. If reverence for the law was the determining factor, European banks would have been put through bankruptcy more than a year ago. As these crises teach, the law and its penalties is only for the little guy.

      At some point, we are going to have to learn the revolutionary lesson that when elites have stood the law on its head, it will take violation of the elites’ false law to reaffirm basic legal and ethical principles.

  15. pebird

    Ha, it would be England worried about having enough printing presses. They don’t have enough computers over there.

  16. pebird

    You know, maybe it isn’t that difficult to exit the Euro. All a country has to do is reissue a new national currency that is required to pay taxes.

    Keep the Euros in the country, let markets and retail keep their prices in Euros. People have more than one credit card, what is the big deal having two currencies? You don’t need to cut over all prices and wages and everything on some Domesday.

    Banks would just have to add another currency account for the new national currency. People would have separate accounts in Euros and national currency. Banks could offer loans in either currency – right now there are Polish mortgages tied to the Swiss Franc/Zloty rate.

    Let the market determine the FX rate. People will change their Euros for national currency to pay taxes.

    Over time, people will migrate to the national currency. Where are people going to move their Euros to if they are still good for spending in their nation (except for taxes). All the banks are global and play with all the currencies, why not 2 in a exiting-Euro-over-number-of-years country?

    1. F. Beard

      Where are people going to move their Euros to if they are still good for spending in their nation (except for taxes). pebird

      The question then is what would back the Euro if taxes were not required in it? The assets of the ECB? What good do those assets do anyone who accepts Euros? None?

    2. be'emet

      classy idea. Countries could accept any of above in payments. How would currency speculators play it?

  17. Susan the other

    I’m puzzled as usual. If liquidity is creating a trap whereby nobody will buy bonds because they anticipate too much inflation, it almost goes without saying that all central banks will see to it that inflation remains very low. The whole thing is being cobbled together as necessary to make the world turn.

    Would the ECB start dealing in bonds and agree to become the buyer of last resort if the US made changes to the CDS derivatives market? And how does this possibility affect the current refusal by Germany to shoulder gambling debts of the sovereign nations? In the interim, will their debt levels become even more unbearable? All debt has reached such unbearable levels it has virtually become the unbearable lightness of debt. So vastly irrational.

    Jamie Dimon announced JPM was selling lots of currency swaps to cover a potential 20% Euro devaluation (or default?). This means JPM doesn’t anticipate total collapse. So 20% must be a figure agreed to at high levels to see this thing thru. A little default; a lot of debt restructuring at very low rates for the long foreseeable future. I can’t read any of this talk. I just too dumb. But something tells me the EU is not going to collapse.

    And what about another thing Jamie Dimon said: He indicated that JPM was so healthy it could meet a 9.5 capital reserve cushion required by Basel! When did that happen? Two month ago he was really whining about having to set aside that money. In those intervening two month JPM hasn’t made any real money so where is it coming from? MF Global?

    This whole damn thing is such a mess that when I hear talk about the 1% taking over the world, I ask myself why would they even want it?

    1. Moneta

      True inflation will probabply hit us in the next slowdown when the economy tanks, bankruptcies and/or consolidation soar and production drops.

      Austerity will have caused much damage. No rate cuts will occur, companies will collapse and our leaders will print.

  18. nun yerbizness

    meanwhile this just in from another Euro-Summit…no dog whistle this—a damn mess for sure, one that will undoubtedly get messier still

    “The Führer has requested our presence,” an enraged diplomat from one of Germany’s neighbors recently quipped, making a less-than-subtle allusion to its Nazi past. The comment followed attempts by Nikolaus Meyer-Landrut, an EU policy adviser to Chancellor Angela Merkel, to gain backing for Germany’s position.”


    1. Fiver

      Can you imagine how incredibly difficult it must be to try to live as any modern German born since the War to have that legacy of half-truth that “Only Germans were Evil in the War” shoved in your face every time any sort of disagreement involving other nationalities arises? In both Germany and Japan, we are close to the day where ALL the remaining participants, perpetrators and survivors, are dead and gone.

      I look forward to that day, so I never have to here another cheap smear, the entire living population having had nothing whatever to do with it.

  19. be'emet

    goods to live by abound, at least potentially. and their production does not require, or even promote, full employment globally. Needed: a system of tickets for goods aside from the work-for-a-living model. For distributions, any of many ideas that have been shared here might do.

    And let’s remember, half of every population is below average. And we humans are still the Greatest of the Apes.

  20. zebulon

    Having a contingency plan for a potential Euro collapse is smart. Even if “everything possible” is done to continue the Euro, it is not obvious that the existing imbalances can be resolved at all. To get some idea on how totally wrecked the situation is: Italy’s industrial production is 17% below the 2000 output value now; Germany’s is at +20% (for data see Eurostat.ec.europa.eu ). The realization of the extreme structural weakness of many EZ countries is inducing a massive capital flight to the core, leading essentially to widespread balance of payment crisis which then are causing the numerous cracks in the European banking system to widen further. For a clear symptom of this happening just look at Italian central bank’s Target2 balance blowing out recently (see Bancaditalia.it) as balance of payment financing through the private banks comes to a complete halt.

    The periphery thus requires massive financing (through ECB, fiscal transfer or some hitherto unknown instrument of financial engineering) for a very long time just to patch this up half way, and even then it is not at all clear for me if it will be possible to achieve anything close to convergence in the meantime. If the imbalances persist, the Eurozone will fall apart simply due the fact that things that can’t go on forever will eventually end. Looking at the magnitude of the imbalances this will be rather sooner than later. To think that there is anything like a quick and obvious solution to the crisis is at best naive. And this is not Merkel’s fault.

  21. Fiver

    Seems to me NC, along with virtually the entire class of business/finance/government/media opinion has been calling for a commitment to fiscal union as the only path that would save the EZ structurally, as well as make it politically saleable to the German public to loosen the reins on the ECB. How many times did many of those providing comments here query the seeming lack of any respect at all for whether any of these peoples WANTED fiscal union, that democracy was being ruthlessly impaled by “markets” that are transparently manipulated to force policy and should be resisted by ALL?

    Merkel is doing exactly what was demanded of her by the global banking cartel, Eurocrats, and their supervisors in the US along with the great bulk of the Angloshpere “press” yet “She” doesn’t “get it”? She’s bending the law to the breaking point just to do this. Is she supposed to just rip up the German Constitution? Are we to allow no time whatever for even the appearance of democratic process?

    Here’s the question: Is there nothing at all that is worth saying “NO” to “markets” for? Because if there isn’t, we are all headed straight down the toilet.

  22. Hugh

    Re Merkel, much the same argument has been made about Obama, that his hands have been tied by Congress. But in both cases this misses a fundamental point. Neither has led. Neither has tried to educate the public about what was really needed. Nor have they fought for that even if it was a fight they were going to lose. All of which leads to a much simpler explanation for what they do and don’t do: that they are doing what they want. Merkel is not leading the charge to increase the power of the ECB, redress trade imbalances, and stabilize the periphery because this is not her agenda or the agenda of the kleptocrats who own her.

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