The Eurozone is becoming a farce now. Last
Thursday/Friday's Summit's "Grand Plan" was
supposed to lay all doubts to rest about the
Eurozone's future. By Wednesday this week it was
realized that the plan was yet another "kicking
the can down the road" episode and would need at
least several months of negotiations and, today,
not only have Italy's and Spain's 20-year bond
offerings have dropped so much in value that both
countries are now entering the same frame as
Greece -- no-one will want to invest in them. To
put a tin hat on it, the European Central Bank is
now offering 0% on any deposits. Consequently,
JPMorgan, Goldman Sachs and Blackrock have closed
their European investment funds today.
Bootle's "elegant" prize-winning ideas on how the
Eurozone could unravel in a relatively
uncatastrophic way could never happen because he
entirely misses the politics of it. No Eurozone
country would ever have the courage to initiate
it -- not even Germany. It would immediately
condemn the future careers of any politicians who
proposed it. The collapse will happen all by
itself when the last sources of investment funds,
such as some of the major trade union pension
funds, start parking their funds outside --
anywhere but Europe. Even America, itself dicey
and with only a cooked-up positive GDP growth, would be a better place.
Keith
At 21:47 05/07/2012, Arthur wrote:
Spinning a Scenario of Euro Zone's Unraveling
* by LANDON THOMAS Jr. NY Times
* July 5, 2012
LONDON The new Greek government of Antonis
Samaras insists that Greece will stay in the euro zone.
But if Greece does soon reach the point when it
must ask the hard questions about how to return
to the drachma, Mr. Samaras might save his
technocrats weeks of work and instead download
<http://www.policyexchange.org.uk/images/WolfsonPrize/wolfson%20economics%20prize%20winning%20entry.pdf>Leaving
the Euro: A Practical Guide .
The report, by Roger Bootle and a team of
economists at Capital Economics in London, was
announced on Thursday as the winning entry in a
hard-fought contest sponsored by the British
businessman and euro-doubter Simon Wolfson to
see who could come up with the most elegant
solution for how the euro zone might unravel.
The incentive: £250,000, or $388,000, no small
amount in these low-bonus times.
Many economists and analysts submitted entries
including a
<http://policyexchange.org.uk/images/WolfsonPrize/wep%20special%20entry%20-%20jurre%20hermans.pdf>10-year-old
Dutch boy.
But it was Mr. Bootle and his team that took the
prize, and not surprisingly they focused on
Greece, laying out in detail how the country
might go off on its own and cause the least disruption in the process.
For starters, the departing country would need
to meet in secret a month prior to its exit.
Euro zone officials would be notified of the
countrys plans just three days prior to the
announcement, which would be followed by the
closure of banks and capital markets.
The new currency could be converted to euros on
a one-for-one basis and then the currency would be allowed to devalue.
While none of Mr. Bootles arguments are new,
they do represent a widely held view that while
a euro zone exit would be initially very painful
for the departing country because inflation
would spiral upward, the cheaper currency and
the ability to write off high levels of debt would pay off in the end.
Mr. Bootle and others have pointed out that
there have been many currency breakups in the
past and that normalcy returns after a time.
Keith Hudson, Saltford, England http://allisstatus.wordpress.com
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