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The bailout rejected, what's next for Cyprus? Open Europe suggests the EU will allow a few days...
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Tuesday, March 19, 3:18 PM ETThe bailout rejected, what's next for Cyprus? Open Europe suggests the EU will allow a few days for Cypriot MPs to get their minds right before the ECB thinks about cutting off funding for the country's banks (which would lead to their collapse). Or not. Reuters' Anatole Kaletsky notes the ECB needs two-thirds of its board to cut off ELA funding, and the Germans don't have the votes. "Time to get bullish ... German U-turn ahead!"
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Here's how this goes down. ECB ships euros to banks to the extent of their reserves - probably about 10% of deposits - which is what they meant by "provide liquidity". Banks liquidate assets at market that was purchased with depositor money. Depositors get that money on some sort of pro-rata distribution. The banks close down.
This deal was orchstrated and the outcome calculated. This doesn't end well for Cyprus. They end up being the sacrificial lamb that tanks the euro - exactly what the plan was.
So next question - is Bernanke in on the fix. Probably. Could see some hawkish statements tomorrow after FOMC meeting. We'll see.
Shoot first, ask questions later.
1) Germany runs away with its tail between its legs
2) Russia steps in to fill the power and financial gap
As a result of these two developments, we will see a third one.
3) A great bailout deal for Cyprus will emerge. There will be no liquidity crises. There will be no unfair punishment of non-Germans. The Euro will stay intact. The markets would rally.
I give it at most a week for this to happen.
Ordinary Cypriots will need banks to lead their day to day lives. So they just won't be able to take all the money out, and keep it where? Mattresses?
You know, this will be a great showcase for the limits of German power. Once Germany is snubbed thoroughly and still has to pay for the Cyprus bailout, that will embolden other Club Med countries, and we will start to get far better bailout deals. This actually may end up restoring financial stability in Europe.
Look, Europe's problems are not complex. They just need QEternity like the USA, and also needs to follow some Keynesian economics of borrowing and spending. But Germany won't allow that, and Germany is way too powerful in EU now. Once German power subsides, things will get better.
Indeed, Germany represents only €3,577 bn of GDP while Italy, France, Spain and Greece represent €4,233 bn.
To pretend Germany is trying to dominate Europe as part of a deliberate plan is simply preposterous. Who says so has watched too many WWII movies.
To put things into perspective, here's an interesting BBC article on the origin of Cyprus' astonishly rich banking accounts:
http://bbc.in/11cUQQx
What puzzles me is how they will put Putin aside now that his attention is arisen on the vast riches of some of his compatriots stashed abroad.
LTRO is also what I think will be the tool they'll try out.
Which one is your favourite ?
"The Battle of Britain" ?
Seriously?
I can quote 10 independent news sources that will corroborate that the whole Cyprus BS was the brainchild of Germany. Can you quote one - just one! - independent news source that says that Germany had nothing to do with the Cyprus BS?
Look, I respect you, but I can't continue to respect someone who just wouldn't own up to the very simple fact that Germany is trying to force its will on the rest of the EU countries.
http://bit.ly/ZQZQYr
http://bit.ly/139kFG4#
However, whatever the outcome, the main drive and goal seems to be harmonization of EU taxes, call it fiscal unification :
http://bit.ly/YTbh4n
Sorry to my American friends, you'll have to learn a few words "de la langue de Molière" to understand this very interesting article.
This will be very interesting for the Italian discussion, which is ongoing and is the real substance behind this negotiation. No one gives a rat's ass about Cyprus. But the terms for Cyprus will define the terms for Italy, and that is a very big deal.
Not sure it will turn out that way: it's a German election year and bailouts of profligate states aren't so popular these days in Germany anymore. They know if they bailout Cyprus now, they'll have to do it tomorrow for Italy, Spain, France....
I told you before, look at the numbers: German GDP simply isn't powerful enough to keep on subsidizing all those with current account deficits.
Besides, what will the Russians do ? That is the only question that still worries me. The Russians never gave up their interests in the Mediterranean and now that this Cyprus-goose comes flying into their open mouth, it could be very attractive for them to catch that bird.
The more some people criticize the Germans for wanting to dominate Europe, the more they add to the probability of the Russian fleet to be the triumphant third dog who robs the bone. Be careful what you wish for: American interests are at stake.
You're right. It all started going terribly wrong when they implemented this damn euro-business.
Anyway, so you think now German politicians will have to face the challenge of passing a deeply unpopular financial measure? Ho, ho, ho! The shoe should fit well on the other foot, no?
Germany knows very well that it needs the Euro and the EU. So the politicians will ultimately do the "right thing" and pass a deeply unpopular financial measure. If they have trouble doing that, they should take some lessons from Greece. After all, Germany gave the Greeks a lot of practice in passing unpopular measures, no?
The irony, of course, is that Germany doesn't have to bail anyone out. All Germany has to do is to drop the austerity dogma and give OK to the ECB to print, print, and print to buy sovereign bonds all over the EU. Of course, Draghi is already doing that despite Germany's complaints.
What EU needs is a good, old-fashioned QEternity. The main issue in the EU is lack of Keynesian style pumping. The whole dogma of only spending what you can raise in taxes is old and wrong.
This is probably one of the most ignorant and dumb posts I've read on here.
Let me see... since you feel so comfortable with prejudiced bigotry: Americans are fat and ignorant? English have bad teeth and their birds are ugly? French are lazy and their birds don't shave?
This is a serious economic website. Please keep your ignorant drivelling psycho-babble to yourself in future. Thank you.
"Of course, Draghi is already doing that despite Germany's complaints."
So what are YOU complaining about then ?
You are an absolute master in altering other people's words. I did not say it is in the US interest to rob ordinary Cypriots. I said be careful not to bash the Germans too much or the Cypriots might think it's safer to seek shelter under the Russian umbrella.
BTW, it appears they practice austerity in your US paradise as well. Didn't they raise taxes ? Not very Keynesian if you ask me.
You think the Cypriots would seek help from the Russians not because of what Germany dished out to them, but because of the international reaction to it?
This is like saying an abused spouse would call the cops not because his/her SO is beating him/her up, but because the neighbors disapprove of the beating.
Please, filipo, your position is getting more absurd by the minute.
Raising taxes on the rich who save most of their money is fine. To stimulate demand you have to shovel money into the hands of the poor.
The Cypriotic attitude is meant to take the best of two worlds. One cannot blame them therefore, on the contrary.
They try to get credits from Russia and they try to do the same from the EU to save their Laiki-bank. Iceland did the same: they even offered Russia a seaport to their submarines in exchange for credits. The US (rightly) intervened and the party did not substantiate.
Now if YOU give the Cypriots the feeling that Germans are but bullies seeking to enlarge their influence to the detriment of other European nations, you give the Cypriots a convincing argument to go look for their happiness in Russia, moreover you probably wouldn't care if they did.
I do not hold you personnaly responsable for this eventuality, and the fact that you utter these nonsense indeed probably do not affect Cypriotic judgment. But that doesn't mean one hasn't the duty of having a clear judgment oneself.
Especially since the Germans don't have that expansionist goal you claim they would have at all. All they want is states in the EZ behaving in a financially orderly way, now that they are stuck with them in a currency union (a thing they deplore). For the Germans being bullied at by you isn't pretty either: it's like the Jews in WWII: first they had to give their money to the indebted state and then they were bullied at (and killed).
"Raising taxes on the rich who save most of their money is fine. To stimulate demand you have to shovel money into the hands of the poor."
Well, that's exactly what the EU wanted to do: 9.9% tax on the very rich (accounts of +100,000) and 0% tax on accounts -20,000 to stimulate demand.
Since the Cypriotic state is very poor, this scheme that you propose is precisely what the EU wants.
It's not the first time you contradict yourself.
Now, as for Russians having a port in Cyprus, if Germany is worried about that they should simply bail Cyprus out without asking any questions.
As for Germans not wanting to dominate any country - are you kidding me? Merkel threw out Berlusconi - I showed you the news reports and you never responded. According to you, all the Germans want is for all other EU countrie to just act like Germans. And that is not dominating all the other countries?
I think you are super biased here and simply ignoring facts.
Only idiots don't understand that endless bailouts of tax dodgers and criminals eventually get very frustrating.
Even the French have some sympathies for the German paymaster:
http://bit.ly/139m1AT
Lo and behold, we must first recognize the beauty of slavery.
Let us pray for a Dream Act to re-enacting slavery here now; make it open to all skin colors, Equal Opportunity if you will.
Yeah, Amen and Amen.
Of course people prefer inflation to deflation. Inflation increases standard of living while deflation destroys it. This is because inflation increases demand while deflation reduces demand. You think it is irrational to want a better standard of living?
I don't.
It will be funny that a silly island in the far south east corner showing ECB, IMF, and Berlin the middle finger. Who knows if Cyprus be the first nation to leave Euro zone? It'll be funny.
Russia´s Cayman Island, in exchange the natural gas probably
will be developed by an Israel/Russian joint venture, Syria
will remain well "protected" from the western influence and
probably Cyprus will be the first country to leave voluntary
the Euro and adopt rubles or the Cypriot peso.
Cyprus is an English rule of law jurisdiction. Big Russian companies like Norilsk Nickel transact $B sales to Western buyers through Cypriot banks.
US has california and illinois. We would never let them go bankrupt any more than the EU can let a 'state' go bankrupt. They will print a trillion or so euro's and that will cause inflation that will eventually make the debts in PIIG nations look small.
For the moment Germans want to get rid of those ticks on their skin. They're getting sick and tired of the eurozone.
go do your homework and READ IN ENGLISH the details behind the Emergency Liquidity Assistance provisions and you will find two very important facts;
one, it only applies to the particular institution provided said institution has met the criteria necessary to be considered for assistance AS PROVIDED BY THE NCB (national central bank that oversees the specific institution);
two, it only applies in full where there exists defined collateral whose value is ACCEPTED by the ECB
forget whether ELA is available or whether 15 of 23 will vote to rescind it; it cannot and will not be used in an across the board fashion including institutions which do not qualify as being in trouble
a few billion euros is a bloody tip for the trillions so far dished out; this is being pushed for far deeper reasons than any of us can reasonably fathom or know by some reference in some blog
And, the euro-zone will shrug, publicly, and Draghi will flex, and stability will probably not be far away.
But Italy -- and in particular 5SM -- is watching. That has to scare the bejeezus out of all of the bankers. It scares me, and I don't even own any of the 2 trillion in Italian Debt. Lehman is a gnat next to a voluntary Italian default.
http://bit.ly/146zOHq
excellent article, thanks for the link.
I wish some of this thread's "comment warriors" would read it.
There are other factors at work here involving the Russian Mafia. Even Gartman warns that people could get killed if they don't cooperate.
This situation will create a degree of moral hazard unseen in all human economic history as Italy, Spain, Ireland and all can do as they wish because of Euro-Cowardice.
With their banks capitalized 1 to 26, They Have No Choice but to print Euros with wild abandon. As Jim Cramer said, "we all know this will not end well". Indeed.
you are so ignorant. That beats it all.
Did you not know it was the French and the Italians (and the Belgians and Dutch) in the first place who were the driving force of that euro-experiment ? Germany was very reluctant because it meant for them they would have to give up their strong currrency.
It's people like you who are at the start of wars.
I pity you. I knew the level of historic knowledge in the US was very low, but this is absolutely stunning.
Can the Euro survive long-term? .. Not without miracles. Anyone here expecting miracles? .. QEternity might work medium-term, but it's not miraculous.
Is Germany smart enought to realize the Euro can't survive long-term, and maybe not even medium-term? .. I think so.
Is Germany smart enought to start planning and executing an exit before chaos descends? .. I hope so. [Germany is promised NY gold in 7 years, maybe they can pay a 10% depositor tax to get express/overnight delivery?]
Is this Cyprus episode "real" or some kind of "charade" or "distraction" or "gaming" while Germany prepares its exit? .. You decide.
What does Russia know, and when did they know it? .. Every story needs a mystery. Bond movie, anyone?
In the end there was just to much cheap money for to long of a time period. Consumers got tempted to live above their needs.
In the US it started with Alan G. who just did not want a clearing recession to clean the road for the next period of growth. Instead he threw money at the consumer to keep them running on steroids. Same thing happened in the PIGS countries. After the implementation of the Euro money got cheap, the hunger for consumption grew to be a massive problem.
The healing process is painful and has to be assisted by the central banks if we don´t want to see a Weimar kind of event to happen.
But keep in mind the German federal elections in September. The outcome may be a game changer.
That is right. And they need to be part of the Eurozone now like they need cancer. At the start of the financial crisis it was fine because they received a lot of cheap money but they are all too familiar with hyperinflation as you aptly noted in your reference to the Weimar (but its not the '30's anymore) and so it is time for the insolvent south to get a nice cheap currency with the hardworking french as their leader. It will bring back their tourism economies and pay-off their monstrous debts after the uninsured bondholders get a juicy haircut while the north will get a strong stable currency better for high-end industrial manufacturing. Plus, the southern Europeans will be so pleased with their inflation as long as they are rid of that terrible, terrible country that kept bailing them out of their messes.
As always, you're completely wrong. The weak euro has never been Germany's goal to help their exports, it's the consequence of the Club Med profligation.
In fact the Germans would prefer a stronger currency and less exports. You have no idea at what cost the Germans have to work to obtain these exports. Otherwise you wouldn't talk like a headless chicken.
permanent was right if he had added "since WWII and the reorganizations of their central banker Schacht."
The Weimar-debacle has for ever traumatized the Germans in a degree you cannot imagine. It's stuck in their genes. Not willing to understand this and laughing at them like if they were all neo-nazi idiots, is very intolerant and haughty.
I wish the US would experience a same hyper-inflationary experience, that would teach them. But of course that will never happen as long as the $ is the reference currency. Lucky bastards.
European companies that try to compete. It is also a coincidence that the US economy is 5-6 times larger than unified Germany. It is also a coincidence that the best want to come and excel in America and not Germany. There are a lot of coincidences. If you ever lived in America and dealt with the true hard-working never-sleeping never-taking-a-day-off Americans who make America great, you wouldn't be so confused to think that it is a coincidence, but instead a fine and deliberate achievement that took decades to accomplish.
Of course. That's why the export-oriented economy of Germany keep whining about the export-oriented economy of Japan weakening the Yen deliberately.
But hey, filipo said that Germans actually want less exports. So it must be true. Germans want less jobs and less exports.
Perhaps collective therapy is needed?
Well done Stephen. Two thumbs up.
I thank my lucky stars every day that I am an American and not an European.
Indeed, the US never experienced a hyperinflation like the Weimar inflation. Instead, the US experienced a deflationary experience in the 19thirties. The US have been traumatized by deflation. That's why they now apply a different medicine than deflation, f.i. QE. Bernanke explicitly said so.
Hence, since WWII it's in the US genes to fight crisises with monetary easing.
So I certainly won't say it's a coincidence, on the contrary, it's the consequence of historical facts.
I certainly have never questioned (and I never will) the scientific, intellectual, military or economic preponderance of the US over any other country on earth. I take this SA forum as a model. No other language (Spanish, French, German...) offers something of comparable high level.
When I said "lucky bastards", I meant to say that no other nation on earth can pay itself the luxury of (mis)treating it's currency the way the US do, because they have a reference currency, used by more than half of the world. One would need to print tens of trillions of $$$'s before causing inflation. Hence, the medicine the US adopt to fight their economic downturn is simply not applicable to other countries. It works without inflationary consequence for the US, but it would not work for any other country whose currency evidently is no reference currency.
I did not mean that the great US accomplishments are the result of coincidence. They indeed are not.
My best friends emigrated to the US, so I have every reason to acknowledge the vast opportunities that lay in your country.
By the way, I feel very comfortable under the US military umbrella too. I have no need to question that. My father has fought in the resistance against the Germans during WWII (got his training in Ireland), but that didn't refrain him from being compassionate and acknowledge that the nowadays Germans are other people than those of WWII.
Actually it was my father who taught me to be compassionate by sending me as an 18 year old to one of his German business relations to learn German.
I'm sorry if what I wrote has been misinterpreted by you. My poor English is probably the cause.
But they are: they just sent a check of €10 bn with the only condition that the Cypriots (and Russians) would pay for the other €7 bn.
And hardly one year ago did they pay €40 bn to Spain to bailout Bankia, Spain's largest mortgage bank.
And around the same time they paid €40 bn to Greece to bailout that country.
This is a joke right? Attempting to balance a budget is a ridiculous concession? If you had a sister that spent 100% more than she made and kept coming back to you for more money to pay her bills, would it be too much for you to ask her to cut back a little and attempt to create a sustainable budget.
You have no sense of reality as I have found so many who share your theories lack. Compassion has nothing to do with giving someone else everything you have if all they will do is burn it up. In the end you both are left with nothing. Compassion is giving someone an opportunity to stand on their own two feet, sometimes that involves the much more difficult decision to not give them what they want. With your reasoning it is clear you have never had the experience of being responsible for anyone but yourself, another trait that many who share your perspective have in common.
I didn't bring up th topic of compassion, filipo did. Your vision of compassion is obviously different from mine. I believe it is compassionate to provide people both with material help and future success conditions, but not to require them to avail of those conditions.
Otherwise, compassion becomes compassionate conservatism, and we all know that's just a sugar coated way to say that aid to hungry kids should end and instead the kids should be taught to stand on their own two feet.
Compassion doesn't equal naivity either.
The "ridiculous amounts of concessions" is your perception.
Of course, inventing $85B dollars a month to pump into the economy is going to have some type of short term benefit or at least effect, but it will not last and it is not sustainable, it will have serious side-effects. If it did not why would anyone worry about fiscal anything anymore? You just print? The EU languishes because of an insane amount of debt, if printing money was a sustainable solution it would have been done long ago and countries wouldn't need to sell debt to pay for all of the lovely social programs, they would just print it more but this is obviously not how economics works. The more you create of something the less valuable it becomes, it is a fact no matter how much you would like to theorize your way out of it.
Don't think I question the sense of QE Bernanke applies. It is given the circumstances the best solution. I have explained this several times to Macro too.
Doing nothing (as they did beginning of the 30ties) would have had terrible consequences and simply was no alternative. Bernanke deserves a knighthood therefore, because resistance to that policy was in the beginning very fierce, in the US too. It's only when people started to understand the benefits and the positive mechanisms that they changed their ideas.
QE does come to printing money. Let there be no misunderstanding about that. Question is though, is it needed or not. It certainly is to compensate for the uncountable effects of deleveraging. The best way of combatting deleveraging is creating new money... until the economy gets track again. US corporates haven't completely understood that yet: today I saw a Reuters report on cash that is being stashed in tax havens by US corporates: over $1T (Apple, Pfizer, Amazon, Microsoft, Google...), double of 2 years ago.
Meaning, these corporates still don't have incentives to invest rather than to hoard.
OK, having said that, if any other country would adopt the same financial policies of monetary easing, they would face a huge raise in inflation. Britain for instance creates a poor £45 bn of QE (buying Gilts) on average a year and the inflation in the UK is already at +4% yoy.
The US monetize by buying $40 bn of Bonds (Treasuries) a month and another $40 bn mortgage related assets (house loans). That is newly created electronic money that is directly injected in the economy, not to be confounded with the trillions they created to save the banks in 2008-2009.
The latter indeed never came into the economy because the banks hoarded the money because they saw no investing opportunities or used it to clean up their balance sheets. Hence the subdued growth rate of inflation.
So the fact that the $ is the world reference currency is not the only cause of a subdued US inflation. US financial institutions have been very responsable not to throw their money to whoever was asking for (not to be too compassionate).
Were it not for the relatively high unemployment, I'd call the US situation a goldilocks economy. That relatively high unemployment is caused by the increase of productivity (automatization) and by delocalization to low salary countries, not to name China.
Overall, I'm very bullish therefore on US equities and EZ exporters. I saw this bloomberg interview with Larry Fink today. He seems to be of the same opinion. A few weeks ago I posted a comment in which I wrote the SP500 could easily go up another 20%. Today Fink mentioned that very same number , talking of a coincidence.
"In Europe the media tells them that the US is still in bad shape."
I have evidence of the contrary.
Those born between 1947-1967 are retiring number and there are simply more of them than people since and hence the stats get skewed. On the issue of inflation, Europe's problem is that it doesn't produce its own energy and instead it throws money away in alternative energy. Norway and Sweden are doing pretty well. Why? Because they have their own energy and don't depend on the Russians. If anything you should be cheering for more QE because it makes the dollar cheaper and thereby your oil and copper and other commodities cheaper. Strong dollar will make oil cheap for the US, but not for Europe. If the euro goes down as I think it will, y'all will be paying twice at the pump, and for things you don't produce, a vacation to the US will be a dream. You know nothing about inflation yet. The inflation bomb is about to hit Europe and everybody seems to be blind to it.
I disagree on equities, equities can't grow beyond their current state without real growth in the economy, which we do not have. We have gotten back to an equilibrium where equities are fairly priced but without economic expansion companies can not grow further no matter how much free money is out there. Check out Walmart, target, Caterpillar and Fedex's guidance for the year, they all lowered guidance and missed forecasts. Check out consumer confidence it can't break out of the 70's and we have never had a bull market with 2/3rds of our economic engine (the consumer) in the doldrums, the mid-to-late 90's the index was in the 100's and in 2007 it was in the 90's. The market has run its course and consumers and investors are anesthetized to any more QE, but they also can't do without it. QE has done all it can to get us back to fair value but it will also have to remain to keep us here, because of a lack of real growth and an optimistic consumer. For the next couple years we will trade sideways at best and most likely go into a final bear turn down, not a steep crash but a gradual step down. We will not get back to a real growth economy until the second half of this decade when employment, jobs and wage growth come back in a meaningful way -- inflation will precede that but after it has hit the economy then equities will begin to rise again. Blackrock and Larry Fink are now in the market of getting people to trade using their fancy new ETF's the only way to get new blood in the market is to say it is going up.
For the benefit of brevity, I concentrate on the points of disagreement between us two.
First, consumer confidence (cc) depends on a number of factors nobody can evaluate f.i. the weather. There has always been a discrepancy between the real figures and cc. I don't rely on cc therefore unless for trading reasons. But it does not influence my overall strategy. They started publishing cc because they didn't have anything more substantial to talk about.
"companies can not grow further no matter how much free money is out there"
The point of returning to the markets for me was that shale gas business developing. We should not forget a few years ago we faced oil prices of over $140/barrel. We're at $93 now, quite a difference and I expect the price to slowly grind down further.
We're (you're) only at the very beginning of the consequences of that, and it is hard to imagine the relevancy now, but I can guarantee you it is huge. Energy prices are very slowly coming down, because the oil (and ng) glut isn't fully used yet because of a lack of refining and storage and transportation capacity (environmental issues also are responsable, probably justifiably).
A 5% decrease though of energy prices would cause an exponential increase of productivity and investing opportunities. A further decrease of social polarization (I agree with Macro on that topic) is however needed to implement these investing opportunities. That's why I'm favorable to higher taxes, especially on the very wealthy.
In general I prefer the spring to the summer season. When everything is still pristine and greenshoots are still hard to detect, is for me the best economic condition.
Walmart is the victim of US social polarization (less consumption), but I understand the Democrats are working on that.
Fedex is the victim of the strong $ (repatriation costs of FX) and European sluggishness.
Caterpillar is a wonderful C° (my uncle has spent his whole life working for it) but the victim of fierce Japanese (and soon Chinese ?) competition and of course the European economic downturn.
But what about:
http://seekingalpha.co...
and there are others as well, in IT, electronics, health services...
I do not know when time will have come to stop QE. Waiting for inflation to pick up might be the wrong strategy because it would mean you're too late (the Titanic-syndrom). I think economic growth is a better indication, but Bernanke is sure smart enough to acknowledge that.
Economic growth is indeed still anaemic, but, again, I prefer spring to summer season.
I'm aware Larry Fink is a market-vendor, but that doesn't exclude he can be right.
The only thing I'm lightly afraid of, is the black swan: Iran, North Korea, currency wars (Japanese QE could have a much more devastating effect to other countries' exports than US QE has on other countries' exports)...
OK on that US corporates' money stashed away.
In the meantime it's however a lot of potential not re-entered into the economy.
I'm not sure how the fact of babyboomers going on retirement can have a causal effect on unemployment. On the contrary, the more people get retired, the more jobs should come available for younger people. So I think you should look for other causes.
But whatever these causes, the figures are what they are and they still don't look nice.
I can't agree more with you on the subject of Europe's wrong green energy policies. It's a disaster. Even Germany has to cut on wages to maintain it's high productivity level because of expensive energy costs (due to their decision to end up nuclear energy plants).
"QE because it makes the dollar cheaper"
I'm not so sure of that bearing in mind the faint amounts of QE Bernanke applies.
"and for things you don't produce, a vacation to the US will be a dream."
I had a vacation in the US in mind though in the second half of this year (need to visit my friends in CA and NM). I know, life will be tough although, as the saying goes, the soup is never eaten as hot as it is served.
Right now, I'm more concerned about deflation in Europe.
Here is a chart on consumer confidence and the S&P for the past 43 years as you will see there is no bull market with cc in the 70's area, if and when it spikes at least once into the 90's and stays at least in the 80's then I will be looking to get more bullish. If NG and lower energy prices make that happen this year and optimism from the consumer unexpectedly rises this year (I do no expect it at all considering the environment we are in) then I will get more bullish.
http://bit.ly/YkGFGx
Taxes -- it seems like maybe you and macro do not realize that higher taxes has been a major part of the austerity programs he does not like. In fact, Italy's austerity program was 60% higher taxes and only about 40% in budget cuts. Taking more money from the productive parts of our society and giving them to the unproductive government is not a good policy. Government officials with more and more power are just as corrupt or not corrupt as corporatists with more and more power, accept a corporations business is to make money while a governments business is to take money keep some and give the rest out to who and what they like.
http://reut.rs/Zffmwz
if you say so....
Have you read this:
http://bit.ly/WMFunb
This is the beginning.
The rest will follow, be sure, and it will be gigantic.
Up till now austerity in my country meant higher taxes on the middle class, the most productive of society. That's asphyxiating the economy.
It's not that kind of taxes I had in mind though. I meant taxes on the very wealthy, those with +1 bn (or whatever number a statistician might come up with) who use their capital to make bets or speculations on very short time, a thing the economy doesn't profit from.
Actually, Hollande was not far from understanding that, except he forgot to realise France is such a tiny little country that everyone with a fortune fled to foreign countries as soon as he uttered his first word on high taxing. High taxing to mend current account deficits in a globalized world can only be implemented under mutual agreement of all the world states.
I know, that's utopic.
I therefore do not think high taxing has much chances to successfully be implemented and I certainly would not advocate it as a medicine to smaller countries.
But theoretically, it's the best solution to fight social polarization and enhance growth in an anaemic economic environment. So, in theory I agree with Macro on that topic and under these restrictions.
http://on.wsj.com/102ACrF
Just FYI, there are 1,226 Billionaires in the world. If we straight-up took $2 Billion dollars from each one (completely wiping out well over 90% of them) that would give us about $2.452 trillion dollars. The US government alone spends $3.5Trillion in one year. In the US we have 1 million millionaires, if we wipe out 90% of them by taking $1M from each that gives us another trillion. We can almost cover the US expenses for one year after destroying all private wealth.
The only way to preserve current spending is by raising taxes on the middle class, just like our current president just did.
I finally got time to read that WSJ article that you gave me.
It's certainly interesting and it comes down to "the US certainly won't become the workshop of the world thanks to the shale gas boom".
Indeed they won't and I agree with the author that a certain amount of coporates who face to a lesser degree the impact of cheaper energy, won't feel a big difference when energy gets cheaper: taxes, labor costs, credit writedowns... might indeed have a larger share in the overall costs.
However, for the majority of manufacturing like petrochemicals, equipment makers, exploration, the difference will be huge.
Railways and trannies will be beneficiary. That's why I bought SAIA a few months ago.
Concerning wiping out all the billionaires, I find that rather rash. You needn't erase completely the Government's debt. A budget deficit of 2-3% would be just fine to keep things under control.
A therapy for yourself might be useful.
Before you know the spectre of J.F. Dulles comes back and locks you up for communist sympathies.
"And a Full-Blown Liberal".
Awesome !!!