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  • Tuesday – Unthinking the Euro Crisis 3 comments
    Dec 20, 2011 8:25 AM | about stocks: GS, FXE, UUP, FAS, XLF


    “It’s still absurd and unthinkable in many senses of the word for people who really understand what it means to have a monetary union, it’s really unmanageable and unthinkable.


    “Some people that seem to think about it or have the idea of preparing for it, they don’t know what they’re talking about.  In my view, it’s still not going to happen.” – ECB Vice President, Vitor Constancio 


    Finally someone official is saying what I’ve been saying for months!  The palpable fear that surrounds the Euro-zone is itself the problem – not the EU itself.  I pointed out to Members last year, when the Greek crisis first hit, that dumping Greece from the EU would be as silly as the US dumping Florida or California because they missed their budget goals.  

    Constâncio said the ECB was determined to stick with its current policy of introducing new three-year funds to try to counter the freeze in interbank lending, and support greater fiscal integration in the euro zone. “What we decided is very recent and it’s enough, but we never pre-commit, so we will see,” he said. “So far, we think the decisions we made are very significant and should be enough for the objectives that we are responsible to attain.”

    And what is it the EU has done recently?  Up to one TRILLION Euros has been pledged in 3-year funding at the (variable) ECB rate, which is currently 1%.  That is enough money to fund ALL the financing needed by ALL of the EU nations for the next two OR THREE years, according to GS analyst Jernej Omahen.  Keep in mind that all you have to do is borrow $1Tn at 1% and lend it at 4%…
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    Stocks: GS, FXE, UUP, FAS, XLF
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  • GreenRiver
    , contributor
    Comments (3846) | Send Message
    ... and hope you get back all of your $1T back at the end of the 3 years.


    Really, unless the ECB is going to commit to a permanent facility to lend to banks to lend to sovereigns to assure the sovereigns' ability to roll over their debt, this accomplishes nothing - other than to roll the snowball a little farther down the road.
    20 Dec 2011, 08:54 AM Reply Like
  • chigger
    , contributor
    Comments (28) | Send Message
    To create demand, why is government stimulus spending suggested?


    Why not reducing taxes to create demand, which has been twice proven successful by Calvin Coolidge in the early 20's and Reagan in the early 80's, which also increases government revenue instead of adding to government debt?


    Government stimulus and bailouts has never proven successful, but right in fron of our eyes displays failure in Europe.


    Why do you think China has performed so well? They have utilized capitalism, which engenders more freedom of decisions, financial incentives to be creative and take investment risks.
    20 Dec 2011, 10:24 AM Reply Like
  • GreenRiver
    , contributor
    Comments (3846) | Send Message
    Reducing taxes, which means reducing taxes on the WEALTHY, dosn't really do much.


    The wealthy aren't really forgoing any consumption, and any windfall they receive in the form of reduced tax payments will likely be used to speculate in the stock market, commodities, forex, etc. and won't do anything to stimulate demand. But likely to stimulate inflation by driving up the price of everything you need to survive.


    Transfers to the poor, on the other hand, almost immediately go back into the economy.
    20 Dec 2011, 12:26 PM Reply Like
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