Tuesday, July 24, 2012

Bite The Bullet

Moody's just lowered the rating outlook for Germany, the Netherlands and Luxembourg to negative (currently AAA) because of the ongoing debt turmoil in Europe's South.  In other words, Mrs. Merkel, if you force a starvation diet onto your trading partners it won't be long at all before they stop buying BMWs and Miele washing machines.  Fiscal rectitude can go way too far, when imposed at the long end of a dogma stick.

It's time to bite the bullet and face facts: the EU is not a federal union a la USA.  Instead, it is a theoretical construct created by political and idealistic visionaries who had enough of perpetual bloodshed in Europe.  As such, it is irreplaceable and should never be allowed to fail because a bunch of short-sighted hacks cannot create a workable common monetary and fiscal policy.

Bottom line, once again: Spain and Italy, accounting for 22% of the EU's GDP, are now falling apart. It is plainly insane to think that the euro will survive Grexit, if it happens.  And it is certain that the EU itself will not long survive the demise of the euro.

...Time to bite the bullet...

13 comments:

Jo said...

I refer you to your 'mission statement' banner:

I HOLD THIS TRUTH TO BE SELF-EVIDENT, THAT A DEBT CRISIS CANNOT BE RESOLVED WITH MORE DEBT

...then invite you to reconsider this post.

Love & Peace.

Anonymous said...

Why is it that everyone talks about the Euro's imminent demise yet no one explains how I can make money from it?

I would assume the dollar will rise and metals tank short term? Sound good? Will the rise in the dollar be dramatic?


Anyone....

Anonymous said...

Funny...??? Coincidence...??? Today's first poster just referenced the exact thing I was going to quote! I preach your (also mine) mission statement... "you can't solve a debt crisis with more debt"

...and then I was thinking about it again today and said...

Why not?!?!?

Maybe you can?

It's all fiat. ...and everyone's in the same boat... so why not? What let the charade last this long? ...and if it's all a farse, and it has lasted this long.... well then why not 30 more years?

Why not?

Hell, I'm with you, ...and just don't think it can last.

In a private exchange with London Banker, I just said one of my other phrases that I love:

Is it better to be: Right alone -or- Wrong together?

...and being "Right" alone about solving a debt crisis.... well if the "wrong together" crew chooses to solve the debt with more debt... well then their wrong together style can be made to last. forget another 30 years. How about infinitely?

....Why not?

All the Best, Miss America (a.k.a. Rich Hartmann)

Hellasious said...

To Jo...

I am not for creating more debt as a means to resolve the eurozone's crisis. Not by a mile...

But I also do not see anything good coming out of the constant repetition of dogma, in words or actions.

Instead, I am all for concentrating on what I call the Real Economy, whose demise in the West has lead to the Debt Crisis ( or debt crisis, with small letters to denote that it is a symptom of the disease, not the main disease itself).

Solution? Concentrate on an economic paradigm based on the creation of as much earned income as possible through jobs that add high value to the products and services they produce.

What are they? Too long for a comment, but how about renewable energy, the electric economy, etc?

Anonymous said...

Miele is French!

Anonymous said...

IMHO you are not reading German press properly hell.

Of course Spanish Real Estate is not going to be revived. And that hurts.

Of course, Italy is going into a series of painful years.

But come on. Spend a couple of weeks here in Europe and make a report from "les tranchées".

I doubt that it will be in line with the mood of this post.

Same words for Mish by the way.

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James Evans, DAKCS said...

It's sad to see that their ratings have gone down. This post seems to offer no alternative solutions to the problem. No one likes going intodebt, but in this situation it's too late for that.

Brenda said...

I have been studying your blog posts during my break, and I need to admit your complete article has been very useful and very well composed.

alternative investing said...

"Instead, I am all for concentrating on what I call the Real Economy, whose demise in the West has lead to the Debt Crisis ( or debt crisis, with small letters to denote that it is a symptom of the disease, not the main disease itself)." -- Spot on. The entire financial system has become a bloated beast increasingly divorced from the world economy.

Anonymous said...

There is no way for the Euro to continue existence in its present form without adding to the debt to "print" more Euro's. That will not work as your masthead says. Attempting to save the Euro via increased debt will fail as well as strict austerity due to the economic imbalance of the EU zone. Both approaches will result in major economic losses and uneven distribution of those loses, which is what is driving the resurgence of nationalism. The Euro cannot exist without the EU, but all approaches to save the Euro in it's present form will destroy the EU and therefore the Euro anyway. The fear of continental war is real and legitimate. All attempts to save an unfixable Euro make a European war more likely.

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