Very interesting perspective on Germany, Greece and European Union

[n74tg]

Here is a link to another of those weekly emails I get from Stratfor (Strategic Forecasting).

This one about blew my socks off, as it discusses many of the reasons the European Union was created in the first place, as well as how things are changing in the EU and some possibilities that might occur as a result of those changes.

Consider giving it a read, better yet, comment on it here.  I'm interested in the variety of opinions.

http://www.stratfor.com/weekly/20100315_germany_mitteleuropa_redux?utm_source=GWeekly&utm_medium=email&utm_campaign=100316&utm_content=readmore&elq=bd7e2fa868d74de1b4213269b91ac82c

[LeoinSA]

An accurate assessment, IMO.

[ScottA]

Accurate maybe but what's the point? German bashing sounds like. Germany is an economic powerhouse. Has been for a long time. Doesn't make them evil. These countries that have the huge debts should get a clue. Yet another example why global government is an bad idea.

[pagan]

It's far too easy to bash the Germans, just like it's so easy to bash Americans. Germany is working the EU system to their advantage and we're supposed to feel sorry for countries who have grown accustomed to living on the public dole through cheap financing. Those countries are now facing crushing debt and people are protesting because they're going to have to get jobs and give up their nice social programs. It's far easier to look outward for someone to blame rather than look inward to your own avarice and sloth. Who better to blame than the Germans?

[muldoon]

In my opinion, the euro is done. 

http://www.bloomberg.com/apps/news?pid=20601087&sid=ag_cwqJcUj_c&pos=2

March 18 (today) Greek Prime Minister George Papandreou set a one-week deadline for the European Union to craft a financial aid mechanism for Greece, challenging Germany to give up its doubts about a rescue package.

Papandreou said he may turn to the International Monetary Fund to overcome its debt crisis unless leaders agree to set up a lending facility at a summit March 25-26.

They have been caught cooking their books, and there is no escape.  The market will call them on it.  Their can be no Eurozone bailout of Greece because the second that happens, they need a bailout of Italy, and Spain, and likely the UK before the end of the year.  Greece will have to go to the IMF and that will not "help" because you cannot fix insolvency with more loans.  Either you spend less than you bring in or you just get further into the hole. 

Germany is a special case here.  Everyone here knows that in the 1930s we went into a depression in the USA.  But financial crises's like what we have today and what we have had in the past are global in nature.  While we entered a depression they took a path of "printing" to pay their way out and had something much much worse than what happened in the US.  Specifically at that time Germanies debt was not in German denominated assets.  So the more they printed the less it became worth.  The Weimar republic hyperinflation was devastating.  So devastating that the country welcomed Hitler to come punish those Jew Bankers who the common people saw as the reason for the collapse.  I DO NOT support any of the views of Hitler; I have seen those tattoes at family reunions and heard stories.  I am not in any way saying he was right, I am making the statement that historically; they have gone this route with huge devastating results.  You have to understand that we in the US we hear stories of the great depression, in Germany they grew up hearing those stories.  There is ZERO political will in Germany to "print" their way out just to save the corrupt banks and corrupt politicians from other countries.  They will not do it. 

The only way to put out a Greecefire is to smother it.  Tossing more fuel on it is not the answer.   

[pagan]

Isn't the U.S. government and the FED essentially attempting to print a way out of the current crisis here in America?

[muldoon]

Isn't the U.S. government and the FED essentially attempting to print a way out of the current crisis here in America?

Yes and no.  I'll clarify the distinction in a second. 

But we cannot compare the Euro countries to America for a simple reason.  Debt denomination. 

Greece owes money in euros and in dollars.  Greece cannot print anything, they cannot print euros, it would have to come from the euro countries and without Germany they do not have the pull to do it.  Even if they did, after bailing Greece, up comes Spain and Italy and the UK with even larger troubles.  None of those individual countries can "print" their way out because the debts they have are largely in dollars.  (Worlds reserve currency and all).  If they do try to print their own currency to buy dollars, their currency goes down much faster than dollars because they still need dollars to pay debts.  The faster they go into that hole the more it trajects.  If Greece was still on the Drachma, (ended in 1982) they could in theory print it and weaken, but on the euro its not even possible.

America is still not printing in the generic sense that most people consider when they hear the term.  Dollars in America are born from debt, they are initiating huge sums of debt however with each debt comes interest due which has a net affect of reducing supply.  If I give you 10 dollars, and tomorrow I want 11 dollars to be paid back - you can say I added 10 dollars, or you could say I removed 1 dollar depending on the way you view the transition. 

The proverbial printing press is not done at the fed, but is done at your local bank.  It's the fractional lending process that indeed multiplies money through credit creation.  The destruction of working credit markets is what has destroyed the printing press.  We can talk about printing at the fed level but if the money does not get into the real world it's just numbers.  The fed cannot be the credit market; and even tho they are still trying to support the market such a move always fails.  Historically always, 100%. 

[pagan]

So a "better" way would be saying we're trying to "debt" our way out of this crisis, right?