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10 Jul 2012 7:38 PM:

 There is another possibility which is perhaps the most likely.

German taxpayers unwilling and unable to fund the PIGS force Merkel to pull out of the Euro and reinstate the Dmark.

Its widely agreed that the PIGS countries need a devaluation of atleast 30% to get competative again relative to the solvent northern core and to devalue their debt obligations. This would happen under this scenario of the German exit.

It would be much the simplest arrangement because perhaps all the PIGS would then be able to stay in the Euro, with some further debt forgiveness for Greece. Can you imagine the chaos of multiple defections from the euro and currency changes and the effects? This is the reason why Greece is still in, because of the fears of contagion and hyperinflationary depression for those leaving.

They may try massive money printing first in the form of QE or suchlike, but this may just speed the exit of germany as it picks up the bill in inflationary terms. Unless Germany exits it will pay one way or the other, of that much is certain. Of course it will take a hit on exit on its various loans and in currency appreciation hurting exports, but the alternative is decades of being bled to death by the PIGS and their un closeable budget deficits.

 

 



Thread: What would happen to a Euro mortgage, if Spain dropped the Euro?

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30 Jun 2012 11:24 AM:

 Hi ads

 

Hope you are well and enjoying the hot weather. I have only just seen this and will try and reply soon. In short i think its a good article which is mostly correct, but there are problems which need to be discussed.

The main problem is that when you have too much debt which all the PIGS countries have and the UK and France etc, there is no easy solution. Its tempting to think that you can interviene in free markets by using other people's money (people who have been prudent and not spent too much ) to try and FORCE interest rates down for countries that have borrowed too much.

But this has huge moral and other hazards. Its these hazards that need to be fully understood, because they can and do make things much worse in the long run. This needs some explaination, but essentially its meddeling with the free market processes that work to keep things in balance.

Everyone needs to understand that the financial crisis that we see now in Spain and all the unpleasant side effects that go with it ARE PART OF THE SOLUTION. The problem was always the boom. The unemployment and the recession and the property crisis are all part of the rebalancing of the economy back to a sustainable basis, its the clearing out of the toxic boom. When you drink too much or take too many drugs, the withdrawal as unpleasant as it may be is part of the healing. If you take more drugs or drink to ease the pain, it just prolongs the agony.

The bailout of countries and the buying of bonds or Eurobonds is getting in the way of this healing process and allows overindebted countries to avoid dealing with structural problems that were the cause of the problem in the first place.

Some measures of help maybe appropriate, but only if the fundamental structural problems are dealy with FIRST. This is essentially what Germany is saying and is the reason why they appear to be taking such a hard line.

What is now apparent is that Spain knows that it can be both a beggar and a chooser, because its too big to fail and allow the Euro to continue. In this way it can ask for help but not agree to tough and very necassary painful reform. The problem with this is that it may look like a solution in the short term, but longer term will only do more and more damage.

All the over indebted nations of the Euro need to get back to sustainable living within their means and there is no two ways arounnd this - it means a economic belt tightening and moves that will be very unpopular. If these moves are not taken then the crisis like an addiction will just roll on and on.

 

 

 

 



Thread: The coming worldwide credit crunch

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15 Jul 2011 10:27 AM:

 Muy buena pero....

Come to holiday, for fun and laughter, or live the good life renting. Not for stress and tears - DO NOT BUY IN SPAIN.......

Until property is sensibly priced and Spain lives up to its obligations in the free and democratic world.

 

 



Thread: Wonderful Andalucia

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20 May 2011 8:42 PM:

 Ta PJY - we will be getting a UK account i guess.



Thread: Kindle in Spain

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20 May 2011 6:26 PM:

 Thanks everyone for the replies. We are going to buy one and give it a whirl. We have a permanent wifi connection, so probably won't need the 3G. Feeling a bit behind the times here lol!



Thread: Kindle in Spain

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