When Eurozone collapses, what next? (feels more when than if)

[Hamishbear]

Posted on Chat but felt this may be a better place.

So, the bailouts can't continue indefinitely, what happens next?

What's the best case scenario and how will it affect us in the short term and long term?

Argentina defaulted in the 1982 Latin American debt crisis. There's all sorts of talk over here, it's very difficult to see the wood for the trees at the moment, far too many 'what ifs' to see a clear picture of this crisis.

It's not Greece the German's are worried about. The impact in real terms to the German economy of Greece leaving is negligible.

The problem with Greece cannot default without leaving the Euro. If Greece leaves the Euro then markets will get REALLY jittery and that will have more impact on Germany. In addition the dominos start to fall and next in line will be Spain then Italy...maybe even France.

Germany also cannot be seen to let Greece off the hook either. That sends out the wrong signal and next Ireland & Portugal will want to know why they can't simply forget about their debts either.

The solution is fiscal union which Germany would effectively underwrite the debts of all these struggling nations. That is understandably not medicine the German's want to take. From their point of view they practiced prudence whilst the good times rolled unlike their European cousins. So they really don't want to pay the price for the other's excesses.

It's being reported that the big bazooka may not be employed after all.

Hardly surprising as the German Supreme Court ruled the exerise was unconstitutional.

Expect the Spanish bond market to raise spectacularly again tomorrow.

This is now way beyond a farce.

I think there are certain faceless people like bankers doing what is best for them, not best for the majority of the people. How can staying in the Euro be good for Greece when it is in the turmoil it's in. And I heard just yesterday lots of people won't be holidaying there because of this and that will make things infinitely worse as the tourist trade is their main industry.

WetAugust, don't forget that some of this is classic theatre. Newspaper headlines scream panic, the BBC interviews politicians and speaks of impending doom and gloom and the odd polar bear for good measure, and the public and any reluctant politicians go along with the plan.

Everytime there is a G20 summit, there is usually some sort of economic crisis in order to make sure that the politicians come up with the right deal, the one that was wanted all along.

In the same way, just as the Euros start, the BBC does an expose of racism, which it failed to do months before. And in the same way, when there is a catastrophic climate change sustainability conference, the BBC often reports on some new found catastrophic climate news discovered by catastrophic climatologists which pushes the intended agenda along and forces any reluctant politicians, who don't quite buy the scheme, to buck up their ideas and get with the plan.

It's the old sword of Damocles trick. The media plays that card so often, you'd think the public would remember the last one, but the spin meisters know that with all the bread and circuses, the public will have forgotten the last one by the time they roll out the new one.

Up to a point Claig. That's the Michael Moore theory - that Govts want to keep us all in a state of heightened anxiety to make us more pliable.

But the evidence is the way the markets are reacting to all this and the (so far limited) runs on banks. That's not contrived by politicians.

I wish the whole Euro would just implode and take the whole rotten EU edifice down with it - really soon.

I even think the markets are part of the trick. I seem to remember markets tumbling and headlines screaming and pundits pounding the table and demanding immediate action to stem the flow, and politicians on podiums saying the time for a deal is now, " we have passed the tipping point" and if we do not take action then we all face a catastrophic financial climate. And then when the conference ends and the deal has been struck, then the markets rise again and the polar bears sleep easy in their beds at night.

But the elites are higher up the food chain than the money markets,or are part of the money markets,or at least know how they work and react.
The politicians,on the whole,are further down.

Cameron says it is make or break for the Eurozone, they must take action for closer fiscal union NOW! The crisis is upon us, there is no time for delay, now is not the time for any reluctant politician to ask awkward questions, hesitate and sway.

Yes, I agree, amillionyears. The politicians enact the laws and pass the bills. The money markets apply the pressure and the elites pull the strings.

So who are these 'Elites' if they are not the Market and are not politicians? What's actually in it for them? Are we talking Bilderberg here?

We don't know who they are. Bilderberg are only functionaries; CEOs and bank chiefs and politicians. None of these people are in permanent power or have permanent wealth. Politicians come and go, and can lose their seats or offices; the Fred the Shreds, even with knighthoods for "services to banking" come and go too. The real elite remains in permanent power and has permanent wealth.

So the much-bashed bankers are the ones that need to be courted?

Do any such funds actually have assets that could be realised, used in the ways you suggest, and are actually sufficient to do even a proportion of the tasks listed for even one country? Let alone all of those which are struggling?

'Do any such funds actually have assets that could be realised'

I doubt that they do. We are talking hundreds of billions, even trillions. It is not pension funds and bankers who have that sort of money available or even invested. Only governments, like Germany, have access to those types of funds.

We know that many of the banks need recapitalisation and Germany is supplying money that is used by Greece and Spain to recapitalise their struggling banks.

Or China

The Bank of England is now going to loan over £100 billion to the banks in the hope that they will lend it to businesses. That suggests that the banks don't have that kind of capital.

People tell us that it is China. But I don't believe that. They don't have teh real power. How many meetings have we seen between the Chinese leader and Angela Merkel? I can't remember many recently, but everybody wants to meet and talk to Merkel, and she is the center of discussion at the G20.

China don't need to meet with Angela Merkell.

Claig, who do you see as being the true elite who control everything?

I have no idea who the real elite are. If I or anyone else knew, then they wouldn't be the real elite.

It looks like there may be more bad news until politicians do what some people feel they need to do.

'European policy makers are unlikely to solve the region?s sovereign-debt problem unless they have a crisis ?moment? like Lehman Brothers Holdings Inc.?s 2008 bankruptcy, said Gary D. Cohn, Goldman Sachs Group Inc.?s president and chief operating officer.

?My personal view is we?re going to need a moment? because the issues are political, Cohn, 51, said in an interview with Erik Schatzker on Bloomberg Television?s ?Market Makers.? ?Politicians sometimes need the moment in order to do what they need to do.?'

www.bloomberg.com/news/2012-06-20/cohn-says-europe-needs-lehman-like-moment-to-spur-action-1-.html

It seems that the issues are political and not financial. So the sovereign debt crisis is not an economic issue, but a political one.

And in order for the politicians to do as wished, then there may need to be a crisis to put the frighteners on, so that the headlines scream panic and so that some politicians can pound the pulpit and tell the public that the "tipping point" has been passed and we only have 50 days left to save the entire economy and save the world. It's a shame we haven't got a statesman like Gordon Brown at this time of crisis.

It makes you wonder whether the Lehman bankruptcy in 2008 was also a "crsisis moment" so that politicians could do what they needed to do. It makes you wonder whether it was artificial and created at a certain moment in time for a certain purpose. It makes you wonder why the ratings agencies and regulators and pension funds and hedge funds and high rollers did not foresee it.

It makes you wonder whether the austerity was created artificially so that politicians could do what they needed to do.

It makes you wonder why we really have such a crisis where doctors sadly feel they have to go on strike for the first time since 1975.