Is the end of the Euro nigh?

Deutsche Bank forecasts crash of the Euro for 2017

by Michael Smith (Veshengro)

According to predictions by the Deutsche Bank the Euro is headed for the abyss and it is headed for it at a rate of knots. They predict that the demise of the is about imminent and state that the Euro zone is headed for the largest capital flight in history and estimate that the value of the Euro until the year 2017 will fall to below that of one US Dollar.

After already Goldman Sachs, the leading American investment bank, declared the true and fair value of the Euro to be one Dollar or less the Deutsche Bank is following suit in that analysis. According to prognoses by Deutsche Bank the Euro will only be worth 95 US-Cents by 2017, which would mean a catastrophe for Europe and the Euro.

A fall to 95 US-Cent would mean a devaluing of the Euro by 25%. With this estimate the Deutsche Bank stands, however, almost alone as almost no other bank seems to see it in the same way. However, as the Deutsche Bank is the world's second largest dealer in foreign currencies this estimate should be taken seriously and into consideration.

Currency expert George Saravelos justifies this with the largest flight of capital the Europe will be facing in the near future. The continuing stagnation in Europe – even the possibility of another recession in the Euro zone – which is being likened to the lost decades of Japan, together with low rates of growth (as said, another recession may be in the offing even) and very low rates of interest will lead to investors no longer seeing any return for their investments in Europe and thus will move their money in droves to other places. This would seriously weaken the European common currency.

Saravelos said that the proof for his thesis of the Euro problems are in the economic data. The currency union produces record export surpluses while at the same time the unemployment rate remains at a record high.

This is referred to as an economic paradox. The export surpluses are estimated to be soon over 400 Billion Euro per annum and thus will be higher than those of China even. This surplus is, however, not, as it would be common, transferred into local currency in order to pay workers there. The European Central Bank (ECB) creates artificially low interest rates and negative deposit rates and levies penalty interest on the money that is “stored” in banks and shown on the balance sheets the investments of which are over 500 Billion Euro so that investors have no other option but to move their money abroad.

The British Barclays Banks sees the situation equally gloomy as does the Deutsche Bank and also the US bank Morgan Stanley.

Already in October 2014 the Euro crashed from its then value of $ 1.40 to the current level of $ 1.26.

A further devaluation of the Euro of the magnitude predicted and estimated by the Deutsche Bank and others will see the Euro zone hitting rock bottom and as no local, as in sovereign national currencies, exist anymore in the Euro zone countries those cannot even jump into the gap to bridge things.

This could lead to a new Great Depression rather than just a Great Recession in the Euro zone and to a collapse of the economy – at least of those parts of industry and commerce dependent on export – with serious consequences. The 1920s in Germany will look benign in comparison to what may be headed Europe's way should the predictions of Deutsche Bank be to some degree correct.

© 2014

US study proves: Euro-Zone close to collapse

by Michael Smith (Veshengro)

The Euro-Zone is, according to a study by US economists Kevin O’Rourke and Alan Taylor in the recent issue Journal of Economic Perspectives—Volume 27, Number 3—Summer 2013—Pages 167–192.

The reasoning behind this belief of the two top economists is that the current Euro-Zone is not a uniform currency and economic area. Locational factors and market cycles are marked by fundamental differences and without a synchronized development of the market cycles such large economic area such as the Euro-Zone is unable to function.

The monetary politic in this case faces a dilemma. While the southern states of the EU clamor for lower interest rates there is a definite need to for higher interest rates in central and northern Europe. This, however, is not allowed under the current policies of the European Federal Bank and thus the problems are going to get worse.

Officially inflation is not permitted in the countries worse hit by the crisis and therefore those countries are attempting, via salary reductions, to create a so-called “internal inflation” in the respective national economies.

During the years of economic growth until about 2007 wages grew disproportionally in those southern EU countries aided and abetted by low interest rates from the ECB. Now we are being confronted with a heap of shards which was the Euro.

Kevin O’Rourke and Alan Taylor can foresee the day of the total collapse of the Euro as Brussels is incapable to take the required steps that are necessary for a reform all the way to a partitioning of the Euro-Zone into a northern and a southern one.

The Euro and the EU itself are a failed experiment that the powers-that-be, hellbent on creating a federal Europe as envisioned already by Adolf Hitler, are trying to force on everyone and which they try to keep afloat despite the fact that the boat is filling up rapidly with water, and that with all means possible.

Even the UK government is trying to persuade the people, even though there is supposed to be, at some time, a referendum on whether or not the UK is to stay in the EU, that the European Union is necessary for our economy and that we would have serious problems if we would leave the union.

The truth, however, is that we do not need to be in the EU in order to trade with the EU and furthermore we should concentrate, in Britain, to, first of all, manufacture things at home again and that primarily for the domestic market before even thinking of export.

The most important thing is to cut ourselves loose from imports, whether from China or elsewhere, of goods that could easily (and they used to be) made here and for about the same retail price if the corporations would not be as greedy as they are.

Manufacturing at home, however, could be done by smaller companies who might, if we are lucky, not be as greedy as the current large corporations and they might actually even be prepared, as used to be the case, produce quality products that, when they break, can – perish the thought – be repaired and thus be made to last.

The European Union is not and never was a good idea. Envisaged already by Adolf Hitler under the same title that it took already almost in the beginning, the European Economic Community, it was intended as a fascist takeover of all of Europe and it is now coming to pass with Germany being in the driving seat. They may have lost the war but won the peace, so to speak, and will do their utmost to dominate as of Europe in a United States of Europe.

The Euro is, basically, the USE's “Dollar”, but as the EU is not a union – and that one is rather flawed as well – such as the United States of America, it cannot and will not ever work on its own.

It is time to abandon the experiment of the Euro as well as that of the EU and to return to the way things were, of individual nations trading with each other without some unelected fascist super body interfering. And, after return to normality, it then is time to also abandon the nation state for smaller entities such as tribes so that people can really participate in politics.

© 2013

EU just cutting its nose off in-spite its face

by Michael Smith (Veshengro)

The EU has decided to give Cyprus a bank bailout package that will penalize banks' customers via a levy that everyone who has any money in a Cypriot bank is forced to pay and a run has begun on Cypriot banks with people withdrawing their money.

This savings tax, as it is being referred to, is automatically deducted from account holder's accounts without them having any say in the matter. This is the state stealing people's money by order of the European Union.

The fear is now that this could set a precedence for the banks in other countries such as Greece, Italy, Spain and Portugal and it could just happen that investors are going to withdraw deposits from banks in those countries.

Chances are that such actions, should they happen could bring the Euro to its knees and with it, more than likely, the EU altogether.

Banks, apparently, will be closed until the moneys have been withdrawn to prevent people taking their money out of the banks and thus foiling the plot. Initially it was said that this closure of banks would be just until Tuesday, March 19, but this has now been extended until Thursday, March 21.

No wonder the powers-that-be want everyone too no longer use cash and, in the UK, any cash transaction above a certain amount, presently one thousand pound, will immediately be informed to the police. So, if you go into a store to buy an expensive PC or a plasma TV or a car in a car show room and come in with the money in cash the store will immediately call the police who will then come and ask a lot of questions.

© 2013

Time is quickly running out for the global financial system

by Michael Smith (Veshengro)

Are we rapidly approaching a moment of reckoning for the global financial system? All the signs are the we are, but I add the probably bit. Like in Carslberg being the best lager, probably. It's Danish, you know. I am not.

August is likely to be a relatively slow month, as most of Europe is on vacation, and I mean literally. Most of the EU members states have a month of vacation with factories closing down and all that.

However after that we will be moving into a "danger zone" where just about anything could happen. Historically, a financial crisis has been more likely to happen in the autumn than during any other time, and this autumn is shaping up to be somewhat extraordinary.

Much of the focus of the financial world is on whether or not the Euro is going to break up, but even if the authorities in Europe are able to keep the Euro together we are still facing massive problems.

Countries such as Greece and Spain are already experiencing depression-like conditions, and much of the rest of the globe is sliding into recession. Unemployment has already risen to record levels in some parts of Europe, major banks all over Europe are teetering on the brink of insolvency, and the flow of credit is freezing up all over the planet. If things take a really bad turn, this crisis could become much worse than the financial crisis of 2008 very quickly.

The UK, despite what the government keeps telling us all, is in a double-dip recession and negative growth, people, means not just no growth but actually a shrinking of the economy. Let's get that understood once and for all. The terms is but spin by the government.

Let me put it like this. I am no economist and don't claim to be one but I can see the writing on the wall and unless the Euro zone countries really do something then the Euro is going to be history, and this could, actually, be a good thing. At least in the long run.

The idea of the Euro as a single European currency was a problem from the start. It can only function in a federal Europe and that is a bad idea for starters. However, let us remember that in the Europe before borders a common currency did exist and trade in the days of the Hanse was conducted by its means. It was gold and silver coins, all had the same value, as they all had the same weight, and all were acceptable by any trader across Europe, as it then was, regardless of the portrait or whatever that was on the face of the coin.

That Europe of old (and the Hanse traded much further than today's EU) was not one of national borders either. There were no passports and no border controls, etc. Despite the fact that there were different countries no one really cared. And it all worked well, bar the trade wars and piracy.

However, the idea of a federal Europe is not going to work, especially not as long as the organs of this organization are no elected entity and their members and officers are accountable to no one.

Forcing sovereign states into any kind of allegiance, especially one that the citizens of those states are not happy with, can only be enforced by some kind of coercion, by some kind of force, and with the EU bodies making comments that Germany can not continue to object to not bailing out the Greek and other economies and that, in fact, they will have to pay, will not go down well with the people.

Hence it is but a matter of time before the Euro and the -zone will disintegrate and we will, as a matter of course, see the old currencies coming back. This could be a good thing in the long run but definitely could cause lots of problems in the short term.

The global financial system is extremely complex and there are so many thousands of moving parts that it is always difficult to predict anything precisely as to the when. In fact, history is littered with economists that have ended up looking rather foolish by putting a particular date on a prediction, and, as I have said, I am no economist and am not claiming to be one. But we could be starting to see storm clouds gather for this autumn.

According to recent reports from Reuters September could be the decisive month as far as the Euro and the -zone is concerned for in that very month a German court makes a ruling that could neuter the new Euro zone rescue fund, the anti-bailout Dutch vote in elections just as Greece tries to renegotiate its financial lifeline, and decisions need to be made on whether taxpayers suffer huge losses on state loans to Athens. On top of that, the Euro zone has to figure out how to help its next wobbling dominoes, Spain and Italy – or what do if one or both were to topple.

The way things look at the moment, but they have looked iffy for the EU and associated issues before, things could go belly up. But, and that's why I said “they have looked iffy before”, we must not forget the the European Union bodies have a tendency to tell member states to have their people vote in the way that they, the powers that be in Brussels, decree. We saw that when the Irish rejected the Lisbon treaty and the government in Dublin was told to continue holding referendums until the Irish would vote yes. Remember, this is democracy a la Brussels.

© 2012

Credit rating agency downgrades nine Euro-zone countries

by Michael Smith (Veshengro)

London,UK, January 2012 : Credit rating agency Standard & Poor's has downgraded the credit ratings of nine Euro-zone countries, stripping France and Austria of their coveted triple-A status. The status of EU paymaster Germany, however, remains untouched. This is a definite a Black Friday the 13th for the troubled single currency area.

S&P has cut the ratings of Italy, Spain, Portugal and Cyprus by two notches and the standings of France, Austria, Malta, Slovakia and Slovenia by one notch each.

Greece already, if I am not mistaken, has a credit rating of “junk”and are things really not looking well for the Euro now. One can but wonder whether it is not time to take the patient off life-support and allow him to die peacefully.

In another potentially and possibly more ominous setback even the negotiations on a debt swap by private creditors seen as crucial to avert a Greek default that would rock Europe and the world economy broke up without agreement in Athens, although officials said more talks are likely next week.

The truth is that if Greece cannot persuade banks and insurers to accept voluntary losses on their bond holdings, a second international rescue package for the euro zone's most heavily indebted state will unravel, raising the prospect of bankruptcy in late March, when it has to redeem 14.4 billion euros in maturing debt.

The move by S&P has put highly indebted Italy on the same BBB+ level as Kazakhstan and pushes Portugal into junk status.

The credit rating agency has put 14 Euro-zone states on negative outlook for a possible further downgrade, including France, Austria, and still triple-A-rated Finland, the Netherlands and Luxembourg. Germany was the only Euro-country to emerge totally unscathed with its triple-A rating and a stable outlook.

The French finance minister downplayed the downgrade of Europe's second-biggest economy from AAA to AA+ for the first time since 1975 saying that it was far from a catastrophe and claiming that it is an excellent rating.

It would appear that it is business as usual in the make-believe department all over the Euro-zone and no one has the guts too admit that the single currency is in more than serious trouble.

But then, make-believe at this very time the favorite past-time of the governments as they are trying to have the people believe that everything is fine and rosy and that everything is going to be back to normal in a jiffy.

As I keep saying, I have bad news. It is not going to be all well in the end very soon. Far from it and the sooner people – the governments know and are in denial – realize it the better.

© 2012