cobran20

Martin Armstrong's Economic Writings

3855 posts in this topic

Why would Germany default? They now own Greece!

You've failed to answer the question. Is Greece ever going to say that they can't pay their debt and go into default? I'll make it simple for you - a yes or no answer will do!

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You've failed to answer the question. Is Greece ever going to say that they can't pay their debt and go into default? I'll make it simple for you - a yes or no answer will do!

As long as Germany loans, the Greeks won't be defaulting. It depends on Germany, Greece can cope with 5%. For the Germans bringing down Soros and Wall Street is too good to pass up.

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As long as Germany loans, the Greeks won't be defaulting. It depends on Germany, Greece can cope with 5%. For the Germans bringing down Soros and Wall Street is too good to pass up.

I'll take that as a no.

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I'll take that as a no.

A Greek default is the best myth since the Lochness Monster. Soros is full of piss and wind.

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The main difficulty inflicted on Weimar Germany was a will o wisp currency. Greece doesn't have that problem it has a strong currency to back its market.

Euro doomed? Rather sweeping statement.

The Euro buys 1/3 the gold it did a decade ago.

The USD buys 1/5.

The GBP buys 1/6.

I can see who is the least ugly pig.:thumbsup:

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The main difficulty inflicted on Weimar Germany was a will o wisp currency. Greece doesn't have that problem it has a strong currency to back its market.

Euro doomed? Rather sweeping statement.

The Euro buys 1/3 the gold it did a decade ago.

The USD buys 1/5.

The GBP buys 1/6.

I can see who is the least ugly pig.:thumbsup:

... and Europe has such a strong history of unity amongst its nations. I sure Deustchland will be more than happy to bail out all the PIIGS indefintely! Next few years should be telling.

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... and Europe has such a strong history of unity amongst its nations. I sure Deustchland will be more than happy to bail out all the PIIGS indefintely! Next few years should be telling.

Has it's positives and negatives. Historically balkanized Europe proved more culturally vital than say a unified state like Imperial China. Germany has no problem bailing out the pigs, it can borrow 3% for 10 year and lend to the Pig for 5% and make a profit in the process.

So Germany has this fantastic carry trade that creates a larger market for its products. Beggar thy neighbor without even trashing your own currency. The only thing Germany has to worry about while the world will lend to it so cheaply is running out of Pigs.

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The value of a currency is not determined by debt. The currency itself is a synthetic commodity which is not debt and the values lies in its role as a unit of account.

The major factor that determines the fate of a currency besides its legal tenure is the quantity per capita and the interest rates associated with it.

If the USD continues in the same vane as the last 12 months, printing 9% (7.5% vs gold quantity) more while running with a short rate of next to nothing (.10%), then the USD is doomed. Based on O/N rates, the USD has been a 7.4% loss over 12 months.

Please tell me how many businesses can afford a 7.4% loss over 12 months?

The Euro has printed 4.8% over 12 months (3.3 vs gold quantity).

3.3% minus 1.3% equals a 2% loss over 12 months.

There's not so much the Euro has to do to shape up, while the USD goes off the deep end. :thumbsup:

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The value of a currency is not determined by debt. The currency itself is a synthetic commodity which is not debt and the values lies in its role as a unit of account.

The major factor that determines the fate of a currency besides its legal tenure is the quantity per capita and the interest rates associated with it.

If the USD continues in the same vane as the last 12 months, printing 9% (7.5% vs gold quantity) more while running with a short rate of next to nothing (.10%), then the USD is doomed. Based on O/N rates, the USD has been a 7.4% loss over 12 months.

Please tell me how many businesses can afford a 7.4% loss over 12 months?

The Euro has printed 4.8% over 12 months (3.3 vs gold quantity).

3.3% minus 1.3% equals a 2% loss over 12 months.

There's not so much the Euro has to do to shape up, while the USD goes off the deep end. :thumbsup:

Please explain why all the money is rushing to US bonds (checked the yields recently?) if it is so unsafe (and that is a matter of crowd perception)? Why haven't they all parked their money in Euro bonds?

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Please explain why all the money is rushing to US bonds (checked the yields recently?) if it is so unsafe (and that is a matter of crowd perception)? Why haven't they all parked their money in Euro bonds?

You mean you'd expect the US government would have difficulty selling bonds when it prints the money the bonds are purchased with? You should apply for a job at PIMCO!:rolleyes:

If you recall I've been the one all along warning against US treasuries being "the short of the century". If you recall I'm the one making the deflation call, not you! I'm the one arguing zero bound rates.

If you haven't noticed the government who creates the money also sets the rates.

However what you should ask yourself is were are the world reserves of "money" and why gold is figuring so strongly? It's currently private reserves of monetary gold are over 20,000 tonnes now.

NEW YORK | Mon Aug 29, 2011 6:26pm EDT

NEW YORK(Reuters) - Bill Gross, the manager of the world's largest bond fund,feels like "crying in his beer" for having bet so heavily against U.S.government-related debt earlier this year, the Financial Times reportedon Monday.

Showing a more bearish view on the U.S. economy,Gross said PIMCO had initially dumped all of its U.S. debt holdings inMarch as he expected economic growth to be higher, resulting ininflation down the road.

That decision greatly undermined the performance of PIMCO's Total Return Fund (PTTRX.O).As Treasuries prices rallied, the fund lost 0.97 percent in the pastfour weeks, while the benchmark Barclay's U.S. Aggregated Bond Indexrose 0.23 percent in the same period, according to Lipper data.

So far this year, the fund has returned 3.29 percent, less than the 4.55 percent recorded by the Barclay's benchmark index.

"Whenyou're underperforming the index, you go home at night and cry in yourbeer," the Financial Times, in its online edition, quoted Gross assaying. "It's not fun, but who said this business should be fun. We'retoo well paid to hang our heads and say boo hoo."

Gross,who oversees $1.2 trillion at PIMCO, said it was "pretty obvious" hewishes he had more Treasuries in his portfolio right now.

"Iget that it was my/our mistake in thinking that the U.S. economy canchug along at 2 per cent real growth rates. It doesn't look like itcan."

When U.S. Treasuries yieldsfell to 60-year lows earlier this month, Gross said investors werepricing a higher probability of recession in the United States. In May,he had said the only way PIMCO would purchase Treasuries again was ifthe United States headed into another recession.

Hetold the Financial Times that his view on the U.S. economysignificantly changed earlier this month after the Federal Reservepromised to keep interest rates low for at least another two yearsearlier.

"Freezing rates for twoyears, that was a pretty significant statement in terms of thevulnerability of Treasuries to go down in price and up in yield," Grosssaid.

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You mean you'd expect the US government would have difficulty selling bonds when it prints the money the bonds are purchased with? You should apply for a job at PIMCO!:rolleyes:

If you recall I've been the one all along warning against US treasuries being "the short of the century". If you recall I'm the one making the deflation call, not you! I'm the one arguing zero bound rates.

If you haven't noticed the government who creates the money also sets the rates.

However what you should ask yourself is were are the world reserves of "money" and why gold is figuring so strongly? It's currently private reserves of monetary gold are over 20,000 tonnes now.

I was responding to your statement that the Euro is a much better proposition, yet the market prefers the $US since they're still buying the bonds, scared of the Euro. The market has voted against you!

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I was responding to your statement that the Euro is a much better proposition, yet the market prefers the $US since they're still buying the bonds, scared of the Euro. The market has voted against you!

If that was true then why is the Euro 144 cents?

Gross sold treasuries put the money in the banks. The banks then having nothing better to do with the money bought treasuries. If the US banks were allowed to buy Greek treasuries they would've made a killing!

This is not free market.

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If that was true then why is the Euro 144 cents?

Gross sold treasuries put the money in the banks. The banks then having nothing better to do with the money bought treasuries. If the US banks were allowed to buy Greek treasuries they would've made a killing!

This is not free market.

Argue what you like but the big money is going into US bonds as the market has assessed it as safer than anything available in Europe.

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Argue what you like but the big money is going into US bonds as the market has assessed it as safer than anything available in Europe.

You mean you safely lose a greater amount of your purchase power?

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You mean you safely lose a greater amount of your purchase power?

Unless the cookie completely crumbles in the un-United States of Europe, where you'd loose the lot!

I tend to agree with Armstrong - Europe is a bigger can of worms than the US, with both likely to explode in the future.

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Unless the cookie completely crumbles in the un-United States of Europe, where you'd loose the lot!

I tend to agree with Armstrong - Europe is a bigger can of worms than the US, with both likely to explode in the future.

Flexi Jerkoff : "I know what you want, but you're not going to get it!"

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Banking also LEVERAGES the economy by creating MONEY. If you have $1,000 on deposit and I borrow $1,000, we both now have accounts reflecting $1,000 each.

Doesn't actually happen, because the regulators don't allow retail banks to create money in this fashion. There is still only $1,000

What happens is the original input is a time deposit. Somebody borrows the amount for a term equal to the time deposit, the borrower pays interest and that is split between the bank and the depositor.

The banks take a calculated risk that savings depositors will not withdraw their deposit, and the bank scores with the longer lending rate. If the banks did create deposits from thin air, then the currency risk would soon destroy them. If this was actually "money" then no bank would ever close its doors.

The banks essentially borrow money from one entity and lend to another.

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I guess the USA is at least a known and understood problem. They have a single currency and a myriad of means to escape their debt problems. Yes your stake is eroded should you own either thier currency or bonds in their currency as they print more dollars but there is a risk in the EU in that no one knows for how long the political will will be there to hold things together? It has never happened before as I understand it that a myriad of countries with diverse economies have come together and been tested.

Sure I would buy German Marks or even possibly French Francs and these economies are more resilient than others in the EU but what happens if some economies never look like coming good and appear that they will be an economic shackle on the likes of Germany for decades to come? At some point I fear Germany may decide to cut them loose or perhaps they decide to cut themselves loose?

Surely this is a risk?

I don't know what will happen but there is a risk there for sure.

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Doesn't actually happen, because the regulators don't allow retail banks to create money in this fashion. There is still only $1,000

What happens is the original input is a time deposit. Somebody borrows the amount for a term equal to the time deposit, the borrower pays interest and that is split between the bank and the depositor.

The banks take a calculated risk that savings depositors will not withdraw their deposit, and the bank scores with the longer lending rate. If the banks did create deposits from thin air, then the currency risk would soon destroy them. If this was actually "money" then no bank would ever close its doors.

The banks essentially borrow money from one entity and lend to another.

;). Indeed I agree with you around that, if you remember the thread on another forum that went for over 1000 posts! It is not virtual money at all it is just plain old credit and anyone can create it. Hey here is $100.00 can you pay me back on tuesday next week. Money goes off gets spent but I still have my "deposit" for $100.00 though I don't think in that case the government would count it in their M3.

Largely it is the monetisation of assets but for every deposit account something has been there to allow the creation it has not been from thin air. It has not come about fancifully but due to one persons hard work or ownership of an asset which they sell to create a deposit account. The fact that the money gets to recirculate and create more deposit accounts after the first through further monetisation is precisely why the whole system can go into reverse and that is when real money becomes king.

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