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| Europe |
| EMU break-up risks global deflation shock that would dwarf Lehman collapse |
| 2010-07-08 |
| A full-fledged disintegration of the eurozone would trigger the worst economic crisis in modern history, devastate every country in Europe including Germany, and inflict a deflationary shock on the US. There would be no winners, warns the Dutch bank ING in a new report "Quantifying the Unthinkable". |
| Posted by:tipper |
| #5 A smart way of dealing with this situation is to "parallel the Euro" with national currencies. The easiest way to do this is to print a vast amount of Euros that have individual countries identifier on them in large print. For example a "German Euro" would have a big "GER" on it. The number of German Euros printed was based on Germany's solvency and relative wealth. Germans could exchange their ordinary Euros for German Euros 1 for 1. But the trick is that they can *only* be spent in Germany. If Euros left Germany, they would have to be converted, at whatever exchange rate, for the Euros of that other country, likely worth less than German Euros. And conversion could only be done through an official source. Once the core nations would be back on their feet, their Euros could be permitted to exchange. For example, GER and FRA(nce) Euros could be spent in either country, once France had equivalent economic stability to Germany. Insolvent nations, like Greece, would be confronted with an inflating Euro currency, forcing a restoration of economic sanity on them. It would temporarily cut them off from the rest of Europe, except at a premium price, and they could only return once they got their house in order. From that point, in the future, any country that misbehaved financially would have its Euros "lettered" until they got their house back in order. |
| Posted by: Anonymoose 2010-07-08 15:33 |
| #4 Notice all the talk throughout the article about how it would affect the US. They will ask for money sooner or later. Just like a pan-handling bum sidling up to you on the sidewalk, you can see them coming a mile away. |
| Posted by: bigjim-CA 2010-07-08 15:20 |
| #3 But the prospect isn't "full-fledged disintegration", just getting rid of the EMU members that never had any business joining in the first place. A hard-currency, fiscally-responsible, smaller EMU focused on Germany and northern continental Europe would do fine, and we'd all be better off as a result. |
| Posted by: lex 2010-07-08 13:23 |
| #2 Deflation is a sign you've regulated far too mcuh credit to push up asset values to unsustainable levels. Inflating out of this is of course the worst possible outcome, which is why they'll try it. |
| Posted by: Bright Pebbles 2010-07-08 09:56 |
| #1 Anything to avoid the painful medicine that they need. |
| Posted by: gromky 2010-07-08 08:34 |