sailingaway
03-21-2013, 04:49 PM
the nations in difficulties don't have a separate monetary unit to devalue
The recent strength in the Eurodollar has added insult to injury for those Eurozone countries struggling with massive debt and high unemployment. An effective monetary policy for these countries is to devalue their currency.
The problem is these Eurozone countries don't have a sovereign currency to devalue. Furthermore, not all who use the Eurodollar have the same problem and therefore don't have a vested interest in currency value destruction. Bottom line - the situation is an intolerable mess.
Mario Draghi has uttered a few guarded statements suggesting that he is concerned about the strength of the Euro in recent weeks. For that matter, IMF head Christine LaGarde has made similar comments. The problem - the ECB doesn't have the tools to devalue the Euro.
That said, where there is a will there is a way. Want to take the Eurodollar down - just start confiscating depositor funds. Despite what many think, the convoluted mess created by the decision to seize depositor funds to rescue the Cyprus banks might not be as ill conceived as most assume. In fact, I don't think it was ill conceived at all. I think it was a calculated decision taken for the purpose of devaluing the Eurodollar and Cyprus was the sacrificial lamb.
The euro has been a colossal failure. How do you merge a group of hard core socialist countries and a group of hard core capitalist countries under a single monetary system that has no real power and expect it to succeed?
I don't profess to be an expert but as an observer it seems to me that the "have not's" expect the "haves" to come to the rescue and the "have's" insist that the "have not's" adopt the methods that got the "have's" what they have if they expect to be rescued.
Doesn't that about size the situation up adequately and how should we expect these diametrically opposed philosophies to co-exist under one monetary umbrella? The tug and pull of this dynamic has gone on for some time now and the situation has moved from bad to worse. At some point the "haves" must simply say no more to protect their own interests.
more: http://seekingalpha.com/article/1294091-cyprus-parliament-calls-the-eu-s-bluff-but-the-eu-wasn-t-bluffing
The recent strength in the Eurodollar has added insult to injury for those Eurozone countries struggling with massive debt and high unemployment. An effective monetary policy for these countries is to devalue their currency.
The problem is these Eurozone countries don't have a sovereign currency to devalue. Furthermore, not all who use the Eurodollar have the same problem and therefore don't have a vested interest in currency value destruction. Bottom line - the situation is an intolerable mess.
Mario Draghi has uttered a few guarded statements suggesting that he is concerned about the strength of the Euro in recent weeks. For that matter, IMF head Christine LaGarde has made similar comments. The problem - the ECB doesn't have the tools to devalue the Euro.
That said, where there is a will there is a way. Want to take the Eurodollar down - just start confiscating depositor funds. Despite what many think, the convoluted mess created by the decision to seize depositor funds to rescue the Cyprus banks might not be as ill conceived as most assume. In fact, I don't think it was ill conceived at all. I think it was a calculated decision taken for the purpose of devaluing the Eurodollar and Cyprus was the sacrificial lamb.
The euro has been a colossal failure. How do you merge a group of hard core socialist countries and a group of hard core capitalist countries under a single monetary system that has no real power and expect it to succeed?
I don't profess to be an expert but as an observer it seems to me that the "have not's" expect the "haves" to come to the rescue and the "have's" insist that the "have not's" adopt the methods that got the "have's" what they have if they expect to be rescued.
Doesn't that about size the situation up adequately and how should we expect these diametrically opposed philosophies to co-exist under one monetary umbrella? The tug and pull of this dynamic has gone on for some time now and the situation has moved from bad to worse. At some point the "haves" must simply say no more to protect their own interests.
more: http://seekingalpha.com/article/1294091-cyprus-parliament-calls-the-eu-s-bluff-but-the-eu-wasn-t-bluffing