Out of Left Field: A New Idea to Save the Common Currency

[sysop]

Germany's Left Party is not often associated with neo-liberalism. But a new proposal from a senior party member could provide a way out of the cycle of bailouts and bank aid. Why not just reboot the market economy and then cushion the fall?

http://www.spiegel.de/international/...846788,00.html

[honest_abe]

Originally Posted by sysop

Germany's Left Party is not often associated with neo-liberalism. But a new proposal from a senior party member could provide a way out of the cycle of bailouts and bank aid. Why not just reboot the market economy and then cushion the fall?

http://www.spiegel.de/international/...846788,00.html

A partial default is like being partially pregnant - you either default and renegotiate your loans or you pay them in full, there is no such thing as a partial default as being suggested by the neo-liberal.

[sbanicki]

http://www.spiegel.de/international/...846788,00.html[/quote]


The only way for the euro to survive is if parts of Europe politically unite under one constitution and one governing body elected by the citizens of the new amalgamated country. In order for anyone to believe this will happen, he must be one highly intoxicated optimist. There are 27 countries in the European Union from Germany with a population of 81.7 million to Malta with 417 thousand citizens in 2011. Only 17 of these countries use the euro.


Europe, and the world, needs to plan for the end game. The dissolution of the euro is inevitable. We need to plan now to minimize the negative impact. The impact will be negative, it is the degree of impact that is yet to be decided.

The six most populated countries of Germany, France, United Kingdom, Italy, Spain and Poland have combined populations of 355 million. This is slightly larger than the United States. In 2010 the GDP of these six countries totaled $12.7 trillion in nominal dollars while the GDP of the U.S. totaled $14.6 trillion.

It becomes easier to trade between "countries" if they are all a part of one sovereign state. It is being Pollyanna to believe this will actually happen. There is much bad history between these countries, pride and tradition for each country runs deep, each country has its own taxing system and all have different social programs for their citizens.
http://www.freeourfreemarkets.org/20...rope.html#more

[janpoloniecki]

Which sovereign debts should be honoured? Rather than repay the same proportion of all bonds, taper repayment to reflect the diminished expectation of being repaid the larger was the country's debt. The yield at time of purchase could be used for this formula. See my proposal for the Wolfson Prize for this and other suggestions such as changing the unit for assessing sovereign debt from % GDP to years of tax income.

[sbanicki]

Many are saying Germany needs to step up; however, why should they.

I am not going to co-sign on a note for a stranger. Further, I am not going to reduce my ability to export by increasing inflation, and thus unemployment, in order to help the unemployed in another country.

Some argue that Germany must save the euro because of exports going to other countries in the Euro Zone. This is untrue. "The German government reported... that the country’s trade surplus with the other 16 countries in the euro zone was 62.2 billion euros in the 12 months through March. ...down 29 percent from the level a year ago, ... the lowest for any 12-month period since 2002.

But the country’s trade surplus with countries not in the European Union has risen, offsetting the decline within the euro zone. That figure climbed to 62.9 billion euros, a record figure that is up 115 percent over the previous year.", Outside Europe, German Trade Surplus Soars, New York Times, May 12, 2012.

Yes, some German banks may need to be bailed out, but perhaps this will be less costly than saving the entire zone.

Does Germany have a moral obligation to save the euro because they benefited the most? This argument does not hold water. No country was coerced into joining the euro.

It is not the United States of Europe. German politicians have a fiduciary responsibility to German citizens; not Spaniards!
http://www.freeourfreemarkets.org/20...of-europe.html

[tnt_ynot]

I just love it when the anti-capitalists led by Red-Wagon-Sahra are out in front of all the Euro Marvelous Masters of Mayhem with at least half the solution. That half is the needed debt reduction in Club Med. The half she is missing is that, even with severe haircuts, these countries are not economically competitive and therefore must be removed from the Euro.
But half right is better than dead wrong like Barroso, Junckers, Samaras, Wolfgang and Gabriel etc. She must have been brainstorming with Oscar and reading the wisdom of
http://euro-meltdown.blogspot.com

Anthony

[oldone]

This one talks about a dual currency system.

http://seekingalpha.com/article/3079...ve-sovereignty

I think Germany should step out of the Euro, but allow its citizens to transact business amongst themselves and honor existing contracts in Euros. But government business and salaries should be transactable only in its own currency (DM?). Most Germans would switch to transacting in DM. Other countries are likely to follow suit.

Draghi will then become laser focussed on preserving the value of the Euro, which is is his legal charter, rather than propping up governments. Printing and distribution of tangible notes would follow as well as discouragement of bank loans to governments. He may need to find another goods basket (not gold) to measure his success - such as the value of a food basket in Euros. The ultimate measure of success will be Germans switching back to using Euros for intra-German trade.