They have just come out today (Gonzalez-Paramo) and said that they will publish the details of how they'll be sterilising the bond purchases next Tuesday. That look like monetization to you? At the same time, Spain came out yesterday with additional austerity measures (5-15% cuts in civil servant wages and pay freeze for 2011; pension freeze; cancellation of child tax benefit; this is on top of the already announced VAT hike). Today Portugal announced that they're raising retirement age, scrapping infrastructure projects (new airport and high-speed rail), cutting senior public servants' wages by 5%, as well as lifting VAT and income taxes. I'd say they're doing the right thing, so I, personally, am willing to give them a chance.
What does the Eurozone have to do with Britain and the Pound? Moreover, I thought we're talking about Germany exiting, so I don't understand what you're saying. They would have to ring-fence the German banking system, if they decide to exit. When the cost of the periphery bailout exceeds the cost of this ring-fencing, exit might start looking viable.
Not only that but they would also have to take the potential losses for their export into account due to the loss of purchasing power installed in the rest of Europe. Volkswagen sells 1 million cars a year in europe Germany excluded. Would they be in favour of a return to the Mark in Germany and the rest of the Eurozone being condemned to the EU pesso?
They're trying to do the right thing in that regard, but it'll never work. Even if it somehow manages to get past the populace without them burning the country to the ground, it essentially ensures a double dip recession. What about when the ECB gets ready to hike rates next year? More fun!
That's actually the main point to me... The EuroZone, unlike the US, is not running a trade deficit, which means that, effectively, Germany is exporting to the rest of the EuroZone countries. So it's not like Germany, by agreeing to the bailout, is paying a lot for nothing. They're paying to avoid inter-EuroZone trade wars that have the potential to cripple the German economy. That's on top of the implications for the German banking system. Moreover, in any currency union, incl the US, transfer payments in exchange for demand are the norm, so it's not so strange to see it admitted explicitly in the EuroZone. The question, of course, is whether Fritz in rural Munsterland understands this.
Firstly, according to anecdotal evidence, at the moment it's not looking that horrible. For instance, Ireland's exports have done quite well; car sales are up 75% as a result of the scrappage scheme; manufacturing PMI is rising and, most importantly, the exchange rate is working wonders for them. Secondly, if there's one thing that's certain, it's that the ECB is not hiking for a long time to come. Note that I am talking my book...
Until we get within 3% of a balanced budget, it's just half-measures and talking points. Regarding the talk of sterilization, don't kid yourself. The ECB is buying sovereign debt. That's monetization. And those bureaucrats can write down anything they like. Who says they'll hold themselves to anything at all? Look around. Nothing is sacred. Debt, risk, contracts, free markets, the dollar, the Euro. Everything is expendable. The Maastricht Treaty specified less than 60% debt-to-GDP and 3% per annum, budget deficits. Some good that did !! To be fair, America and Canada are up next. They've got to man up just as hard as the EU. Nobody will. So it's all just conjecture, really. We're just rearranging deck chairs on the Titanic. I respect your patriotism but we all need to face facts. We borrowed far too much, for far too long, and now it's time to pay the piper. I'm not happy about it either. I've got vulnerable family and friends, too.
But that's the thing, the Irish, the Portuguese and the Spanish seem to be doing the right thing. They aren't the Greeks, they ARE paying the piper, albeit too slowly for you. Why aren't you willing, at least, to give them time to deal with their problems? Moreover, the EuroZone will overhaul the Stability and Growth Pact and some better fiscal discipline might still come out of that. Finally, as demonstrated by the US, all ccy unions need time and crises (sometimes as bad as a civil war) to gel into viable long-term economic entities. This is one such crisis. It may end in the dissolution of the EMU or they might come out of it stronger. I am not as pessimistic as you and I don't see why the process necessarily has to end in failure. At the very least, I am willing to grant them a stay of execution. As to the US, 100% agree. In some ways the US situation is even worse. However, the US seems to have a sponsor, i.e. China and the rest of the EM world, so it's not clear how that story develops.
Latest buzz is about several online banking websites announcing maintenance for this weekend. One says ATM machines will also be affected. Probably just some kind of patch day. https://www.ksk-koeln.de/Sicherheit_Warnmeldungen.aspx https://www.dab-bank.de/meinedabbank/login.app.html https://wwwsec.axabank.ch/authen/login https://internetbanking.gad.de/ptlweb/WebPortal?bankid=8289 https://banking.donner.de/ https://hbcibanking.apobank.de/onlinebanking-apo/ Major gold shops are closed "due to high demand" since the internet outage in Germany yesterday. But hey, there has to be high demand to drive prices to record levels. http://www.proaurum.de/ http://www.reisebank-gold.de/