Germany must be forced out of the Euro Monetary Union.

sheda · Jul 21, 2015

loyek590 said:
we should just divide the USA up into importing states and exporting states, and each can have their own currency
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..... . . .

Troy Bombardia · Jul 21, 2015

Why would anyone want to kick out Germany? Germany is what's holding the union together. Without Germany, the Euro would crash because the eurozone's main economic engine would disappear

http://tradingslugger.com/2015/07/21/predicting-the-news-is-a-terrible-way-to-trade/

sheda · Jul 21, 2015

Dear lord.

loyek590 · Jul 21, 2015

I don't know how to post the exact link. Go to ET and page down to the short 3 min video. It will crack you up.

http://www.elitetrader.com/et/index.php?threads/who-owns-chinas-debt.292738/

Tsing Tao · Jul 21, 2015

Troy Bombardia said:
Why would anyone want to kick out Germany? Germany is what's holding the union together. Without Germany, the Euro would crash because the eurozone's main economic engine would disappear

http://tradingslugger.com/2015/07/21/predicting-the-news-is-a-terrible-way-to-trade/
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That's kinda the whole point of the argument. The significant drop in the Euro would be just what the doctor ordered for the remaining countries.

piezoe · Jul 22, 2015

GarrettKimmel said:
2 piezoe: And how likely the dissolution of the eurozone is? Once we reject euro, lots of problematic issues just vanish in the air.
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I would guess Ashmore is right here. rejecting a common currency will create a lot of problems. What is needed is a better monetary structure. Perhaps it will be impossible to get all the countries now involved to go along with what is needed. I can see that eventually there may be more then one currency, but certainly not a return to every country having its own currency -- well there are still several: the Danes have theirs and the Brits of course.

The simplest solution is for Germany to agree to a eurobond. But they will not. That is why I think they must leave the EU monetary union, though they could remain apart of the union in other respects.

piezoe · Jul 22, 2015

Tsing Tao said:
As if anyone has wondering where Piezoe got his idea for this thread - his idol BB's blog.

Why it's time for Germany to leave the eurozone
Influential figures including Ben Bernanke have called on Germany to start pulling its weight to end the eurozone's dysfunction. The only alternative is a German exit from the euro

Berlin has let the Grexit cat out of the bag. It is now having to bear the consequnces Photo: AFP

By Mehreen Khan

Germany's finance minister, Wolfgang Schauble, has drawn opprobrium and praise in equal measure for his suggestion that Greece takes a "time-out" from the eurozone.

In proposing that Greece could be better off outside the euro, the irascible 72-year-old crossed a political rubicon: he confirmed that the single currency was "reversible" after all.

But having broken the euro's biggest taboo, commentators have now suggested that it should be Mr Schaeuble's Germany, rather than Greece, that should now take the plunge and ditch the euro.

To stay close, Europe's nations may need to loosen the ties that bind them so tightly
Ashoka Mody, former IMF bail-out chief

Figures as esteemed as the former Federal Reserve chief Ben Bernanke used last week's decision to press ahead with a new, punishing bail-out for Greece as an opportunity to remind Germany of its responsibilities to the continent.

Mr Bernanke took to his blog to highlight that Berlin's excessively tight fiscal policy has helped scuppered the euro's dreams of prosperity and "ever-closer" integration between 18 disparate economies.

In its latest assessment of Germany's economic strength, even the IMF (seen in many German circles as chief disciplinarian against the errant Greeks) urged Berlin to carry out "more ambitious action... and contribute to global rebalancing, particularly in the euro area".

• AEP: Germany's trade surplus is the biggest threat to the euro

A rebalancing act
Germany's record trade surplus is held up as the main symptom of its dangerously preponderant position in the eurozone.

A measure of the economy's position in relation to the rest of the world, Germany's current account hit a euro-area record of 7.9pc or €215bn in 2014. It is now expected to hit more than 8pc of GDP this year, according to the IMF.

The persistently high surplus in part reflects the strength of Germany's much-vaunted export industries. But other contributing factors are reasons for concern. The IMF has said such chronic imbalance also reflects a "reluctance by the corporate sector to invest more in Germany".

Persistent imbalances are unhealthy, reducing demand and growth in trading partners

Ben Bernanke

As Mr Bernanke also notes, the surplus puts "all the burden of adjustment on countries with trade deficits, who must undergo painful deflation of wages and other costs to become more competitive."

Southern economies such as Greece are chief victims of the cost of this adjustment. But as the chart below shows, with Germany in the bloc, the eurozone's rebalancing act is going nowhere.

Rating's agency Standard & Poor's notes that the initial adjustment between debtor and creditor nations, which started in 2008, "has halted since 2012, and seems to be on the verge of reversing".

The Black Zero
The other problematic area of Germany's economy policy is the government's obsession over the "schwarze Null" or "black zero" policy to reach a balanced budget.

Berlin managed to hit this magic target earlier this year. The "schwarze null" is held up as the cornerstone of German financial strength and stability in a perilous global environment, but has drawn criticism from as yet another symptom of the eurozone's dysfunction.

Economist Paul De Grauwe has dubbed it an almost religious "balanced-budget fundamentalism”.

The fiscal rectitude has also fallen foul of the IMF's recommendations for the German economy. The Fund has said Germany should have a 2pc increase in investment for the next four years, a target which Berlin is undershooting.

Why a German exit would help
Princeton economist and former IMF bail-out chief Ashoka Mody is among the most recent proponents of a German exit from the euro.

Mr Mody notes that a return to the deutsche mark would provide a two-fold boost to the rest of the beleaguered eurozone: it would immediately cause the euro to plummet in value, stimulating exports in the southern periphery, and also cause far less disruption to the rest of the bloc than a potential Grexit.

"A deutsche mark would buy more goods and services in Europe (and in the rest of the world) than does a euro today, the Germans would become richer in one stroke", writes Mr Mody.

"Germany's assets abroad would be worth less in terms of the pricier deutsche marks, but German debts would be easier to repay."

Outside the single currency, German industry would be forced to return to a pre-euro world, and continually adjust to the costs of an appreciating currency. But Mr Mody posits that such transition, although exterting a big initial shock, would hardly be new for German business.

A less competitive currency could also provide a much needed-incentive for German industry to produce higher-quality products and improve sluggish productivity in the service sector, he adds.

A design to shackle German strength
Germany's economic prowess under the euro should not be over-estimated.

One of the drivers behind its "fiscal fetishism" and the need to get their fiscal house in order derives from a deep insecurity about the country's longer term economic prospects. Germany is one of the fastest ageing economies in the world, in need of mass immigration, more women in the labour force and a substantial boost to its birth-rate.

And for all its relative economic strength, the euro was at its heart a political construct designed to neuter a reunified Germany 25 years ago.

Paradoxically, Mr Mody now says that a release from the shackles of the single currency will enable Germany to act as the hegemon a working monetary union now requires.

"To stay close, Europe's nations may need to loosen the ties that bind them so tightly," he writes.

Having let the Grexit cat out of the bag, Mr Schaeuble and co. are now having to suffer the full extent of the implication that the monetary union is no longer sacred.
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I hadn't seen this so thank you. Bernanke is naturally one of the Central bank experts, so his opinion will carry great weight.

The first time I heard it suggested that Germany should either agree to the eurobond or leave the EU was the Soros speech in Frankfurt. It made complete sense according to my understanding of the way modern monetary policy should be handled in a world of fiat currencies. I have been an advocate of that idea ever since. I hope it comes to pass, and I think it will eventually, as more and more European Heads of State realize how essential it is to their country's economic well-being that a common bond be adopted. Of course this would be somewhat of a mixed bag for Germany, whether they eventually agree to a eurobond and remain in the union, or exit. They will be OK in any case, but with a eurobond in place and a thoroughly integrated monetary system they would no longer be able to borrow at much lower interest rates than their neighbors.

loyek590 · Jul 22, 2015

just remember, your currency can't go down unless mine goes up, and I don't like it when mine goes up

GarrettKimmel · Jul 22, 2015

Whether Germany agrees to eurobonds or leaves the euro, either choice would be infinitely preferable to the current state of affairs. The current arrangements allow Germany to pursue its narrowly conceived national interests but are pushing the eurozone as a whole into a long-lasting depression that will affect Germany as well.

sheda · Jul 22, 2015

Germany is to selfish to do what is in the best interests of the ez and the country's that make it up as a whole, to germany the eu is about germany and germany alone, they will milk it to the fullest extent.