The Beginning of the End for the Euro?

worldtraveller

I see that Greek tax collectors are on strike for two days. I didn't think that they had anything to do when they were actually at work!

Thrugelmir

michaels wrote: »

It now appears that the European bank stress test did not even include an MTM of EUR sovereign debt let alone any scenarios relating to default.

The bar can only be raised in stages. That's an accepted fact.

RBS is on the ECB watchlist after the most recent stress tests.

michaels

I believe RBS marked their Greek sovereign debt down to about 50% of face value in their latest P&L, well below the 21% haircut being imposed in the latest bailout. If other banks are carrying sovereign debt at face value on their books then their unreported capital hit may be fairly large?

Thrugelmir wrote: »

The bar can only be raised in stages. That's an accepted fact.

RBS is on the ECB watchlist after the most recent stress tests.

Flight2quality

You could say the begining of the end for all fiat currencies that started in 1971.

Thrugelmir

michaels wrote: »

I believe RBS marked their Greek sovereign debt down to about 50% of face value in their latest P&L, well below the 21% haircut being imposed in the latest bailout. If other banks are carrying sovereign debt at face value on their books then their unreported capital hit may be fairly large?

RBS and Lloyds problems are in Eire.

Barclays in Spain and Italy.

HSBC can absorb their exposure.

FTBFun

Flight2quality wrote: »

You could say the begining of the end for all fiat currencies that started in 1971.

Well, you could if you were a nutcase.

Degenerate

Flight2quality wrote: »

You could say the begining of the end for all fiat currencies that started in 1971.

You could say that. Or you could wake up and realize that the problem with the Euro is that it's a rigid fixed-exchange currency regime similar to the one that we thankfully got rid of in 1971.

Masomnia

Degenerate wrote: »

You could say that. Or you could wake up and realize that the problem with the Euro is that it's a rigid fixed-exchange currency regime similar to the one that we thankfully got rid of in 1971.

That's interesting, I never thought of it that way.

As in the 1930s after the Great Depression, there was an observed correllation between leaving the gold standard, to floating currencies, and economic recovery; I wonder if we'll see the same here? The countries that leave the Euro sooner may recover faster!

Thrugelmir

Certainly free them of the straight jacket that the ECB has imposed.

Degenerate

Masomnia wrote: »

That's interesting, I never thought of it that way.

As in the 1930s after the Great Depression, there was an observed correllation between leaving the gold standard, to floating currencies, and economic recovery; I wonder if we'll see the same here? The countries that leave the Euro sooner may recover faster!

Theoretically, yes. The problem is that because they went a step further and actually merged their currencies, the immediate effect of breakup will be absolute economic carnage as cross-border balances must either be re-denominated (an effective default), or will be defaulted on anyway because the new, devalued, currencies just wont buy enough Euros to pay them back.

At least in the days of the Bretton Woods system, people knew that devaluation was a possibilty and hedged their bets appropriately in international trade.

It's a bloody mess brought about by the sheer hubris of the European political elite, when they thought they knew better than competent economists and went ahead to create this ghastly system.