How to Break Up a Currency Union
Jonathan Tepper of Variant Perception has written an excellent report on the break-up of the euro. The report includes an overview of past break-ups of currency unions (the euro is not the first one that has failed), and a detailed 'how to' manual as to how to handle the likely coming break-up of the euro, this is to say, the exit of those current member nations that are clearly not able to live with the euro.
Also included is an assessment of what would likely happen to the economies concerned after they break away, default and devalue, illustrated by fairly recent historical examples.
A break-up would certainly be a traumatic event, but it wouldn't be the end of the world. On the contrary, since this would force the insolvent states to deal with their debt and competitiveness problems once and for all, it would pave the way for a successful new beginning.
As we always point out, the economic losses can not be wished away. They are a product of the boom, not of the bust – the bust merely revealed their existence. Instead of dragging the process of adjustment out with programs that are clearly failing and are creating social upheaval on such a grand scale that the situation seems more and more like a powder-keg waiting for a spark, it would be far better to opt for a radical new approach and admit that the currency union such as it is now constituted has failed.
Jonathan has graciously allowed us to promote the report on Acting Man, we highly recommend it.
VP – February 2012 – Eurozone Breakup – Summary
Emigrate While You Can... Learn More
Dear Readers!
You may have noticed that our so-called “semiannual” funding drive, which started sometime in the summer if memory serves, has seamlessly segued into the winter. In fact, the year is almost over! We assure you this is not merely evidence of our chutzpa; rather, it is indicative of the fact that ad income still needs to be supplemented in order to support upkeep of the site. Naturally, the traditional benefits that can be spontaneously triggered by donations to this site remain operative regardless of the season - ranging from a boost to general well-being/happiness (inter alia featuring improved sleep & appetite), children including you in their songs, up to the likely allotment of privileges in the afterlife, etc., etc., but the Christmas season is probably an especially propitious time to cross our palms with silver. A special thank you to all readers who have already chipped in, your generosity is greatly appreciated. Regardless of that, we are honored by everybody's readership and hope we have managed to add a little value to your life.
Bitcoin address: 12vB2LeWQNjWh59tyfWw23ySqJ9kTfJifA
One Response to “Variant Perception – A Primer on the Euro Break-Up”
Most read in the last 20 days:
Is the Canary in the Gold Mine Coming to Life Again?
A Chirp from the Deep Level Mines Back in late 2015 and early 2016, we wrote about a leading indicator for gold stocks, namely the sub-sector of marginal - and hence highly leveraged to the gold price - South African gold stocks. Our example du jour at the time was Harmony Gold (HMY) (see “Marginal Producer Takes Off” and “The Canary in the Gold Mine” for the details). Mining engineer equipped with bio-sensor Photo credit: Hulton Archive As we write these...
Fed Credit and the US Money Supply – The Liquidity Drain Accelerates
Federal Reserve Credit Contracts Further We last wrote in July about the beginning contraction in outstanding Fed credit, repatriation inflows, reverse repos, and commercial and industrial lending growth, and how the interplay between these drivers has affected the growth rate of the true broad US money supply TMS-2 (the details can be seen here: “The Liquidity Drain Becomes Serious” and “A Scramble for Capital”). The Fed has clearly changed course under Jerome Powell...
Are Credit Spreads Still a Leading Indicator for the Stock Market?
A Well-Established Tradition Seemingly out of the blue, equities suffered a few bad hair days recently. As regular readers know, we have long argued that one should expect corrections in the form of mini-crashes to strike with very little advance warning, due to issues related to market structure and the unique post “QE” environment. Credit spreads are traditionally a fairly reliable early warning indicator for stocks and the economy (and incidentally for gold as well). Here is a...
The Gold Standard: Protector of Individual Liberty and Economic Prosperity
A Piece of Paper Alone Cannot Secure Liberty The idea of a constitution and/or written legislation to secure individual rights so beloved by conservatives and among many libertarians has proven to be a myth. The US Constitution and all those that have been written and ratified in its wake throughout the world have done little to protect individual liberties or keep a check on State largesse. Sound money vs. a piece of paper – which is the better guarantor of liberty?...
Fed President Kashkari Hears Voices – Are They Lying?
Orchestrated Larceny The government continues its approach towards full meltdown. The stock market does too. But when it comes down to it, these are mere distractions from the bigger breakdown that is bearing down upon us. Prosperity imbalance illustrated. The hoi-polloi may be getting restless. [PT] Average working stiffs have little time or inclination to contemplate gibberish from the Fed. They are too worn out from running in place all day to make much...
US Stocks and Bonds Get Clocked in Tandem
A Surprise Rout in the Bond Market At the time of writing, the stock market is recovering from a fairly steep (by recent standards) intraday sell-off. We have no idea where it will close, but we would argue that even a recovery into the close won't alter the status of today's action – it is a typical warning shot. Here is what makes the sell-off unique: 30 year bond and 10-year note yields have broken out from a lengthy consolidation pattern. This has actually surprised us, as...
Switzerland, Model of Freedom & Wealth Moving East – Interviews with Claudio Grass
Sarah Westall Interviews Claudio Grass Last month our friend Claudio Grass, roving Mises Institute Ambassador and a Switzerland-based investment advisor specializing in precious metals, was interviewed by Sarah Westall for her Business Game Changers channel. Sarah Westall and Claudio Grass There are two interviews, both of which are probably of interest to our readers. The first one focuses on Switzerland with its unique, well-developed system of direct...
Exaggerated Economic Growth of the Third World
Exciting Visions of a Bright Future Fund Managers, economists and politicians agree on the exciting future they see in the Third World. According to them, the engine of the world’s economic growth has moved from the West to what were once the poverty-stricken societies of the Third World. They feel mushy about the rapid increase in the size of the Middle Class in the Third World, and how poverty is becoming history. GDP of India vs. UK in 2016 – crossing...
Choking On the Salt of Debt
Life After ZIRP Roughly three years ago, after traversing between Los Angeles and San Francisco via the expansive San Joaquin Valley, we penned the article, Salting the Economy to Death. At the time, the monetary order was approach peak ZIRP. Our boy ZIRP has passed away. Mr. 2.2% effective has taken his place in the meantime. [PT] We found the absurdity of zero bound interest rates to have parallels to the absurdity of hundreds upon hundreds of miles of...
Why You Should Expect the Unexpected
End of the Road The confluence of factors that influence market prices are vast and variable. One moment patterns and relationships are so pronounced you can set a cornerstone by them. The next moment they vanish like smoke in the wind. One thing that makes trading stocks so confounding is that the buy and sell points appear so obvious in hindsight. When examining a stock’s price chart over a multi-year duration the wave movements appear to be almost predictable. The...
How Dangerous is the Month of October?
A Month with a Bad Reputation A certain degree of nervousness tends to suffuse global financial markets when the month of October approaches. The memories of sharp slumps that happened in this month in the past – often wiping out the profits of an entire year in a single day – are apt to induce fear. However, if one disregards outliers such as 1987 or 2008, October generally delivers an acceptable performance. The road to October... not much happens at first - until it...
Yield Curve Compression - Precious Metals Supply and Demand
Hammering the Spread The price of gold fell nine bucks last week. However, the price of silver shot up 33 cents. Our central planners of credit (i.e., the Fed) raised short-term interest rates, and threatened to do it again in December. Meanwhile, the stock market continues to act as if investors do not understand the concepts of marginal debtor, zombie corporation, and net present value. The Federal Reserve – carefully inching forward to Bustville People...
Austrian Theory and Investment
Realtime Charts
Gold in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_usoz_2.gif)
Gold in EUR:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/gold/t24_au_en_euoz_2.gif)
Silver in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/silver/t24_ag_en_usoz_2.gif)
Platinum in USD:
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/charts/metals/platinum/t24_pt_en_usoz_2.gif)
USD - Index:
![[Most Recent USD from www.kitco.com]](http://www.weblinks247.com/indexes/idx24_usd_en_2.gif)
Good read, I have question regarding one of the recommendations in report:
“The countries that remain within the euro will have to take steps of their own in order to deal with the unilateral exit by a departing country.
1. Print new currency – In order to limit large inflows of “old” euros from the any country that has exited the euro, the core countries should print new euros and then de-monetize old euros.”
How could it possibly affect euro holders outside of eurozone, e.g people who have some euro savings in Russia or China, looks like those savings would be de-monetized as well? or there is some way to differentiate e.g greekeuros from euros circulating in Russia?