slapphead_otool

For the record (and this is just a personal opinion so please don’t shoot my bum off) I have always thought that the economic “free trade” concept was fraught with danger.

My economics lecturers (a bigger bunch of communists you could not find) used to argue “but slapphead, it will give you access to cheaper goods”, which of course it did.

But if the West doesn’t have jobs, then no one had the money to pay for those goods.

So the global manufacturing base went to China, taking with it all of the jobs. To keep the western economies buoyant, consumers used credit – even though they had no jobs, and prospect of ever getting jobs. That kept demand up for the new goods being manufactured in China. Big screen LCD TV sets etc. Made in China, sold in the West, paid for with credit.

Then the bottom fell out of the credit game.

Now as Centurion points out, the west is going to have to bite the bullet, whixh means a serious reduction of living standards in the West.

Which is EXACTLY what I argued would happen with my lecturers.

The West will get poorer, our standard of living will be reduced, and the Standard of the newly emerging economies will rise, until we reach parity.

Being died in the wool communists they were probably happy with that solution.

kevin747

True,pity it's too dull for Europeans with a few bob !

renth

This is an interesting piece in the FT site, either the Euro is about to go tits up or all these traders are about to lose big:

Traders make $8bn bet against euro

"Traders and hedge funds have bet nearly $8bn (€5.9bn) against the euro, amassing the biggest ever short position in the single currency on fears of a eurozone debt crisis."

http://www.ft.com/cms/s/0/0330ba78-1...44feab49a.html

slapphead_otool

Apparently Germany is going to bail Greece out.
The problem then may be:

It sets a precedent – its ok to spend your money unwisely and get deep into debt, Germany will come to the rescue.

It is sure to infuriate Germans, who have suffered stagnate standards of living because of the Euro, whilst other countries have borrowed their way to a better lifestyle.

Germany will impose drastic restrictions on Greece, which is sure to upset the Greeks, who will either ignore the restrictions or simply riot until they get what they want.

MartinLuther

With reunification and the Euro the Germans are becoming masters of absorbing and managing the debt of others. I suspect Greece will be Germany's bitch for a while if this happens.

I suspect absorbing Greece's debt will probably be easier than reunification.

slapphead_otool

Better to foot the bill than see the Euro slide off the edge of the scales and fall into the basket case currency pool.

renth

After Greece, then Spain, then Portugal. Where does it stop?

I reckon Greece will be booted out of the EU - IMHO.

slapphead_otool

I guess they hope that if Germany props up Greece there will be no contagion, and confidence in Spain and Portugal will remain sufficiently high for them to be able to borrow at reasonable rates.

I think you are right though, sooner or later there will be a culling in the Eurozone.

(moving back from a Euro to a Drachma will be hard)

mohogony

How will the standard of living in China and the new ecomonies improve if the west gets poorer becasue then people in the west don't have the money to purchase Chinas manufactured goods.

slapphead_otool

This was one of my points in my classroom “discussions”. When the West had no money to buy the LCD TV made in China, the financial musical chairs stops.

renth

I think a lot of Chinas growth is govt. stimulus plus the Chinese making LCD TVs for themselves.

iamthecreaturefromuranus

http://business.timesonline.co.uk/to...C-Bltn=9ALCR2F

slapphead_otool

Can they call in the IMF?

And if they do, is it the Eurozone that calls them in, or just Greece?

I guess its Germanic pride V Germanic money.

I suspect that even though the UK isn’t part of the Eurozone it will have to stump up for the rescue package one way or another.

iamthecreaturefromuranus

I'm not sure how the IMF would work in that situation.. it would be almost like calling in the IMF just for Arizona.

slapphead_otool

Thats what I don’t understand. I can only see a situation where the IMF props up the Euro, and thats the entire zone.

And if that is the case it would be better for Germany to bite the Bratwurst and do the propping itself.