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AP spells out EURO doom

 
Cybermerc
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06/17/2012 12:27 AM
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AP spells out EURO doom
[link to hosted.ap.org]

The unthinkable suddenly looks possible.

Bankers, governments and investors are preparing for Greece to stop using the euro as its currency, a move that could spread turmoil throughout the global financial system.

The worst case envisions governments defaulting on their debts, a run on European banks and a worldwide credit crunch reminiscent of the financial crisis in the fall of 2008...

ACT I

What would Greece's exit look like? In the worst case, it starts off messy.

The government resurrects the drachma, the currency Greece used before the euro, and says each drachma equals one euro. But currency markets would treat it differently. Banks' foreign-exchange experts expect the drachma would plunge to half the value of the euro soon after its debut.

For Greeks, that would likely mean surging inflation - 35 percent in the first year, according to some estimates. The country is a net importer and would have to pay more for oil, medical equipment and anything else it imports.

Greece's government and banks currently survive on international loans, and if it dropped the euro, the country would probably be locked out of lending markets, says Athanasios Vamvakidis, foreign-exchange strategist at Bank of America-Merrill Lynch in London. So the Greek central bank would need to print more drachmas to make up for what it could no longer borrow from abroad.

That's one reason analysts say the switch to a drachma would lead the country to default on its government debt, possibly triggering losses for the European Central Bank and other international lenders...

ACT II

Here's where things get scary.

The European Central Bank and European Union would have to persuade investors in government bonds that they will keep Portugal, Spain and Italy from following Greece out the door. Otherwise, borrowing costs for those countries would shoot higher.

The main way European leaders have tried to calm bond markets is by lending to weaker governments from two bailout funds. Experts say these two funds, designed as a financial firewall to stop the crisis from spreading, need more firepower.

Much of the (EURO)248 billion ($310 billion) left in one of them, the European Financial Stability Facility, was pledged by the same countries that may wind up needing it, Vamvakidis says.

There's also a (EURO)500 billion European Stability Mechanism that's supposed to be up and running next month, but Germany has yet to sign off on it.

"If they fail to reassure bond investors, all of the nightmare scenarios come into play," says Robert Shapiro, a former U.S. undersecretary of commerce in the Clinton administration.

The biggest danger is a fast-spreading crisis known in financial circles as contagion - a term borrowed from medicine and familiar to anyone who has watched a disaster movie about killer viruses on the loose.

"It's like a disease that spreads on contact," says Mark Blythe, professor of international political economy at Brown University....

ACT III

A full-blown crisis would cross the Atlantic through the dense web of contracts, loans and other financial transactions that tie European banks to those in the U.S., experts say.

Blythe, the professor at Brown, believes credit default swaps, the complex financial instruments made infamous by the 2008 financial crisis, would provide the path.

Banks created the swaps to sell as insurance for loans. After lending money to a business or government, investors can turn to a bank and take out protection on the amount they lent. If the borrower runs into trouble and can't pay - say, the government of Spain defaults - the banks that sold the insurance cover the loss.

A $2 billion trading loss that JPMorgan Chase revealed in May, traced to a hedge against the Europe crisis, shows just how easy it is for even the safest and savviest of banks to slip up.

And it doesn't even take a default for a credit default swap to go bad.

If traders think other countries will follow Greece, they'll drive up borrowing rates by selling government bonds, which also pushes up the cost of insuring their debt. That's similar to how your neighborhood insurance agent handles a teenage driver.

In the derivatives market, where credit default swaps are traded, there's a twist. When markets treat Spain like a bad credit risk, those who took out insurance on Spanish debt to protect against a default can force the banks that sold the insurance to prove they can make good on the claim.

To do that, banks cash out something else - U.S. government debt, gold, or anything easy to sell. In normal times, it's no big deal. In a crisis, it can lead to a cascade of selling, spreading trouble from one market to another.

Another problem: It's not clear how much U.S. banks have at risk to Europe through credit default swaps because regulations let banks keep that information a secret.

"You could have American banks up to their necks in CDS liabilities," Blythe says. "We don't even know."...

However the Greek story ends, Blythe believes it's bound to be ugly. Putting 17 countries together to share a common currency worked well when Europe prospered. Now that they're struggling, "all the design flaws are becoming apparent," he says. And every solution that's supposed to fix a problem creates another problem.

The proposed $125 billion loan to save Spanish banks, for instance, will add to the debt burden of Spain. That sent Spain's borrowing costs higher this week and will put a tighter squeeze on its budget.

"The euro itself," Blythe says, "is a bloody doomsday machine."
 Quoting: [link to hosted.ap.org]


note - this is less than 50% of the article.
"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy."
- James Madison

“The first time you blow someone away is not an insignificant event. That said, there are some assholes in the world that just need to be shot.”
- Marine Gen. James Mattis
Cybermerc (OP)

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06/17/2012 12:32 AM
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Re: AP spells out EURO doom
They do note in the article that no one expects the crisis to go that far. But then call the Euro a doomsday machine. rofl

If it does play out like article states we do have some time to prepare. So, get your shit together while you still can!

Last Edited by Cybermerc on 06/17/2012 12:32 AM
"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy."
- James Madison

“The first time you blow someone away is not an insignificant event. That said, there are some assholes in the world that just need to be shot.”
- Marine Gen. James Mattis
Cybermerc (OP)

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06/17/2012 12:37 AM
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Re: AP spells out EURO doom
bump
"If Tyranny and Oppression come to this land, it will be in the guise of fighting a foreign enemy."
- James Madison

“The first time you blow someone away is not an insignificant event. That said, there are some assholes in the world that just need to be shot.”
- Marine Gen. James Mattis
Anonymous Coward
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06/17/2012 12:47 AM
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Re: AP spells out EURO doom
They do note in the article that no one expects the crisis to go that far. But then call the Euro a doomsday machine. rofl

If it does play out like article states we do have some time to prepare. So, get your shit together while you still can!
 Quoting: Cybermerc



Yeah, I've read something similar which basically said "this is the entire rundown but it won't happen because once some of the larger issues occur it will scare even that most hardened bailout opponent to death"
Butterfly girl

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06/17/2012 12:52 AM

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Re: AP spells out EURO doom
good article..thanks for posting
To everything there is a season, and a time to every purpose under heaven... A time to weep, and a time to laugh; a time to mourn, and a time to dance....
Anonymous Coward
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06/17/2012 01:10 AM
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Re: AP spells out EURO doom
They do note in the article that no one expects the crisis to go that far. But then call the Euro a doomsday machine. rofl

If it does play out like article states we do have some time to prepare. So, get your shit together while you still can!
 Quoting: Cybermerc



Yeah, I've read something similar which basically said "this is the entire rundown but it won't happen because once some of the larger issues occur it will scare even that most hardened bailout opponent to death"
 Quoting: Anonymous Coward 713727


so what if they're scared to death, this is just a tiny window into what is actually happening.

It's like the entire house is on fire and burning to the ground and someone points out that you have a termite infestation and should call pest control to come and spray.

The U.S. dollar is collapsing.

Japan and China have already dumped the dollar as a trading vehicle and are now trading amongst each other, The six fastest growing economies have gotten together and stated they are to trade outside of the dollar, China and Saudi Arabia are in the middle of constructing the worlds largest oil refinery, think they will still trade in dollars, in short what they are explaining over in Europe is a possible pin being pulled from the financial grenade and doesn't even go into the explosion itself.

What we are heading into is the perfect storm, America is on the verge of collapse also, USSR SOviet style collapse, you remember when their entire military went home in defeat, not because they were defeated militarily, but because they were bankrupt.

We have lent spent or borrowed at least, and I'm saying at least because this number is two years old. 16 trillion dollars that were injected into the economy, we are now strung out like crack whores on constant quantitative easing, that doesn't even count the 4-5 trillion dollars that Obama the pretender in chief has injected into the economy to keep it going, and we are now spending more right now in entitlements that what our nation is taking in on tax revenues, and what you are talking about is a financial collapse that would send tax revenue, and gdp along with jobs plummeting. Not to mention the trillion dollar student loan bubble, the massive amount of over hang in housing that is still sitting around needing to be foreclosed on, or moved out of the banks inventory, which doesn't even touch on the commercial real estate collapse that is coming.

Look, imagine the worst case scenario, and then understand that they are looking through a very narrow window of the connectivity of the worlds financial system to everything else, and realize that society is a very fragile thing, and that the first time that first food stamp doesn't get paid, or that first social security check either doesn't arrive or doesn't have any value by the time it does, then all bets are off.

All great societies have a life cycle, we are in a cycle of death.

When I say death, I don't mean like a phoenix with a new beginning, I mean a very real death. First the sick and feeble will parish, then the old and then when total chaos is upon us and the city dwelling population is no longer receiving a constant supply of food, then you will see the true cannibalization of society in the most real of terms.

In the end, this is what society looks like when the free stuff is all gone.

FATMANGOBOOM

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06/17/2012 01:12 AM
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Re: AP spells out EURO doom
If the Euro Fails... the American Dollar will stop being the World Reserve currency... everyone will bail on it and switch too gold and silver as a safer investment...


It will allow the IMF bring in a new system... a one world currency...

But that is how I think it will play out...

Last Edited by FATMANGOBOOM on 06/17/2012 01:20 AM
Anonymous Coward
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06/17/2012 01:24 AM
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Re: AP spells out EURO doom
If the Euro Fails... the American Dollar will stop being the World Reserve currency... everyone will bail on it and switch too gold and silver as a safer investment...


It will allow the IMF bring in a new system... a one world currency...

But that is how I think it will play out...
 Quoting: FATMANGOBOOM


I would agree with that, why would people think that America was anymore financially stable that europe? Makes no sense, to take your money from one paper currency and put it in another.
Anonymous Coward
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06/17/2012 01:31 AM
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Re: AP spells out EURO doom
How many will take everything they have left and go stock up on all final items if they watch Greece drop out of the Euro, the bank runs continue in France and Spain followed by a euro collapse?
Anonymous Coward
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Australia
06/17/2012 02:41 AM
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Re: AP spells out EURO doom
If the Euro Fails... the American Dollar will stop being the World Reserve currency... everyone will bail on it and switch too gold and silver as a safer investment...


It will allow the IMF bring in a new system... a one world currency...

But that is how I think it will play out...
 Quoting: FATMANGOBOOM


Forget Gold and Silver dude..Just forget it..Yep the play on One World Currency is just around the corner..
Anonymous Coward
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06/17/2012 02:42 AM
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Re: AP spells out EURO doom
They do note in the article that no one expects the crisis to go that far. But then call the Euro a doomsday machine. rofl

If it does play out like article states we do have some time to prepare. So, get your shit together while you still can!
 Quoting: Cybermerc



Yeah, I've read something similar which basically said "this is the entire rundown but it won't happen because once some of the larger issues occur it will scare even that most hardened bailout opponent to death"
 Quoting: Anonymous Coward 713727


so what if they're scared to death, this is just a tiny window into what is actually happening.

It's like the entire house is on fire and burning to the ground and someone points out that you have a termite infestation and should call pest control to come and spray.

The U.S. dollar is collapsing.

Japan and China have already dumped the dollar as a trading vehicle and are now trading amongst each other, The six fastest growing economies have gotten together and stated they are to trade outside of the dollar, China and Saudi Arabia are in the middle of constructing the worlds largest oil refinery, think they will still trade in dollars, in short what they are explaining over in Europe is a possible pin being pulled from the financial grenade and doesn't even go into the explosion itself.

What we are heading into is the perfect storm, America is on the verge of collapse also, USSR SOviet style collapse, you remember when their entire military went home in defeat, not because they were defeated militarily, but because they were bankrupt.

We have lent spent or borrowed at least, and I'm saying at least because this number is two years old. 16 trillion dollars that were injected into the economy, we are now strung out like crack whores on constant quantitative easing, that doesn't even count the 4-5 trillion dollars that Obama the pretender in chief has injected into the economy to keep it going, and we are now spending more right now in entitlements that what our nation is taking in on tax revenues, and what you are talking about is a financial collapse that would send tax revenue, and gdp along with jobs plummeting. Not to mention the trillion dollar student loan bubble, the massive amount of over hang in housing that is still sitting around needing to be foreclosed on, or moved out of the banks inventory, which doesn't even touch on the commercial real estate collapse that is coming.

Look, imagine the worst case scenario, and then understand that they are looking through a very narrow window of the connectivity of the worlds financial system to everything else, and realize that society is a very fragile thing, and that the first time that first food stamp doesn't get paid, or that first social security check either doesn't arrive or doesn't have any value by the time it does, then all bets are off.

All great societies have a life cycle, we are in a cycle of death.

When I say death, I don't mean like a phoenix with a new beginning, I mean a very real death. First the sick and feeble will parish, then the old and then when total chaos is upon us and the city dwelling population is no longer receiving a constant supply of food, then you will see the true cannibalization of society in the most real of terms.

In the end, this is what society looks like when the free stuff is all gone.


 Quoting: Anonymous Coward 17995655


Well said.
Anonymous Coward
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06/17/2012 02:50 AM
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Re: AP spells out EURO doom
Are you sure your post didn't come from this thread today OP?

Thread: No matter how the election goes: Greece leave the Euro within Days!!!
Sammie

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06/17/2012 02:55 AM

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Re: AP spells out EURO doom
Everything is going according to plan.
"Beware lest you lose the substance by grasping at the shadow".  ~Aesop


"Once in a dream I saw a snake swallowing its own tail, it swallowed and swallowed until it got halfway round, and there it stopped and there it stayed, it was stuffed with its own self. Some fix, that.
We only have ourselves to go on, and it’s enough…" -Charles Bukowski



"Grasping at things can only yield one of two results:
Either the thing you are grasping at disappears, or you yourself disappear.
It is only a matter of which occurs first."
-Goenka
Anonymous Coward
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06/17/2012 02:57 AM
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Re: AP spells out EURO doom
If the Euro Fails... the American Dollar will stop being the World Reserve currency... everyone will bail on it and switch too gold and silver as a safer investment...


It will allow the IMF bring in a new system... a one world currency...

But that is how I think it will play out...
 Quoting: FATMANGOBOOM


In other words: This could have been the plan from the very beginning. ;)
HANGFIRE

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06/17/2012 02:59 AM
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Re: AP spells out EURO doom
E U R O spells doom.
pray_Italy

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06/17/2012 02:59 AM
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Re: AP spells out EURO doom
Don't you see it..... ?????

It is THEIR goal to let the entire system collapse so as to throw as many people/countries/trading zones into a HOLE just after THEY make max profits out of it.....

As THEY don't care about the people, why would they care if THEIR wealth/profits are in either USd, EUR, gold, silver, water, wood or whatever......

THEY want this to happen.... tt's THEIR plan which is getting completed step by step!!!
Anonymous Coward
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06/17/2012 03:19 AM
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Re: AP spells out EURO doom
If the Euro Fails... the American Dollar will stop being the World Reserve currency... everyone will bail on it and switch too gold and silver as a safer investment...


It will allow the IMF bring in a new system... a one world currency...

But that is how I think it will play out...
 Quoting: FATMANGOBOOM


I would agree with that, why would people think that America was anymore financially stable that europe? Makes no sense, to take your money from one paper currency and put it in another.
 Quoting: Anonymous Coward 17995655


I'm glad to see i'm not the only one that gets. whats going on.
This whole thing is planned and the dollar and the euro will fail so will the Asian money so TPTB can get the one world currency that they want and be one step closer to the one world government. They already have the world court, the world bank, the world health org. the one world currency may be the last step...idk. The only question is.....How bad will things really be for the normal average people....when the shit hits the fan???
777
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06/17/2012 03:22 AM
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Re: AP spells out EURO doom
bump
Anonymous Coward
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06/17/2012 03:40 AM
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Re: AP spells out EURO doom
Everyone is already working for the banks indirect in one way or another. This is because banks always want back more than they lend out.
With all the bailouts the last few years they could have paid ALL debt in US and Europe. But no, they instead increase the debt burden.
Letting all the banks go bust in 2008 and now would be much cheaper than 'bailing' them out with more loans.

This is designed to go tits up, and all we can do is to sit back and watch.
Who the hell needs banks anyway. The sentral banks should lend directly to consumers, and print enough money to cover the interest and/or wanted inflation.
Anonymous Coward
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06/17/2012 04:08 AM
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Re: AP spells out EURO doom
To all idiots whom think that a new world currency will come, no it wont because you need to defeat United States with military power before you change the world order, you can`t take out dollar that easy, you would be a real moron to think about it.

You are underestimating the United States War Machine. Idiots.
Hypertiger

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06/17/2012 04:23 AM
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Re: AP spells out EURO doom
Planned?

Yes when you choose to take more than you give to sustain existence...you are planning to collapse.

taking more than you give is the same as chopping down trees faster than they regrow to sustain your existence.

The top have known all along that the system was going to implode.

Because that is all the global system based on taking more than you give can do...Inflate to maximum potential...then implode.

You all are of course kept ignorant of this...It was inevitable.

All the top does is capitalize upon your ignorance of this.

The system has been inflating since 1944...it's been the roaring 6 decades.

but then in 2008 it reached maximum potnetial...and now it's time to downsize or deflate.

But you all think inflation can be sustained forever.

No...Inflation to maximum potential is followed by deflation to maximum potential.

You all are ignorant of this...The top is not and they capitalize upon your ignorance.

It's a wave...The top employs the bottom as a serfboard to ride the wave.

The top employs you all to inflate to maximum potnetial and then employs you all to deflate to maximum potential.

The hires the surviviors to inflate to maximum potential again.

1919-1929 was the inflate to maximum potential...1929-1933 was the collaspe...1933-1945 was deflation to maximum potential or the bankruptcy reorganization of the system...with a liquidation climax at the end called WW2.

The survivors were then employed to inflate the new system instituted 1944 to the maximum potential during the roaring 6 decades. 1944-2008...

Now we are topping and heading down...
Geologic
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Hong Kong
06/17/2012 04:28 AM
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Re: AP spells out EURO doom
I agree with most of that, Hypertiger

Well said.
Anonymous Coward
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06/17/2012 05:02 AM
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Re: AP spells out EURO doom
LOL, by this time tomorrow you will all be eating your words and taking back what you said.
Has there ever been an analysis from these so called experts that have come true?
Anonymous Coward
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06/17/2012 05:33 AM
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Re: AP spells out EURO doom
I NEEEEEEEED DAT CRACK....errr money

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