Meanwhile, Prospect Fades for Joint EU Bank Bailout. Two nations garunteed deposits forestalling a run on their banks. Actually Grece and Ireland "had no choice" as the notional losses of larger members due to derivative losses effectively make them "below depository value." I guess stated another way, lets say everybody pitches in $50 dollars to join a group and ten members join, and the club is to poll resources for the better good, but the fifty dollars is "all of the money of two members" and a fraction of the amount of the other, then the group loses 600 dollars, two of the members are broke!
So to avert a run on banks, the European bank rescue plan in tatters amid savings stampede. So for the sake of argument, if I had Euro Dollars in say France, I would deposit them in Greek or Irish banks! So this leaves Central banks become lender of only resort.
So you read it here first.
Most Americans don't realize the facts behind the crisis. The facts that unwinding positions in derivatives will post "notional losses" greater than the GDP of Ireland and Grece.
The bailout was the right thing to do.
We are in a
For example, the spring phase of the cycle is generally regarded as a time of emergent expansion - usually after an extended downturn in economic activity. The spring phase is followed by a summer phase, during which economic activity is at its most robust. Generally, it is believed that economic growth begins to be inflationary during the summer phase of the cycle. There is often a recession of some significance between the summer phase and the autumn phase-the recession signifying that the "best" or most healthy part of the economic expansion has concluded.
The autumn phase of the cycle represents both the recovery from the post-summer phase recession and the first stages of a disinflationary trend. This trend tends to coincide with falling interest rates, which peaked during the inflationary growth of the summer phase. As befits a disinflationary market, stocks and bonds tend to do tremendously well during this phase. Falling interest rates boost bond prices, make stocks more competitive with bonds, and introduce a powerful credit cycle that is largely responsible for helping to shift economic activity from production to finance.
The autumn phase is followed, predictably, by the winter phase. During this phase, all those disinflationary chickens come home to roost in what is most often a full-blown deflationary episode. Prices for all assets-from physical assets to financial ones-begin to slip and, before the winter phase is over, eventually plunge to startlingly low levels. The purpose of the winter phase is well put in the infamous quote by Andrew Mellon, President Herbert Hoover's Depression-era Treasury Secretary, who urged:
"Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted and enterprising people will pick up the wrecks from less competent people."
As is true in nature, so it is with economics in Kondratieff's view. Winter is a time of death, but it is in that death that new life becomes possible. At the bottom of the Kondratieff winter, "enterprising people" indeed "pick up the wrecks," and a new 50-odd year Kondratieff cycle is reborn in spring.
I would think that promoting and initiating the EURO in a kondratieff autumn bodes for a hard winter.
It will be a hard winter for the EURO.
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