Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Breakup’

You’d never know it, but the future of the United Kingdom is at stake

Posted by hkarner - 29. November 2019

Date: 28‑11‑2019

Source: The Guardian Martin Kettle

The upcoming election could trigger the breakup of the union, and yet the main all‑UK parties have barely mentioned it

If the Conservatives win a majority on 12 December, as they are favourites to do, they will claim a mandate to “get Brexit done”. As a result, there is an extremely real possibility that, by the time of the next scheduled election in 2024, the United Kingdom as we know it will no longer exist. Scotland may by then have voted to become an independent country. Northern Ireland may have voted to unify with the Irish republic. But you would hardly know any of this from the general election campaign so far.

In the leaders’ debate between Boris Johnson and Jeremy Corbyn, there was much discussion of Brexit. But there was no discussion about Brexit’s consequences for the parts of the UK – Scotland and Northern Ireland – that did not vote for it. Nor was there a single word about Brexit’s effect on the unresolved divides in Ireland. This was genuinely remarkable. For the past three years, the issue of Ireland has been at the very core of the argument about Brexit. But now, from the leaders of Britain’s two main parties, there was absolutely nothing. Not for the first time in British political debate, it was as though Ireland simply did not exist. Den Rest des Beitrags lesen »

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Posted by hkarner - 25. Februar 2017

Date: 24-02-2017
Source: The Wall Street Journal By JAMES MACKINTOSH
Subject: Can You Make Money in a Euro Collapse?

In a euro breakup scenario, there are a few ways bond investors can protect against a redenomination into a devalued currency

As Europe is roiled by fears of a breakup of its currency, investors and lawyers have begun digging through bond documentation in the hope of finding ways to protect themselves against the possible return of the franc, lire and deutsche mark.

The plethora of bonds available offer many ways to bet on the possibility of the end of the euro. One opportunity comes from ancient bonds dating from before the single currency was created, another from bonds sold under English rather than French or Italian law. But so far, investors seem to be making significant bets on only the simplest option—that of switching to the bonds of safe countries such as Germany, even though the safety that its bonds appear to offer could prove illusory in a worst-case European breakup.

There is no sure-fire way to protect an investment against what would be the biggest default in history—the redenomination of French or Italian bonds from euros into new francs and lire. Even though the bonds would be paid in full in francs or lire, investors paid in the devalued currencies would still class it as a default. Den Rest des Beitrags lesen »

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And Then There Is Disaster C

Posted by hkarner - 12. August 2012

Traurig: es wird Disaster C werden. Sadly, I agree it will be disaster C (hfk)

By John Mauldin | Aug 11, 2012

Breaking Up Is Hard to Do And Then There Is Disaster C

Who Do You Trust?

They say that breaking up is hard to do.
Now I know, I know that it’s true
Don’t say that this is the end.
Instead of breaking up
I wish that we were making up again.
– Neil Sedaka, 1962

I have contended for some time that Europe is faced with two choices: Disaster A, which is the break-up of the eurozone, or Disaster B, which is the creation of a fiscal union, which keeps the euro more or less intact. Over the last few months I have come to realize that there is indeed a third option, which now looks increasingly possible. This is rather sad, as the third option is just an even worse Disaster C. Each choice carries with it its own unique set of problems, but the outcome of any of the choices will be that the people of Europe face a serious recession, if not a depression. This will impact global growth for more than a short time and, depending on the choice, could plunge the world into a crisis as bad as or worse than the recent credit crisis. In today’s letter we look at all three choices, meanwhile musing on how we arrived at the bottom of such a deep hole, shovels flailing.  Den Rest des Beitrags lesen »

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The euro: Tempted, Angela?

Posted by hkarner - 10. August 2012

Definitely one of the crisper scenarios of the next years (hfk)

Date: 09-08-2012
Source: The Economist

A controlled break-up of the euro would be hugely risky and expensive. So is waiting for a solution to turn up

FOR all you know, Angela Merkel is even now contemplating how to break up the euro. Surely Germany’s long-suffering chancellor must be tempted, given the endless euro-bickering over rescues that later turn out to be inadequate. How she must tire of fighting her country’s corner, only to be branded weak by critics at home. How she must resent sacrificing German wealth, only to be portrayed as a Nazi in some of the very countries she is trying to rescue. Den Rest des Beitrags lesen »

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Breaking up the euro area: The Merkel memorandum

Posted by hkarner - 10. August 2012

 Just gorgeous (hfk)!

Date: 09-08-2012
Source: The Economist

ANGELA MERKEL, the German chancellor—and also, in effect, the euro area’s boss—has always insisted that she wants to preserve the euro area in its current form. But as the euro crisis intensifies and the potential bills for Germany mount, she would be imprudent not to be considering a Plan B. Drafted in utmost secrecy by a few trusted officials for the chancellor’s eyes only, this is what the memorandum outlining a contingency plan might say.

TO: Angela Merkel
FROM: ???


I. Since the euro crisis started over two years ago you have said that Germany will defend the single currency, based on your conviction, shared by business and the political class, that its survival is in our national interest. To that end Germany has pledged large amounts of public money, both in our contributions to various rescue funds and through the Bundesbank’s share of risks taken by the European Central Bank (ECB). At the same time you have tried to minimise the bill for German taxpayers by insisting that bailed-out states implement strict austerity programmes and, more generally, by resisting calls for debt mutualisation—code for Germany underwriting the euro area—while demanding greater central control over all national budgets.

II. Bluntly, the plan isn’t working. Greece is a disaster zone. Ireland and Portugal are making some progress (it was encouraging that Ireland was able to raise some money from the markets in July) but they still have a long way to go and could easily be knocked off course. Worse, Spain looks as if it may need a full bail-out rather than the partial one for its banks you had hoped would suffice. And Spanish sickness is infecting Italy, undermining all the good work that Mario Monti has been doing since the Italians saw sense and got rid of Silvio Berlusconi, as you had been urging behind the scenes. Meanwhile François Hollande isn’t doing enough to get France into shape and is playing the usual French game of calling for Germany to do more while resisting your attempts to centralise control at the European level. Mario Draghi, the ECB’s president, has calmed things down for the moment, but his plan could easily come unstuck. Den Rest des Beitrags lesen »

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What Will Germany Do?

Posted by hkarner - 26. Juni 2012

Wie immer, eine gute Analyse des Wirtschaftschefs der Londoner Times, Autor von „Capitalism 4.0“  und Partner in GaveKal . Auch wenn er hier eine (komische) typisch englische Position widerspiegelt. (hfk).

This week all eyes are on Germany, and the question is „What will Germany do?“ We are going to look at four quite-short essays. Two are from GaveKal, one is from Dennis Gartman, and the last is from Kiron Sarkar – all on this very topic.

One of the reasons I really like to read the research from GaveKal is that they are very public when their analysts disagree, and you get to listen to the back and forth. Some of the best analysis I see is when Charles and Louis Gave (father and son) and Anatole Kaletsky do email battle with each other while they are on three different continents. This time it is Anatole and one of their analysts, Francois Chauchat (whom I have not had the pleasure of meeting), differing on whether Germany should (or even can!) leave the eurozone.

I should note that it is not unusual for there to be intense debates in serious research houses. Happens every day, and perhaps often during the day. When you are playing an „A“-level game at one of the best research houses, you are typically not a shy, retiring type. What is less than usual is for that debate to be played out in public for clients to see. While a strong, useful consensus may be reached, I find the sturm and drang of the debate to ofttimes be just as instructive.

Anatole thinks Germany should leave, and you find yourself nodding your head, and then you read Francois and you sit back. This is a very complicated issue.

I continue to believe that Europe in general and Germany in particular have no good choices. They can only choose between Disaster A, which is keeping the eurozone together, and Disaster B, which is breaking the eurozone apart. Either will cost trillions of euros and mean much pain. It is not a choice of pain or no pain. It is simply a decision as to what type of pain you want and in what doses you want to take it. Choose wisely.

Then Dennis Gartman weighs in this morning. For those who know Dennis, he is never shy about voicing his opinions when he writes every market day at 3 AM Eastern Time, from wherever in the world he is. But he is not married to any positions. His favorite quote seems to be from Keynes, which is (loosely), „When the facts change then so do my opinions.“ And then he tells everyone about the change and why. You have to love that.

But this morning he was exceptionally strong in his opening piece about Europe and Germany. After reading the notes from GaveKal, absorb Dennis’s pithy analysis.

And finally there is a one-page summary note from Kiron Sarkar, which he sent me while we were exchanging emails today.

By Anatole Kaletsky, 25/6, John Mauldin’s Outside the Box

Now that the Greek election is over, with the pro-bailout parties gaining enough seats for a slim majority, Europe can return to the regular cycle of panic, relief, disappointment and renewed panic, that we have observed for the past two years.This time, however, the relief rally may be even shorter than usual, since the market’s attention will soon shift from Athens to Madrid, Paris and, above all, Berlin. Since Greece has no chance of meeting its financial targets, the new government will soon need significant new concessions from the troika. Assuming that Germany resists such concessions, as well as the much larger ones that will soon be required by Spain, the fundamental contradiction of the euro project will again be brought into focus. A single currency can only be sustained within a fiscal and political union that can mutualise and monetize the debt— something that Germany refuses even to discuss.

If this situation persists, then one of two things could happen. The debtor countries could resign themselves to permanent depression and bankruptcy as they sink further into debt traps and Greek-style crises which will ultimately push them out of the euro one by one. Or they could turn the tables on Germany. Instead of letting Germany impose its economic and political philosophy on Greece, Ireland and Portugal—and in the near future on Spain, Italy and probably France—the Club Med countries could unite and impose their economic philosophy on Germany. Den Rest des Beitrags lesen »

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The Disastrous Consequences of a Euro Crash

Posted by hkarner - 26. Juni 2012

Date: 25-06-2012
Subject: Imagining the Unthinkable

Fears are growing in Europe again that the euro could soon collapse.

As the debt crisis worsens in Spain and Italy, financial experts are warning of the catastrophic consequences of a crash of the euro: the destruction of trillions in assets and record high unemployment levels, even in Germany.

It isn’t long ago that Mario Draghi was spreading confidence and good cheer. „The worst is over,“ the head of the European Central Bank (ECB) told Germany’s Bild newspaper only a few weeks ago. The situation in the euro zone had „stabilized,“ Draghi said, and „investor confidence was returning.“ And because everything seemed to be on track, Draghi even accepted a Prussian spiked helmet from the reporters. Hurrah. Den Rest des Beitrags lesen »

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Why Germany Should Leave the Eurozone

Posted by hkarner - 12. April 2012

A very smart consideration. And Business Week isn’t just a nobody (hfk)

Date: 12-04-2012
Source: BusinessWeek

The departure of Germany would take pressure off the weaker countries, and the costs of breaking up the Eurozone will have to be paid no matter who leaves.

Most discussion about a potential breakup of the Eurozone assumes that Greece and other financially troubled countries would be the ones who ended up abandoning the common euro currency. But there’s a compelling alternative to that conventional wisdom – that the true problems of the Eurozone could be best addressed if Germany were the one to leave, accompanied, perhaps, by a few other rich countries.

The argument for the weak countries leaving is that they would be able to escape the austerity policies imposed by Germany. Once they had abandoned the euro, their new national currencies would quickly depreciate, making their economies more competitive internationally because their exports would be cheaper for foreigners to buy. In the process, of course, the weak countries might have to default on their euro-denominated debt, but that would be the inescapable price of freedom. Presumably, the richer European countries would then try to establish a smaller, more viable common currency zone. Den Rest des Beitrags lesen »

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Unscramble the Euro Omelet. Win $400,000!

Posted by hkarner - 5. April 2012

Date: 04-04-2012
Source: Businessweek

Today the sponsors of Britain’s $400,000 Wolfson Economics Prize announced the five finalists of a contest for the best contingency plan for a breakup of the euro zone. The most intriguing one is by a British private investor, Catherine Dobbs, who proposes to unscramble the euro currency, quite literally—replacing it with two brand-new currencies, which she calls a yolk euro and a white euro.

The yolk euro would be the currency of the weaker countries, presumably ones such as Greece and Portugal. The white euro would be the currency of such stronger nations as Germany, Finland, and the Netherlands. Seemingly ovo-obsessed, she calls her plan Newney, for New Euro White/New Euro Yolk.

The beauty of Dobbs’s plan is that people would not have a choice of which currency they would be given when the euro broke up. Everyone would get some of each. For every 100 old euros, people might be given 70 white euros and 30 yolk euros—and that ratio would be the same for all euro holders, regardless of nationality. Writes Dobbs: “The exit of one or more countries is not viewed as an exit, but a split of the Union into two (or more) regions.” Den Rest des Beitrags lesen »

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What Wolfson Did Next

Posted by hkarner - 5. April 2012

Author: Edward Hugh  ·  April 3rd, 2012  ·  RGE EconoMonitor

At around 9:00am London time this morning Lord Wolfson held a press conference to announce the five finalists in his economics prize contest. I have done a podcast discussing the prize objectives and their implications with the Spain based British blogger Matthew Bennett. You can download it here.

The first thing that needs to be said about the initiative Wolfson has taken, in offering a 250,000 pounds stirling prize using his own money to anyone able to offer practical solutions to the current Euro crisis, is bravo. Someone willing to put their money where their mouth is, to try to find policies which should be applied in the common good has to be lauded.

Naturally Lord Wolfson is not looking for just any solutions, as the initial question makes clear, he is looking for a solution in which at least one member country leaves the Euro and a procedure (or template) whereby other countries who find themselves in a similar situation might leave. The question he asked is the following one.

“If member states leave the Economic and Monetary Union, what is the best way for the economic process to be managed to provide the soundest foundation for the future growth and prosperity of the current membership?”

Unfortunately this question begs many others, some of which have no easy answer. In particular the question assumes that someone at some point will be seeking to voluntarily leave the currency union, and that this process can be managed in an orderly fashion. I doubt that either of these assumptions are realistic, on grounds which I will explain in what follows. But first, I have to declare an interest, I submitted an essay (which you can find downloadable here), although in all honesty I have to say I never expected to be shortlisted or win. I never expected this outcome since I basically wrote trying to explain some of the theoretical background to the Euro crisis which I feel is poorly understood, and suggest that, basically speaking, they had asked the wrong question. As I wrote in the letter accompanying my submission. Den Rest des Beitrags lesen »

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