While this is a good overview to describe the catch 22 trap the Eurozone is in, first of all the same can be projected out to the total global economy and the true problem is much deeper.

Even this article mentions several times the hope that in case the economy or growth picks up thing could turn around, the usual mantra, because we do not dare to look beyond the corner and see what everybody suspects: there is no hope for recovery, as the present system is not sustainable.

There is no hope for constant growth for multiple reasons.

First of all as the article itself says the consumers who cunsumed all the products the stronger nations produced have no cash or confidence, thus they are unable to consume any more. And this is a world wide problem, not only in Europe. Today there are more producers than consumers, not to mention the fact that most of our production is based on unnecessary, luxury products people simply do not need for a normal human life.

Besides in this totally intermingled, closed network we have become there is no chance to expand, to grow anymore, unless we eat each other up, or expand into someone else's market, territory, leading to trade or actual wars.

We are frozen.

The only solution is to take stock, accept the losses and start mutually building a completely new equal structure starting from how we relate to each other according to this interdependent system, and then building a political and economical system on top of it while we are still in control, as within months the wheels can come off and we will all be scrambling under the ruins.

This is way beyond the Eurozone, or Europe in general, this affects all of us, we are all sitting on the same boat.

Gamesmith94134: A path through Europe’s Minefield

As I mentioned earlier that Greece will be “separated, but equaled’ among the EU members would jeopardized its growth and disengaged its controls on the aspects of financial problem and domestic difficulties to meet its liabilities since its EU members will not guarantee the Euro-bonds world by Greece. Based on the portfolio of the liabilities, the estimated under watered real estate are now 40% off or 21% write off as suggested. The 440 billion dollars from EFSF is under the German-Franco control; and it will not be totally sufficiently to solve the imbalance of it 2.7 trillion dollars either, and it applies in case of emergency only and some claimed of the new resolution to the problem.

Zsolt said well,” The whole basis of the Union has to change from self centered, profit oriented, exploitative financial association to the mutually responsible cooperative, equal Union that fits the new conditions of the world today.”

Since governments can call upon the European Central Bank, which the eurozone member states already fully guarantee on a pro rata basis, it only short on the Lisbon treaty to guarantee the tax collecting or privatizating to cover the bond issuance.  Then, timing place a negative factor in further contagion to Greece and the global economy; if French or German Central Banks is not taking up the slack from the defaulters. It may come to a global reckoning by switching to the World Bank in separating the defaulted and its liabilities; and reassess the values on the Euro-bonds through the arbitration or resale them after its write-off; at the same time, the IMF will work on the Euro or the pegged Greek drachma if the EFSF fails.

In the last months, investors and money managers sought the relative safety and liquidity of bank deposit that rose to 6 trillion dollars in American; even though the recent drop of Euro 1.37 from 1.4 to a dollar, the aggregated money demand in ECB had rose significantly. I suspect the coming solutions from ECB and the FED might depends on the M2 deposit aggregated heavily in the ECB and FED in the past months with its low rates in recapitalizing the banks and loans; also, the last jump in the stock and commodity could have gave a lot of equity in use to meet its liabilities. Since the economy is in the slump and the central banks have no alternatives to adjust on the down turn GDP, it would be a decent option for the central banks and the local bank to cut its deal on the 2.7 trillion dollars of Eurobonds if they are willing to contemplate.

There is always hope for everything even on the PIIGS’ defaults, but my personal opinion is the multispeed and multi-currencies for Euro Union work better if monetarily and political sovereignty can work out its own to resolve the international or sovereignty issue. When both can compromise even on my offer of the “seven percent solution” that withheld the time to let bond to default till the arbitration is completed, meantime, one percent on the reserve, three percent on the coupon that links to tax-pay that can be traded, and another three percent payments for collateral in the political channels with privatized program or liabilities applies. It is arguable what liabilities would compensate with the debts, but what does the value be if the foundation of it at any currency failed due to the ruptured global economy?

Perhaps, it is not clear how the global communities can agree on the loss of funds, or the risk factors in any dealing of the Soveriegnty bonds; since we are alredy lowest in its compensation of interest rates, and the functuation on value that inflate or deflate. However, we have seen the effects on disinflation that turn the economy sour or anemic, we must rechon the interest rate held the power to move forward or show its risks to afford independency of its own; therefore we must compromise even on profits.  It is all foundation of bargaining.

May the Buddha bless you?

Just as montary union is controlled and regulated by the ECB, I believe the other half the spending needs to be centralized to ensure the rules are kept. While this might not be practical or wanted its the only way to avoid "mistakes" and oversights that result in Greece. The central Eurogov needs to collect tax and then hand it back to each of the countries of perhaps directly to the states, provinces etc in those countries.

Gracias por sus palabras profundas Roubini y Zsolt

El mundo economico va cambiar bruscamente por falta del querer por los poderes en control. Se ve como error, pero en realidad se mira mas y mas como una estrategia: el corriente de la riqueza se va agotando, dejando solo los ricos en el momento con poder.

Salvacion llegara, entonces, con la logica restribucion del poder desde concentraciones egotisticas al entero justificado; La mayoria de la gente ya a sufrido sufficente.

---

Thank you for your profound words Roubini & Zsolt.

The economic world is about to change brusquely because of the lack of care by the powers that be. This may seem like error, but in reality it appears more and more likely that this is the strategy: the rivers of wealth are drying up, leaving only the current holders of wealth with power.

Salvation will come from, then, with a proper redistribution of power from egotistical concentrations to the justified whole; the majority of people have suffered enough.

The parallel with the North Italy - South Italy is not correct. The main reasons for the failure of the North subsidies to foster growth in the South are to be searched in the "nation state" constraint for designing the rules and the institutions governing public and private contracts. For example, the principle that the same job has to be paid the same wage, irrespective of the geographic location of the workers, is one of the constraint that permanently reduced the competitivness of the South, despite a huge unemployment situation. Another example is the principle that the same service level has to be provided for all the social security services (health, pensions, ...) provided to the citizens, irrespectively of the contribution history and the current productivity of the nlabour force. All those constraints are not present in Europe and will never be, so for a country like Italy is much easier (than for South Italy) to regain competitivness with respect to Germany (North Italy) by accepting lower wages and lower level of social security charges if unemployment or current accounts' situation worsen  

Another means to rectify the Italian fiscal deficit and national accounts would be to tax the underground sic also mafia industries .Apparently this shadow economy accounts for about 20 % of Italian GNP. This could be done at source via their banking connections at least those inside Italy. The fiscal status of the church could also be modified. Big role for the fiscal carabinieri.

Roubini has been at this for about two years now, with his "predictions". I am in fact surprised this time he didn't use his famous "there is an xxxx probability of yyy happening" which has become somewhat of a trademark for this apparent "crystal ball seer". 

Roubini is playing his act, but he risks looking ridiculous if in the end the eurozone ends up surviving. 

Roubini is also apparently a racist, it is not a very politically correct thing to do to call a list of countries swines, or "basket cases".

One could make the case that there is very little economics in what he says, and a lot of hocuspocus and theatre.

Theatrical, interesting, but devoid of any sort of validity in any sense whatsoever. I don't have the documents with me right now but I am pretty certain he must have said Greece would abandon the eurozone in 12 months at last 300 times. Well like Goebbels said, say it a 1000 times and it might as well happen.

It seems the euro sets some people in motion. 

So much hatred towards the euro... 

Not much more than that. 

"Unfortunately, Germany and the ECB oppose this option, owing to the prospect of a temporary dose of modestly higher inflation in the core relative to the periphery."

Inflation is unacceptable for Germans.

Gamesmith94134: Why the euro crisis is an American problem

Why should the Euro be smashed if we all can accept the collective bargain and accept the sovereignty right to its monetary policy?

As Mr. David Frum demonstrate the differences of the economical strength of the ones’ nation and its bonds if the market price does apply. Perhaps, it is the purpose of the multispeed world as in economics controlling the currencies; and it is how sovereignties must apply its political strength to restore its policy of the currency to what is affordable for its populace. If the European Union may have different monetary policy and political policy as well for sovereignties, then, the unified values of euro is not sustainable under the same cost or price, and each euro nations may be accountable in due course on the productivity and also for its loans and debts based on the common currency of Euro. Now, the default may jeopardize the transaction of the Euro either within the European Union or the world, the question fell on the unity of the currency and integration of its political system.

Perhaps, we must protect the system of the present that the EU can work out on its own with all its debts. The resolution would be the Euro and currencies of its choice as each political parties can administrate if the European Union allows since the Euro may have a not function properly in facing the domestic and foreign commerce; and I would suggest the dual currencies system that Euro for sovereignty loans and debts that strictly run by the Central Banks of the regions, and not traded by regional banks; and each will adopt its own currencies for the domestic trading; and the Euro Union would not be smashed and foreigner investments as in Euro must pass the reality check instead of credits to sustain a conversion channel so it does not interrupt the domestic economy and its populace. Also, in the process all cashes must accomplish its exchange cycle for both investment and withdrawal off the central Bank of the region; then the political system must bear the mindfulness of the rate exchange with the central bank that reports the inflationary or deflationary seasonally or daily, so, each of the monetary and political system must reflect how the inflow or outflow may change their policies on the productivity and how its tax and tariff may change to mend after the effects of the loans and debts for repayment.

Perhaps, it is the questions on the users of the currencies how much will they value their currencies and how they will support them with lesser credits or quantitative easing run and sold by ECB or FED; since some would not accept responsibilities of the sales of their bonds. The Issuers must set values on these sovereignty bonds by using the domestic purchases ratios to foreigner’s investment; and limit the transactions on “the credit only” among the Central banks and World Bank which guarantees the full extent of the transaction with repayment. The World Bank can scrutinize each transaction whenever the Central Banks trades or the regional bank purchased or sell; then the issuer can enforce its internal system to maintain both the monetary and political systems. If each can maintain a good will; the nation must repay through the incentive of its monetary and political policy.

It is impossible to smash the Euro without shaken the global economy. It is better to reserve the Euro to the term of sovereignty debts and loans and pay attention on the exchange rates on the balance of trade when IMF can step in to monitor how each currency is rated and valued.

Does anyone would buy the bonds and shred 50% off its value for charity or guilt?

May the Buddha bless you?

"Too big to fall, too big to save". I like that. 

I found this article very interesting! Warren Buffett just came out and said the Euro will fail.  I used to work in the realm of high finance with Hanover Brooks Panama and now am a writer:  Here is my latest on the EU Zone Mess: http://nut.bz/zb1gky5o/     "The Euro End: A Complex Domino Effect of Currency Death Explained"

As an engineer and scientist I do not understand the current hysteria of the financial markets. The mass of debt has accumulated not instantaneously but much since the foundation of the common currency in the EU and for quite some time in the U.S. - and everybody knew it.

The biggest holders of sovereign debt seem to be the banks and certainly their well-paid CEOs should have realized what was going on. Yes, there is a growth problem in the Western hemisphere but nobody can expect that this will be solved in a matter of month. It is an inherently political process to stimulate people to work more and harder and to generate values.

It is by no means obvious why a default or breakup of the EU would benefit anybody. If creditors want their money back they need to convince the people in those indebted countries that they need to give something in exchange for the credit they got. And that persuasion cannot be done by demanding higher interest on sovereign debt.

And his is the crux: in the past the attempt to exercise power over people to work more and harder always has been achieved with the help of armed conflicts. There is much doubt if the sovereigns can meet their obligations with regard to pensions, medicare or debt repayments. Yet this doubt is contrived. The solution solely hinges on the willingness of people to work more and harder in order to make good on those promises.

Instead of focussing on the health of the world financial system creditors should come up with some practical ideas on how Greece or Italy can repay their debt. How can these countries generate values? What needs to be done to build a thriving middle class there?  Some people belief that the debt burden for those countries is too big right now for it to be completely repaid. I am not convinced.  It will certainly need a very long time to get it all done. The problem here is that investors extrapolate a linear future. But we have no crystal ball. The future jumps and does not crawl. These countries may become of strategic importance for some yet unknown reason.

We do not need a bazooka or yet another financial instrument. We basically need the willingness of people (and sovereigns) to meet their obligations. This is a problem from a physics textbook: debt is like potential energy. Lots of potential energy has been accumulated in the form of future obligations between sovereigns and their creditors. This potential energy needs to be converted into mechanical work right now, i.e. we need a blueprint of how people generate real values and thereby repay their debt.

That blueprint is all the creditors can get right now. If they want more there will be war.

As an engineer and scientist I do not understand the current hysteria of the financial markets. The mass of debt has accumulated not instantaneously but much since the foundation of the common currency in the EU and for quite some time in the U.S. - and everybody knew it.

The biggest holders of sovereign debt seem to be the banks and certainly their well-paid CEOs should have realized what was going on. Yes, there is a growth problem in the Western hemisphere but nobody can expect that this will be solved in a matter of month. It is an inherently political process to stimulate people to work more and harder and to generate values.

It is by no means obvious why a default or breakup of the EU would benefit anybody. If creditors want their money back they need to convince the people in those indebted countries that they need to give something in exchange for the credit they got. And that persuasion cannot be done by demanding higher interest on sovereign debt.

And his is the crux: in the past the attempt to exercise power over people to work more and harder always has been achieved with the help of armed conflicts. There is much doubt if the sovereigns can meet their obligations with regard to pensions, medicare or debt repayments. Yet this doubt is contrived. The solution solely hinges on the willingness of people to work more and harder in order to make good on those promises.

Instead of focussing on the health of the world financial system creditors should come up with some practical ideas on how Greece or Italy can repay their debt. How can these countries generate values? What needs to be done to build a thriving middle class there?  Some people belief that the debt burden for those countries is too big right now for it to be completely repaid. I am not convinced.  It will certainly need a very long time to get it all done. The problem here is that investors extrapolate a linear future. But we have no crystal ball. The future jumps and does not crawl. These countries may become of strategic importance for some yet unknown reason.

We do not need a bazooka or yet another financial instrument. We basically need the willingness of people (and sovereigns) to meet their obligations. This is a problem from a physics textbook: debt is like potential energy. Lots of potential energy has been accumulated in the form of future obligations between sovereigns and their creditors. This potential energy needs to be converted into mechanical work right now, i.e. we need a blueprint of how people generate real values and thereby repay their debt.

That blueprint is all the creditors can get right now. If they want more there will be war.