Eurozone Debt Imbalances Aren’t Sustainable Yet They’re Unfixable Due to Germany’s Constitution
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10 comments on Eurozone Debt Imbalances Aren’t Sustainable Yet They’re Unfixable Due to Germany’s Constitution
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10 Comments
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2 years ago
link to richmondfed.orgThe Economy: “What Decade Are We In?”
2 years ago
To riff on @JonSellers note about CA and AL, it would be interesting to see a graph showing US states’ trade volume in and out. Cities, too. ZIP codes. Houses. This can go on. 🙂
Which makes me wonder: Is it useful to organize the EU’s debt/credit by country? I see IE up there, for instance, but is Irish trade much the same as, say, Delaware’s?
2 years ago
I think there’s another option that’s not mentioned here. The United States has the same issue between California and Alabama. So the federal government taxes California heavily and invests the money in Alabama. So the EU could come up with a significant federal tax and invest the money in the southern nations.
2 years ago
Hence the ongoing political push towards a Federal States of Europe 🙂
Power then shifts from the sovereign nations to the EU and isn’t popular with the electorates. Therefore its happening on the sly.
The UK also have such a transfer mechanism between England and Scotland, it’s called The Barnet Formula.
2 years ago
Germany will leave first if anyone’s going to in my view, they’re paying for it and the electorate know it. The longer the can gets kicked down the road the more it costs them. It would be very messy.
2 years ago
100 million debt is debtors’ problem.
1 billion debt is creditors’ problem.
United States of Europe is the solution but Germany has to take the burden forever.
This is capitalist socialism.
2 years ago
Yep. There will be a united states of europe sooner or later. The only reason I don’t think it’s happened yet is because of the two world wars and Germany likely being in charge.
2 years ago
2. Debt Commingling and Forgiveness Without Reform
It looks to me like the debtors hold the cards and the creditors will keep cutting them slack. So maybe what is really going on right now could be considered a sort of defacto #2 scenario above. It’s what’s been going on for years, right?
Germany has an economy that has been (until COVID) about 47% exports. Two of its 3 biggest customer countries are outside the EU (US and China) and the 3rd is France, which isn’t one of the bad stepchildren of Europe. So they can, at the moment, afford to keep the situation from completely disintegrating. How long that goes on depends on whether those major trading partners can afford to keep driving BMW’s and Mercedes Benzes .
2 years ago
Why wouldn’t there be an ECB bailout? When there isn’t enough money to pay debt, central banks have proven they’re willing to create as much money is necessary to avoid defaults.
2 years ago
Forget it Mish. The pain inflicted in forcing a single state will be considered worth it by the EU elite.
There is no exit allowed if in the Euro.
Draghi has been positioned on purpose, money will be pumped into IT, GR, ES, to keep it together.
You cannot understand the lengths they will go to to keep the show on the road.
As for debt overall, take a look at France. Italy has decent personal savings.