Analyst predicts break up of the Euro Zone

Talk about doomsday analysis, this has to be it. An analyst from Société Générale (French Bank) is concluding the Euro area is headed for a break-up:

Southern European countries are trapped in an overvalued currency and suffocated by low competitiveness, a situation that will lead to the break-up of the euro bloc, according to Societe Generale SA’s top-ranked strategist Albert Edwards.

The problem for countries including Portugal, Spain and Greece “is that years of inappropriately low interest rates resulted in overheating and rapid inflation,” London-based Edwards wrote in a report today. Even if governments “could slash their fiscal deficits, the lack of competitiveness within the euro zone needs years of relative (and probably given the outlook elsewhere, absolute) deflation. Any help given to Greece merely delays the inevitable break-up of the euro zone.”

Zero Hedge has some even more doomsday predictions, all due to GDP to debt ratios, including the United States.

But, buyer beware, they are using the insane financial oligarchy derivatives bail out to blast Keynesian economics. Nowhere in the theory I've read on Keynes does it state one should run a nation into sovereign default to enable corporate welfare or a glorified global gambling casino with the checkbook to pay off bad debts being Joe Q. Public's.

Also buyer beware, competitiveness is usually code word for global labor arbitrage. Somewhere I don't think selling one's middle class into abject poverty is what economics in the national interest is all about....or even necessary.

If you're wondering what a Euro Zone is, that's the currency union, details here and involved monetary policy surrounding the common currency, the Euro. It involves 16 countries and shouldn't be confused to the European Union.

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Neoliberal policies crash the entire global financial system which cause these massive deficits and more "trickle down" bullshit - save the top and financial conglomerates and everything will be OK.

Zero Hedge and the rest of the gold bug, monetarists can take a flying leap because they don't know jack shit about Keynesian economics.

True Keynesian economics would have called for more principal reductions, loan write-offs and more economic stimulus going to those who can use it - not the upper income/financial oligarchy. But no, what we got was bailout the financial oligarchy - nothing Keynesian about that. - Financial Information for the Rest of Us.

compartmentalized bullshit

I see this all over the place, on the economics blogs. You will see some great research, writings on say the financial bail out...then the same person will turn around and write some religious doctrine on labor arbitrage, claiming how it's the way to go, or in spite of all of the evidence that the U.S. trade deficit is a major problem....try to claim that's good and means economic growth.

Same true with some on deficits. Not all spending is equal and wasteful spending or corporate welfare spending isn't the same animal as investment spending or demand driven temporary stimulative spending.

Kind of amazing the economic blinders on people who look at this stuff every day.

Yet another reason to focus on the numbers, on the theory itself and the stats.

But....ignoring that agenda to ruin more working populations and turn the world back into a pool of glorified serfs.....these GDP to debt ratios are really friggin' scary!

So, I guess we need to dig around into these ratios and discover just how much of it is financial oligarchy prop-up, giveaway.

Another post would be how much of Medicare/Medicaid is waste and it should be/could be eliminated since those 2 plus SS are the deficit propaganda du jour.

Europe is doing much, much better than America

Yeah, this hype at 0hedge and elsewhere is indicative of a lack of knowledge of the overall EuroUnion. Their small businesses are doing much better, and generating more employment than in America, Mirkel in Germany has reined in the leveraged buyout spree by the international private equity firms, changing their tax laws their to preempt them (ditto for Denmark in that regard).

Nope, there appears to be a bear run taking place on Greece (a la Lehman Bros., WAMU and Bear Stearns, etc.).

Their CDS exposure displays all. And Goldman Sachs, as always, figures in.

it's just spin

It's pretty clear they have never lived abroad or even studied in depth their overall economies. I think the focus is just markets and they are looking for those quick gains.

I agree, Europe quality of life, middle class, labor, employment is so much better than the U.S.

Here is one Keynesian explanation of Euro Zone crisis

Euroland is being crucified upon its cross of gold

The euro was introduced in 1999, the high-water mark of neo-liberal economics. As such, its institutional design embeds neo-liberal monetary theory which in many regards rests on the same economic principles as the gold standard. These principles are that fiscal policy is ineffective; inflation is caused exclusively by money supply growth; and the real economy quickly and automatically returns to full employment in response to negative shocks.

All three principles have been fundamentally discredited by the current recession. Around the world, countries have turned to fiscal policy to offset the collapse of private sector spending, and the recession would have been far deeper absent that fiscal response. Money supplies have risen dramatically almost everywhere without matching increases in inflation, showing that the money - inflation link is highly contingent upon economic factors such as unemployment, capacity utilisation, commodity prices, and business expectations of profits. Finally, rather than rebounding to full employment, the global economy looks set for high unemployment that will last years. This possibility was Keynes’ message in his 1936 General Theory. - Financial Information for the Rest of Us.

Two sides - who benefits from doomsday

This is an excellent and concise presentation. I have to wonder, who benefits from the doomsday scenario. Do you think it might be politically motivated?

doomsday scenarios

Well, there is the "never let a crisis go to waste" and the more CT view of "create a crisis as a diversion".

My real question on these debt to GDP ratios is how much of it is propping up our new glorified organized crime gang known as the global financial sector.

I don't know who has verified it but the history of the IMF, World bank at least was to let 3rd world countries get into massive debt and then come in and demand they remove all of their social safety nets, labor standards, etc. privatize a bunch of things order to be "helped".

and it sure looks like that's what they are after in Greece, but I have not personally analyzed it.

I will note that Societe Generale generated a doomsday report earlier this year which mentioned sovereign defaults and it was for internal investors.

So, they might have a host of bets on black square doomsday in the structured finance, derivatives roulette wheel for all I know.

Also, currency has it's own CDS and derivatives....

place yer bets! S.G. was the big winner in the 100% AIG CDS payout and before that, they had a rogue trader and were suffering major losses, partly due to that.

I mean this is just insane to have all of these derivatives not even touched, just no reforms, regulations....

so I have no idea, but beyond the derivatives global Gambling casino of these various financial "entities" ...
ya know, can they influence a collapse of a nation or a currency with so few players and a $65 trillion derivatives market?

So the real question is the actual debt, what it's from, how much of this is the "real" economy, i.e. poor management and what's the projection...

I don't know what to believe, it's bad enough digging through the dirt in the U.S. economy/finance sector, or should I say chicken scratches on the top of the shit pile.

Greg Palast, first and foremost

I don't know who has verified it but the history of the IMF, World bank at least was to let 3rd world countries get into massive debt and then come in and demand they remove all of their social safety nets, labor standards, etc. privatize a bunch of things order to be "helped".

While I don't recommend that Economic Hitman book by Perkins (as if he was unaware of what he was doing up until the very end and now works for further compensation, etc.) the person who really did the great, and much preferred, work and interviews on that was Greg Palast. He really nailed it.

The most revealing item about the IMF is their establishment, by way of a third party orgnization, of Financial Intelligence Units at the various offshore finance centers, to track money laundering, which, DUUUUHHH, is what those OFCs are all about.

Kind of self-evident, that one?