How The Fed Could Force A Euro-Crisis Solution In Just A Matter Of Hours

BusinessInsider ^ | Nov. 28, 2011, 9:32 AM | Simone Foxman

[fight_truth_decay]

Jefferies strategist David Zervos is back again with new recommendations about how the U.S. could step in and save the global economy.

This week: threaten complete disaster if EU leaders don't act right away.

Akin to what he said about the matter last week: The game in Europe is as we have described many times before - the Germans want budgetary control throughout all of Europe and the rest of EMU wants Eurobonds. Its a game a chicken with the entire global financial system on the line. The US should not allow itself to become a casualty in this Euro chicken game.

Zervos previously proposed that the Federal Reserve buy massive amounts of EU sovereign bonds, but acknowledged today that it engendered a "bailout culture" that Americans won't be too happy about. Now he says there's actually another way:

So here is another approach that may appeal to the "no bailouters". We could have the Fed cut the USD swap lines with the ECB effective immediately. This would accelerate the game of chicken to the point where a euro financial market crash is basically hours away Either the ECB monetizes and they begin to issue Eurobonds or the entire Eurosystem falls apart - its that simple. If the US forces the Germans to blink and we get monetization and Eurobonds then its a win! If the Germans don't blink,

[Carry_Okie]

Power freaks of all stripes are truly scary people, having no concept for what they are doing in reality, with currency manipulators at the top of the list.

None of these machinations are truly necessary.

[fight_truth_decay]

"the US forces the Germans to blink and we get monetization and Eurobonds then its a win!"

"the Germans don't blink, then US the just nationalizes its own systemic BHCs and watches Europe fall into depression while executing a massive QE3 program to save our own economy."

"we print up a whole bunch of USDs to buy up distressed European assets (in fact that worked out pretty well for us back in 90s with the Asian crisis)"

" we can get on with business of technological advancement and real economic growth"

[In case:Foreign banks that own a U.S. bank are BHCs]

http://www.mofo.com/files/Uploads/Images/Dodd-Frank-and-Foreign-Banks.pdf

Lincoln Amendment

[jpsb]

Could we please wait until spring when the weather is sunny and warm? I really would rather not do a collapse in fall/winter. Thanks

[Georgia Girl 2]

All we have to do is borrow a few hundred billion more from China.

[joe fonebone]

if europe goes under, can i buy a country for pennies??? I got dibs on denmark..

[dirtboy]

The solutions to these kind of problems are fundamental. But no one wants to face them.

[dirtboy]

Could we please wait until spring when the weather is sunny and warm? I really would rather not do a collapse in fall/winter.

Yeah, but south of the Equator, it will be cold and bluster, you hemispherist, you.

[oldasrocks]

I prefer a wintertime collapse. It will keep the rioters at home or at least cool them off.

[Carry_Okie]

The solutions to these kind of problems are fundamental. But no one wants to face them.

Yup, without economic basis in physical sources of wealth with stable economic value (such as precious metals) a currency is doomed, yet in my humble opinion there is a preferable alternative to the historic and relatively unproductive store of value in gold, namely the productive capacity of the land for all its attributes. Without productive basis in land an agro-urban civilization will eventually wreck its soil and hit the wall anyway. So a currency based in the productive capacity of land is a way of increasing the monetary base with which to supply capital to an economy with capital requirements to implement the advancing technology that also increases wealth. Thus, such a system would have a structural motive to manage ALL the land to increase the underlying reserves for its currency.

Unfortunately, the agro-urban tendency is to crush or assimilate the people who care for the land in its mad dash to grow. It's been invariably true since before Genesis 4 was written (and that is exactly what the Hebrew actually says).

[fight_truth_decay]

You just want to take over the LEGO market!!!$$$$$$$$$$$$$$

[dirtboy]

You could even have a fiat currency tied to a basket of goods produced by a country, so that the money supply is tied to the material wealth produced by the country.

But the current monetezation of debt is incredibly short-sighted. Once the deflationary pressures are gone, it will lead at some point to hyperinflation. And most businesses are cognizant that they have to spend a lot of effort hedging instead of just concentrating on running their core business.

[Carry_Okie]

You could even have a fiat currency tied to a basket of goods produced by a country, so that the money supply is tied to the material wealth produced by the country.

The thing I like about what I'm proposing is that it motivates discovery of value in the land that then feeds back as investment. For example: the vegetative/soil system that produces a nutrient could be patented, much like a mine.

We're on the same page about "monetizing debt." It's theft.