China Economy Concern

[Daylate]

So maybe we'll be protecting our bins with AK's instead of OPI's

[bduke]

Parsley.... Your comments regarding German taxpayers dislike for bailing Eurozone
wrecks are valid.

This is why Merkel is walking such a tightrope to not scuttle her re-election.

However, the effect of the reduced euro value from its many over indebted members is
very favourable to Germany's exports and economy.

In fact Germany is gaining control of Europe through its Euro membership which it didn't
gain through previous wars.

The likely hood of any Government reverting to the Deutsche mark is slim, when the
reality of governing with a greatly increasing currency value is laid out.

They would probably need to fix this mark like the Swiss recently have to stop the inflow
to their currency.

Were they not to fix it ,lower to negative interest rates are most likely.

More importantly, why would Germany reduce their influence over Europe which they
have sought for generations?

Regarding bank failures and interest rates, the vulnerability of banks is dependent upon
the quality of their loan portfolios.

Higher interest rates allow for better consumer spreads for personal banking.

Corporate banking would be more at risk because of sovereign defaults, and the
incidence of large corporate failures.

Tom has referenced the ability to increase money supplies. I think this tactic is more
likely if banks.. especially Eurozone banks... are at risk.

Unrest and demonstrations may be prevalent in the developed counties. I doubt such
disruptions and malfeasance would be tolerated in China.

BTW... China apparently is still executing about 80 people per day. Their government
tolerance is not comparable to ours.

Regarding unrest in more developed countries, I believe that bond values eventually rule
the day.

Changing governments are likely, but adjustments tend to be driven via the old "Hip
National" when the cheques don't cash.

I still think China will be an ever increasing force in the near future, and I don't believe
the Chinese powers believe an epidemic of disruptiveness is in their interest... including
their markets.

Nor do I believe that 6% growth is a recession.

Cheers... Bill

[parsley]

"Soverigns create currency... so don't expect that
to run out. "

Indeed, Tom. Print. Print. Print. But would your
Princess perhaps be a little annoyed if her fifty
dollar bill buys one loaf of bread? Pars

[TOM4CWB]

Parsley,

As long as the loaf of bread is backed by some land to grow the wheat... it is a zero sum issue.

I am NOT making the rules... nor is PM Harper.

I am a simple observer... just commenting on what I saw!

[bduke]

Parsley... Your concern regarding the diminishing value of money is the greatest threat to
reducing a so called "middle class".

Governments are aware of this, many cultures and investors realize it also.

This is why real estate, precious metals, commodities, art works etc. are important
investments.

But the so called "middle class" tend to have homes, vehicles, toys, and videos of their trips
as assets.

Democracy as we know it tends to askew priorities as well, hence the litany of campaign
promises.... and subsequent Country indebtedness.

Still economist look at compounding growth rates and debt to GDP ratios etc., and the funds
tend to invest accordingly.

The theory being that an economy compounding at 2 to 3 % greater than its debt growth will
eventually be attractive.

Time will tell.

Cheers... Bill

[bduke]

Sorry folks... I must be stretching the reply box a little too much, and
the results are strange lies..... Bill

[bduke]

LOL.. I think many will agree with "lies" instead of "lines" also!

Bill

[parsley]

Yes, bduke, I agree Germany increases both it's
exports and influence. But at what risk?

Some of the countries have protested profusely
about yielding their sovereignty through terms of
debt repayment. (A bit similar to our provincial
transfer payments). Others have openly flirted
with EU withdrawal. (gimme the money or we
secede. lol) Is there a point at which they throw in
the towel, refuse to pay their debts, withdraw from
the EU and tell Germany to stick it.

Rather like imagining a sovereign co-operative
class-action bankruptcy, isn' t it, cpallett! With the
UN intervening for the poor. Lol

If you look at ever increasing corporates'
benchmark of 'sense of fiscal responsibility', a
common precedent being set is to declare
bankruptcy and walk. Will nations continue that
trend, bduke? Just musing. lol. Pars

[hedgehog]

germany will not exit the euro, as it benefits from having a weak currency for exports.
but,,, greece , portugal, spain ,italy etc will exit the euro, declare bankruptcy and return to drachma, peseta,etc.
that will leave germany and france high and dry with an overvalued euro, unable to export, so will go into recession. their banks will also collapse from the PIGS default.
UK banks will also fail over it.

[bduke]

Parsley... the risk to Germany is minimal. The risk to Merkel's government is greater.

The countries protesting profusely about loss of their sovereignty are, IMHO
"technically" bankrupt now.

The cost of refinancing their enormous debt is rising quickly.

The credit default swaps used to insure the bonds are practically impossible to buy.

Without the Eurozone "co-operative" they could not finance with external funding.

They have little internal funding and the IMF has given up.

Follow the money. They doth protest too much!

IMHO they are playing politics to keep their jobs.

They may leave the Eurozone... i.e. Greece and Portugal... but it isn't Germany
or German banks that can't afford their share.

It is the French banks... hence Sarkozy's insistence upon saving the status quo.

I think the Eurozone and the Euro currency would be much stronger if they force a
couple countries to exit.

France would become a weaker partner and Germany a stronger force.

Whether Nations go "bankrupt" or not is in the interpretation.

Should they leave the Eurozone they will need their own currency... which will likely
be hyper-inflated.

Your concern of extremely high interest rates will be a reality in those countries.

Not sure a common precedent is being set by declaring bankruptcy, but an
increasingly dynamic financial environment combined with far greater values
at risk is definitely in play.

Basel III is working on this problem, and fortunately Canadian banks are meeting
these new capital requirements.

Whether nations will trend towards defalcation depends upon their desperation.

Bonds are the greatest provider of debt, and bond purchasers are very mobile.

Interest rates reflecting risk in these countries will become prohibitive, and they will
have to endure much economic and societal pain with out this financing.

Pay me now or pay more dearly later.

I could be wrong.

Cheers... Bill