Business

Investors Brace for Euro Collapse

When Otmar Issing joined the European Central Bank Executive Board in 1998, free market advocate and Nobel Prize-winning economist Milton Friedman sent him a friendly note: “Dear Otmar, congratulations on an impossible job.”

Friedman, of course, had no faith in ability of the Euro to stand the test of time. Today, long after Issing’s retirement, it looks like investors are finally beginning to understand what Friedman was talking about.

“Banks, investors and companies are bracing themselves for the possibility that the euro will break up — and are thus increasing the likelihood that precisely this will happen,” Martin Hesse writes for Spiegel Online (as translated from the German by Paul Cohen).

“There is increasing anxiety, particularly because politicians have not managed to solve the problems. Despite all their efforts, the situation in Greece appears hopeless. Spain is in trouble and, to make matters worse, Germany’s Constitutional Court will decide in September whether the European Stability Mechanism (ESM) is even compatible with the German constitution,” the report adds.

This anxiety has been exacerbated by the growing tension between lender and borrower countries. Prominent German officials have called for the expulsion of Greece from the 17-nation union while France’s socialist government has called for more “shared sacrifice.” Meanwhile, in the financial markets, the back-and-forth bickering between eurozone officials has accomplished one thing: It has weakened the euro.

And you better believe the banks are worried.

“Banks and companies are starting to finance their operations locally,” said former chief economist at Deutsche Bank Thomas Mayer.

In fact, a growing number of euro banks have drastically reduced their investments in risky EU countries and, as the report notes, the flow of money across borders has dried up.

“According to the ECB, cross-border lending among euro-zone banks is steadily declining, especially since the summer of 2011. In June, these interbank transactions reached their lowest level since the outbreak of the financial crisis in 2007,” Spiegel reports.

Adding to the growing financial storm is the fact that the fear of a collapse isn’t unique to Euro banks. Major private companies are also wary.

“There’s been a shift in our willingness to take credit risk in Europe,” announced Shell CFO Simon Henry, adding that the company had opted to invest in U.S. bonds and use U.S. bank accounts rather than risk anything in Europe.

“Many companies are now taking the route that US money market funds already took a year ago: They are no longer so willing to park their reserves in European banks,” said Uwe Burkert, head of credit analysis at the Landesbank Baden-Württemberg.

And although the U.S. dollar isn’t exactly in the best place right now, many investors believe it’s far preferable to what’s going on in the EU.

“We notice that it’s becoming increasingly difficult to sell Asians and Americans on investments in Europe,” asset manager Vorndran told Spiegel, adding that although the U.S., Japan, and the U.K. “are all lying in the same hospital ward,” as he puts it, “it’s still better to invest in a weak currency than in one whose structure is jeopardized.”

But more than market reactions and more than private companies shying away from the struggling currency, the one thing we should probably keep our eyes on are the old “short-selling” pros, that is, John Paulson (who made millions off the U.S. real estate crash) and, of course, billionaire philanthropist George Soros.

“Paulson, who is now widely despised in America as a crisis profiteer, announced in the spring that he would bet on a collapse of the euro,” Hesse writes.

At the same time, George Soros said in April that — were he still active trader — he would bet against the euro if EU officials failed to establish a central authority to deal with the crisis (as he so graciously suggested they should).

So far, neither Paulson’s nor Soros’ predictions have come true, but, as Spiegel puts it, “the deciding match still has to be played.”

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Read the full report here.

Front page photo source: The Associated Press

Comments (67)

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  • barber2
    Posted on August 14, 2012 at 5:45pm

    This is what happens when they allow more people to get into the wagon than there are people to pull it. Also known as European Socialism . The Far Left Obama Democrats are trying to bring this same mess to America. Apparently some fools never learn. Or maybe the fools that want to destroy capitalism have figured a way to do it with an “ economic revolution ” : a series of economically disastrous policies which will collapse the system. “Collapse the system”….now where have I heard that phrase before ??

    Report Post »  
    • docgreen
      Posted on August 14, 2012 at 6:14pm

      I believe they also get part of the summer off! What more could they want?

      Report Post »  
    • The_Jerk
      Posted on August 14, 2012 at 6:36pm

      It’s an incestuous relationship. Otmar Issing is an advisor for Goldman Sachs.

      Report Post »  
    • The_Jerk
      Posted on August 14, 2012 at 6:45pm

      They will crash the dollar too. They’re looking for a one world currency.

      Report Post »  
    • KIOTI-TEXAS
      Posted on August 14, 2012 at 8:38pm

      Why sould Europe have so much power over the US econ????WHY????

      Report Post »  
    • historyguy48
      Posted on August 14, 2012 at 9:24pm

      It appears that the IMF is trying to time the demise of currencies around the world for late September or early October. Their hope is that the failure of the unbacked euro will bring down the entire house built of cards, basically, every unbacked paper currency around the world.
      But notice the timing. The ensuing economic crises will bring world commerce to an immediate halt. Cities around the world will burn because of the ensuing food riots. Dear Leader will be “forced” to declare martial law and suspend the election until the situation is stabilized. They will then introduce their new government and currency.
      There is an excellent e-book written by Nathan Hale and titled “Death of Civilization; the Apocalypse Begins” that starts with what the IMF is trying to bring about and takes it to it’s logical conclusion. I must state that this book is not only a good read, but terrifying as all get out.

      Report Post » historyguy48  
    • johnpaulkuchtajr
      Posted on August 14, 2012 at 9:31pm

      Hey Barber2,

      You reckon the situation in Europe is why DHS bought another 750 million rounds of ammo last Friday?.

      Let me see, that’s a total of 1.2 billion rounds bought this year.

      Since our Fed bought 61% of our debt in 2011, Obama IS correct when he says his economic policies have worked, right?

      Report Post »  
    • docgreen
      Posted on August 14, 2012 at 11:41pm

      Johnpaul
      Thats not the only one stocking uo on ammo! If you think thats crazy DHS prior to the 750 bought 450 million rounds prior to this! Thats not even the worse of it. DHS has purchased also purchased Bullet Proof checkpoints with Stop and Go Lights! DHS and the army are purchasing riot gear! In that same memo/article, they stated that the National Weather Service had also purchase ammo! They just posted a update and someone put the National Weather Service Purchasing number on it. The Washington Post is now saying its for the Fisheries Office of Law Enforcement. Quick question for anyone. Why are they ordering Hollow points? Is it me or something else going on? DHS is saying the riot gear is all for RNC and DNC Parties coming up? If this true, why would the army be ordering this also? Would the National Guard not be the ones protectin within the US? None of this passes the Smell test! Why would DHS purchase that much ammo? Dont tell me their stocking up! I could probably understand if its for a Great Price, for any other reason, I really question the why!

      Report Post »  
    • docgreen
      Posted on August 15, 2012 at 12:04am

      As for the IMF we fund the majority of it! In between the Federal Reserve, IMF and the UN we the Taxpayers fund it all! The Scary part about this is the Fed has not been Audited! So they take taxes, that funds the IMF and the IMF turns around to bail our Countries and Banks overseas. Then look at the Fed. and their doing the same thing the IMF is! And of Course you know about the UN! People we’ve been paying the Majority of all these! And who owns the Big Banks? Yep, you said it. Their the same people as the Global Elite, but the other thing we have to remember is Bernanke and Geitner are in with these same Global Elite! When obama stated he’s going to spread the wealth, he didn’t mean to American People! Their Enslaving US and all this will end! They’re using muslim terrorists to justify the takeover of all the monetary system! Remember what the NWO and the Global Elitests want! Look at the monument over on the East Coast, I believe its in Georgia

      http://en.wikipedia.org/wiki/Georgia_Guidestones

      Then look at the Denver Airport and the Significance of paintings on the wall! Why is it they moved the Denver Airport so far out? Why’d they build massive amounts of structure underneith the Airport! Things are about to happen thats going to blow our minds! We need to be watching Politicians and when large Quantities start flying to Denver, get ready for something big to happen!

      Report Post »  
    • old white guy
      Posted on August 15, 2012 at 8:33am

      they just keep throwing money at people who have no intent to work to pay it back. they are parasites and deserve to suffer whatever it takes to get them off their collective asses and producing something of value. socialism sucks.

      Report Post »  
  • D-Fence
    Posted on August 14, 2012 at 5:40pm

    @ JZS, ENCINOM, ROSE, AND ALL YOU OTHER PROGRESSIVE SOCIALIST, MARXIST, COMMUNIST, idiots. Do you see what big government control does? Do you see how we’re losing money on GM? Do you see how Obama lies to the people by syaing that GM is #1? Did you know that GM was only #1 in 2011 because the Tsunami in Japan held up Toyota production until earlier this year? GO AWAY ALL OF YOU SOCIALIST, MARXIST, COMMUNIST PARASITES.

    Report Post » D-Fence  
    • lukerw
      Posted on August 14, 2012 at 7:57pm

      Focused upon Destruction of their Enemy… they accept a Living Hell as a consquence!

      Report Post » lukerw  
    • historyguy48
      Posted on August 14, 2012 at 9:30pm

      Don’t worry about the fools, worry about you and yours instead. If they pull this off it is not going to be bad, it might be fatal to our civilization.
      What they are trying to do has never happened before at any time in human history. Have at least a years supply of food on hand, a means of purifying water and the means to protect it from others. Find other like minded people and band together because as an individual you will be one of the statistics not one of the survivors.
      According to a 2001 think tank study done for the pentagon a worldwide financial collapse or an EMP attack will leave roughly the same number of survivors one year later. 10%.

      Report Post » historyguy48  
  • bumfuzeled
    Posted on August 14, 2012 at 5:35pm

    Gee that one world government and one world currency and one world leader crap doesn’t work. Do people not watch TV anymore? We should know by now the evil scientist always gets caught by James West, 007, heck even Scoobie Doo foils these plots on a daily basis in TV Land

    Report Post » bumfuzeled  
  • KidCharlemagne
    Posted on August 14, 2012 at 5:35pm

    Ironically enough, this comes on the 41st anniversary of the collapse of the U.S. Dollar:

    The Nixon Shock

    Report Post »  
  • freedoc
    Posted on August 14, 2012 at 5:12pm

    I love it: Officials in France calling for more shared sacrifice.

    Sounds like the USA under Obammcommy.

    So, the Greeks, who retire at 50 and sun themselves in their Meditterean beaches, have lived of the work( borrowed money) from other Europeans( and Americans), now get to have their cake and eat it too.

    In my world there are other words for people who use/sponge off the labor of others:

    PILFERER, PARASITES.

    This is what Obammcommy wants from the ‘rich’( which is defined as anyone but A) politicians or B) the favored group status) of America…….‘shared’ sacrifice.

    Where were these looters when I was workiing??? Oh, thats right, I didn’t study 16 hours a day, and work 100 hours a week….someone ELSE did that.

    Could have fooled me.

    Report Post »  
  • dublinthewagons
    Posted on August 14, 2012 at 5:03pm

    How sad our polititions don’t get it either. Borrowing & foolish spending has weaked the country and dollar. The US would be the strongest in the world if corruption in Washington didn’t exist.

    Report Post »  
  • JUSTANOTHEROPINION
    Posted on August 14, 2012 at 5:00pm

    Even I, a lowly highschool graduate knew this was never going to work. No chance, no how. When the Euro calapses it‘s going to be bad for us too and if we don’t get spending under control the statement “bad for us” will be a gross under statement.

    Report Post »  
    • Salamander
      Posted on August 14, 2012 at 10:47pm

      Nancy Pelosi reminds us that reducing tax revenue from the rich will CAUSE our deficit to go higher! Will somebody please take away her credit cards before she SPENDS us into oblivion! This is a woman who missed ‘show and tell’ in kindergarden, never had a lemonade stand, and hasn’t a clue how her newspaper arrives at her stoop every morning!
      See: http://www.youtube.com/watch?v=C_Kh7nLplWo

      Report Post »  
  • Helpful
    Posted on August 14, 2012 at 4:57pm

    I’m not worried about the EURO, My concern is with the DOLLAR……….and WE has a Nation are BROKE,BROKE……….ZERO ??

    http://www.crisishq.com/why-prepare/economic-collapse-inevitable/

    Report Post »  
  • lisa2994
    Posted on August 14, 2012 at 4:52pm

    We are the only ones (USA) standng in the way of Global Governance” so to speak. We pesky americans love our GOD, guns and freedom!

    Report Post » lisa2994  
    • John 3:16
      Posted on August 14, 2012 at 5:40pm

      I’m getting more GOD and more Guns but my freedoms have been in short supply the last 20 years and my freedoms seem to be diminishing consistently.

      Report Post » John 3:16  
  • RGB
    Posted on August 14, 2012 at 4:39pm

    This whole euro scam was invented to spread the pain of socialist economies crashing down. I’m glad the UK had enough good sense to not fall into the trap. It will leave one viable trading partner for us, and maybe Germany if they can hold together through it. As for the rest of the euro zone, they are toast that just hasn’t popped out of the toaster yet. We should be doing everything in our power right now to unplug from this mess.

    Report Post » RGB  
    • RetiredAmericanNavyTaxpayer
      Posted on August 14, 2012 at 9:10pm

      Denmark also was smart and retained the Danish Krone. however, it‘s exchange rate is tied to the Euro so don’t know how things will fall out with it when the Euro crashes. Hope they have gold or whatever backing the Krone.

      Report Post » RetiredAmericanNavyTaxpayer  
  • Viking64
    Posted on August 14, 2012 at 4:26pm

    When is over half of this country going to wake up and see what has been happening the last three plus years, we are all going to see some real pain soon. Obama has the lib slugs dancing with glee, if only they were smarter.

    Report Post »  
  • Eagle_Eye_1970
    Posted on August 14, 2012 at 4:12pm

    Obama was the face of this destruction, but not the architect. Soros &Co put this into motion as soon as Obama took office, and Obama is doing exactly what his handlers tell him to do. Nobody could have pulled this off like Obama could and they knew it…the perfect storm was put into effect when Mcain was put in as the candidate for the GOP. Soros has been working on this for a long long time and I don’t think any of the 2008 election just happened by happenstance. Sounds like conspiracy theory I know, but what else can explain the Evil that is happening here? If Europe falls then so does the U.S., and then by his (Soros) own admission, we are the only thing standing in the way of his Open Boarders Utopia. It is a good thing we have God on our side for He is the only one that can truly save us…a true fight between good and evil…God have mercy on our Republic!

    Report Post »  
  • searching for the Truth
    Posted on August 14, 2012 at 4:07pm

    See – even the people in Europe are fat – it’s collapsing .

    Report Post »  
  • Ivehadenoughtofthisgovenmentcrap
    Posted on August 14, 2012 at 4:00pm

    Hey…they didn’t build that…..why you didn’t build that….I know, lets loan them Barry…Barry can fix anything. See how well he fixed the auto industry…..

    Report Post » Ivehadenoughtofthisgovenmentcrap  
    • barber2
      Posted on August 14, 2012 at 6:19pm

      Yes. Let’s send him over as a foreign exchange president problem solver. And DO NOT let him come back !

      Report Post »  
  • Rothbardian_in_the_Cleve
    Posted on August 14, 2012 at 4:00pm

    In all seriousness, this is the tip of the iceberg. When this goes the ripple through the ECB will be felt and the ability of the Germans to weather that loss and still have capital to support ongoing bailouts in Spain and Italy will be drastically diminished. That is even providing that the German courts allow further bailouts AND that Merkel could survive politically. The Germans are dealing with at “take it hard now or take it harder later” situation. I think they are realizing that they can’t avoid it and that getting it behind them would be advantageous. Too bad we didn’t do that…sidebar.

    Anyways, when the EU goes nipples up to think that this won’t have huge impacts here would be mistaken. The counterparty risk alone is mind boggling. When all these CDOs and CDS’s come undone and the balance sheet impact is realized by Too Big to Fail banks here at home, get ready for Uber-TARP.

    WE will pay for Greece. Because we socialized the private counterparty risk via TARP (it actually wasn’t called that) and Dodd-Frank, ultimately US taxpayers will backstop Greek pensions.

    Report Post » Rothbardian_in_the_Cleve  
    • nolemming
      Posted on August 14, 2012 at 4:53pm

      @Rothbardian I always stop at your posts, always spot on. We are on the roller coaster, strapped in, can’t get off the ride.

      Report Post » nolemming  
    • historyguy48
      Posted on August 14, 2012 at 9:36pm

      This was designed and is intended to destroy every unbacked paper currency around the world at the same time. Since there are no backed currencies anywhere, this means that the entire worlds economic system is nothing but a house built out of cards. Remove one and the entire house falls down.
      Watch Italy, when Italy goes under in September or early October, that will probably be all it will take. The IMF is counting on that to bring it all crashing down.

      Report Post » historyguy48  
  • starman70
    Posted on August 14, 2012 at 3:58pm

    Next Spain, Portugal, and Italy. Can the USA bail them out? Hell no, we can’t even bail ourselves out no less Europe.

    Will the dominoes keep falling? No products imported from already shaky Japan, no raw materiels imported for Europe from many countries and the list goes on and on.

    THE OUTCOME – - – WORLDWIDE DEPRESSION! All because of UNION GREED! Greed by government union members and leadership and the weak kneed governments which refused to put their feet down to stop entitlement programs they could never pay for.

    We see it happening right here in the USA. State, County and City governments being held hostage by Public Sector Unions. Governmental bodies promising far more than they can ever pay for.

    Report Post »  
    • progressiveslayer
      Posted on August 14, 2012 at 4:07pm

      And when it hits the so called poor here are going to get introduced to real poverty,Bangladesh style,and they won‘t react like they did in the 30’s. Today people have been conditioned to believe that government is simply an ATM,to take care of people from cradle to grave,it won’t be pretty.

      We are so far from our founders these idiots in government don’t even know what their real role is supposed to be.

      Report Post » progressiveslayer  
    • FREEDOMoverFEAR
      Posted on August 14, 2012 at 4:23pm

      Lemmings jump off of cliffs humans have depressions and wars. Evolution at its finest. In the long run everything always works out for the better. Sometimes though you happen to be in the pack of lemmings that went over the edge. Basically wars and depressions are hard on the individual but good for the population.

      Report Post » FREEDOMoverFEAR  
  • SREGN
    Posted on August 14, 2012 at 3:58pm

    And yet that imbecile in the White House wants to use them as a model for us. There are none so blind as those who will not see.

    Report Post »  
    • RetiredAmericanNavyTaxpayer
      Posted on August 14, 2012 at 9:05pm

      Oh, he sees all right. His goal is to reduce the US from the world’s Superpower to just an ordinary nation among all the rest.

      NOBAMA
      2012

      Report Post » RetiredAmericanNavyTaxpayer  
  • watersRpeople
    Posted on August 14, 2012 at 3:55pm

    You know what ****** off God more than anything? Moving industry, shutting down this and that thing to spur people to move around away from family to survive – just so some evil investors can make a financial killing investing in a transportation industry and refineries.

    Report Post »  
    • watersRpeople
      Posted on August 14, 2012 at 4:12pm

      If I was you folks I’d be getting to where you want to be stuck at in the near future.

      Report Post »  
    • barber2
      Posted on August 14, 2012 at 6:15pm

      Tim: Yes. God hates capitalism. ( Barack and Joe told me so. It is written in their Bible, Rules For Radicals. ) Oh, and God votes a straight Democrat ticket. And I am the King of Siam . Would you like to dance ? Oh, and a grammar note, Tim. It should be “ if I WERE ” not “if I was.” Conditional verbs take the subjunctive . Am sure they haven’t taught any grammar rules in American education for the past 50 years. Just like they have been teaching a “watered ” down version of Marxism which you have probably “ absorbed” and which inspire your religious babbling Trolls and your dedication to the wacky Lefty ideas of a certain Barack Obama and his Merry Marxists.

      Report Post »  
    • stumpy68
      Posted on August 14, 2012 at 6:49pm

      Investors invest where their money will make money
      between rules fees fines and taxes that is no longer
      the U.S. i build fishing lures i pay 10% Federal Excise Tax. on every part i buy
      then taxes on every assembled lot i sell in order to make a profit i need to charge
      more than a similar item imported from china i have a few stores that carry my
      lures mostly due to local demand but its difficult to expand.

      Report Post » stumpy68  
  • watersRpeople
    Posted on August 14, 2012 at 3:52pm

    As the scripture goes you’ll bury gold in the mountains only to return to it valueless.

    Report Post »  
  • Edohiguma
    Posted on August 14, 2012 at 3:51pm

    The Euro could survive, theoretically, if only used by countries with an actual economy. That means that the PIIGS and Eastern Europe would have to be thrown out, which, honestly, is a good idea either way.

    Report Post » Edohiguma  
  • progressiveslayer
    Posted on August 14, 2012 at 3:49pm

    The dominoes are all lined up and ready to fall,ole Georgie boy will make a killing when the euro implodes. It’s just a matter of time and will probably implode sooner than most think.

    Report Post » progressiveslayer  
    • Snowleopard {gallery of cat folks}
      Posted on August 14, 2012 at 4:02pm

      Indeed, and now that Obama has done the euro for dollars insanity to the maximum, we will be hurt in many areas as well; the only questions are when it begins, how hard will we be hit, and will it be after Obama is out of office to avoid him declares martial law.

      Report Post » Snowleopard {gallery of cat folks}  
    • MCDAVE
      Posted on August 14, 2012 at 4:09pm

      I don”t like that this economic terrorist is allowed to live in our country. He is wanted in Russia for crimes , Send him to the Russians to face justice,,The entire world is better off with out him.

      Report Post »  
    • progressiveslayer
      Posted on August 14, 2012 at 4:11pm

      If it’s after Barry is fired in November the drones on the left will blame president Romney,it’s encoded in their DNA to blame republicans for everything. If we get outnumbered be those simpletons and they‘re able to inflict the Marxist POS for four more years we’re done anyway.

      Report Post » progressiveslayer  
  • LeadNotFollow
    Posted on August 14, 2012 at 3:47pm

    …
    It‘s Barack Hussein Obama’s fault.
    The World has seen how weak America has become.
    America‘s credit grade was downgraded under Obama’s crappy “leadership”.
    The World has gotten nervous. Obama caused a domino effect.

    Report Post »  
    • johnjamison
      Posted on August 14, 2012 at 3:51pm

      Maybe Obama can campaign there after Nov. AND SPREAD MORE OF HIS HOPEY CHANGE

      Report Post »  
    • Eagle_Eye_1970
      Posted on August 14, 2012 at 4:09pm

      Obama is the face of our would be destruction, but not the architect. Soros &Co put this into motion as soon as Obama took office, and Obama is doing exactly what his handlers tell him to do. Nobody could have pulled this off like Obama could and they knew it…the perfect storm was put into effect when Mcain was put in as the candidate for the GOP. Soros has been working on this for a long long time and I don’t think any of the 2008 election happened by happenstance. Sounds like conspiracy theory I know, but what else can explain the Evil that is happening here? If Europe falls then so does the U.S., and then by his (Soros) own admission, we are the only thing standing in the way of his Open Boarders Utopia. It is a good thing we have God on our side for He is the only one that can truly save us…a true fight between good and evil…God have mercy on our Republic!

      Report Post »  
  • Detroit paperboy
    Posted on August 14, 2012 at 3:45pm

    So no more three month vacations ? No more three hour lunch breaks ? My heart is breaking…

    Report Post »  
  • Landon410
    Posted on August 14, 2012 at 3:44pm

    whats the old says? No sh… sherlock?
    everyone saw this coming years away (except libs)

    Report Post »  
  • Detroit paperboy
    Posted on August 14, 2012 at 3:44pm

    You mean the socialists are finally running out of other peoples money…..ohhhhh so so sad booo freakin hooo…….

    Report Post »  
    • lketchum
      Posted on August 14, 2012 at 4:13pm

      Marxists have run out of any and all money – not just yours and mine. They can’t even print enough to cover the burn.

      Report Post » lketchum  
    • barber2
      Posted on August 14, 2012 at 6:06pm

      LKE: But Obama has a solution : go after the nasty rich people. Make them PAY MORE. Bleed them until they’re DRY !! Grab you pitch forks. Follow Barack. Just like ACORN: go to their front yards. Grab your bull horns. Maybe your Guy Fawkes masks. Call the OWS Crowd. They hate capitalism so they must hate rich people too ! And Republicans are all rich so we should hate them too ! Uncle Joe ( no, not the old Russian Uncle Joe…don’t think they are related ? ) said they ” want to put some people back into chains.” Heck. shouldn’t those rich Republicans be punished for wanting to do THAT ? Listen to Barack and Joe. They have all of the answers.

      Report Post »  
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