Business

Paul Krugman: The Entire Euro Could Collapse in ‘Months’ — and Here’s How

If you think that what’s happening in Greece and Europe (read our post on Sunday for more background) isn’t worth worrying about right now, think again. Imagine what would happen if the European currency collapsed — the shock waves would disrupt the American economy instantly. The next question, then, is: How likely is it that the euro collapses? Paul Krugman, the New York Times economic columnist, says it could happen in months.

In a post on Sunday, he lays it out:

1. Greek euro exit, very possibly next month.

2. Huge withdrawals from Spanish and Italian banks, as depositors try to move their money to Germany.

3a. Maybe, just possibly, de facto controls, with banks forbidden to transfer deposits out of country and limits on cash withdrawals.

3b. Alternatively, or maybe in tandem, huge draws on ECB credit to keep the banks from collapsing.

4a. Germany has a choice. Accept huge indirect public claims on Italy and Spain, plus a drastic revision of strategy — basically, to give Spain in particular any hope you need both guarantees on its debt to hold borrowing costs down and a higher eurozone inflation target to make relative price adjustment possible; or:

4b. End of the euro.

And we’re talking about months, not years, for this to play out.

Let’s let Business Insider (BI) translate that:

Greece leaves the euro “very possibly next month.” That would lead to a massive run on Italian and Spanish banks. There would be massive borrowing from the ECB [European Central Bank] to prevent a banking collapse. At which point Germany has to decide: Shoulder a major burden for the debts of Spain/Italy, etc., or let it all go.

Now, BI says because of the potential consequences big investors won’t let Greece leave (thus stopping the chain reaction at step one). But it’s still a possibility. And as long as it’s a possibility, it’s one you should familiarize yourself with.

Comments (115)

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  • 1WhoQuestions
    Posted on May 14, 2012 at 10:08am

    Months, weeks, days or hours. Does it really matter as we know change is on the way? When all is said and done the paper in our wallet we may burn to keep us warm. Though not legal we may melt the currency as the raw materials will be worth more.

    Collapse is coming. The million dollar questions are when will it occur and what will the effects be?

    Report Post »  
    • jnobfan
      Posted on May 14, 2012 at 10:50am

      IMO all of this has been pre-determined. The EURO never had a chance. The forming of the EU and the collapse of the EU will take them to a pre-determined place. The EURO never had a chance and it did not make sense for Germany to join. Something else is at work here. We will know soon. Anyone who has been to London or Paris after dark lately knows what I am thinking.

      Report Post »  
    • ChiefGeorge
      Posted on May 14, 2012 at 12:01pm

      Well if the Euro collapses then the dollar could fail as well. This would be great timing for the elite who run things and will coincide well with our elections to pull the plug on the whole system to flush it clean. Whatever the grand plan is, (they) the designers know all to well what is best for all of us….right? They want to heard everyone into a one world currency thus putting all nation states on an equal and fair footing. Except for the differences in personal talent and initiatives, their plan might work but it won’t and its another man made plan doomed for failure.

      Report Post » ChiefGeorge  
    • Detroit paperboy
      Posted on May 14, 2012 at 12:20pm

      Yes, my friends, the Europeans followed Krugmans economic advice, right off a cliff…….

      Report Post »  
    • fldammy
      Posted on May 14, 2012 at 12:42pm

      If you think it’s bad now, just wait till there is a oil disruption in the middle east. Say Iran gets attacked. Then you will see things go flush as oil pricing spirals out of control.

      Report Post » fldammy  
    • AmericanFightingMan1
      Posted on May 14, 2012 at 1:24pm

      After WWII, the globalists created the General Agreement on Tariffs and Trade (GATT) to merge all the world’s big economies. The GATT was based on western societies remaining as they were, but the globalists did not see the demographic shift that would undermine the economies. Western society aborted its future generations, allowed the marxists to infest the schools and indoctrinate our youth, turning us away from the recipe for success we had in the past.

      In order to keep the economies chugging along, Europe and the US imported foreign labor, with the unintended consequence of cultural change away from a first world economy to a third world economy. The banking systems planned on first world, but in a third world context, it all falls apart. Why? These economies only function when the members of society produce more than they take, creating an economic surplus. Instead, we have an economic deficit, and we are broke.

      The European Union was based on the GATT. NAFTA is based on the GATT. They will fail. Economic disorder will rule. The only path to salvation is by those peopel who have built strong families and communities. Those who rely on “the system” will lose out. Prepare for chaos; it is coming. No one knows when it will hit. Just prep as best you can. That is the wise man’s focus.

      Report Post » AmericanFightingMan1  
    • TH30PH1LUS
      Posted on May 14, 2012 at 1:28pm

      Nigel Farage puts it so elequently http://www.youtube.com/watch?v=hJ6_Ey_MJV4

      Report Post » TH30PH1LUS  
    • judymac10
      Posted on May 14, 2012 at 3:04pm

      Save all your jfk silver dollars might come in handy.

      Report Post »  
    • ragsmann77
      Posted on May 14, 2012 at 3:15pm

      JNOBFAN: You don’t need to go to London/Paris just look at the OWS, hmmm!!!

      Report Post »  
    • jonnydoe
      Posted on May 14, 2012 at 5:30pm

      And they will collapse by enacting the same economic policies that Krugman is endorsing for America.

      Report Post » jonnydoe  
    • A Doctors Labor Is Not My Right
      Posted on May 14, 2012 at 9:08pm

      This wouldn’t lead to the bond market crash that Peter Schiff has been predicting, would it? Hmmm.

      See here.

      Peter Schiff: Ben Bernanke is Public Enemy No. 1
      http://www.youtube.com/watch?v=0LC1RIljtp8

      Report Post »  
    • StevenNarbonne
      Posted on May 15, 2012 at 6:55pm

      1whoquestions, you are right “on the money.” (lol softly). The question is not, nor has it ever been, “if” but “when”. At the moment a country or empire creats fiat currency, it begins its own demise. The same goes for gas. It is going to run out sooner or later so go ahead and use it up. The sooner we get back to reality and horses if needed the better. Our children and grandchildren ect. are going to curse us as the worse generation ever so what does it matter if we add “no gas today” to the list of charges. Don’t forget the nuclear waste we are so generously leaving our descendants… that will pollute for atleast 20,000 more years. Oh yes, we will be long remembered. As a curse from God.

      Report Post »  
  • daxbrady
    Posted on May 14, 2012 at 10:03am

    Foregone conclusion that the euro will collapse… Why does it matter? Every country had their own currency before the euro.

    Report Post »  
  • Free2speakRN
    Posted on May 14, 2012 at 9:50am

    We better hurry to be more like Europe. Obama’s aim. Also, Cloward and Piven.

    Report Post »  
  • objectivetruth
    Posted on May 14, 2012 at 9:26am

    Really Just really.Yeah and I guess the sky is falling too.Sorry I’m just about sick to death of speculation of what might happen.Its a given that this could and probaly should happen.When you play the wrong cards and end up to interdependant on other countries you are doomed to failure.This is common sense that even a grade school student could figure out.Bail them out?Not on your life.We have been propping up europe for over fifty years.They were able to get into the massive debt and socialist boondoggling mess as we bailed them out we spent to defend them exc.
    HINT
    Just like tough love with children.Its time to show them some tough love by making them stand on their own two feet.

    Report Post »  
  • matt708
    Posted on May 14, 2012 at 9:24am

    Paul did they let you out of the aslum again. get back on your meds

    Report Post »  
    • NeoFan
      Posted on May 14, 2012 at 9:38am

      Paul Krugman thinks the answer is that they need to spend much more money. That is his answer to everything.

      Report Post »  
  • Mr Sanders
    Posted on May 14, 2012 at 9:16am

    Interesting Paul….. I thouht this wouldn’t happen…. and where’s Georgie…. will Germany be the headquarters for the Euro-Nationalized Bank? Hmm?

    What will it take for our elected officials, the ones that believe IN America, to stop the legislation train, bring it to a hault, and truly deal with our debt and standing in the world? We need to re-organize our structure underneath the cover of our Constitution, and live/Govern by it! If we stopped cooking our books, make great strides to lower our debt, make hard decisions, draw lines for each generation to limit passing these problems to the next and make it difficult to do so…. wow, the US would be attractive again. We need to HAVE an Energy Policy that fits our national needs with a balance in clean coal, NatGas, Oil, methane reclaimation from garbage dumps, Solar, Wave, Chemical, Wind, and any other sources – but we keep it a level playing field; lowest Kw Hr wins! Then Lower the corporate tax rate while also lowering the capital gains tax to zero for a generation. Next, I think Nixon was right and was wrong – we need to start buying precious metals stockpiles to firm up our currency…. its what kept our currency strong [one component anyway].

    What would it take for ‘reality’ to hit home? Greece wasn’t enough… will the EU & Euro collapse be enough? was 2008? What about 1987? What about 1979? When are we/they going to get ‘real’?

    Glad you came around…. Paul.

    Report Post » Mr Sanders  
  • Individualism
    Posted on May 14, 2012 at 8:56am

    Lets have come currency competition instead of some greedy rat control our currency.

    Report Post » Individualism  
  • BlackCrow
    Posted on May 14, 2012 at 8:53am

    Keynesian Economics and fiat currencies failing Paul? How would you fix this mess? Especially when socialist tax and spend politicians are fighting with fascists.

    Silver, Gold and Guns!

    Report Post » BlackCrow  
  • Individualism
    Posted on May 14, 2012 at 8:53am

    Back to sound money? or are they going to shove global currency for the NWO.

    Report Post » Individualism  
  • GrumpyCat
    Posted on May 14, 2012 at 8:21am

    Most reasonable thing Krugman has ever said. Euro followed Krugman economic policies. Now Krugman recognizes imminent collapse.

    I think its about time Europe got it over with, collapse, and get on with a recovery. All they are doing right now is pretending that if they pretend long enough their problems will go away.

    Report Post »  
    • meeester
      Posted on May 14, 2012 at 9:33am

      I hear ya. He‘s typically so out of whack that I’m assuming he is this time also. As such it will probably be the opposite of what he says. Even if he is approximately correct this time I would attribute that to the “1 in 10 = chance” thing.

      Report Post »  
  • drivebyshooting
    Posted on May 14, 2012 at 8:15am

    If only they had a Euroso, yet, I canazi Greece leaving, Italbe alright, Spain in the ass Germany will force their hand.

    Report Post » drivebyshooting  
  • 4xeverything
    Posted on May 14, 2012 at 8:11am

    Raise your hand if food insurance is looking better with each passing day.

    Report Post » 4xeverything  
  • Ron Staiger
    Posted on May 14, 2012 at 8:05am

    Good riddance to the Euro. Let each megalstupid socialist state be responsible for their own irresponsibility while each capitalist state reaps the rewards of a Euro-free Europe!

    Report Post »  
  • Blazebanned
    Posted on May 14, 2012 at 7:51am

    The euro was a failure from day one,and people and european economys are just now realizing that?

    Report Post »  
    • BreeZee
      Posted on May 14, 2012 at 8:03am

      All I heard from the left was krugman this and krugman that, so I read his books and read his article and watched him on TV, his guy is a blooming “IDIOT”! I don’t care what prize he won, come on! barry won a peace prize then proceeded to burn down the world.

      these ppl that believe in Keynesian economics are socialist/marxist for sure.

      Report Post »  
  • gpk
    Posted on May 14, 2012 at 7:49am

    No need to worry Paul. Our pos potus will print a few trillion dollars and presto problem solved.

    Report Post »  
  • doomytram
    Posted on May 14, 2012 at 7:47am

    Remember this is this the ridiculous Paul Krugman, the Princeton Academic looney leftist. We have have been saying the same thing about the EU for years. The academic has been writing about how insane the conservative right are and how amazing it would have been if we spent more on big government, unemployment checks, and waste, fraud and abuse.

    This Curmudgeon Krugman should be locked up in a straight jacket. Just like all of Obama‘s failed Princeton Unemployment and Labor Economist’s. The Obama administration has nothing but Princeton, Harvard and Yale hacks… All of them are lazy and don’t know how to roll up their sleeves.

    Report Post » doomytram  
  • thegodfather
    Posted on May 14, 2012 at 7:47am

    The laughable bearded dwarf, keeps telling US, to spend more… faster…but warns us about economic collapse in Europe for doing the exact same thing.

    Polish your Nobel some more Paulie….

    Report Post » thegodfather  
    • doomytram
      Posted on May 14, 2012 at 8:06am

      Maybe Time will make Krugman co-man of the year with the First Gay President next year for his amazing prediction and Obama doing nothing about Gay marriage. Obama’s the Protester beat him out this year, but he created OWS. Time = Dying Liberal Rag

      Report Post » doomytram  
  • Neesey
    Posted on May 14, 2012 at 7:46am

    Paul Krugman is an idiot. Beck has been saying this for 4 years and no one wanted to listen…are you kidding me? And Monty from Ace of Spades with his daily doom columns gave up the acronym PIGS…Portugal, Ireland, Greece, Spain…how many are left standing, Krugman? And, NOW he pretends to have an effing clue? France is gone, now Germany. Say hello to major inflation. We propped up the Euro and now they are going to print like there’s Weimar for tomorrow….Paul Krugmand and his followers are idiots!

    Report Post »  
    • Mutiny
      Posted on May 14, 2012 at 8:55am

      Beck has been saying that. Yet he is backing a guy that has been on tv saying he has done a good job. I dont understand Beck anymore. To bankrupt our country over the fear that a country might get a weapon and attack Israel is just stunning.

      Talk about the lesser of two evils. One side you have Israel MAYBE being attacked and destroyed. On the other you have for certain our countries economic destruction. What will happen if the only country for good in this world collapses? What will happen to Israel if we fall?

      Some of you people need to really wake up.

      Report Post » Mutiny  
  • EP46
    Posted on May 14, 2012 at 7:37am

    I seem to remember a couple of years ago Glenn discussed this …MAD…Mutually Assured Destruction with world banking……..glad to see it is now being talked about…too late as usual.

    Report Post »  
  • welloddyfriggindah
    Posted on May 14, 2012 at 7:33am

    Paul, Paul…and the liberal left media will oogle at your wisdom as you parrot what so many of us have been anticipating for what is now years!

    Report Post » welloddyfriggindah  
  • soybomb315
    Posted on May 14, 2012 at 7:29am

    We got to know how Romney/Obama are going to react to this thing. Why isnt anyone asking questions? My feeling is that both of them would bow to the globalist bankers and subsidize/bailout europe.

    I hope we end up with a guy that will abide by the constitution.

    Report Post » soybomb315  
    • EP46
      Posted on May 14, 2012 at 7:42am

      We have to talk about gay marriage …..talk about Julia….talk about a made up bullying story….we can’t talk about world economic collapse …or the fact that California is $16 billion in debt and ready to collapse…. we were told ….and shown on the black board….every bit of this by Glenn a couple of years ago…but we were laughed at.

      Report Post »  
  • conservativejon
    Posted on May 14, 2012 at 7:22am

    hey wait isn’t the euro still worth more than the dollar?

    Report Post »  
    • chicago76
      Posted on May 14, 2012 at 3:55pm

      We are propping up the Euro by buying up Euros thru the bond market. The Fed secretly has been buying Euro bonds for years. The dollar and Euro are so intertwined now that if one goes down, they both do.

      Report Post »  
  • Obama_Sham
    Posted on May 14, 2012 at 7:16am

    Hey Paul… I thought everyone could spend their way to prosperity?!? Weren’t you backing Barry with his prosperity spending plan a few years ago?!? I think you should straighten the EU out… Tell them to just keep spending more and more money and eventually they will be prosperous…

    Report Post » Obama_Sham  
    • GayDem4Beck
      Posted on May 14, 2012 at 7:31am

      Guess Beck was right about something else… I can‘t keep track how many times the media on the left has been proven wrong months and years after Beck’s pointed out trends and observations.

      Report Post » GayDem4Beck  
    • lineinthesand
      Posted on May 14, 2012 at 7:45am

      Obama_Sham….you are exactly right! The way the Eurozone has been handling it‘s affairs is the poster child for Krugman’s economic philosophy!! Now that even the msm is beginning to question the sustainability of such foolishness, Paul tries to jump on the smart side of reality and claim himself grand master of a Euro analysis that is in direct conflict with his ‘Nobel’ gift. This tool is and always will be an opportunist….and nothing more than entertainment.

      Report Post »  
  • RepubliCorp
    Posted on May 14, 2012 at 7:12am

    The good news……. this might wake up America.

    Report Post » RepubliCorp  
    • pscully17
      Posted on May 14, 2012 at 7:25am

      the funny part about obama and soros advocating the collapse of the economy and the euro is, they will not benefit a dime from whats about to take place. if the whole thing collapses, whats going to happen? the people getting government ( stolen money from tax paying people) handouts, will no longer get those hand outs. They will realize the hardships that come with ebing personally responisble for themselves, and then they will become anti-govwernment, self sustaining individuals. with guns!!! so, I say, go ahead, collapse the system, if that means the end of liberalism and government dictatorship, then I say bring it on.

      Report Post »  
    • KeystoneState
      Posted on May 14, 2012 at 7:27am

      This country isn’t sleeping, its in a coma.

      Report Post » KeystoneState  
    • Mutiny
      Posted on May 14, 2012 at 8:44am

      I doubt it. I mean the one guy who has been preaching against central bank planning you and others think is crazy. Romney and Obama are both part of the global banking crap. Look at their lenders. Do you really think they are going to do anything to turn this around?

      Our foreign policy wont matter if the euro collapses and the dollar follows it. A global currency will be set up after the euro collapses. Oil will be taken off the dollar, the dollar will be worthless.

      We need to completely redo our strategy. We need to think America first or will just become part of the global government and we will give all of our freedoms as Americans away. Do you not see that?

      Report Post » Mutiny  
  • rickroland
    Posted on May 14, 2012 at 7:08am

    (Sigh) — This isn’t Nobel Laureate science, Paul. Even I figured this one out. Not only that, but Euro collapsing entirely, is and has been a possibility for quite a while now.

    In other words, Paul, all your Nobel awarded smarts aren’t worth the award you received for them.

    Report Post »  
    • 4xeverything
      Posted on May 14, 2012 at 7:20am

      Snap!!! Oh no you di’int!

      Report Post » 4xeverything  
    • biohazard23
      Posted on May 14, 2012 at 7:25am

      Oh, yes he did!

      Report Post » biohazard23  
    • soybomb315
      Posted on May 14, 2012 at 7:37am

      I think Paul Krugman finally learned a lesson or two since his public debate with Ron Paul

      Report Post » soybomb315  
    • RepubliCorp
      Posted on May 14, 2012 at 8:21am

      Ron Paul: Return to the gold standard
      Coming from a guy the is invested in gold and silver mines
      No one seems to be able to tell me what problem the (gold standard) solves. Franklin D Roosevelt, under Presidential Executive Order number 6102, confiscated all privately held Gold in the United States on April 5, 1933.

      Report Post » RepubliCorp  
    • RepubliCorp
      Posted on May 14, 2012 at 8:23am

      Oops that is invested

      Report Post » RepubliCorp  
    • Mutiny
      Posted on May 14, 2012 at 8:51am

      @republic

      What does the gold standard do?

      Well currently gold isnt a currency. If you buy or sell it you are taxed. Now, take the tax away and make it gold and silver to be used at stores. People will be getting rid of the dollar for a more stable currency. What this does is make the dollar have a true value. You buy a shotgun for 400 dollars or 10 pieces of silver. Well if the government keeps printing money the dollar value goes down, the silver value goes up. You still buy the gun for 10 pieces of silver, but now the gun costs 450 dollars.

      All it does is give the dollar a competing currency and keep the FED from just printing money like crazy.

      Report Post » Mutiny  
    • Inlightofthings
      Posted on May 14, 2012 at 12:46pm

      MUTINY:
      Name the country hoarding gold….and lead, and most any other raw material?

      Report Post »  
    • Mutiny
      Posted on May 14, 2012 at 1:40pm

      @unlightened

      China has been buying up a lot of it because they understand what our government is doing. Paper is just that, paper.

      Report Post » Mutiny  
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