RIP The Euro
Robert Peston mulls over the Cyprus ‘bailout’ in The rescue of Cyprus won’t feel like one to its people.
The bottom line is that the Euros in Cyprus are no longer ‘real’ Euros, meaning that Cyprus has a separate currency that they don’t control. No one is going to bank in Cyprus, and large depositors are probably going to move their money out of Spain and Italy as well.
Cyprus would have been better off exiting the Euro on their own terms, than what was imposed on them. There isn’t going to be any money available for the normal loans that an economy needs to function, so Cyprus is going to go downhill rapidly.
This means that Russia is going to get a great deal on developing Cyprus’s natural gas deposits, and Europe is going to get screwed.
4 comments
There’s also a good discussion on the “Cyprus euro no longer a real euro” topic over at Mark Thoma’s site. Like I said, this nonsense has been all over the econo-blogosphere, and almost to a man they’re all appalled. Even the neoliberal / Austrian types see it as nothing more than a blatant statist power grab and disaster in the making.
The gnomes in Frankfurt felt that the money in Cyprus belonged in their banks, and intended to do everything they could to make that happen. Working through Deutsche Bank and Chancellor Merkel they have eliminated Cyprus as a financial center in Europe, but the blast wave from their method was much bigger than they planned for, and will cause considerable collateral damage.
Today the Euro is at $1.29 so it will be necessary to watch the trend.
The way the global insanity is going, the only viable economies left will be Dubai and Aus! And I’m damned if I know how we are (apparently) doing so well, seemingly inspite of a massively incompetent Gov’s at both State & Fed levels! *SHRUG*
I knew something was wrong a couple weeks ago when I had to buy a couple things in Euros, and noticed the exchange rate was favorable to the AU$ for a change! Usually, the EU was quite a bit higher than the USD. Oh well… lucky me.
I wouldn’t bet on Dubai if the Israelis bomb Iran.
Australia is a much more balanced economy than most of the world. You export raw materials, but also have manufacturing and a domestic market that is a decent size. Governments that don’t do a lot can often be a blessing, and your political parties are actually different, as opposed to the two subsidiaries of Wall Street that we have. You have a lot more churn than the US has, especially when it comes to the leadership of parties. The bad ideas don’t get fossilized into ‘conventional wisdom’ as your media is still combative.
I hate to think what will happen if the Euro drops to parity with the US dollar.