Dr. Malmgren: Germany to exit the euro

Dr. Malmgren is reported to have said "The Germans announced they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up."


Dr. Malmgren's predictions

News to expect in the coming days and weeks:

1) Greece defaults

2) Germany protects German banks but other countries cannot do the same thus quickly provoking multiple sovereign defaults and or bank failures, all of which may easily lead to a payments crisis in the global banking system. Derivatives are particularly at risk in terms of operation and execution.

3) The Euro falls in value especially against the US dollar

4) The Germans announce they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up.

5) The Euro falls even more on any news that Germany is withdrawing from the Euro.

6) Legal wrangling begins as to the legality of Germany’s decision. Resolution takes years.

7) Germany insists that the Euro continues to exist even they do not use it any longer. They emphasize that European unification will continue and suggest new legal instruments to strengthen European Unification including new EU Treaties.

The markets are focused on the imminent default by Greece. But, this is not the most important issue now. The historic development the markets have not priced in as that Germany is preparing to exit the Euro. The markets are very likely to have to contend with the re-introduction of Deutsche Marks in the near future. This is bound to mean a collapse in the value of the Euro for those countries that will remain in it (devaluation for the rest of Europe). This step may seem unthinkable but, I believe that the German government is telling us in multiple ways that there is no other solution from their point of view. It is also why you will hear various policymakers at the G7 meeting his weekend echo Christine Lagard’s comment that the world economy is entering a "dangerous new phase." This was certainly the atmosphere at Jackson Hole where policymakers openly talked about entering a period of history where we would face challenges beyond the scope of anything we have seen in our careers.

http://www.pippamalmgren.com/77.html


More and more Germans want to go back to the Deutsche mark and who can blame them. Dr. Malmgren isn't concerned so much that Greece will default but that Germany will exit the euro.


"The Vice Chancellor of Germany, Philip Roesler[ii], gave a speech on September 11th in which he said there will be no more bailouts and any German politician who approves a single Euro for the debt problem of another European nation will not survive in office. This is consistent with a German poll over the weekend that shows more than 70% of Germans oppose any more transfer of German wealth to nations with debt problems."


I see no reason why Germany should continue this charade of being the breadbasket to basket case economies. Question is what is the likely scenario if Germany departs. What will be the effect on other EU nations if Germany goes back to its old currency? Other than Greece, what would happen to economies such as Italy, portugal, Ireland and the UK for example?


*Dr. Malgrem's bio: Dr. Philippa Malmgren is the President and founder of Principalis Asset Management, a financial firm based in London. In short, she helps fund managers better understand how politics, policy and geopolitics will impact the financial markets. Investors use her insights to manage their portfolios more profitably. Her clients include many investment banks, fund managers and hedge funds as well as Sovereign Wealth Funds, pension funds and corporations. She founded the Canonbury Symposia, which brings together high level experts on strategic security, defense and intelligence matters to meet with experts from the financial markets.

 

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Then the Deutche Mark raises in value and Germans can't compete due to a "strong" currency just as was happening the Swiss Frank (they just blew their currency up a few weeks ago).

It seems to me we have a f*cked up financial system.

 

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Have any notion of how it will affect the US economy?

 

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So instead of trying to help resolve a problem Germany wants to just bail out and let the rest sink or swim. This isn't going to help Germany to much in the eyes of other nations no matter if it does help Germany gain better financial strength but lose the relationship with those around it. This avoidance of trying to help out will only create more problems and have negative affects for many.

 

Exactly. It's just like saying, "I want to be a team player and reap the benefits, sign me up."

But, when instead of benefits, something has a negative impact on me, to heck with the rest of the team!

 

Why shouldn't they? Would you have stuck around and pay for all of Mexico's debts if all of a sudden your country teamed you up with canada and mexico? You people freak out if you even have to extend the minimum human rights on a mexican in the states and yet you rush in to say Germany shouldn't have any sense of self-interest. They were singular sovereign nations way before there was a euro, everyone will adjust. Its what it will do to your economy (greek default) you should worry about.

 

I haven't seen about this in any German mass media, and as I google it, so far I've only found this information in blogs. It wasn't the first time that some financial analysts or experts predicted that Germany will go back to Euro (I recalled one such discussion last year on a German TV), but up to now Euro still prevails. Anyway, with the Euro crisis, it is probably possible.

Also, the link in the OP says: News to expect in the coming days and weeks. Such is a prediction.

 

Because its a prediction. Go to the bloody link or better yet read the top of the OP where it says 'prediction'

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If there is to be a breakup of the common currency (which is surely inevitable) then it can be done less chaotically if the "breakee" is going to see its new currency RISE against the euro rather than FALL. (For one thing, it would not indicate that the breakee was going to default on its debts.) To this extent, Germany would be helping to end the present paralysis by bringing back a currency of its own (presumably called the Mark again).

This would be tricky politically -- which is why it hasn't happened. However, in Finland feeling against membership of the common currency is far stronger even than in Germany. For many Finns, that feeling could be described as positively savage! The anti-European True Finn party, previously considered a tiny fringe outfit, polled almost a fifth of the total vote in this year's elections (up from 4%) -- and they want out of Europe altogether! It is not politically unimaginable for Finland to return to its own Finnish Mark.

ONCE THAT HAPPENED, once the first domino had fallen, the political landscape would shift and a German exit would become an odds-on possibility.

 

No, it's not like that. First of all, let me say: though living in Germany, I am not a German, just a foreign student, and I don't study business related things, but after living here for about 5 years, I can tell you what happened (from my basic understanding).

Unlike its European neighbors, Germany is very conservative. When it comes to making debt, the German principle is, you can make a debt if it is used for investment (like creating infrastructure which can catalyze the economic growth), and not for spending/consumption. Some German neighbours (like Greece, Italy, and Portugal), were/are very careless in making debt and speculation. Mrs. Merkel once said this as a "cowboy way", she said (to Greece once) that if you continue to do your "cowboy way", I'll let you go bankrupt.

As I understand also, after the first bailout of Greece last year (in May or June, don't exactly remember), Germany expecting its neighbors who are expecting help to agree to some arrangement, i.e. some austerity measures, such as: you must reduce the salary of civil servants 5-10% (for Italy, and a bit higher for Greece), you must agree not to recruit any new civil servants until 2013, you must change some highway into tolls (applying tariffs), etc. Actually I can't remember exactly if this was suggested by Germany or by Euro zone leaders in general, but I supposed this was what Germany wanted as well, and it has a very strong voice in the zone. All those austerity measures actually aren't that bad if you compare with England, for example, which, as far as I remember, planned to cut some 330,000 civil servants.

As it is now, let see for example here, after more than a year of bailout, Athens seem could not meet the deficit cutting plan. This is why Eurozone leaders decide to delay the next installment of the bailout cash.

http://www.bbc.co.uk/news/business-15161809
4 October 2011 Last updated at 17:03 GMT

Eurozone delays decision on next Greece payout


Eurozone finance ministers have delayed making a decision on giving Greece its next instalment of bailout cash, sending European shares down sharply.

It came after Greece said it would not meet this year's deficit cutting plan.

A meeting set for 13 October, when finance ministers had been expected to sign off the next Greek loan, has now been cancelled, said BBC Europe correspondent Chris Morris.
​

 

People who read very fast (e.g. Cosmic, as I understood from his post above), doesn't seem to distinguish it (prediction) from fact. This is why I tried to emphasize that this was only a prediction. The title of this thread also doesn't say if it is sure or it's just a prediction. To be honest, to me it looks like the headlines in "evening newspapers" which people leave in train (kinda provocative headlines, but after you read carefully the content, it isn't as what it says in the title).

I must add, though, since the lady who wrote the analysis is an ex of Deutsche Bank leader, she probably has a good insight.



Edit: btw, Lucy, you started your opening post with: "Dr. Malmgren is reported to have said "The Germans announced they are re-introducing the Deutschmark. They have already ordered the new currency and asked that the printers hurry up."". I'd be very interested to find the original source of that sentence, since I couldn't find any in German online news yet.

 

Its because she did say that. But thank you for assuming that you are the only member here who can read correctly. I'm sure they're grateful for your special insight, helping clarify things for the toddlers who are too stupid to read a thread correctly because they don't have Kira's super reading skills.

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I answered your post with what I thought would happen if Germany actually implemented this change. I guess I'll state that next time, sorry I didn't make myself clear.

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I disagree, I think its much more likely that the Germans would leave before the Finns. 70% of Germans want out and Germany is paying the bailout money. Of course its easier for the Finns from the standpoint that there is far less for the EU to lose, Germany is a bigger player a kind of glue so to speak. Yet still I think they will get rid of Merkel and then go back to their old currency. But again there are other variables, like when or if Greece defaults, Greece defaulting would change everything for everyone.

 

You may be right, Lucy . . . but bear in mind that when you wish to bring down a wall it is far easier to begin by dislodging a small stone than by tackling the biggest.

 

Hmmm...you make a good point. And no one would see it coming either! Its always the things we aren't paying much attention to that becomes a game changer.

 

As far as I understand, the reason the Germans don't like the idea of Germany bailing out Greece (which actually made the popularity of Mrs. Merkel decreases) is simply because there is no point why should people's tax money is used to bailout other country. Not because people afraid that if Greece default, the Euro will fall worse, and then the German economy would be dragged down with the rest of Euro Economic Zone. In fact, which newspapers that scream most about the fears of the Germans about the fall of Euro? Not German newspapers (I read from time to time 3 biggest German newspapers, they rarely express the fear of the effect of the falls of the Euro on German economy), I think it's the English and American papers like the Economist and the New York Times which express this from time to time (at least that what I got in Facebook newsfeed in which I also subscribed to those online newspapers).

The Germans don't fear about the fall of the Euro. The fall of Greece won't affect them much either. The reason is pretty simple. First of all, Germany is an export oriented country, yes? It's the 2nd biggest exporter in the world (after China). Its export has a very strong tradition, very diversified in terms of type and destination countries. With the crisis in the USA, Germany already diverts its export to countries which has more liquidity like China.

In my humble opinion, when the Euro falls, it means the product becomes cheaper (for the importers), which in turn increase the export's volume. Say, if usually with 2000 Euro people can buy 1 German laptop (1000 Euro) and 1 US laptop (1000 Euro), and then when the Euro decreases, with 2000 Euro the buyer can now get 2 German laptops (each 500 Euro) and 1 US laptop (still 1000 Euro). If the buyer needs just 2 laptops, it will buy from Germany, because with 2000 Euro, they can now buy 2 (German) laptops and save the other 1000 Euro. This means, if usually people import "1 laptop" from Germany and 1 laptop from the US, when the Euro falls they will then import the "2 laptops" just from Germany (so the US loses an amount of export). Admittedly, the amount that the German received is still 1000 Euro, but this means the production volume is increasing, which means more employment. I can safely say this because with this "Euro crisis", just about 2 months ago the labor minister said that the unemployment level in Germany is at the lowest since the world war 2! This condition of course don't apply to the surrounding neighbors like Greece etc which are not export oriented.

In addition to that, as I understand, German banks (except Deutsche Bank, if I am not mistaken) have all healthy assets! There was this survey sometimes ago about the ratings of the bank in Germany, and they are all healthy, with a high liquidity. They don't need support or any bailout in the near future. Now please look at Greece. There are many many American (and UK) banks there, besides other assets belong to the US and the UK. Which is why it is the US that wanting so much for the Euro zone to bailout Greece (to save their assets).

I got most of my source from German newspapers in German languages, but I am sure people like you guys or Billy T can check if I am on the right track or not. I sure must learn a lot as this isn't even my usual field of interest.

 

I made a mistake in the previous post, the unemployment rate is the lowest *not since WW2*, but since the reunification (of east & west Germany):

http://www.reuters.com/article/2011/...7KT18H20110929
Thu Sep 29, 2011 8:30am EDT

UPDATE 2-German unemployment falls to new low in Sept

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http://www.bloomberg.com/news/2011-...in-east-as-exports-to-china-eclipse-u-s-.html
By Jeff Black - Apr 7, 2011

Germany’s Future Rising in East as Exports to China Eclipse U.S.


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http://connect.in.com/state-quarter...bac64d22774be889595127ac66b3a93781a25cb4.html
2011-08-07

German banks healthy amid debt crisis -Soffin head ​

 

Exactly! And that's what I think some americans don't understand, its not like other states bailing out california (and they don't even like the idea of doing that). These are separate nations with separate histories, different cultures and languages. The idea of linking everyone together under the pretense of unity is a pretense. I don't blame the germans for not wanting to bear the brunt of fixing someone else's fiscal errors. At the same time I wouldn't blame Greece from shirking off the shackle of their debt and the euro.

 

Why is it that only Germany must bail out Greece? Why aren't the other EU countries helping out and putting in something as well? :shrug: