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But the bond markets are not so constructed to be able to save the euro. That would require euro zone wide cooperation and statesmanship along the lines Yanis Varoufakis has suggested in his "Modest Proposal". But, more fundamentally, it would require the major players to accept that euro-zone economics is not a game that one country can win because pursuing such an attempt will destroy the euro in proportion to the extent the policy succeeds. A policy to make all members prosperous would be most valuable to the largest players, but accepting this is highly unlikely. Such a change would likely only come about through the deaths of the leaders of the existing policy, along the lines Thomas Kuhn has suggested.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 10th, 2011 at 10:56:04 PM EST
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The problem is that an exit from the current situation requires a mature, adult approach that takes into consideration the needs and the lives of all involved and the vast majority of leadership on offer is by raging sociopaths who care only for their own aggrandizement or frightened, superannuated children who live in terror of the sociopaths.

As the Dutch said while fighting the Spanish: "It is not necessary to have hope in order to persevere."
by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Wed Aug 10th, 2011 at 10:59:23 PM EST
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... new institutions and demolition of obsolete existing past-bound institutions, when the thinking of the people with power to do so are informed by the obsolete past-bound institutions.

I've been accused of being a Marxist, yet while Harpo's my favourite, it's Groucho I'm always quoting. Odd, that.
by BruceMcF (agila61 at netscape dot net) on Thu Aug 11th, 2011 at 11:30:29 AM EST
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One of the reasons for the US Constitutional Convention and the resulting ratification of the current Constitution was a situation similar to the one the EU is in.

Deutsche Bank, et.al., have shown they could give a rat's ass about the EU Project® simultaneously they have shown they deeply care about getting their money back, with interest.  If the euro goes ker-blewie the financial instruments denominated in euros has as much value as German bonds denominated in Reichmarks.

Skepticism is the first step on the road to truth. -- Denis Diderot

by ATinNM on Thu Aug 11th, 2011 at 01:44:35 PM EST
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If the euro goes ker-blewie the financial instruments denominated in euros has as much value as German bonds denominated in Reichmarks.

No, if the €-Mark goes boom, those instruments will have as much value as ones denominated in D-Mark, as long as you possess sufficient political connections to the German government.

Of course the rest of the Eurozone may well be a wasteland by that point, and the German economy may well find itself fresh out of customers. But the currency will be sound.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Aug 12th, 2011 at 05:16:55 AM EST
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It will depend on the nationality of the issuer. Everyone will try to pretend their obligations were issued by greek entities and are therefore in Drachmas.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Fri Aug 12th, 2011 at 07:22:21 AM EST
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Not if the way the €-Mark falls apart is by ejecting the internal deficit countries one by one. Bailouts will then be decided on a case by case basis. Which means that what matters is how on how tight your political connections are to the CDU and the Quisling wing of the SPD.

Clearly, a number of bondholders view themselves as quite secure on that count. They may end up being surprised, of course, but by then the rest of us will be too busy trying to keep our heads above water to have much fun pointing and laughing.

- Jake

Austerity can only be implemented in the shadow of a concentration camp.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Fri Aug 12th, 2011 at 09:35:43 AM EST
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Overall, the history of a currency collapse is the holders of bonds, etc., in that currency can suck eggs.  There's no global agency to enforce a legal decision on a national government.  Offsetting that, ss you rightly say. who, what, and how much of these instruments are backed in the new currency depends on the Decision Making of the elites in the defaulting country and the connections (being "one of the kewl kidz") the holders have.

Skepticism is the first step on the road to truth. -- Denis Diderot
by ATinNM on Fri Aug 12th, 2011 at 12:39:27 PM EST
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