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Originally Posted by $5 submissions
Man, I hope there's no hyperinflation. Those old newsreels of Weimar notes being piled on to a wheelbarrow to buy a baguette are really disturbing.
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That only happens when wages adjust quickly with the rate of inflation which the strong unions in Weimar Germany made happen. If wages do not inflate with the price of goods then when things get to expensive people stop buying and that forces prices to deflate a bit. You can have serious inflation without fixing wages to the rate of inflation, but you can not have Weimar style hyperinflation.
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Originally Posted by $5 submissions
That's always the risk and the temptation. Devaluation is the easier way to get out of debt than actual production/productivity increases. Americans would do well to guard against that.
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Yeah, the problem is we can not produce our way out of our debt. Oh, and another thing propping up the dollar is the fact that somewhere around 70% of the world's debt is dollar denominated. Most of the world's oil markets also trade in petro-dollars also. All this creates more demand for the dollar that would otherwise not be there.
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Originally Posted by $5 submissions
Greece and Spain are hurting bad--both economies have a strong tourism focus. Do you see the same level of economic distress spreading to other more economically diversified Western European nations (GB, France, and Germany)?
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Greece and Spain and nearly all of Eastern Europe are heading into a very very serious depression. Ireland is probably equally fucked. The citizens of Great Britian are in for some serious hard times. The only thing keeping the Bank of England afloat is the swap lines they have with the Federal Reserve. Yes, the US tax payer is propping up Great Britian. Swedish banks are nearly all technically insolvent already because of their exposure in the Baltic States. They have been getting bailed out by their central bank for awhile now. Once the Baltic States devalue their currencies that will push Swedbank et all to the brink. Austrian banks are leveraged to the max and then some also. Even Swiss banks are getting skullfucked because of their Eastern European exposure. The stongest economy in Europe is Germany and they are going to get dragged down by everyone else in the Eurozone.
Those are the immediate problems in Europe. The long term picture is even more bleak. You have a serious declining birth rate. North Sea oil drying up. Huge social obligations coming that can not possibly be shouldered by the young generation coming into the work force. There also is not really any option to raise taxes to cover pay for all these upcoming social obligations because the tax rates in Europe are already so high.