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RADIO SHALOM 1650AM
MONEY AND BUSINESS SHOW
MONEY MONEY AND THE EUROZONE
The challenge for Europe , is it to keep Italy and Spain from ending up like Greece and Portugal?
Guest speaker live from Poland ;Patrick L Young
Since the fall of 2009, the European Union has been struggling with a slow-moving but unshakable crisis over the enormous debts faced by its weakest economies, such as Greece and Portugal, or those most battered by the global recession, like Ireland.
The debt crisis first surfaced in Greece in October 2009, when the newly elected Socialist government of Prime Minister George A. Papandreou announced that his predecessor had disguised the size of the country’s ballooning deficit.
But its roots of the crisis go back further, beginning with a strong euro and the rock-bottom interest rates that prevailed for much of the previous decade. Greece took advantage of this easy money to drive up borrowing by the country’s consumers and its government, which built up $400 billion in debt and In Spain and Ireland, government spending was kept under control, but easy money helped turn real-estate booms there into bubbles.
Much like the North American housing crisis, the European financial mess is unfolding in a foreign language. It is the lingua franca of financial obscurity — “sovereign credit spreads” "derivative swaps" sovereign risk and other terms that most people don’t need, or care, to know.
Yet the bottom line is simple: Europe’s problems are a lot like the Americans , only worse. Like Wall Street, Germany is where the money is. Italy, like California, has let bad governance squander great natural resources. Greece is like a much older version of
I personaly feel that Fraud caused the Great Depression, and the current crisis as well. But – instead of solving the problem – fraud has been covered up in Europe, just like in the U.S. Indeed, one of the world’s top experts on fraud says that we’ve had the greatest financial crime in the history of the world, and that none of the main players have been prosecuted.
Today on our show live from Poland is Patrick Young best selling author of the capital revolution, a frequent financial speaker around world and a world class reporter on major news network , Patrick young will answer some of the most pressing questions in a language everyone can comprehend. Though the word for “Lehman” in virtually any language is still “Lehman.”
My name is Samuel Ezerzer, your host to the Money & Business show on Radio Shalom, CJRS 1650 AM. Thank you for tuning in live with our Business studios headquarters in Montreal, the financial capital and the home to the greatest hockey team, the Montreal Canadians. We have another great show for you today and as always, you can call if you have any questions, comments, or criticisms on today's topic. Please call us direct at 514 738 4100 ext 200 or email me at email@example.com if you have any inquiries. You can also visit our website at www.radio-shalom.ca – all our shows are archived there.
Todays discussion on the money and business show will centre on" The challenge for Europe , is it to keep Italy and Spain from ending up like Greece and Portugal?
Patrick L Young is the best-selling author of the "Capital Market Revoluton!" books as well as a former exchange CEO. A fairly intrepid Irish investor he lives between Monaco and Poland. Originally a derivatives trader, he is an expert in the workings of stock exchanges and advises investors in financial markets infrastructure the world over. Patrick has a broad portfolio of investments and activities both directly in the world of finance and in emerging markets, particular the "New Europe."
|THE GATHERING STORM|
Patrick remains a sought after speaker at conferences throughout the world, having keynoted for audiences of up to 1000 people in countries as diverse as Argentina, Australia, Canada, France, Germany, Hong Kong, ,Monaco, Russia, Singapore, South Africa, Switzerland, UK and USA. He has also taught all manner of aspects of financial markets for exchanges such as LIFFE as well as on public courses and within many financial institutions. He has guest lectured at various schools and business schools including Insead and the International University of Monaco.
Patrick: Really, the EU's problems are all remarkably simple - if you keep spending more than your income you will end up with a big debt problem. Overall, EU governments are used to being the largest economic actors in their economies, with many, such as France being a whopping 55% of all economic activity, squeezing out the private sector and stunting entrepreneurship. Many EU nations, such as Greece, approached the Euro with the restraint of Homer Simpson at an "all you can eat buffet"
they gorged on debt for a decade thanks to low Euro interest rates set to help the German economy which were totally unsuited to several states such as Ireland and Spain where enormous property booms took place. In Greece, the government borrowing went to a client state until debt had finally spiralled out of control...
----On Dec. 21, European banks borrowed more than $600 billion from the European Central Bank at the extraordinarily easy terms of 1 percent interest for a three-year loan. Analysts suggested that the Bank had hit upon an indirect method of stopping the market from spiraling, threatening Italy, Spain and other governments, by flooding banks with money they could use to lock in guaranteed profits by buying sovereign debt , is this the right method by flooding banks with cheap money?
Patrick : In small doses, central bankers do remarkable things to keep the wheels of the economy moving but this truly strikes me as both exceptional activity and exceptionally dangerous. The LTRO process as it is known has seen the European Central Bank accept government bonds which have less redemption value than some Groupon coupons.
It is known affectionately as "cash for trash" in the financial markets. I find this epithet difficult to view optimistically.
- The United States is no lightweight when it comes to spending, either, of course. It just happens to be in a slightly more advantageous position at this point for a few different reasons, including:
The dollar is still the world’s official reserve currency.
The USA has larger percentage of workers to draw revenue (i.e. taxes) from.
The U.S. government only has to fight with itself in order to get anything done whereas, in the Eurozone’s case, there are multiple governments involved, complete with multiple interests and agendas
will the European debt crisis spread to the United states?
Patrick: Well for one thing the USA is a single language, essentially homogeneous political and economic unit. The Eurozone is a mish mash of conflicting legal and political systems with no inherent political unity. Moreover, the USA is the world's most successful capitalist economy full stop. That remarkable success story makes the US the economic equivalent of the Montreal Canadiens when it comes to an unparalleled track record of success. I have great faith that the Schumpeterian creative destructive spirit that made the US a success in past times will shine through again in the future.