EU Fighting Tsunami with more
Real Estate Analysis Limited
this instance is a metaphor, and in the Chinese (Cantonese) context, it
means money. And the Europeans are printing lots of it, 750B Euros in all to
save the PIIGS, not least Greece, from being butchered.
commentators are now screaming the eventual demise of the EU (European
Union), the uselessness of having a common currency given no punitive tooth
exists to rein in the less than disciplined countries, and the possible
delisting of Greece from the Euro. The last point was raised by prominent
economist Paul Krugman.
of the final outcome, your humble author thinks, as and like a layman, this
would further flood the global economy with more money than it could chew.
This in turn means there is plenty of excess dough which, if history is any
guide, would somehow be destroyed or utilized one way or another:
= is one way to render the excess dough extinct and while such inflationary
pressures may not be applied equally worldwide or in all things, they
destroy the excess money by lowering their purchasing power. When the world
has $100, a pencil may cost $1. When it has $300, the same pencil would have
a $3 price tag. Naturally this is a much too simple (and sometimes naïve)
way to put it yet it illustrates the general point.
Asset Price Bubbling and Bursting
= is another
way to make such excess dough disappear. Before the print, there is $100 and
10 assets with each costing $10. After the print, there is $300 and still 10
assets and thus each now costs $30.
extra $200 is NOT dished out as a gift without strings attached. Instead, it
is usually distributed in the form of financing (call it a loan, bond,
mortgage etc as one likes) which needs to be repaid plus interest and with
many strings attached.
assets are way under-priced to begin with, and usually they are not, they
would generally become overpriced assets which in turn means an
unsustainable market condition.
to kill off the excess dough eventually. Now, at this point, governments and
central bankers may again print another round of money to cover the losses,
just like some idiots paying credit card A with credit card B which in turn
is paid off by credit card C°Kwell, you know, this is not going to solve the
the above is also a too simple and sometimes naïve example but it shows the
= is the least desirable way, for most at least, but then again was employed
throughout history when the world had excess dough, or where transformed,
excess productive capacity, excess goods and services, excess gadgets, or
simply excess human aspiration and energy. Wars have the double effect of
using (sometimes wasting) the excess stuff, whatever these may be, while
disrupting the normal money creation process IF played out on a big, and
your humble author means really big, scale.
anyone noticed the coincidence? When the economy is flooded with money, we
describe it as being very liquid and liquidity is also one measure of
economic (well) being. And °•water°¶ is a liquid and is also one without which
we could not have lived. In short, there is a good reason to call money
Americans fought (off? Had they?) their tsunami, literally a problematic
water event, with more water in 2008 and now it is the turn of Europeans in
would be next? And when°Kand where?
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