European Debt Crisis

The European debt crisis has begun to spread from weaker countries to stronger ones and the borrowing cost across the Continent rose as investors are disappointed and confused.In next few weeks,the bond investor will leave the Europe's weakest economies-as a result, the soaring bond yields could lead the euro zone to implode.The last thing will happen as one country after another will default on Himalaya like debt. So,what are the solution to these problem ?In my view ,there should be a separate currency for Northern European Countries and Southern European Countries.Greece,Ireland and some countries with Himalaya like debt should leave the Euro.As a result,devaluation will lead people transfer deposits to other Euro-zone banks,leading to catastrophic bank runs.If Ireland,Greece and other debted countries stay with euro,bank runs and financial crisis will happen anyway.Another solution to these problem is a 'Brady plan'(after Nicholas F.Brady,who helped Mexico and other Latin American Countries to restructure debt.)But the problem with the so called 'Brady plan' is that the bond holder have to take 30-35 percent loss in exchange for new,longer dated debt.So,in my view,leaving the common currency is the only solution to these problem.

Currency War

The U.S. pressure on China to revalue its currency have repeatedly failed at doing anything positive about Chinese currency manipulation.The yuan has gained 0.8% in the last week,since a two- year peg ended in June to a little more than 1%,though not a sign of greater flexibility in its exchange rate.An undervalued yuan makes it difficult for shaky U.S. & European countries.If China revalue the yuan,it would be a catastrophe for its booming economy.The same thing happened in 1985,the Plaza Accord,where Japan agreed to let its yen currency appreciate against the dollar,which was a catastrophe for Japan.A bad decision for which Japan is still paying the price.The U.S. trade deficit with China reached $119 billion in the first half of the 2010,which is going to exceed last year's total $227 billion to $235 billion or even more than $235 billion. Meanwhile,Japan started to make situation more complex by sudden intervention of its currency.The Japanese Prime Minister Mr Naoto Kan ,in some extent,wants to spoil the U.S-China currency diplomacy.Now China ,certainly going to ask,why don't you ask Tokyo first? Of course,yen isn't representing global imbalances the way the yuan does.In next few months,policy makers from Seol,Taipei,Malaysia,Thailand may step into limit volatility in their currencies,thanks to Mr kan's short term thinking. So,what are the solution for this complex situation?In my opinion,the U.S. should impose a strict tariff that offset the subsidy.Of course,by doing so,china will retaliate by dumping the U.S. holding and will stop buying U.S. bonds anymore,as a result,the dollar would fall.But in long term,U.S. will benefit because this will make the export more competitive.

Double-dip Recession

The U.S. economy is growing at a 1.6%,not exactly a double-dip recession,but the economy will actually enter a double-dip recession with shrinking GDP by December 2010.By year end,the unemployment rate will be double digit.Tim Geithner,the Treasury secretary,says that,"we are on the road to recovery."Either he (Timothy Geithner) doesn't understand Economics well or he is a such a liar,misguiding people of United States of America. The 2.34% point gap between yields on two-year and 10 year Treasuries is a matter of concern.If my prediction goes well,the 10 year yields will rise to 3.4% by year end.The yield on the benchmark 3.5% note due on May 2020 rose 3 basis points on first week on July.The Bond market is also not doing well.Two year note yields came down to a record low of 0.59% on June 30,while Ten year yields fell to 13 basis points to 2.98%.The three month London interbank rate or LIBOR,was 0.531% while two year swap spreads to 34.81 basis point.What about the corporate Yields? It ended 2.08% points between company bonds and government debt,according to British Bankers' Association.There is a huge gap between 10- and 30-year Treasury Yields,a clear indication that where the economy is heading. So,what are the solution to these problem?First,the fed should buy a massive amount of long term and private debt.It is too late now,but still it can be a helpful.Secondly,Mr. Ben Bernanke must keep short term interest low as soon as possible.I am 100% sure that these measure would work well.The U.S. is too scared of about confronting china over its currency manipulation,as china holds substantial amount of U.S. government securities.But this is damaging U.S. economy indirectly.So,my prayer to Ben Bernanke is,please take urgent steps or be ready to face the recession.

Source-Bloomberg,wsj.

Dawn Spacecraft

The ion-propelled Dawn spacecraft has broken the record for velocity change produced by a spacecraft's engines,breaking the previous record by Deep Space 1's. On June 5,the Dawn Space craft's acceleration go beyond 4.3Km per second,or 15,360Km per hour. Dawn 's 4.9 -billion km odyssey includes exploration of asteroid Vesta and the dwarf planet Ceres. The prospect of an ion-propulsion technology is very bright,which is less powerful than Chemical Rocket Engines but are very efficient.They can last for years before running out of fuel.

Final solution

The austerity measure taken up by Greece will not help the country in the long run. Greece is going to default ,like Argentina.In the next few months, we are going to witness the migration of young Greeks to western Europe and other countries. The speculators are not sure whether Greecewill default or not, but at the same time they are little optimistic about Greece’s austerity measure. These massive trillion dollar hair cut could be a major catastrophe to the banking industry, particularly to Germany, in next couple of months.

The austerity measure will cause the economic activity to shrink and as a result, there will be an unemployment for a long time.The down slides in Gross domestic product(GDP) will make it an impossible task to service the debt,causing the economy and probably,the Euro to collapse.

What I suggest is to divide the common currency, the Euro into Northern European countries and the Southern European countries.There should be a separate currency for Northern European countries and Southern European countries.This will solve all the problem and the region will get out of the crisis.

Debt crisis in Greece-part 2

So,where is Greece heading? The recent 1000 point crash in Dow was a clear message that how globalization has made the world so interconnected.European leaders are not willing to acknowledge that Greece’s debt crisis will extent to Spain,Portugal and other Southern European countries.They are still optimistic that Greece’s association with the common currency will be a good for Europe.

Is it possible for Greece to stay with Euro? No,not at all.Greece should leave the euro
zone as soon as possible.If George Papandreou don’t want to leave the Euro,he will have to convince his country to accept the wage cuts/other fiscal measure.Secondly,he should request the ECB to buy Greece’s government debt.Finally,he should ask Germany and other rich nation who can flaunt their tax payer’s hard earned money to Greece.But seeing the streets of Athens on the t.v. news channel, I doubt that whether this alternatives would be possible.
So,Greece had no choice other than to leave Euro. That will solve all the problem.The Economic recovery,which is only possible if Greece leave the Euro zone and devalue its own currency.The economic recovery will generate higher revenues,low spending and massive job creation.By this way,Greece can increase its export competitiveness.

What will happen if Greece stay with Euro? There will be mass protest,poverty,looting and rioting,rise of criminal activity and finally,a default followed by a civil war.People will have no choice but to throw out Mr.George Papandreou out of the country same way like Krgystan people throw out their prime minister.

Debt crisis in Greece

The 45 billion Euro bailout by IMF to Greece should be make entry to Guinness Book of World Record.After a month long fighting between France and Germany over Greece issue, the two country took interest on providing 15 billion Euro each to Greece.So,Greece must do their best to maintain financial credibility,avoiding IMF imposed interference in future.


The task for the Greek government is to keep public spending moderate,normalize budget deficit and keep an eye on tax fraud.

Greece is a part of the Euro zone for 10 years.Euro zone is not a club that any country will join and leave.But Greece should leave Euro zone as soon as possible.Leving Euro will will be catastrophy to it’s Bank.Greece’s attachment with Euro will lead to massive default which will eventually a major catastropy to banks and the country.Wheither to leave Euro or not, is going to be a decision of the century.

Now,the question is,Wheither this would lead to ultimate crisis for Euro?Should private banks be involved in rescue package?
Till now,Euro zone is little cautious towards Greece.A weak Euro is good for Germany.Let’s hope for the best.