patrick.net

Aside from losses of money invested over there, if the Euro was to start collapsing in value, imports/exports could swing, which could be bad.

MF Global account holders care.

John public runs the risk of waking up one day and finding their financial instution of choice bankrupt beacuse of exposure or bad debts to Europe. If the IMF ends up bankrolling more bailouts then American tax payers will get to pony up.

It all depends on how the crisis unfolds and how the debt is handled.

Who buys Europe bonds? 3-7% is nothing, a bank account in Australia pays 7% for a savings account.
A bank account In Mongolia pays 16-20% plus you get 15% appreciation of the currency.

What kind of idiot would loan money to a bankrupt country? Yes this includes the US.

TylerDurden1 says

Who buys Europe bonds? 3-7% is nothing, a bank account in Australia pays 7% for a savings account.

Australia has almost a 4% inflation rate you have to subtract out.

Plus a currency that's trending up 20% pa since the crash.

It could easily move up another 20% this year, say goodbye to your interest gains unless you want to move to Oz.

Not that there's anything wrong with moving to Oz!
I would if I could. Seems like Canada with a much better climate really.

TylerDurden1 says

Who buys Europe bonds? 3-7% is nothing, a bank account in Australia pays 7% for a savings account.
A bank account In Mongolia pays 16-20% plus you get 15% appreciation of the currency.

What kind of idiot would loan money to a bankrupt country? Yes this includes the US.

You can count on the ECB and banks in general buying bonds. Not that I think its smart, but they have to keep the game going. If your a TylerDurden fan then I'm sure you've seen that question asked on ZH.

MF Global seems to have bought europe. A lot of good it did them.

The only odd thing with Oz is the southern parts you really have to put on the sunscreen. Ozone hole sometimes is above them. Normal sunlight has some damage..without the ozone it is quite a bit worse. They've been running psa's about it for decades now.

I would say the Euro matters a bit because if it causes some of the other rates to go up. LIBOR is a interbank loaning rate. If it goes up it can prevent lending across banks or make it significantly harder.

Parts of africa are on the europe (CFA I think) so a decrease there is a bit different. It might actually help them.

A fair amount of US exports go to Europe and if they cannot sell then they have to lower their prices which might cause lower profit margins.
http://www.census.gov/foreign-trade/balance/c0003.html

If the EU itself needs a bailout eventually they'll end up asking the IMF or the World Bank and that's where it would be the rest of the world (USA mostly but also Canada) to pay for it. Japan is in a odd position because the have plenty of dollars but the strong yen is killing them.

If all countries have a currency that keeps dropping in value eventually it starts a trade war. One tactic Italy used to use was they'd devalue the lira to spur cheap exports and help in tourism..but in the long run that doesn't work as paying for anything from government becomes null and nearly void.

Problem is that the global TBTF banks were very clever in convincing real world corporations that actually produce things of value to society to switch from defined benefit pensions to 401k's and other market driven vehicles. Now, most people with fewer working years ahead than they have behind them feel compelled to support the banksters in order to protect their nest eggs. They will loose their life savings, while banksters take priority in repayment, if the TBTF banks fail and the Eurocrisis could do just that. John Public runs the risk of working till he's 80, and living on catfood while doing it, because the wages he makes at 80 won't cover his basic needs to live.

Germanys bond auction only failed because the low "negitive" interest rate and expected devaluation of the euro over 10 years. Better to hold cash the world is full of oppertunity right now, housing is really crashing fast in Australia, it took a few years to catch up to reality. I friend just sold an amazing house for $340K that was in the 600K price range two months ago. The market is flooded with foreclosures here and banks are foreclosing on anything they can to sell fast. The local banks are companining they cant raise cash from overseas right now.

DrPepper says

John public runs the risk of waking up one day and finding their financial instution of choice bankrupt beacuse of exposure or bad debts to Europe. If the IMF ends up bankrolling more bailouts then American tax payers will get to pony up.

Already happened: MF Global.

bob2356 says

TylerDurden1 says

Who buys Europe bonds? 3-7% is nothing, a bank account in Australia pays 7% for a savings account.

Australia has almost a 4% inflation rate you have to subtract out.

Yes, and Australia's economy is highly driven by commodities. If we have a slowdown elsewhere, driving commodities prices down, Australia will get killed.

TylerDurden1 says

A bank account In Mongolia pays 16-20% plus you get 15% appreciation of the currency.

Yes, and Mongolian inflation is double-digit and was 25-30% in 2008. That is high risk with a chance to get killed.

Investing in foreign currencies is not risk-free. You have to know what you're doing. That's not to say it should never be done, but it shouldn't be done casually. Anyway, I doubt you've even tried to open an account in Mongolia and are speaking merely hypothetically.

thunderlips11 says

DrPepper says

John public runs the risk of waking up one day and finding their financial instution of choice bankrupt beacuse of exposure or bad debts to Europe. If the IMF ends up bankrolling more bailouts then American tax payers will get to pony up.

Already happened: MF Global.

Yup, and over the weekend I think we heard the amount of missing money is double whats been reported. Its pretty damn sad, wake up one day and through no fault of your own your account is frozen and mabye the bankruptcy trustee will give you some money back. All the while the TBTF banks jockey for position in the front of the line ahead of customers which should be universally criticized from the politicians yet they remain silent.

corntrollio says

Investing in foreign currencies is not risk-free. You have to know what you're doing. That's not to say it should never be done, but it shouldn't be done casually. Anyway, I doubt you've even tried to open an account in Mongolia and are speaking merely hypothetically.

A number of years ago I was thinking of investing in foreign bonds.

Now if you can sink 450K into south african bonds then you can get above 3%..otherwise it is Brazil and that is pretty risky
https://www.everbank.com/personal/rates.aspx?tab=currencies

Rates are low world wide. Brazil gives a high rate...but there's some stipulations about how that works.

I think domestic muni bonds have higher rates although the maturity rate is longer.

DrPepper says

Yup, and over the weekend I think we heard the amount of missing money is double whats been reported. Its pretty damn sad, wake up one day and through no fault of your own your account is frozen and mabye the bankruptcy trustee will give you some money back. All the while the TBTF banks jockey for position in the front of the line ahead of customers which should be universally criticized from the politicians yet they remain silent.

True. More disturbing is apparently what MF Global did was legal, that is, using customer's accounts to invest in pretty much any equity class they wanted.

No doubt the mainstream media - outside a handful of business publications - will avoid making this aspect part of regular stories.

If Joe Sixpack was aware that the ultimate account holder - who is usually NOT the financial firm he choose and whose logo graces the office he visits - can speculate freely with his money, there would be a helluva crisis of confidence.

Or not, since everybody seems determined to avoid talking about bad news, bad laws, and bad policy and prefers to blame it on a few bad apples or laziness. Which itself is lazy.

mdovell says

Now if you can sink 450K into south african bonds then you can get above 3%..otherwise it is Brazil and that is pretty risky
https://www.everbank.com/personal/rates.aspx?tab=currencies
Rates are low world wide. Brazil gives a high rate...but there's some stipulations about how that works.

Well, that's just Everbank though. Those rates are a joke and won't come anywhere near beating inflation in many of those countries. If you get rates at a local bank, it'd likely be far higher than Everbank's.

For example, Everbank quotes 2% for short-term money for India, but you can apparently get 7% on a short-term CD from the SBI:

http://www.rupeetimes.com/compare/fixed_deposits/state_bank_of_india.html

I think Brazil's central bank rate is 11.5% now. I really wouldn't use Everbank as a comparison.

Well that would be a interesting argument...we tend to have some states subsidize others. Alaska has this to attract people..the states along the gulf coast also are subsidized. It would be interesting to see what would happen if say Alaska went bankrupt and what it would do simply because the energy markets.

The dollar is not on a gold standard but oil is priced in dollars.