By Fareed Zakaria, CNN
Imagine a region of the world where stocks have had their best January in nearly 15 years; bank shares are up 20%; the rates at which governments borrow money has fallen sharply; investor sentiment is at its best in months.
You'd think I'm talking about Asia; maybe the BRIC nations. Nope.
The region is actually sclerotic, struggling Europe.
What in the world?
The story is actually quite simple - and was pointed out to me by Sebastian Mallaby of the Council on Foreign Relations. After months of endless hand-wringing, innumerable talks, and considerable pain, it seems the eurozone has actually been saved - quietly but effectively.
The savior is Mario Draghi, the new head of the European Central Bank (ECB), an institution that had been seen as powerless and obscure until now. For much of the last couple years, it had taken a backseat amid the crisis around it. Its original mandate was almost solely to keep inflation low and stable. But now, under Draghi, it has become Europe's deus ex machina.
Last December, the ECB did the equivalent of printing nearly 500 billion euros worth of cash. Essentially, the central bank lent money to more than 500 European banks at just 1% interest.
What was the effect?
Look at the chart below. It shows what we call "bond yields" - the rate of interest governments pay to raise money from bonds.
Both Italy and Spain's rates have fallen sharply in the last three months - so they pay less to borrow money. That means they can get their financial houses in order without as much pain.
At a more micro level, Barclays estimates that the cheap source of cash from the ECB will boost the earnings of eurozone banks by 4% this year. That's going to trickle into the rest of the economy, but most importantly it means that a run on Europe's banks - the great fear – is now highly unlikely.
Remember the moment in "It's a Wonderful Life" when everyone runs to the bank to get their money out and Bailey Savings and Loan just doesn't have enough cash during the Great Depression. Well, thanks to the ECB, banks will now have access to plenty of cash.
The ECB is now said to be preparing another auction worth a trillion dollars this month. You can expect that to further de-clog the financial systems.
To put this into perspective, over the last two years Europe's governments have painstakingly put together a "stability fund" to convince markets that they are serious. Well, the ECB just conjured up three times the money - almost out of thin air.
The magic of its work is in the perception of what it does. It doesn't want to directly bail out any one country - that sets a dangerous precedent. And yet by demonstrating its ability to inject liquidity into the system, it has convinced investors that it is the ultimate lender of last resort.
Now this does not fix Europe's longer term problems. Greece is likely to default. But there is unlikely to be a Lehman-like crisis.
It's also bought crucial time for Europe's leaders to make structural changes to their economies and move towards growth. (And, no, I don't think inflation is a likely consequence - with unemployment at record highs in Europe, how can wages go up in that circumstance?) The irony is that the ECB's activism is not a new theory of what a central bank can do.
Here in America, the Federal Reserve did exactly that four years ago. The story goes that at the height of the financial crisis in 2008, Congressman Barney Frank asked the Fed Chairman Ben Bernanke if he had $80 billion to help bail out AIG. Bernanke replied, "We have 800 billion."
For all the criticism heaped on our central bank here in America - by the Tea Party and others - its instructive to look back and see how the Fed's prompt and massive action prevented our crisis from turning into a Great Depression. And it's happening once again in Europe in an even trickier situation.
The moral of the story? Don't bet against a central bank.
For more of my thoughts throughout the week, I invite you to follow me on Facebook and Twitter and to visit the Global Public Square every day. Also, for more What in the World? pieces, click here.
 |
Post by: |
© 2012 Cable News Network. Turner Broadcasting System, Inc. All Rights Reserved.
| Advertising practices | Advertise with us | About us | Work for us | Help
DONT MESS WITH THE CENTRAL BANK!!!!!!
What a sick pathetic joke to think the Euro Zone was saved... It is being run by criminals at the EU Commission in Brussels and the People will soon RISE UP and attack those who are responisble for Destroying Europe!
RETRIBUTION DAY is VERY NEAR!
Fareed, you said, "Don't bet against a central bank". If someone bets against a currency, he is also betting against its central bank. George Soros placed a $10 billion bet against the British pound in 1992 and broke the Bank of England. He himself hade made over a $1 billion in profit. In the recent months when asked whether he bet against the Euro, the U.S. dollar and the Swiss franc, he replied he had retired from running the hedge fund.
It's rhetorical, not literal.
Zakaria,
You even said it yourself "they seemingly got money out of thin air" – If you seriously think bailouts strengthen the economy, you haven't been paying attention to what has been happening in America. Cavalier statements like "I've got 800 Billion" tell you that neither the Fed nor our Federal Government are able to function in a world of economic sanity. Our Government (and obviously Greece) are out of control, and the outlook is not pretty....
i think the moral of the story is don't mess with a bank that can print money out of nothing, that is attached to nothing, and in unlimited supply. the whole thing is such a joke. it's really all about who controls the printing of money.
Considering that not only does this money come out of thin air, but every 17 member nations of the EU have to repay these loans through increased taxes, this should have never happened. All this amounts to is another massive transfer of wealth from the 99%, who work for a living, to the elite 1%, who are masters of illusion. All the while the mainstrean propagandists were screaming that the worlds economy would collapse if Greece wasn`t bailed-out, I say bs. So what if Greece is removed from the EU, that only makes the EU`s economy stronger and the only ones that would take a hit in the US would be the wall street traders, who are betting on countries economies. In fact, these bailouts actually hurt our economy, as well, as gold spiked to $1754 an ounce once the bailouts were passed. Truth is treason in the empire of lies!
The bailouts and who;e thing is a FARCE and a FRAUD from the EU in Brussels!
Mr Z.
I enjoy your work and analysis as well as your interview guests and style questioning them. It is also clear your political bias – we all have them. It would seem given your bully pulpit you might be more self aware and moderate. The most recent sensativitty for me (owning an opposite bias to your own) was the recent mention of the Tea Party in a group critical of moves by the Fed. While that may be accurate, the group more aligned to your politics – Occupy Wall Street – has also been critical of the Fed and governments actions. Not asking to eliminate the boas – only to make your presentation more moderate to facilitate both sides consuming the message. Frankly bookended by Candy Crowley makes it tough enough.
Keep up the good work.
a good point.
Tea partiers want to outright dissolve the Fed and blame it every chance they get. Occupy Wall Streeters want more regulation and taxation. Those are completely different positions and to suggest that Zakaria needs to mention both at any juncture suggests an inability to discuss any issue with subtlety and complexity. There is a reason Zakaria is one of the only people on CNN worth listening to – he is the only one that sounds like he grasps the complexity and doesn't do a grade-school analysis pondering both sides vapidly without an intellectual bias towards either.
and the occupy crowd has murdered again.this time in berkely,ca.no headline here.lets face it,the occupy crowd wants a one world government.but then so do a lot of progressives.
glyder: If there's no newspaper article, we call Bee Ess
OWS issues are primarily with lack of Wall Street regulation, not the Fed itself (for the most part...you always have your extremists). Sure, it's the area where OWS and the TPers are most aligned, but they aren't the same.
It is a shame that many people, including OWS and Ron Paul supporters – do not realize how misinformed they really are and have become about the Federal Reserve, and how it really works. there is a reason why most educated grownups do not the Ron Paul seriously, and it is not due to some "conspiracy" or "bias" as he claims. Odd, that is a similar argument cult leader use to explain why most of the worlds is not taking them seriously either, to try to keep their young supporters on the hook, they have to convince them that the rest of the world and reality itself is some sort of "conspiracy."
Fareed is not biased – he is simply extremely well educated about many subjects, including the workings of the Federal Reserve. Educated enough, and old enough, not to get duped by the rantings of a nice and seemingly genuine but greatly misguided and severely misinformed, old man. The truth is, Ron Paul really does not get it at all, and that is the real reason why most informed people do not take him seriously.
dear fareed,
how nice that europe has "quietly been saved".
well, of course it's a good thing that government bond yields go down. however, at the same time european banks make a fortune taking the cheap cash from the central bank and buying govt' bonds. you indicate that this is eventually a good thing: 1. european governments have time to sort out their sh** (whether they are adopting the right strategy with their austerity-measures, i doubt it) and 2. some of the cash "trickles down" to the "real" economy.
i think we are again missing the point here. we are in the fourth year after the start of the financial crisis and nothing has changed. governments pump trillions into banks, and the excess cash will slowly but surely lead to renewed speculative behaviour, bubbles, and eventually crashes. why don't we learn from the past? everyone seems content that the worst is over, but until now there hasn't been a substantial reform of the global financial sector. indeed, the policy window to do that is firmly closed now which.
the crisis was a good opportunity to do some reflective thinking on how we want to organize our economic system. however, it seems everyone will soon again be back one the buying spree and bullishly praise neoliberal capitalism. so i guess we just have to accept that in 5-10 years in some part of the world there will be another crash and we will ask ourselves: "oooh, now how did that happen? i didn't see that coming, did you?"
michael, of course there will be future economic crisis, just as there always has. History is largely cyclical, and that applies to economics as well. Every generation thinks they are experiencing something unprecedented, but it's rarely true.
Still, Germany would be far better off by breaking from the Eurozone and returning to using the Deutschmark. With a stronger economy, Germany would be a better position to help the rest of Europe. In the end, I expect that China will bail the Eurozone out.
Nope,
when we go back to the "Deutsche Mark" it will destroy our economy.
The Currency would be so strong that german products are too expensive for people living outside Germany.
That means no Export – No Jobs
I agree with George above. The Deutschmark has always been strong except right after WW1 when Germany suffered greatly because of the severe conditions imposed by the 1919 Treaty of Versailles! Besides, you seem to have forgotten the Belle Epoch(1880-1914) when Germany, along with the rest of Europe reached the zenith of prosperity!
Smoke and mirrors. Just like the Fed in this country. They print money, they "loan" the fake money to the banks for penauts, the bank loan that money to the governments for real interest. The Fed has done this to us to the tune of 10 trillion. Remember, the Fed is a private organization owned by the banks. The wolves are in charge of the sheepfarm.
Yes, quite true. You must pay back all that money that was created out of thin air plus interest. Can't create money out of thin air for the interest? Then you have to pay back something real like gold, property, or your first-born. Yes. Eventually banks will control everything of real value and they will accomplish this through the greatest racket of all-the financial industry. Ordinary people will be controlled with paper money or even worse-an electronic card with so called "funds" programmed into them.
"will be"? They have been controlled for almost 99 years now in USA. The FED was created in 1913, that means fake fiat money have been in circulation since then. That means our grandparents have been controlled. This is not obviously "Capitalism", it's the worst type of controlled society.
the money is borrowed by banks... they pay interest to get it... they loan it out and collect interest in turn... businesses borrow use it to create things that people buy. The 'nothing' that you're talking about is a complex system that works.... learn what you're talking about before spouting garbage.
Don't be such a leftist stooge Fareed! Try to make it sound like there is nothing to worry about so as to promote Obamas budget.
Saved? How is forking over 240 billion of imaginary money just to stay afloat "saved"? No, what europe did is kick the can a few years down the road at the price of during Greece into a defacto debtors prison. Think about it, both Italy and Greece both have UNELECTED leaders, their elected ones were booted out via an effective coup by the EU against them. Saved? Yea it only cost Europe its soul...good trade. Lets give up the ideals of democracy, enslave some greeks, oust a few elected officials.... just so some bankers can continue to get paid....yea.....SAVED...
Farheed Zakaria, puppet of the New World Order. Bilderberg attendee. Central banks print money out of thin air, backed by nothing. Countries go deeper into debt. Sounds great, glad everything is solved.
Did you ever consider that buying into a huge conspiracy – is not likely to be dealing with reality at all?
Fareed you're smarter than this. This is not a stock market issue, it's a sovereign debt crisis problem. Low interest rates in this environment is not a positive. 25% of the global GDP for 2011 was made up by 3 banks, the ECB, FED, and BOJ. Wait and watch.Watch carefully at the $250 trillion in derivatives that OCC reports on each quarter. 20 times the bets to all the money in the world. 250 trillion chips on the table and only roughly 15 trillion in the cage to pay out. This coupled with bond bubble makes up the largest bubble the world has ever seen.
The 'eurozone' is NOT saved.
It will NEVER be saved.
becuase,just like gas prices,currency speculators have people in place to make sure the Euro fluctuates wildly so these rich speculators can make a killing.
It's a laugh to watch all the new conditions the Euro ministers come up with for the Greeks to do on a weekly basis to SUPPOSEDLY save their economic situation.
It's all for the cash speculation baby.
The Euro WILL NEVER be stable again.
The possibilty of saving euro is still not clear. Greece lenders are still worried. Until a strong political action at the european union level is made, confidence will not come in the markets.
The euro zone is done for. You forgot to mention how Greece has been bailed out many times and their 1 year bond is 600+%! If you think that the ECB or Fed can just print trillions of dollars with no recourse then you are mad! Western countries are done for as their debts are too large. Imagine a 6-7% on US treasuries?! That's about a trillion a year in interest!
Goodbye America. You were the freest land the world has ever known.
A country that used slavery for 400 years and a fake fiat currency for almost 100 years and you called the "freest ladn on Earth" ? I dunno whether to laugh or to cry.
The US is barely over 200 years old, slavery was gone less than 100 years after the country was founded. Your knowledge of history is pathetic!
A free land of Weapons, Censorship and Mc Donalds. Youre free like China our Russia.
Censorship = China = USA
Election Cheating = Russia = USA
National Proud = Nazi Deutschland = USA
Herman: What an odd, factually incorrect statement. There is very little censorship in the USA. There is very little, and no systemic, election fraud in the USA. As for national pride, yes, we have some. And yes, we are similar in that regard to Nazi Germany. But then, we are also similar to Nazi Germany in that both the USA and Germany in the early 1940's had flush toilets, and wore shirts and shoes. What is important is that the USA, in the 1940's and now, was opposed to the defining characteristics of Nazi Germany, and this country was willing to sacrifice a few hundred thousand of our people in a multi-national effort to destroy that regime.
You forgot one thing
Crime= Africa=Pakistan=India=USA
Greece taught us democracy. It's payback time!
The democratic governments are removed from Greece and Italy and puppets are placed to pass bail outs.What a nice payback.
Breaking news: the euro zone agrees to 130 billion bailout of Greece. Just a fix for the short term.
I'm not sure where this guy is getting his logic from. If I'm an investor, I would not invest in Europe. Their socialistic system and spending can only mean meager profits. Heck, I wouldn't ever invest in Greece or some of those other countries again after losing that much money in principal. What investor would do something so crazy? I'm afraid their system will not generate any economic growth. Why the people their support such lunacy is beyond me.
Nothing bad ever came of printing currency and exponential debt growth!
All they do is prolong the inevitable .. a horrendous day of reckoning that will be world-wide.
How do you sleep at night writing this crap? You’re not old enough to even understand the history behind this economic mess.
I also resent your assumption that I am ignorant to the point of believing someone who gives kudos to Frank and Dodd. You’re a fool!
I read your book and liked some of your valed points and that's why I am subscribing to your feed, Mr. Zakaria. I am from Europe and my family still lives there. Most normal people hate centralized government and usurping their national sovereinties just like we, in the US, hate to subdue to Hussein's muslim brotherhoodcracy and the omnipotency of feds. This has not saved Europe quietly. It has quietly further destroyed her. It has further tightened the loop around her neck. Who gives a rip about millions of Euro being lend to the countries at a 1% when all this money has to be returned by whom? People who are loosing jobs at a faster rate than in the US? When this money is being used on immigration programs and social welfare it won't be returned even if it was lend at a 0%. Europian leaders who are (just lately) showing some strides in deislamization of Eurabia are being overpowered and overruled by the unelected EU president Barroso, a communist from Spain and his pack. I lived in crony communism for 25 years and can smell it from a distance. Too bad I have nowhere to emmigrate again with you, feeding American listeners with these unfortunate events and putting a positive spin on them. Nothing positive there, c'mon!
"Don't bet against a central bank"? HAHAHAH! Every single central bank in history has FAILED at some point...in fact the Federal Reserve is the THIRD central bank in US history. Central banking does NOT work and neither do the FIAT money it creates. Only a matter of time.
What a joke. END THE FED.
fareed........nice love affair with stupidity, here AND there.
the central banker just delayed the inevitable and in fact is making the inevitable even far worst because all this debt will
reduce economic growth.. our debt to GDP ratio will be higher than 120% in 4-6 years
http://news.nationalpost.com/2012/02/20/new-finding-may-solve-isotopes-shortage/
COME ON FAREED! MAYBE DO AN EXPOSE ON THIS YOU DUMB BLOODY MOOK.
http://news.nationalpost.com/2012/02/20/new-finding-may-solve-isotopes-shortage/
GREAT NEWS....medical isotope breakthrough....iran always used this as their excuse for the nuclear program, but now the excuse has been removed! Iran now does not need nuclear reactors!!!!!!
http://news.nationalpost.com/2012/02/20/new-finding-may-solve-isotopes-shortage/
but, it ain't over 'till it's over.
the first greek bailout, just a year ago or so, was $110 billion euros.
this one was 120 billion euros.
and it's only one country; there are more to bail out.
the trend is that the number of countries needing bailouts gets longer and longer, and the size and amount of subsequent bailouts gets bigger and bigger.
who's going to bail out the european central bank when IT needs a bailout.
let's see where we are in a couple, three, or five years.
keevan d. morgan, esq., chicago
As a consultant of the Obama administration, Fareed................. don't you feel a bit torn writing for CNN ? Conflict of interest, perhaps ?
The ONLY ones who are torn in any way and especially in a very mental way are the disgusting Teabaggers like yourself.
Interesting that you have to resort just because someone raises what I also feel is a valid issue.
The debt is of concern to anyone that applies any type of business sense to the situation. There may be theories that indicate this or that......but this type of debt is way too high risk to adopt antheoreticalal, dogma based solutions.
Now you will probably call me names as well. That really diminishes any type of legitimacy associated with any of your political insights.
Fareed's comments are just that.....political. The problem is that the stakes of political perspective is potentially financdevastatingtating to the country.
I wonder if you get a gov check?
Once again we are given another obvious example of how and why the extremely arrogant but so very wrong Teabaggers and most of the Extremely Failed Republican party have been wrong about EVERYTHING and why with their failed policies if we were stupid enough to allow them back into power we would only be cutting our own throats as they would attempt to do in this country exact;y the WRONG thing to fix our economy. It is so obvious when you have such an obvious example of why the Republican party needs to be kicked to the curb once more because they just do NOT get it.
If it's so obvious, then tell us! All I see you doing is insulting people. The only obvious thing I see is that you have nothing of substance to say.
Top economists from prestigous Sarah Palin University are on their way right now to meet with members of the European Central Bank. Later this week they will be joined by Sarah Palin herself. She will be bringing mooseburgers and a big plate of s'mores.
The Eurozone has not been saved and Greece is going to default soon-just a matter of time. Try March. The national leaders that sold their countries to international bankers may be facing firing squads .
Seriously, all is good in the world/eurozone? You mean I woke up this morning and the world is a better place because Fareed Zakaria says so? Phew. I'm glad I went to bed last night.
So let me get this straight. Greece borrow yet another HUGE amount of money, 175Billion, to pay it's debts and keep the country running. And the only guarantee is to get there debt down to 120.5% of GDP? Hmmmm... last time I check that's still in the red by 20.5%. I'd love for a bank to loan me money so that all the money I make in a year doesn't even cover the costs. This is a band aid on a problem that needs more attention. And painting it as THE WORLD IS ALL BETTER is foolish.
Fareed,
Like most of the economists. policy makers, financial anaysts you are stuck in the 80's. RONALD REGAN is dead(RIP). His trickle down econimics of the 80's worked. This time around we are trickling down but it's not only going to the US but around the world. That takes alot of money printing and debt plus this time around its only sticking to a chosen few. Back then manufacturing was an engine and it kept going for awhile.
Please tell the people you know that Reagan is dead and they need to think of something new. We trust these people to make the right decisions right now for the American people not the decisions of the 80's.
Sorry, I do not share the same optimism as much. Lending massive cheap money to irresponsible borrowers is just giving cheap tylenol to relieve temperature for a short time not a curative measure for deep mental illness.
Who says it was saved Fareed? Now Zarkaria is an expert on economic matters, just the other day he spewed forth his expertise on foreign policy.
The socialist systems in Europe, if not checked, will crush the economies of those who pratice it sooner than later.
We need to make it clear to Obama and his jack booted thugs that we do not want a government dominated economy in America, just to be likek the Euro Sociialists.
Hard to believe CNN pays the Fundamentalist apologist Zarkaria a dime for his drivvel.
"Jack booted thugs"? Go watch some nascar...
You forgot to rant about Global Warming.
zakaria is such a joke! he almost makes navarette look like a journalist!!!!
Saved? How can you not see the long term picture here. A loan does not save anybody it simply delays a default. You are smarter than this.
I have to laugh at the constant stream of "Tea Partiers" coming here to insult Zakaria's work time and time again.
"You" all idolize Ronald Reagan for saving our country and bankrupting the USSR (though 25 years later we are close to bankrupt ourselves because of some of the same policies) and you attack Zakaria as a fool.
Yet, if you knew Zakaria at all, you'd know him to be one of the most Reaganite of Reaganites in existence today, a man whose principles and economic theories were shaped by the President.
Shows you just how far the GOP has moved away from the man they prop up as a savior of American ideals.
Rick Santorum keeps a fetus in a jar at home on the mantle.
This is untrue and disgusting. Did Mitt pay you to say that?
The more you strengthen the Euro the weaker the US Dollar gets.
The ultimate goal of the New World order that started the Euro is to have a one world currency.
You used to be able to go anywhere in the world and get anything you wanted with the USD now no one wants it.
Is that what you want ?
I say let the Euro and the Fourth Reich falter.
Hooray for the central banks of the world! (Just ignore the fact that their low interest rates led to these countries' credit problems in the first place)
This article is hysterical. I can't believe what's happened to CNN.
Fareed,
1) ever stop and wonder why all nations don't just print money to solve their problems everywhere in the world, including not just to end indebtedness but also hunger, poverty, etc. Why not just print the money Fareed? Are there any consequences?
2) a 20% increase from record lows says more about how far they have fallen than how far they have come since the fall
3) This aticle make no mention of the likelihood that the borrowers will: (a) pay the sum back and (b) won't default and ask for more.
4) The Bailey Savings & Loan didn't have cash because of the Great Depression, they didn't have cash because the money was all out on loan. They were a bank; not mom and dad.
At least some people like the Tea Party understand money doesn't grow on trees. I cannot believe I need to tell an adult this, let alone CNN's media darling.
I sitll think the odds are that Greece will default. The ECB has done a wonderful job containing the pain, but I doubt its over. The best they can hope for is a turnaround in Europe while Greece stays afloat so that the eventual pain is better managed.
Another well written piece by one of the most reasonable human being in the media.
So let's just ignore the central bank's massive contribution to creating the financial crisis. Let me repeat some basic history for you.... The tech bubble burst, and despite pretty decent 5.5% unemployment rate, the press was hammering Bush for the "jobless recovery" (if only they weren't so biased, I wonder what they would be saying about the current situation with much higher unemployment?), so the Fed, to help D.C. rather than the people, lowered rates to basically 0 for several years. They got applauded for getting the economy going, but no one ever seems to blame them for setting the stage for a much worse recession.
If the Fed hadn't kept rates so low for so long, there NEVER would have been a sub-prime boom and bust.
Ben, that is simply not the case. Besides, if low interest rates were the main cause, we would be experiencing a bubble right now – but the truth is, that banks are now being more careful and people now have different expectations, so now it is not happening, because the bubble was actually caused by the opposite phenomonon, than what we have today, and was caused by very careless banks and people with unrealistic expectations about an endless increase in housing prices – those two things we no longer have today.
Low interest rates were only one contributing aspect and far from the real cause. When the risk could be hidden and shifted onto others through mortgage backed securities, the due diligence normally done by banks that was necessary to assure good loans and low risk, seemed to disappear – appraisals were often drive by, no-doc loans came into existence, interest only loans and ARMs were the norm –
Besides, the fed funds rate is not the only thing that affects interest rates, and when the Fed did raise the rates, this did not change anything – in fact there was more house fever – people just went around this with the ARMs, etc – it was sloppiness, carelessness, and greed, and a private sector run amuck that caused this problem – even the CRA's that Ron Paul likes to blame for this problem, had a far lower rate of default than the rest of the sub-primes (I believe 5% as opposed to 27%) – So although low rates was one factor that may have lead more people to get larger loans initially, it was not one of the most important reasons at all for the huge bubble, because the bad appraisals, no-docs, ARMs and interest only loans – all of this carelessness was the real factor and continued the bubble even after rates went up.
Where I live it was common knowledge that appraisers would not get out of the car to look at a home – if they did and came up with numbers the mortgage lenders sis not like – they would not be hired again – there was fraud and corruption and carelessness, everywhere – and this is what built the house of cards.
I mean you could even blame the new super low capital gains taxes as contributing to the fever – it made investments that provided capital gains income – even more attractive than ever – but then this too can't be the only cause either – it was a whole host of factors that created a climate for a bubble -
Big government, high control, leftist political propoganda. Quick fixes with long-term negative consequences.
Really this is laying the seeds for World War III. Greece isn't going to fix itself, they have no incentive to do so when they can just get bailed out. But eventually Germany is going to get tired of carrying the rest of the EU. The idea that a defeated Germany in 1918 could come back two decades later and take on the world would have been called insane, as is what I am saying now. But you wait, if the world continues on this course the Germans are going to end up angry, militant, and violent, and this time I'm not sure I would blame them.
I agree!
The rest of Europe will owe them so much that they will be the new masters of the universe. Looks like Hitlers dream will be realized afterall.
WWII which was the last time we fought anything as dangerous as my President...
I am kean on reading about the Lisbon Accord, how about you??
That's an unfair and dangerous comparison. I'm no Obama fan, but hyperbolic demonizing is not productive and helps no one and no cause.
I wonder why CNN doesn't' have a 'Report Abuse' link on its comments.
Most of the comments here are irrelevant to the discussion and should be removed. I see lots of folks writing some craps just because they want to vent out whatever little they were told about the economy.
And that's fine. But that's not the issue here and hence should be removed..
In other words, "I don't like what people have to say, so I want to prevent them from saying it."
A lot of narrow-minded people don't like some of the things that I say on this web page either. They'd wish that I wouldn't say them but somebody needs to in order to open up some minds to get people to thinking about things!!! We all know the stupid things these mindless, warmongering Tea Partiers say here at times!!!
Gold is up 30 dollars. Someone is wrong here. Is this a Trojan horse?
The Euro zone GDP shrank last quarter...but let's not let that bother us because banks on their heroine high trump an actual GDP figure. Wow Fareed, I love your optimism. And for everyone on here who thinks they discovered economic radium by saying government cuts lead to a drop in GDP...no sh!t, but that was never in question. The goal is achieving the best multiplier for your $ and gov spending falls flat on its face compared to the private sector in that regard.
Surely Greece can backdate income tax audits for the last 10 years and come up with some considerable cash from all those who avoided paying it (thus contributing to the present situation). The fines alone would be enormous. There are enough supper rich who can cough up the money to save their country from financial ruin.
A band aid for a bullet wound – Greece will not bring its debt down to 120% of GDP by 2020 like its supposed to under the loan conditions it was never supposed to be at 100% when it entered the EUROZONE in the first place but provide false financial statements to gain entry. Greece is the ENRON of government accounting in Europe and will be back within 2 years with their hands out for more money. Europe would have been wiser to cut Greece loose as an example of fiscal irresponsibility and to make the larger economies of Spain & Italy know they had better get their house in order. All they did with this "bailout" is prolong the inevitable, say to other nations don't worry we will bail you out too and bring other economies down the lowest common denominator.
May be for this month it's saved but what about next month and its other nations that needs bailed out next. Greece isn't the only country on the edge in europe.
Fareed,all that Europe has done is kick the Greek problem down the road to a later date.
This is pathetic. Greece will be in the same position within the next year. They couldn't satisfy the terms of the first bailout and now they offer them more money? Only a group of politicians could agree to such a bottomless pit of an idea. .. Lesson learned.. If you have money.. Do not LOAN it to any government..
The bonds from Spain and Italy are not suddenly safer because Greece has been saved by the bailout. The fact is that billions of dollars that had previously been invested in Greek bonds because of higher yield have departed because of the Greek default. Anyone who had been investing in Greek bonds was looking for higher yields than could be found with more safe bonds. However, once Greece defaulted the money moved to the next country with high risk but not in default. The next logical choices would be Spain and Italy. It is not that the bonds from Spain or Itally are suddenly safer it is just people are running in panic from known unsafe bonds from Greece.
What everybody here is forgetting is that the Eurozone didn't save itself. That was made possible only by a bailout from the Chinese government last week! Now watch as Greece falls into the biggest depression it ever had as people lose their jobs and sink ever deeper into poverty! The same will take place in Spain and Italy as well.
Quite true Joseph, quite true.
Rick Santorum likes getting greek.
I always read Zakaria's opinion piece after I've read as many other articles as I can find on a topic. I learn a lot from good comments posted by knowledgable people in response to Zakaria and to other articles and usually after reading a few I can pick out the "sky is falling" comments. I appreciate that Zakaria, while he has opinions and beliefs that influence what he says, is almost always pragmatic and he always does his homework. I don't mind that he ends up with a specific opinion, because unlike every other commentator he always has unbiased information as the foundation of what he says. Zakaria's writing never refers to "unnamed sources" and I never feel that he's building scenarios out of thin air. This is where I come when I want to read facts and know what the people behind the scenes are really doing and saying. He's almost always a better predictor of what will happen next than anyone else. I value his opinion and wish that people would understand that opinion doesn't necessarily mean bias.
Fareed Zakaria unbiased? Hardly! He almost always has a pro-Western bias on things! Like I already mentioned above, the Eurozone didn't save itself. That was made possible only by the Chinese bailing out European banks!
Fareed...nothing has been saved, it is a big band-aid with blood leaking out.
Seriously, there seems to be too many garbages out here on the commentators with comments coming straight out of emotional drives. It will be helpful if CNN would pick up and highlight comments (chosen by other experts) that reflect a well analyzed perspective of at least two sides to the situation.
Tom
How is your comment relevant to the column? It's not. Take it to the forum on commenting behavior.
What's sad is that all of this was predicted sltorhy after Bush took over. If the USA wants to be at best a stick in the mud (eg global warming, stem cell research), or at worst go megalomanically insane, it was predicted that the other countries would move ahead scientifically on the one hand, and form their own political and economic alliances on the other.
I often wonder why some friends just hang on Fareed's every word. This is the most asinine thing I have read of his so far. Praise money printing. You are a stooge of the shadow government. And I'm not a tea partier or republican.
Like so many others, Fareed has been drinking the Keynesian Kool Aid. All they have done is delayed the inevitable. They keep reinforcing a crumbling foundation with weaker and weaker currency.
What you suggest is simply not so at all. It is a shame that there is so much misinformation out there these days.
Thank you, Fareed. I have been praising the actions of the Federal Reserve for a long time now, against the headwinds of many who have been misinformed about the Federal Reserve's actual role and function. this misinformation has reached quite a fever pitch, to a level that if not addressed, may be hard to undo. that is a shame, especially since the FR has been a great asset to our recovery, or lack of further decline, from this crisis. My other concern is that my son's generation will likely have to come up against today's young Ron paul supporters, who after putting in so much effort on behalf of their genuine but misguided hero, may form such a great wall of cognitive dissonance, that future attempts for them to accept the truth and reality of the FR will only fall on deaf ears. I have the same concern for many young OWS folks. So, much so that I think there needs to be a serious campaign to educate your youth about the Federal Reserve, in an attempt to undo and unseat all the misinformation, before it turns to cement.
Funniest comment on here.
Hank marvin – read about how the FR actually works – Fareed is right on this one – he often is.
I worked at the Federal Reserve as an analyst in 2003-2005, and I saw how the easy money, low interest rates that the FED decided upon led to the sub-prime bubble and is as much or more responsible for our current economic difficulties than anything else. Maybe you need to learn how the Fed works. They, like the government, look at problems and rather than solve them, they find ways to push them to the future. They did it with the tech bubble burst, and that led to the Great Recession. Maybe their actions now will lead to the second Great Depression.
Ben low interest rates were only one aspect and not the cause. When the risk could be hidden and shifted onto others through mortgage backed securities, the due diligence necessary to assure good loans and low risk seemed to disappear – appraisals were often drive by, no-doc loans, interest only loans and ARMs were the norm – besides the fed funds rate is not the only thing affecting interest rates and when they did raise the rates – people just went around this with the ARMs, etc – it was sloppiness, carelessness, and greed and a private sector run amuck that caused this problem – even the CRA's that Ron Paul likes to blame for this problem, had a far lower rate of default than the rest of the sub-primes (5% as opposed to 27%) – So although low rates was one factor that may have lead more people to get larger loans, is was not one of the most important because of the bad appraisals, no-docs, ARMs and interest only loans – all of this carelessness was the real factor. Where I live it was common knowledge that appraisers would not get out of the car to look at a home – if they did and came up with numbers the mortgage lenders sis not like – they would not be hired again – fraud and corruption everywhere.
Fareed proves once again what an idiot he is. Nations that loaned Greece money to help 'save' it are having to write off parts of that debt. That means the taxpayers that funded those loans lose. The ECB printing more money offers a short term solution by providing more liquidity to these banks, but at the cost of higher inflation and more longer term debt down the road. If just printing more worthless paper were the answer, then why not crank the printing presses to their highest speeds and run 24 hours per day? They don;t do this because they know the longer term implications. It's a shell game tryng to balance short term bailouts with known longer term ramifications. Instead of taking the smaller bite in the butt today, they have pushed it out to a larger bite later down the road. No problem has been solved by this action.
Fareed is one of the smartest people in the media – we are lucky to have him – there is a shortage – do not write him off – instead you might want to question whether the information you thought you knew was correct – do some research – it might surprise you. For one thing your statement "f just printing more worthless paper were the answer, then why not crank the printing presses to their highest speeds and run 24 hours per day" is not even how it really works – it is not like what happened in post WW1 Germany (that Ron Paul's grandparents fled their debts) where the government simply printed notes to pay their debt, etc – but for some reason that is what Ron paul seems to think and why he is misinforming so many young people – look it up – look up the Federal Reserve – etc.
Peg -
If things are so GREAT, and Fareed's gushing cheers for the Fed are so correct -
Why are things getting WORSE, people SUFFERING MORE, and why is the world DESTABILIZING?
Fareed, are you kidding me? This article is littered with half-baked concepts that have no place in a serious analysis of economic policy. You even threw in some latin phrasing to provide intellectual deodorant to cover this garbage. One should not use the word "magic" to justify an economic strategy, nor should the strategist behind the "magic" be called a "savior" before some reasonable time has passed to evaluate his strategy.
When a central bank prints money out of "thin air', the purchasing power of every person holding the paper currency in question will be seriously diluted. Pensions and savings accounts will be worth less (in actual purchasing power) than before the influx of paper money into the economy. Period. That is the way it works. There is no free lunch. There is no free lunch. There is no free lunch.
The Eurozone wasn't saved. The inevitable was merely put on hold.
Printing money to the amount of bailing out a whole country will impact other economies in the months coming. Sorry Mr Fareed, you maybe right in the booked theory of Keynesian Economics but in practicality, this bail-out will turn out bad repeatedly. Keynesian Economics are outdated for debt-driven and saturated markets.
Seriously, Mr. Zakaria: "Saved"? For now, maybe.
Viewing this crisis is a bit like watching a dog chase his tail. He will eventually run out of energy (money).
Maybe even confidence that he can bite the tail.
"The story is actually quite simple – and was pointed out to me by Sebastian Mallaby of the Council on Foreign Relations."- Zakaria
I'm sure it was since Zakaria is a board member of the Council on Foreign Relations (CFR) -a faact he conveniently conceals rom his audience. In fact, counting Zakaria, 3 out of the 4 people on his show last Sunday were CFR members. No conflict for Mr. Zakaria right? Yeah right.
"The savior is Mario Draghi, the new head of the European Central Bank (ECB), "- Zakaria
He's no savior. He's a globablist stooge like Mr. Zakaria.
"Last December, the ECB did the equivalent of printing nearly 500 billion euros worth of cash. Essentially, the central bank lent money to more than 500 European banks at just 1% interest."- Zakaria
You can't print your way out of debt Mr. Zakaria. All you accomplish by doing that in the long run is a) inflating your currency and b) creating more debt. Your praise of the ECB is myopic. The ECB hasn't solved anything by doing this. They are just making matter worse.
If there was ever any doubt that Mr. Zakaria is little more than a shameless deceitful globablist puppet this article erases it.
Saved? It ain't over yet.
I paid my house payment by taking cash advances on all my credit cards!! Yeah I saved my house. Who writes for cnn?
Nothing has been saved. Greece will devolve into rioting, crime and misery. Their economy will go backward, and all these commitments and promises will fall apart. Italy is next, and will take everyone with them. Citizens are addicted to spending and "free stuff."
The Eurozone was saved? That's an assumption.
The Eurozone was not saved.
Fareed,
What are you smoking?
Fareed,
Yes. Print more money and jam it into a monetary system and call it "injecting liquidity." That most certainly hasn't been what has been causing this global malaise.
The European Union is saved! Temporarily. For now. Until the next country defaults. Because their bankers or government officials are inherently corrupt. Too bad the citizens of Greece are looking forward to a living Hell for the next twenty years or so.
Gosh, you are so up beat.
Could I have some of the Kool Aid, Fareed?
Just libs lying again...the euro will fail...watch and see.
Moron.
Who said the Eurozone is saved Fareed? Pure stupidity.Greece will neve be able to survive in the Euro Zone.They are buried to the nech in debtand are to unproductive and corrupt .
Adding more cards may help shore up a house of cards, but it's still a house of cards.
It may seem fine on paper, but this may seriously lead to stagflation – when there is no GDP growth, spiralling consumer prices, and a resulting higher unemployment.
Its like everything stands still while Government tries to control inflation which will hurt GDP growth, while printing more money which will exacebate inflation.
Outcome of all this 'manipulation' and 'morphine shot' will be
a prolong recession.
uh last I check greece and europe was "SAVED" from the 1st greek bailout which now begats the 2nd greek bailouts which in a year or so will begat a 3rd greek bailout.. SAVED? HAHAHAHHAHAHAHAHAHHAHAHAHAHAHAHHA
\HAHAHAHAHHAHAHAHHA
oxygen break
Not true. Game is not over. The Euro has not been saved. The only way to save the Euro is to see Greece leave the EU.
Greece will never recover. They are too lazy for that. If they don't leave the Euro, the ECB would have to give them more money, lose more, and this means trouble for America if the whole EU collapses because of Greece.
Hey dude FZ this is a nice read !
Fareed, fixed you say?? Hardly. If you look at your own chart you will notice those rates are rising yet again. Greece is far from over. The EU with constant austerity coupled with tax increases will self destruct. Cash alone doesn't save an economy if you have no cash left with which to spend.
Greece cannot afford it!.
by Johnny Ho on Wednesday, February 8, 2012 at 8:32am ·
I have a question on the Greece debt:
How on earth are Greeks going to survive, even though their debt repayments are to be made in scheduled sections?
Greece's failing economy and political instability simply cannot allow it. It will be impossible for the Government to carry on paying the nation's debts while simultaneously maintaining strict austerity measures. The next new Greek Government want to be a populist one. There is no hope of Greece ever growing it's already bankrupt national reserve.
Even if the second bailout is approved by EU committee, Greece is still unable to revitalise its shattered economy. Greece badly need the assistance of a financially strapped EU.
I think, all things considered including the lengthy financial numbers, the plight of Greece bondholders, Greece is definitely heading to a collapse of its economy. The stock market will surely react negatively when they see signs of such a catastrophic eventuality.
If Greece declare a debt default (which is preferred), then a domino effect will send the economies of the EU into a tailspin. I see many Greek and EU banks getting badly hurt.
Hold on to your seat, we are going on a whirlwind ride to see the financial chaos – courtesy of Greece collapse, and possibly EU's breakup because of it ! Maybe not in 2012, but highly likely in 2013.
The democratic leaders in Greece and Italy are removed to pass such packages.The big democracies dont love democray any more for Greece and Italy, but naturally no doubt for Syria their love remarkable.
Time to find a new job Fareed. The Eurozone is going down my fine feathered friend – very very soon. Too bad this article is going to get you fired by CNN. See ya buddy.
This isn't a real save, just a temporary patch. Real, serious structural reforms must be made, the fertility rate must climb, productivity must rise, governments must become more efficient, and real GDP growth must occur and be sustained across the whole Eurozone for a long time before anyone can realistically speak of the Eurozone being "saved."
I found this site by mistake, but had to read this post. I sent it to my brother to check out. Cheers!
Hi, Neat post. There is a problem together with your web site in web explorer, could check this? IE nonetheless is the market leader and a good part of folks will omit your great writing because of this problem.
What a great share! Cheers!