Having trouble meeting loan repayments?

Wouldn't be awesome if you could print money? 
Say you're struggling a bit on your home loan repayments, or perhaps that stumble in the market last week pushed you into Margin Call territory, you simply head into your home office and fire up your laser printer. I would have suggested using an inkjet but then if any of your 'money' got wet it would be worthless again.


Of course most of you would think that this is a ridiculous idea, but this is essentially what the US and to a certain extent the UK have been doing. Except, they are taking it to an even lazier easier extreme, why print millions and millions of notes when you can print out a couple of treasury bonds (T-bills, T-notes etc).

The end result of this is that their debt is reduced, or rather the real cost of the debt is reduced, by making their currency worth less they also make the debt less. For the most part it would seem that reducing the worth of your currency isn't the best thing to do. Essentially this is inflating your way out of debt. So the question is:

Can you inflate your way out of debt?
Unfortunately for us this is not possible on an individual basis, inflation eats away at the individual like an insidious parasite that you are never quite aware of. That 3% pay rise is essentially a pay cut if there is 4% inflation. But the US Dollar is in a unique position in the global markets as the defacto standard  against which all other currencies and a great deal of commodities are compared. So perhaps there is a chance that the US can print there way out of trouble. Although the general consensus is that this isn't really going to work but that is a discussion for a different time, the main discussion point for this post is what can Greece and the rest of the PIIGSs in the Euro Zone do and what can the financial powers that be, France and Germany do to recover the Euro?


Why Greece faces a Heraclesean* Challenge?
*Why not Herculean I hear you say? Well the nerd in me has to point out that Hercules is the Roman name for the Greek God Heracles.
The problem that faces Greece is that they don't even have the option of attempting to inflate their way to fiscal freedom. They do not control the Euro printing press (Indeed the rest of the Eurozone countries don't really either, there is a camel sitting at the control panel). So what are their options for repaying the debt, which will require 12% of their GDP to service? That is $1 in every $8 goes to paying their interest bill, not even repaying the debt. Basically they have to reduce there public service (one of the largest in the world), increase their taxes and sell some assets. They will also have to increase the retirement age (currently among the lowest in Europe). All of these options are immensely unpopular amongst the people which is what is causing the widespread rioting.

Why Germany and France are getting a raw deal!
Think of Germany and France as the sensible siblings in Europe, they went to school, they studied hard and now they have a steady, well paying job and are doing fairly well for themselves. Their pigish siblings on the hand have squandered their youth on sex and drugs and live life pay cheque to pay cheque, relying on their sensible siblings to bail them out.

The main problem facing Germany and France is the inherent weakness in the EU. When times are good, everything is great, when times are bad the EU has no power to extract punitive retribution from the member countries.

Think of it this way, if NSWs for example had to borrow a large amount of money from the Federal government. The Federal government would be able to compel payment in the form of adjusting GST revenue flows or introducing a new tax or levy on New South Welshman. The EU has limited power in the regard and it affects how the EU can react to the financial problems facing it's member countries.

One thing is sure, we have not seen the end of the economic stability problems within Europe and we have not seen the end of their effects on the rest of the world markets.