May

11

the euroActually I think Europeans are happy to have a weaker Euro. Especially Germans. it will help their exports in times of low inflation.

I am not sure the fund Europe wants to establish will help. Typically, the European reaction to the Greek crisis has been slow and fragmented, with states once again moving based on individual interests rather than a collective European view. In Germany local elections weighed also in how the leadership approached the crisis. The long term issue is that in Europe the imbalances between north and south cannot be reduced without a common European policy. In Italy we know well how difficult it is to reduce gaps between different geographical areas (north and south specifically) even under the action of a centralized government and a more or less homogeneous culture within the country. You can imagine the kind of challenge when the areas involved have different history, culture, economy, social structure.

The problem of this crisis is that Europe should accept the default of Greece. Sorry for the creditors. By the way: who are the creditors? Mainly French and German banks of course, already weakened by the crisis. The PIGS are not the only problem for a risk of contagion. Eastern Europen countries do not have much space on the news these days, but you my recall that they were the first to suffer a lot in 2008 at the beginning of the crisis. Their issues are still there.

It is the social reaction to the fiscal policies around Europe that can produce the biggest changes in the next years, as peoples of Europe will blame capitalism for what happened. The risk is that a bigger role of governments in society and economy will emerge together with some sort of nationalism and protectionism. Not good for growth… Although the US in the long term may have serious issues with their deficits and debt, it is Europe which is going to be weak for several years ahead.

I was in Italy last week and listened to discussions about the state of the economy. People complain that there are no jobs and it is getting worse. Most say that "the government should do something about it"…..

Alston Mabry writes:

The EMU is adopting the drachma. They will print more €'s to pay off the debt and save the banks. The Germans will benefit from a weaker € and better ex-EU export power. And it will be clear that Portugal and Spain can be saved the same way. Gold up! 

Ken Drees writes:

I remember reading an article about the palindrome when I was just learning about speculation, it showed him sitting and playing chess outside. It was after he had broke england out of the currency band and creamed the pound. He said something to the effect that england was going to amass some large number to defend the pound–and he was prepared to sell twice that amount for starters. I think its similar to europe now as they bluster and puff about in hopes of throwing off the currency attackers. They are in a losing position as Paolo points out. Nothing gets the juices flowing like lines in the sand. They have to have a plan for the entire string of piggies–all the way up the ladder or the wolves will chase them all the way to the end. The euro is surrounded by wolves and swinging the torch around in a circle only works so long. Eventually the wolves get more and more agressive and the attacks become more brazen.

So far it looks like their best attempt to date will be their announcement today/tonight. Anything hollow or doubted will be attacked ferociously or anything a little workable may have the wolves waiting and keeping their distance, following along. And if Big Al is correct than gold wins either way–massive QE or massive breakdown–time will tell.

Alan Millhone writes:

I want to see the US Dollar become King and overshadow the Euro et all.

I am bone tired of political correctness.

I build and remodel and rent apartments. Not an easy trade but one I understand. Not for everyone to be sure. Lumber has dramatically increased of late. One learns to not quote jobs too far into the future.


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