Euro Swoons.
Spoke Joe Brusuelas, Brusuelas Analytics, and John Tamny, RealClearMarkets.com, re the swift decline in the euro and sterling against the US dollar -- which eerily seemed to be happening in real time as we spoke. The euro moved right through 1.23 and the pound right through 1.44, while the Canadian loonie strengthened against the dollar, demonstrating that while the US looks like a sanctuary from the euro dreamers, it is not as firm a currency as the asset-based loonie to the North. The euro crisis is now said to be a sovereign debt crisis -- to be distinguished from the credit crisis of 2008. Which countries must default and who wil pay for it? We debated if the Fed is paying for a bank bailout in Europe. There is a bank run, and the way to halt a bank run is to pour cash into the system and not fret about leverage and risk-management. The Asian markets all plunged in conjunction with the euro and pound.
Euro Plan B.
Am told that the preparations are in place for an alternative universe of Northern Europeans - London, Berlin, Scandanavia - that will jettison the PIIGS and move to a fiscal house with sharp discipline. London aims to be part of this enterprise if and when it corrects its own budget ruination. London now begs Berlin not to be left out of the rescue vessel. The new PM Cameron has no room to maneuver. Cameron must force state job cuts, give-backs, severe reduction in welfare benefits and health costs, the sort of emergency diet that kills off the patient. Cameron must hurry and take on his enemies pronto, or see the UK treated as roughly as Greece.
Jobless Banks.
The impact on the US will be a reduction in earnings per share on the exporters and a corresponding reluctance to grow and hire. The mood will darken. What we will witness in Europe will appear to be a recession without much of a safety net. The European purchase of power will decline, and this will cut into the profit margins in Asia, especially Japan. Canon is off now because 30% of its sales are in the EU. Oil declines because of the expectation of less demand in the EU, even given the driving season. And this all assumes that the PIIGS will accept their fate as beggars and marooned dopes. And what of the French and German banks with exposure to the sovereign debt? Bank runs. John Tamny mentions that some American banks now believe they rehired too quickly before the euro crash.
Drachma.
The wit of the weekend was that the Europeans fathers (and Margaret Thatcher) chose the euro because they figured they were getting the Deutschemark. Instead they got the drachma. The French banks who shoveled money into Greece must now consider the next years of being paid off in olive oil and whining.
Keynesian economics is dead, noone will acknowledge the fact.
Kicking the can down the road, and hoping for better economic times will not work.
Nobel prize winning economists are ignoring the obvious.
Time for an intervention and twelve step program.
true that
It’s sad to watch the former Empire (on which the sun never set) strangling itself even further. Unlike America, the voters there have not yet formed a clear consensus as to the best way forward. Look for infighting and gridlock as outside events will no doubt continue to heavily influence the political narrative. While it is true that the ruling class has been toppled, its replacement will likely find itself without mandate to tackle all the internal and external challenges facing the country. Suddenly deprived of the roadmap a heretofore dependable ally was happy to provide, Britain will find itself alone to work out its problems.
Clearly, Britain can no longer depend on even minimal tea and sympathy from America. Obama has made it clear that the fortunes of Great Britain are no concern of his. Its leaders must now find their own way. Whether this means teaming up with Russian-German axis or going it alone still remains to be determined.
If Britain should choose to go it alone, the choice is between bringing its own fiscal house to order or depending on the Keynesian model that promises much; but, in practice, has never had much to show for itself. The most likely outcome will entail a series of compromises that will nevertheless steer the country further left and to increased fiscal vulnerability. Social instability can also be expected to rise.
Sad to see Brown go. Gone are the leaders who ended their tenure with the vengeful intrusion of old age. Gone are the days when certain closure (death) necessitated the taking of a new direction. It wouldn’t surprise me if in a few years British voters were to once again clamor for Brown’s return. Such is the warm reassurance and comfort inspired by the re-appearance of a familiar face – all sins forgiven.
Oddly enough, for Britain and countries around the world, the example may once again be set in America, where Barack Hussein Obama will likely show no sign of ever leaving.
http://peterkoelliker.blogspot.com/
London is calling and I, I live by the river .....
Thatcher was a walking mandate.
That's Baroness Thatcher Lou!
"Mister, we could use a man like Margaret Thatcher again...."