Wednesday, January 7, 2015


Writing about the travails of Europe he past few days one thought kept pooping into my head.  Is there anyone left who truly believes the monetary union can succeed?  Draghi of course comes to mind  but looking at his pronouncements and actions (or no actions) of the past few weeks I feel more and more that the guy has given up the ghost and is merely going through the motions.  He looks tired, sounds beaten and by any form of judgement, faces an almost impossible task.

The continent is broken.  The gulf between the creditor nations of the north and the debtor nations of the south is widening.  In December, Spain fell into recession whilst Germany continue to grow with an unemployment rate falling to 5%.  The Euro has fallen to its lowest level in years which only increases Germany's export position and noes nothing for the south whose economies become more and more internalized and who's indebtedness inexorably grows faced with an inflation rate in the negative range.  The 10 year Bund yields below 0.50%; the 5 year actually traded to yield in negative ranges today pulling down yields in Italy and Spain to be sure but that is meaningless in a no growth, no inflation envirorment.  It is clear, now, that China has massively over invested so no help there and even the stunning decline in energy means little.  Sr. Draghi may have reached the end of the road.  More importantly, he may now be prepared to accept defeat.

Oddly, German prospects, may also be facing a reversal.  Over the past year, German exports to Europe have experienced a little noticed change.  The market for German in now the U.K., not the members in the EMU as has mostly been the case.  Angie landed in London today which is hardly a coincidence and what comes out of this chin wag may have more importance than people realize.

Cameron needs help.  The up-coming election is far from the sure thing that many commentators, including myself, thought it would be a year or so ago.  The result is in no man's land, and yet it is not altogether clear what Ms Merkel can do to move the momentum in Mr. Cameron's favor.  However, one thing she must understand the one thing Mr. Cameron can do is to make good his threat to take the U.K out of the EU.  That would probably  result in his victory and write finis to the great experiment.

I have more thoughts on this overall situation but right now my eye sight is giving way.  Forgive me, but I need to close and return after a bit of rest.  Stick with me.

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