Pulled up the blog today in preparation of my last post before I'm off fishing tomorrow. To my horror I discovered that the last two paragraphs never made it into print. I've spent hours trying to retrieve then all to no avail and have come to the conclusion that I had better start doing better with my publishing as the problems over the past few months must be mostly of my own doings. Once again, apologies. I'll try to do better.
Anyway, what I was trying to get at is what we can expect over the coming months and what intelligent steps might be taken to straighten out the mess that the Euros are creating for themselves.
Iy seems to me that the first thing one must do is to decide what it is that one wishes to accomplish which so far has yet to be done. At the present time we have an impending crisis in the debt profiles of a number of sovereign countries, which could--it really hasn't happened yet--expand into a full blown crisis of confidence in credit markets much like that which occurred in 2008. The one HUGE difference this time around is that we have seen this coming from a long way off and we have had time to consider solutions...not make things up as we go along. Unfortunately, a good deal of the latter has been done and very little of the former.
So far, this has been considered by the market as a whole as a European crisis but that could change rapidly. Lets stake stock of what has occur ed and where we are today
1. Four countries are basically involved: Greece, Spain, Portugal and Italy with Ireland and sitting on the fringe but Ireland moved early.
2. Greece and Portugal do not really count on their own; they are too small. It is the relationship or "contagion" of the remaining states that is important if the problem of a single state is not solved.
3. The well-know dichotomy of a political union having a single monetary policy but multiple fiscal policies has been discussed ad nauseum...ignore it, it isn't going to change or be fixed.
4. The big players, Germany, France and to a lesser extent the Dutch (the Brits are not players by their own choice) could care less about Greece as a viable nation. Their only concern is how it effect their own body politics.
5. The French and the Germans have one mutual common interest, i.e. the health of their national banking systems and diverse mutual interests, i.e. the stability of the Euro and of the EU which could flip-flop in a heartbeat...or certainly as a result of German Parliamentary elections. Every decision made so far have these interest in the forefront and NOT the viability of a Greece as a nation state and certainly not as a member of the EU
The problem is, the course of action taken by the French and the Germans has, to a great extent, ignored the views of that shadowy thing we call, "the Market," who could care less about all of the above and remains solely interested in situations that allow it to make money by exploiting either systemic opportunity or man-created opportunities. In linking the rescue of Greece with the salvation of the French and German banking systems and the stability of the Euro through this multinational grab-bag of lines of credit, the main players have given the Market an opportunity to make a value judgement and that judgement is too little, too late, too poorly focused and too lacking in permanency to accomplish the undeclared, but well-understood, goals of its authors. The result? In attempting to save what probably cannot be saved...the credit outlook of the respective banking systems and the stability of the Euro, the gruesome twosome have probably exacerbated the problem and made the rescheduling of Greece (and if Greece has sprung who can be but far behind?) and the further collapse of the Euro inevitable. I fear we are looking at the toothpaste splattered all over the bathroom sink: getting it back in the tube is a mug's game.
The good news is that is the boys recognize and have the guts to admit their mistake, we can deal with Greece fairly easily and with minimum loss to all concern...although there will have to be some loss in order to make the effort credible. The other good news is there are a hell of a lot of people still around who not only understand what has been going on but have the experience and know-how to fix it...including the distinguished author of a mid west blog site. Just not next week as NOTHING interferes with the quest for the Blue Marlin. But keep this Market guy in mind: Keep providing him with opportunities and he is going to take advantage of the same. At this point it is really simple to make what has become silly and unworkable ugly and dangerous. The Market knows how to do that just as some of us know how to fix it. Fait vos jeu...and don't waste time doing so.
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