Bite The Bullet

Moody's just lowered the rating outlook for Germany, the Netherlands and Luxembourg to negative (currently AAA) because of the ongoing debt turmoil in Europe's South.  In other words, Mrs. Merkel, if you force a starvation diet onto your trading partners it won't be long at all before they stop buying BMWs and Miele washing machines.  Fiscal rectitude can go way too far, when imposed at the long end of a dogma stick.

It's time to bite the bullet and face facts: the EU is not a federal union a la USA.  Instead, it is a theoretical construct created by political and idealistic visionaries who had enough of perpetual bloodshed in Europe.  As such, it is irreplaceable and should never be allowed to fail because a bunch of short-sighted hacks cannot create a workable common monetary and fiscal policy.

Bottom line, once again: Spain and Italy, accounting for 22% of the EU's GDP, are now falling apart. It is plainly insane to think that the euro will survive Grexit, if it happens.  And it is certain that the EU itself will not long survive the demise of the euro.

...Time to bite the bullet...

Just A Quote

"Democracy destroys itself because it abuses its right to freedom and equality. Because it teaches its citizens to consider audacity as a right, lawlessness as a freedom, abrasive speech as equality, and anarchy as progress."

Isocrates, an Athenian orator ( 436–338 BC)

I dedicate this quote to all EU leaders:  Wake up ladies and gentlemen, they smoked you out THOUSANDS of years ago.  You can't keep on abusing "democracy", hidden behind the smokescreen of popular opinion...

The "Real Economy" Makes The News

Well, darn it!, I feel vindicated at long last... I've been harping on the need to focus on the Real Economy (tm) for so long in this blog, I was beginning to feel like a "nut".  

Lo and behold, Reuters just ran an article on the theme: Crisis forces "dismal science to get real".  Out go "rational expectations", "supply and demand", econometric formulas, etc. and in come... Argentinian ants, of all things (read the article).

 As Real As It Gets, Apparently..

Here's another "shock" from the Reuters report: testosterone levels in human "players" are more important than risk-return analysis (duh.. anyone who's been around a dealing room/trading floor could have told 'em, several dozen years ago, even).

Mmm... better lay off the bug spray.  It may prove dangerous to your (financial) health.

One Picture Is Worth A Thousand Marks (or Merkels)

Given what is going on in the eurozone at the moment, it is worth it to point out that the biggest beneficiary of the euro is Germany itself - and by very, very far. 

Data:Statistiches Bundesamt

The German Economic "Miracle":  It's All About The Euro...

And where do Germany's surpluses come from?

Data:Statistiches Bundesamt

A full 41% of Germany's surplus comes from France, Italy, Spain and (gasp!) Greece, where Germany is still exporting like gangbusters despite the poor country being in its fifth year of recession.  In fact, Germany's trade surplus per person with Greece is 3.6 times bigger than that with the U.S. (290 euro per Greek versus 81 euro per American).
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.... and something totally unrelated, but still in the subject of "one picture worth a thousand..."

Photo Credit

Shanghai 1990

Shanghai 2010