- A Euro 'Hard Landing'

I think this is an excellent article from ZeroHedge, with a few caveats.

First, anyone that says they think Greece should leave the euro is either a fool, or they're trying to make a political point. Greece should not leave the Euro, because if they did, the hammer of the financial markets would instantly fall on Italy, then Spain, and Portugal, and Ireland each in turn (although maybe not in that particular order). Some elements of the German political elite seem to believe that they can expunge Greece and keep both the Euro and their competitive export advantage but it ain't so. If anyone is leaving the Euro it's Germany. Letting the Euro become the 'Italian Lira' of southern Europe, is all the markets will allow.

Secondly, with the speed at which the situation in Greece is degrading, a 'hard default' (a Lehman moment) in 2011 is quite likely, and if not...then in 2012 it's all but assured. The only real question is whether the rest of Europe's political elite can get something together in time to save everyone else. Greece is finished. All further discussions should start there.

Thirdly, in some ways this reminds me of a game of poker between actual reality (represented by the markets), and 'political reality'. Neither player has much of a hand but they'll keep raising the stakes until something bad happens. Something bad happening in the markets is a hard default, a banking failure, and a severe economic slowdown ala 2008. Something bad happening in the 'political reality' is violence.

I believe we're past the point where both can be avoided.


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Oh jeez I almost forgot.... UBS agrees with me.