Tuesday, December 20, 2011

- The "Unthinkable" Euro Breakup

A lot of the Euro-crats have declared the breakup of the euro an "unthinkable" concept. But the nearly universal reaction of those of us in the finance markets has been to say "Well we're thinking about it, so I guess it isn't unthinkable after all." But what if we're making a categorical error here? What if they mean that it isn't an unthinkable concept for them, but instead are telling us that it should be an unthinkable concept for us?

What if they're actually trying to tell us that we aren't allowed to consider it, and if we do we'll be punished? Suppose they mean that they intend to co-opt the banks and the financial markets as much as is necessary to make them say what they want them to? What if what they're saying is that they have absolutely no intention of allowing the Euro to breakup whatever the cost? Every day that ticks by, one more pleb gets bored with the story. Every time they add another layer of derivative complexity to the funding plan one more journalist gets confused away. Pretty soon they start calling Eurosceptics 'maniac's' in the Euro friendly leftist media, and then it's all down hill from there.

We in business are goal oriented, but politicians are not. We look at the Euro and rightly say "This can't possibly go on for ever." But maybe it doesn't have to last forever... it only has to last longer than us.

Maybe the temporary patch has become a permanent policy, where nothing ever gets 'fixed'. Look at Japan, entering it's second decade of being broken. When we look at that situation we see a an economy that has spent nearly an entire generation hobbling along, barely keeping up. Lackluster growth, sclerotic personal income and minimal opportunity for anyone have just been something the Japanese have gotten used to. It's a limp, lame, sickly thing the Japanese economy.

But that's not what they Euro-crats see when they look at Japan. Instead what they see is a docile populace that is grateful for whatever crumbs they're given by their betters, and is supremely ready to be ruled. They see a population that has learned to cope. That's precisely what they want in Europe. Much has been made of how it's impossible to get the northern and southern Europeans to take an equivalent view of the world. But according to the Eurocrats, the Greeks and the Britains, and the Lithuanians don't have to feel the same, they only have to act the same.

These are not people who will ever accept that markets are an objective lens through which to view reality. They are people who believe that they must "reestablish the primacy of politics over markets", and 'reality' be damned.

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