Coffee And Markets - More Euro Socialist State Doom

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Coffee And Markets: With Spain on the Brink, Euro Troubles Continue:

Original audio source (CoffeeandMarkets061812.mp3)

Synopsis: The Greek election result is a shot of morphine to the market and Spain holds the EC hostage with the size of its debt bound crashing economy...




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The Failure of Liberalism That Underlies the Euro as Expressed in Word and Chart...

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American Thinker:

The plain and simple fact is that the euro's failure is about more, much more, than the euro. For it is not just the euro that is failing, but the entire liberal, elitist worldview that underlies it. That worldview, in a nutshell, is the notion that human nature is as malleable as a lump of clay and that any utopian society one can imagine can be created in the real world simply by writing it down on a piece of paper and voting for it.

It is that failed world view that can be seen contrasted between the more liberal European nations and the less liberal.  But that is often political.  That line of demarcation in economic terms invariably comes down to whether a nation has adopted Keynesian Economics or not.


Below we see the European nation graphed such that vertical movement represents surpluses and deficits while horizontally we see the debt load relative to GDP of the same nations.  (click expanded data for a larger view)





Notice Bulgaria's rapid shift to the left as it shed debt prior to the crash and how little it shifted back to the right during the crash.  Estonia and Luxemburg too eschewed debt both prior to and during the crash.  Each are now rebounding from the crash free of the burden of debt.


Contrast that with the more Keynesian nations of Europe.  Note that few rarely enjoy surpluses and when they do, Spain, Ireland, and the UK for example, do  so via a private sector expansion in debt that created the appearance of growth while eroding those nations ability to weather economic shock.


That faux-growth was good for the politicians at the time but bad for the nation later and worse for those that have attempted to credit their way to prosperity.

Keynes and liberalism have in all likelihood killed the euro.










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Daniel Hannan - Hey, Didn't We Just Have a Stress Test?

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Daniel Hannan:

It was only last July that we had the stress tests of all the European banks and we were told there was no problem in Spain, certainly none that the national government couldn't look after.

I find it difficult to accept that anyone really believed the results of the stress tests.  All I can assume is that Europeans must be really well trained to believe bureaucratic drivel.

Does that not put them a step closer to fascism? I believe so. In fact a healthy skepticism of governance is, well, healthy despite what our liberal friends believe.




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Watch the Keynesian Bubbles Dance to Indebtedness and Slide to the Right...

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...while only one dances to the market.



With the exception of Estonia, the only European nations to show surpluses prior to the crash  did so with the accumulation of private debt while others only managed to minimize their deficits via a similar accumulation of  debt.  In either case  all but Estonia massively weakened their ability to tolerate an economic boxing about the ears that came later and in an effort to keep from dropping off the above chart slid toward the right, toward further indebtedness.

It is clear that  socializing private debts will not only set the stage for a repeat, but doing so within  nations already strugging under high public debt loads  allows private debt to become the small bombs that, once socialized, create national bombs, and those national bombs, once socialized across the EU, will create an EU bomb.

There is more debt across the member EU nations than can be absorbed by the EU.

But that is the European dance with credit.  It is, however not Estonia's dance.  Rather than a slide to the right,  toward the burden of further credit,  Estonia chose to crouch and leap into growth and credit free surpluses.





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Feel Good Euro-Deal-Reached Headlines for the Headline Set...

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Article title: "Wall Street rebounds after EU deal, but more stress seen".

Oh! There has been a deal? Let's see what the article says:

An agreement on stricter budget rules for the euro zone went someway to address the structural problems behind the bloc's debt crisis, but investors said more was now needed to relieve stress in the region's troubled debt markets.

"Nothing really concrete has come out of that meeting yet, so it is a little surprising that we are seeing as much of an upturn as we have seen," said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Illinois.

And little later in the article:

The EU summit failed to secure changes to the EU treaty among all the member countries and investors warned the move was far from a panacea. Indications suggest the region is sliding into a recession and questions about how to bring down high sovereign debt yields are still unanswered.

And the market is up some 200 points.
Your call.







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Even the Cheeleaders are Bilnking...

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Cramer, here, describes the Euro credit crises in "terms that we can all understand".

Consider all these countries you hear about, Italy, Spain, Greece, Portugal now Belgium. Consider them like small retailers like my dad.They spent too much on their budgets, now they can't afford to pay their bills....  The banks are stuck with credit risks in the form of bonds and the countries can't afford to pay them back...

DefCon 3.

The Euro created economic linkages between fiscally unsound nations and generally sound nations that allowed credit markets to view unsound nations as if they were sound nations. The assumption has been that any national default within the EU would be absorbed in an effort to protect the Euro and hence any debt owed the sound nations denominated in Euros. Credit risk was spread.

Via the Euro Germany and France extended their credit worthiness to member EU nations; they acted in a very real sense as cosigners. Now they are absent cosigners, but who can blame them. Where a single default would have been fiscally possible if not politically possible, multiple defaults are neither.

So, if not for that pesky political hurdle of democracy in member nation, the EU could have taken advantage of what was once fiscally possible and regained its fiscal footing. Obviously the solution going forward is that member democratic nations should cede further sovereignty to non elected EU technocrats.

It seems that the people of Europe will either suffer from too much patriotism in the form of nationalism  or too little in the form of the EU.

Democracy is an elusive thing for some.



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