First €xit
Where do we go from here? How to play it.
“Time has sharp teeth that destroy everything” —Simonides
Every macro guy knows that the introduction of the Euro caused bond yields across the Eurozone to converge — planting the seeds for the European Debt Crisis of 2012.
But did Europeans learn from this? No.
The founding of the European Stability Mechanism (ESM) and its assistance programs (i.e. bailout packages) together with ECB debt purchase programs once again unsustainably pushed the cost of borrowing down, planting the seeds for the next crisis.
What if this one could be the EU’s last?
Let's have a look at how (this is a working thesis) the Euro can hit ~0.9 to the US Dollar while Eurozone members blow up one by one…
Remember Greece in 2012? Spain? Italy? They were bailed out by a combination of ESM assistance and/or ECB intervention. The big idea was to allow these member states to buy some time and make the proper adjustments.
But there was no adjustment, in typical Greek Mythology-mode the only country that achieved a worthwhile adjustment was the one that took the most grief — Greece.
Other countries were allowed to proceed with their delusions about growing out of debt and twisted Keynesian policies about ROI on government expenditure. (Remember my work on Japan? LINK.)
The thing is, they buried their problems under the rug, and now the problems are creeping back up with a vengeance.
Current State of EU Finances
Are the citizens of Europe willing to go through the adjustment that will be required to cut to size? ❌