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Europe’s choosing the road less travelled | Advantage ‘zyaada’

The Crisis Advantage

Unlike the earlier lessons of Financial history when Europe had a hardly $300 billion sized market and LTCM broke down, this time around Europe is a substantial hub. Europe did not seem that chunky, even when global investors had to build developed market indices and create new ETF assets much like their foray in reforming, exploding markets in India, China and Bill Browden’s Russia.

In this crisis, however Europe and the Euro had used early circumspection to their advantage in browbeating the dollar to size with a financial market with Trillions in liquid treasuries, Trillions in ETF assets, traceable chunks of hot money, largesse from Oil sheikhs and even sizable , sporty purchases from the Russian Oligarchs. All that however, creaked under the weight of clouds of leverage. When the paths thus closed, Europe’s overarching response has been that of denial, come uppance and pandering to information that is allowing vicious circles of misinformation to spread and cloud investment / divestment decisions.

Further up on the road

The very ‘self sufficient’ and proud nature of smaller nation states may not preclude the further devolving of the crisis despite the $1T funded from bankrupt central banks and the new $440bn from the same governments. While pooling funds has been a good home grown advantage, the crisis solution now depends on a $100bn spending cuts from Germany, Spain, France, Hungary, Greece and Ireland among others. Financing growth would have been a simpler solution but this strange aggregation of nation states is otherwise afflicted with the belief in ‘Industrialised’ not needing ‘Change’ or Growth’ and thence falling to economic lacunae of welfare payments and ever increasing ‘public spending’ Even one mistake in allocation now deepens the likely deflationary spirals as it moves to improbable then probable on the Unlikely to Likely Continuum.

However, for global stability, it in fact might be welcome that there is this league of islands of nations forever tightening their belt even at the cost of cutting an arm and a hand, as everyone else prints money to grow its way out of trouble. However, it is unlikely that any of these states will be able to lead in economic philosophy, go-green initiatives & hydrocarbon savings or any other modicum of fiscal responsibility that might be ascribed to prudent spending and saving households due to the nature of spread eagled governments and the international nature of trade.

Also, we look forward to more tales from the muni markets and untenable commercial real estate loans, though the greedy banks in question have already bailed out.

One comment on “Europe’s choosing the road less travelled | Advantage ‘zyaada’

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This entry was posted on June 8, 2010 by in Amitonomics, Emerging Markets, Financial Markets, Global and tagged , , , .

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