Wednesday, February 18, 2009
more on eastern europe
I would offer that ... major European nations face a very real and looming Sophie’s (or should I say Nicholas and Alexandra's) choice – either help bail out their troubled EU brethren, and thereby risk burdening their own domestic economies with significant new debt; or let the other nations fail, and risk the collapse of the EU.
Now, I'm sure there are some reading this who would say there is no choice - the strong must save the weak. But I would offer that, in this environment, that may be too quick a conclusion - one need only look at what's happened to Bank of America (BAC) and Wells Fargo (WFC) in the aftermath of their bailouts of Merrill Lynch and Wachovia, respectively.
Ordinarily, size and reputation would delineate the strong from the weak. But in these turbulent times, a great many lifeguards can be, and are, drowned each year trying to save drowning swimmers. (That's why, here in the US, there will be no more large scale bank mergers.)
Eastern European countries are on the verge of collapsing, 1990s Asia-style.
If they go, countries like Austria are likely to follow - and just look at Austrian sovereign CDS rates if you don't believe me.
... Gold is telling a story. It's not an inflationary story per se, rather the story of the impending demise of fiat currencies. The only instrument countries cannot manipulate are their currencies.
If you read my final comment on the 'rising treasury yields' post I'm curious whether you thought it was potentially accurate or way off base in some way. If you tell me the latter and leave it at that I won't be offended :)
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