Wednesday, 8 February 2012

There are two serious threats to the future of the Euro:
  1. Angela Merkel
  2. US control of the IMF
Why is Greece not on my list? Well Greece always was a basket case in economic terms but what made this crisis was the delay in the bail-out which allowed to crisis to deepen and the markets to lose confidence. The head of the IMF had warned when they were called in that a rapid deal was needed and that the other members of the euro-zone needed to come to an agreement quickly.

The person who held an agreement up was Merkel, with France threatening to walk away from the euro she finally had to yield but now it is a much bigger task to protect the euro than it would have been a week ago. At home the opposition is using this crisis to weaken her government as she wants to impose tight regulation on trading. This is also leading to a big rise in anti-euro feeling in Germany. The FT warned yesterday about th consequences of this beggar my neighbour attitiude.

This attitude of acting in the selfish national interest actually is the real root of the problem and the reason for putting my second point. The US senate just backed a resolution 94:0 to prevent the IMF using its funds for any more bail-outs of Greece like situations. As the IMF needs an over 85% majority to intervene and the US holds 15% of the votes this means the IMF cannot now bail out Spain or Portugal if the go all Greek. This is given that the ECB helped the US when they had the sub-prime crisis that brought about the first crash. If we are globalised you have to think globally. All of the worlds currencies are currently devaluing because of Quantitative Easing and the debt problems. This is forcing up the price of gold and London property into another bubble.

So the markets have to ask themselves the question. If you do sink the euro what will the politicians do in response? Are you going to get lighter regulation? Are you going to be allowed to continue trading as usual? Is it going to be good for you in the long term? Right after all those NO answers go out there and do something useful and tell the politicians how they can undo this log-jam that you created by selfish greed.

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