Monday, January 26, 2009

A short note on Europe's economy 

The media and Europeans have tended to blame America for the world financial and economic crisis -- I saw Tom Friedman do it just this weekend -- but the story is more complicated than that. Europe is a mess. From the Strafor weekly "guidance" letter (sub. req.):

Banks are snapping like matchsticks in Europe, and protests are starting to erupt with Chinese-like regularity. The recession is hitting Europe far, far harder than it has hit the United States, and more and more damage is being uncovered every week. This past week pundits began to openly suggest that major states might default on debt or withdraw from the eurozone. We don’t see things as that bad (yet), but the point is that this is the first period of real economic stress that Europe has experienced since the euro was formed 10 years ago. This is Europe’s time of testing. Things will break; it is just a question of whether they will break so badly they cannot be mended.

Combine that with a declining and aging population and no real leverage over Russia and other powers on its periphery, and you have to wonder when Europeans are going to get worried enough to change what they are doing in some fundamental sense. History teaches that European turmoil is not something to wish for, but that does not mean that we ought to ignore the possibility of it.


By Blogger davod, at Mon Jan 26, 02:11:00 PM:

I read somewhere (It might have been here) that there was an effort to revise the start of our downturn backwards so that it started before the EU problems. This way everyone can blame he US. More specifically the Bush administration.  

By Blogger Muddy Waters, at Mon Jan 26, 03:47:00 PM:

I sure would like another post by Cardinalpark. Its been a quarter since his last post on hedge funds. Losses piling up faster than redemption requests.

Random though: Anyone know what kind of returns Avenue Capital Group is showing? 'distressed debt ... in Europe' HA!

Seriously though, gold is over $900. Are the wealthy still running for cover?  

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