Start the conversation
Comment on This Story
Or to contact Money Morning Customer Service, click here.
Very soon we will see if the old market adage "Buy the rumor, sell the news" is true.
While rumors of Europe's impending demise were momentarily shot down by an array of silver bullets, the actual news out of Brussels of a grand bargain wasn't... exactly... honest.
Let's call the half-measures agreed to by European leaders "Brussels sprouts," because they're more like "green shoots" than a cabbage patch panacea.
The leaders agreed to agree that they needed an agreement on how to more closely integrate their fiscal and monetary interests.
Yeah, that's what they said. I say good luck with that.
Actually, they made some other moves, too.
They moved up the date for the European Stability Mechanism to get funded (yeah, right), and promised to revisit the European Financial Stability Facility's financing so they could have twin facility spigots.
And - this one's my personal favorite - they winked at having European central banks make bilateral loans up to $264 billion (€200 billion) to the International Monetary Fund so the IMF could back Europe's central banks and the European Central Bank.
You just can't make this stuff up.
Seriously, there's nothing like a crisis to consolidate your power - which is what the Northern Europeans are angling for.
But for the life of me, I can't imagine a bunch of sovereign nations subjecting themselves to forced austerity, being taxed by technocrats (who, of course, will be non-partisan, non-xenophobic, nonplussed objectivists), and dictated to as occupied territories by the machinery that ground them down in the first place... and wants to keep them there.
What... You don't get that?
Here's a newsflash for you: The "new" rules about maintaining strict debt to GDP ratios and other my-way-or-the-highway fiscal demands are not new at all.
The same metrics for fiscal discipline that were lauded last week were already in place - it's just that no one followed them.
Everybody cheated... starting with the Germans themselves.
See, the whole idea of a "common currency" was a ploy by the Germans and their French followers to facilitate cheap financing across Europe so European politicians, especially the profligate PIIGS, could float ever-larger deficits to give ever-wanting constituents buying power to, guess what, buy exports from the Northern Alliance.
And it worked.
Now, with no place to go but debtor's prison (whose chief warden is the IMF), the PIIGS and others who lapped up cheap euro financing schemes won't be able to devalue themselves to make themselves more competitive.
So, while they are being told to tighten their belts and being taxed into no-growth (which will then demand "stimulus" measures), the Northern Alliance plans on enjoying a more competitive position in global markets by the pending devaluation of the euro. That will come about when the ECB eventually capitulates to likely quantitative easing schemes.
It's one thing for the leaders of Europe to try and lead the Union out of its crisis, but it's quite another for the people of Europe to capitulate to some foreign fiscal power. The Brits already said take a hike, and three of the remaining 26 nations that are supposed to be agreeing can't agree to anything until their parliaments vote on whether they agree.
Ah, there's the rub... Agree on what?
About the Author
Shah Gilani boasts a financial pedigree unlike any other. He ran his first hedge fund in 1982 from his seat on the floor of the Chicago Board of Options Exchange. When options on the Standard & Poor's 100 began trading on March 11, 1983, Shah worked in "the pit" as a market maker.
The work he did laid the foundation for what would later become the VIX - to this day one of the most widely used indicators worldwide. After leaving Chicago to run the futures and options division of the British banking giant Lloyd's TSB, Shah moved up to Roosevelt & Cross Inc., an old-line New York boutique firm. There he originated and ran a packaged fixed-income trading desk, and established that company's "listed" and OTC trading desks.
Shah founded a second hedge fund in 1999, which he ran until 2003.
Shah's vast network of contacts includes the biggest players on Wall Street and in international finance. These contacts give him the real story - when others only get what the investment banks want them to see.
Today, as editor of Hyperdrive Portfolio, Shah presents his legion of subscribers with massive profit opportunities that result from paradigm shifts in the way we work, play, and live.
Shah is a frequent guest on CNBC, Forbes, and MarketWatch, and you can catch him every week on Fox Business's Varney & Co.
Please check your facts. The whole idea of a "common currency" was invented by the French (Mitterand and Delors) and imposed on the Germans in exchange for the French agreement to the German re-unification when the wall fell. The German were practically forced to give up their strong mark.
This being said, I will welcome any scheme that forces politicians to return to sound financial policy. The current policies of increasing, year after year, the level of public debt, until in the end it reaches unbearable levels, is a road ultimately leading to self-destruction. If that means an international treaty imposing a budgetary straight-jacket, then that may well be the price to pay. Ultimately, this is a lesser evil than spiralling public spending followed by ever higher inflation.
It has been always apparent to me that the Politicians and their bureaucrats cannot realy achieve anything reasonable, effectively and efficiently. They appear only to know what to do when it comes up and bites them on the bum. Planning ahead for outcomes which the populace elected them for, using facts and efficient techniques is just not possible. After all Politicians are not trained to do what they do. Many of them are lawyers who just have the gift of the gab, If you analise what they say after a 'speech' they actually say nothing and in the long term achieve even less.
What to do? It is imperitive that you change the system.
You cannot rule top down, imposing regulation after regulation. You will get constipation. Nothing will move and nothing can change.
In our everyday lives the regulations that we live by are determined by the culture that we live in. Not by page after page of paper. In business, again we live in a culture of pleasing our customers in a moral and within a general legal framework.
Most of the regulations coming from Brussels and our own Civil Service are just not necessary. Yet if I worked in either Institution I too would produce reams of papers about a subject because that is my job.
The key is to change the way that the bureaucrats are taught to operate. You need to take an organisational model which has been proven to work over the years.
Why should the Public sector not work effectively and efficiently? Because they are trained to impose fixed processes which are difficult to change. The legal system still looks for a judgement that someone made in the 11th Century!
Who is training these people?What are they being trained to do?
Start at the bottom and work up. Train the leaders in effective management techniques of the 21st century not those based on top down historical systems of Kings, Queens, Pharoahs, Dictators et al.
The answer of course is a United States of Europe with U.S. financial and monetary structures. Ultimately continental sharing, eurozone stability, sovereign self-control march the Europeans more together than apart.
Everybody call talk until the cows come home… this kind of agreement… that kind of bail-out.. stimulus..etc..etc… but please, there is only one way out of this mess for everybody.. quick clean { and extremely painful} EVERYBODY… has to take their medicine…Instead of economic blocks ALL throwing good money afeter bad { all of this money has to come from somewhere…the taxpayer} All that is happening right now in the Eurozone and in Britain is that ordinary people are suffering the deepest austerity measures since the second war.. and for what??? so that idiotic governments who have borrowed up to the hilt and spent it where it did no good can carry on in the same vain { or are they so stupid… maybe they are in a marriage of convenience with banks, institutions and corporations with the most political clout} Either way.. the ordinary taxpayer has to foot the bill.. so which is the better proposition..suffer from these austerity measures indefinitely.. because everybody is in a position from which they can not recover { the Eurozone..AND America}… or simply say " sorry, we are insolvent, we can't meet our commitments.. we are bankrupt"..Catastrophe .. I hear you say.. but is it? sure..unemployment will rise… sure we will have high rates of inflation..sure we will have public services cut… sure it will be impossible to borrow money..if all this sounds familiar..it should because that's happening now and the only reason for it is the same bad management that got us into all this trouble..so ..if everybody defaults..currencies will collapse..that's a great begining for economic growth.. countries will be able to "grow" out of recession.but more importantly with a clean slate..in maybe 3-5 years instead an indeterminite period of repaying government debt { if it can ever be repaid}.. The Greeks are laughing teacakes { the government that is..why?.. they know that they can never ever repay their sovereign debt.. they know that as sure as God made little green apples, they will either leave the euro ..or get kicked out…they are laughing teacakes because they are fleecing the eurozone with bail-out money before they go.. and the bright sparks in Brussells are playing ball.. I never heard anything so ridiculous..!..sorry, I did, Ireland, Portugal are at it too…maybe evn Italy and France.. looks to me like everybody is jockeying for position for when the big bang comes… Good on you David cameron.. you inherited a financial mess when you were elected { Oh! sorry… you weren't.. more people voted against you than for you..} ah! well… at least you had the gonads to tell the Euro half-wits.. to do one