Tuesday, June 28, 2016

Europe Is In Trouble
"I’ve often expressed concern over what I see as an untenable structure underlying the European Union. There’s certainly merit in promoting flexible trade among European nations, and in the ideal of a common European identity. But the additional fact is that Europe is virtually unequalled in its economic and cultural dispersion. It includes some of the strongest but also weakest economies in the developed world, with diverse languages and deeply-held cultural identities that are immediately invoked by the names of each country - the United Kingdom, France, Italy, Germany, Greece, Sweden, Ireland, Poland, Spain, and many others. These individual national identities are not unanimously seen as insignificant relics, and it is a source of greater discord, not less, to imagine that they don’t exist. Nor is it reasonable to assume that the same fiscal and monetary policies are appropriate to all of them. Probably the most poorly structured element of the EU in this regard is the euro, which binds many (though not all) of these members together under a common currency. A stable common currency requires that its member states pursue common fiscal policies, and presumes that a common monetary policy is appropriate for all of them. This has been a disaster for Europe. The clearest symptom of this untenable structure is the European Central Bank under Mario Draghi. The blindly frantic 'anything it takes' monetary dysfunction promoted by the ECB has enabled the development of massive sovereign debt burdens, Humpty Dumpty banks across Europe (with Deutsche Bank being the most leveraged among major institutions, and Credit Suisse not far behind), and negative interest rates across Europe, with the ECB now buying the bonds of even private corporations."
- John Hussman
LINK HERE to the essay

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