The pressure is building to push
Germany to do what they will not do. Spain, Greece, Italy and France are
trying to execute “check-mate” against Germany. Today, the European
Council website published a new…new plan.
This plan was drawn up by the
European Council President Herman Van Rompuy, European Commission President Jose Manuel Barroso, Eurogroup
President Jean-Claude Juncker and European Central Bank President Mario Draghi.
The new, new plan is the same old
plan except countries don’t have to agree to cut budgets before they get money, the money comes first then they
have to submit their budgets to a European Budget Authority that could demand changes.
Isn’t that what is happening
now? Except now the budget changes have to come hand-in-hand with
receiving money for bailouts or support in the bond markets by the ECB.
That is the rub; France wants money to “grow” their economy. Spain wants
money to recapitalize their banks. Italy wants money so they can enjoy
wine and spaghetti. Greece wants money so they can
The “new plan” also includes deposit guarantees across borders and supervision of all eurozone
banks by the ECB.
Germany wants to keep the euro
together because honestly, they are making out like bandits. As the
largest export country in the eurozone, the cheap euro is a boon to their economy. If Germany went back to the “Deutsche Mark” the value would rise because of the
relative safety and in turn slow their economy as their products became more expensive against weaker
Germany is learning the danger of
having so many “Presidents.” There are too many cooks in the kitchen,
all looking to put in their two cents worth. European governments also want to remove the “preferred status” on any
European Stability Mechanism (ESM) funds. This allows the money to flow for “infrastructure” or “growth” plans
without creating a two tiered credit market.
Italy’s Prime Minister Mario Monti
threatened to resign this morning if Germany does not loosen the fiscal requirements to gain credit from the
European Commission and bailout funds. Angela Merkel said there would be
no shared liability for debt as long as she lives. We will put our money
on the German.
In case you missed it, Michael Burry
was the keynote speaker at UCLA’s 2012 Economics Commencement. It
is 20 minutes long, but you will learn more here than watching Dancing with the Stars.
He is an interesting
guy. He graduated from UCLA with an Economics degree then went to
Medical School. He ended his medical career in 2000 and founded
Scion Capital. He was blogging about investments at night while
doing his residency. He attracted a following on Wall Street and
had money managers send him money to invest.
Burry was profiled in Michael
Lewis’s book “The Big Short.” Goldman Sachs created special instruments
for him to short the mortgage market in the run-up to the 2007 crash.Bloomberg has a good profile show on Michael Burry if you would care to learn more about this
mailbag: “Get It Over
With” was another wonderfully crafted message, full of common sense, and much needed
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