Its easy to make massive amounts of money lately in Bond arbitrage against almost all Euro zone sovereign debt guilds.
And it has been so for some time now, with hyenas bleeding and feeding off the big Euro beast through thousand little cuts.
Arbitragers of bond spreads are not vampires of old but more like sharks in a feeding frenzy at the smell of blood or hyenas looking for easy prey. And its the easiest pickings the world over for large stable funds and hedgies with little to lose. Still wise arbiragers are only going after countries that no longer have their own currencies and are using the European Union currency as their own coin of the realm. One might be tempted to call them fools… Fools because these countries didn’t negotiate their interests properly when they joined the Euro and gave up sovereignty of their Fiscal Monetary policy and also double fools because they don’t have leaders who have balls. Further the whole of the European Union is hobbled by an incredible lack of Leadership with the Brussels ghost of Van Rompuy who isn’t even remembered by his own mother – yet pretending to be of leadership value. And the regional member states leaders are all minnows too – unable to decide to shit or get off the pot literally. So in this massive shite mound of indecision, the hyenas pick off the young uns and mortally wound the future of the herd.
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Because all nations of the Euro are hobbled in their response and can’t fight even if their Life depends on it. And of course the jackals pick on the lame the weak the young members of the herd and the upstarts whom the pack can’ actually protect with it’s collective hoof, claw and horn…
Take this metaphor that aptly describes the going-ons: Mrs Merkel the Swabian hausfrau is for the purposes of the metaphor the leading water buffalo with the greatest set of horns and the meanest looking bunch of young ones, the world has seen. And this Mama Buffalo is more than a march to the pack of hyenas looking for a kill and yet is unwilling to lead the charge to disperse the ravaging hyenas and protect the smaller animals in the periphery of the pack from being devoured whole. This small prey of the jackals is forgotten when the lead Buffalo sits around drinking in the water hole and no space is even made for the young uns to come closer to the centre of the pack for protection or to slacken their thirst…
And although She-Buffalo knows that her herd is mortally threatened and could disperse easily she does little except occasionally uttering guttural sounds and looking left and right constantly fuming and sweating profusely. She-Buffalo is scared and looks he part. She sweats for fear of consequence, because she still looks only after her own brood’s comfort and well being but never fails to advise the other members of the herd in fatal danger in the edges of the pack, to sit near her. And this is as stupid a piece of advise as a means of safety as any devised by human buffalo can be…
Because back in the jungle or even in the European savannah, the underlying logic is that no small, slow buffalo is safe if the leader of the pack is unwilling to lead and fight. What good is a pack of herd animals without leadership?
What good is a ship of state without captain? Same as sea going rats without a Captain Hook to lead and egg them on. Useless and ready to jump in the drink the moment Jack Sparrow arrives in the scene…
Same like the little European countries ready to default on their domestic bonds since they don’t retain the right to set the printing presses in motion and print more money… Yet it seems counterintuitive that bond markets, with their traditional fear of inflation, should punish a country for not being able to debase its currency.”
And the reason Europe has no real leadership is because the big horns didn’t want a real Leader at the helm of the European ship of state for fear they will be eclipsed in their own status of minnows. So now the Europeans are paying the price of their folly to have the first President of the Union not as a George Washington but as a George Bush without even the benefit of being able to decide anything at all. A non entity if there ever was one. And I hate to tell you, we’ve told you so but here it is…
Back when the European Presidency was to be decided by the European leaders, Mr Sarkozy, Mr Brown and Mrs Merkel chose this non entity over far more qualified leaders simply for their own convenience and status benefit. Understood. If you are short, you don’t choose a crane looking tall man as your partner in a photo shoot. So the small minded leads of Europe opted for the smallest creature available to lead the Union and also left the Portuguese Queen as President of the European Council. A sure fire recipe for failure. So now the chicken have come home to roost and the petit inspector Clouzo, Sarkozy, along with the German water she-Buffalo, Merkel, have a right mess in their hands.
It’s all gone pear shaped because Europe is rudderless. The Environmental Parliament had proposed the illustrious leader Vaclav Havel for the helm of Europe to serve as the first President of this iconic Union, same like a new George Washington for Europe. Because that is what Europe needed then and still needs today and will sorely need tomorrow as things get hairy…
There is no solution without leadership. All the answers stem from that. And although my friend Christine Lagarde claims that Mrs Merkel is the unofficial leader of Europe, the reality still stands that Mrs Merkel like all She-Buffalo never leads the pack of the herd. Because still in this primitive savannah – the meat locker of Europe – balls are required for the job. Nature be damned – some women have them and some don’t.
Lack of leadership is the reason why Europe is in such a mess. And that is the big answer to why we are left to bleed from a thousand small cuts, bites and scratches inflicted by the world’s finance community actually serving us a great big and useful lesson: “Get a Leader or be forsaken.”
All simple economics say is that countries on the euro are stuck with a severe competitiveness problem that can only be resolved with grinding deflation, making their debt problems worse.
On top of that, however, is the proposition that countries that place themselves voluntarily out of reach from their own money printing presses — are subject to self-fulfilling crises in a way that nations that still have their own currencies are not.
And here is the right leadership vacuum when the controller of the common printing press fears to lead for the benefit of all this members union. Because this isn’t a country social club with seniors and juniors but rather a union of equals and it’s high time they were treated as such. All citizens of Europe deserve equal status in the eyes of the European leader. Having no leader simply means there is none to speak of their rights. Understood?
And here comes the leaderless Union to a mortal dilemma: ” To default or not? “
This is what keeps She-Buffalo Merkel and Petite Inspecteur Sarkozy awake at night. Nightmares and fears of default…
And the sad thing about it is that these nightmarish fears act on the following day, by driving up interest costs, bond spreads and insurance and these in turn can themselves trigger default on their own accord. And there’s a crossing-the-Rubicon aspect to even a single member of the Euro zone union, going for the protection from creditors, through a default. Because once a country crosses that line it will probably impose fairly severe losses on all creditors who are mostly European to begin with, thus perpetuating the vicious cycle and placing the common currency at risk of default in it’s entirety. something that even the She-Buffalo can’t stop with a hoof in the breach and a horn up the kazoo…
And that a real bad creek to be stuck into without a paddle…
Whereas a country with its own currency isn’t in the same canoe at all. Even if it is pushed into some inflation, no red line need be crossed when the currency gets devalued and the litmus test is far longer and the bungee ropes far more elastic to bring her back up to safety.
That’s why America isn’t Greece, and why Great Britain is being foolish in imposing euro-zone-type austerity measures fashioned by the cameroonian Tories and the Lib-Dem cleggs. Because the UK now beds an expansionary policy. Much like a QE II for growth and economic development throughout Britain and maybe we should not forget Japan’s lost decades. Because Japan and it’s economic fate is an omen for other advanced countries. And right now only the Bank of England is showing the intestinal fortitude right now, holding on to clearly expansionary policies despite an inflation bulge it knows is temporary, but which nonetheless puts it under pressure.
So our friend, Mr Mervyn King shows the real leadership having the “stuff” lacking everywhere else around Europe.
And he does this quietly, by bucking the trends and being a strong contrarian Director.
Well Done.
Yours,
Pano
PS:
Only if Europe could get a single real leader to emerge from the shadows… Even a national one… One to buck the trend of lemmings.
And if Mr Bernanke could show the same backbone as Mr King, we could all be feeling better, right about now.
But then again the Governor of the Bank of England doesn’t fear being charged with treason, lynched in Texas, stepped on in Frankfurt, snubbed in Paris or vajazzled in Essex either…
