mardi 1 juin 2010

Euro Viability and the Quality of Decision-Making

Many of the present difficulties experienced by the euro are the direct result of the European Central Bank's reprehensible attempt to assume responsibility for proping up junk Greek and PIIGS bonds. Until clear-cut, debt restructuring is undertaken, allowing foolish lenders seeking high interest returns, and profligate spenders to suffer the consequences of their own irresponsibility, we can expect the crisis to continue to spiral out of contrlol. Eurozone financial 'leaders ' have raised the stakes unncecessarily high,, in effect betting the viability and solvency of European financial institutions on the behavior and perfomance of economies and governments with a poor track record. All tihs in the absence of adquate contrls, regualtion and penalties for thsoe who transgress the rules.

Unfortunately, European 'leaders' have led by example, and their track record since the founding of the Eurozpne has been deplorable, including the behavior of Germany and France. Is there any wonder that financial markets and lenders have little confidence that Euopean policicians mean what they so piously say. Would you trust a persistent liar, or someone who makes pious promises in writing only to break them the moment such promises prove inconveient? Can you trust an ECB that has obviously acted to protect foolish over-extended bank lenders, including French and German banks that have made doubtful loans to Greece and the PIIGS, rather than protect the long-term stability and value of the euro and the long-term integrety of the Eurozone 's political and financila institutions?

The problem is not the performance of European economies, the problem is the performance of Euroean decision-makers, (even when they don't obfusticate, and avoid decisions). Expect the Euro to survive, despite European 'leaders ... and expect the relative value of the US dollar to ultimately reflect the poorer fundamentals of the US economy the moment the Eurozone appears to be getting its act together.



Link:
http://online.wsj.com/community/groups/market-view-845/topics/do-you-expect-euro-further?mod=djemcomnewtopicingroup&mg=com-wsj

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