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  • Future Euro crisis

    The question revolves around France.

    To give the background that makes me ask the question. A very long time patient of mine was in the office today. He is in every year almost to the day like clockwork. A extremely intelligent guy who is turning 65. Got his engineering degree from Cal Tech. Played B-ball for Cal Tech on top of that. Then went to grad school at MIT for his MBA with a qual background as he puts it. This compared to the guys up the river who do more talking. Never see him without a Wall Street journal and he is currently the CFO of a silicon valley firm.

    Last year we talked about Greece, how would the vote go and would the country pull out. He was of the opinion that the vote would turn out exactly the way it did. Cypress momentarily came up before he told me the next country to start asking the IMF, World Bank and whoever else for a loan would be France. Asked him his thoughts on the time frame and he answered 2-3 years. Not much over here in news about France but what is known about France over there and his prediction?

  • #2
    Seems Greece #4 is looming first... the 'peripheral' European gilts having risen subsequent to King Bernanke's 'taper talk'. Moar bank refinancing is getting harder as ESM support has been limited to 60bn euros and after that bond holders, share holders and depositers get 'bailed in'. Plenty to cover another short term fix for Greece perhaps but can anyone still say with a straight face that this mad exercise is keeping insolvent banks and their sovereigns half alive has been a success? Cyprus will need another haircut or head chop next year almost certainly.

    Regarding France the fundamentals are ominous; they are in recession and facing the same pressure to resolve their deficits to the 3% level as the others. They resent this naturally as in their minds they planned the EU and particularly the euro as a means for them to control Germany post reunification. It is therefore a nasty surprise to find the dog they bread biting them because the Germans have been feeding it. M. Hollande is an imbecile at best and a liar of some standing who was elected with the promise to create 60,000 new teachers and reverse austerity. It's unclear that 60,000 new teachers were ever needed but they have not materialised while retirement age has been lowered leaving an even greater hole in the pension fund (which he is thinking of stealing anyway) and taxes on the wealthy have been raised - forcing them abroad. There is now a French MP who represents London because so many French people have moved there. The result is that tax revenue continues to decline and M. Hollande, bound by EU spending policy constraints, and monetarily by the ECB/troika policy of "we only bail you when you're dead" cannot perform a l'Obama/Bernanke. No stimulus that he promised is possible and they gave away the magic money machine to the ECB. France is a Greece in slow motion. LTRO #3 is likely to be unfurled end of this year/early next unless some miracle saves them. I should imagine that miracle comes from King Ben at the Fed who get's onto his magic money machine again and says "abracadabra moar!!" and 'saves the world' (or delays reality still longer) like the hero he is/n't.

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    • #3
      When he made his comment about France, he also informed me that he had received a call from the French Minister of Economic Affairs (have that right?), asking him if he would consider opening a plant in France. He informed the Minister that he was most uninterested in doing so.

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