Friday, June 1, 2012

Reality Check

Don't worry! A solution is coming I just can't tell you what it is.

Energy and economics have much in common, in fact economics is just a system to organize the exchange of energy in the form of trade. Today however I discovered another commonality between the two: analysts of both are now using "human ingenuity, human importance, human greatness", etc to convince you there's no reason to worry.

This gem crossed my desk today. 'Eurozone crisis: Seven reasons to ignore doomsday predictions'. It includes this amazingly insightful statement:
By this point next year solutions will be in place for a Europe more united and prosperous than ever.
Sound familiar? Is this not the same crap we've been hearing for 4 years now? If you remember, first it was just Greece's finances, and now Greece can't even keep their government together. World-wide job data hardly signals a "recovery" in any shape or form, and any growth which does happen is insignificant compared to the rapid debt expansion occuring.

Further remember that 2008 was just a banking collapse, but the problem today is much more severe. Emergency easing is just standard practice now. It is now entire countries on the verge of default, and yet somehow things are looking up?

Yesterday you'll remember I posted a presentation by a top hedge fund showing a highly likely scenario of not just a Greece default, not just a European collapse, but widespread global defaults from europe, to Japan, to China, to the U.S. Canada wasn't included in the list of countries on the verge of default but just think of what a default of the European, Japanese, Chinese, and United States economies would do to ours. Right now it is not possible to forecast the effect on Canada as this is an unprecedented economic collapse.

So why is this author so sure it won't happen? Well...
1—Europe is the world’s biggest economy, accounting for 20 per cent of global GDP, or $16.2 trillion. It is in no one’s interest, in Europe or elsewhere, for the EU or the eurozone within it to disintegrate. Prosperous Germany, an export-driven economy with a jobless rate lower than Canada’s, sells most of its wares to other EU members. Like Germany, exporters like China, America, Japan and Canada all have an enormous stake in the restored health of the EU.
You can sum up number 1 as "we really don't want it to happen". Well no shit. We didn't want a global recession either. We didn't want Fukushima to blow up. We want global growth to be through the roof right now. Are our interests and stakes in this problem making it go away? No, its only gotten worse. Lesson 1 for the author: what we want doesn't matter - reality dictates events.
2—Among other blessings, the advent of the eurozone in 1999 has boosted job- and wealth-creating trade among its members. It has kept inflation low, eliminated currency exchange risk, and integrated financial markets. That has brought a long-term stability that business craves.
The re-emergence of London as a rival to New York as world’s leading financial centre has been one of the more conspicuous results. Less noted was the common-currency euro made impossible any attempt by Europe to react to the Great Recession with the currency devaluations and protectionism that proved ruinous during the Great Depression.
No, there hasn't been any inflation, devaluations, or anything like that. Well if you discount food and energy, and well.. who needs that shit anyway? Oh, and as long as you discount all of the money printing. Oh and you better forget about those IMF loans too funded by U.S. money printing. Oh, and protectionism? Well no that doesn't happen anymore, the new trend is a staunch faith in globalization. It's really working out well for everyone.
3—In the midst of what Merkel has described as the worst crisis in Europe since the Second World War, Croatians in January voted overwhelmingly to join an EU ostensibly in dire straits. And the geographically strategic Turkey would join in an Ankara minute, if only EU members could overcome their shameful reluctance to admit a first non-Christian member.
Oh the Croatians are into it? Great! How are they doing? 'Moody's Lowers Croatia Outlook To Negative On Uncertain Growth Prospects'. Next.

4— Europe is not in a debt crisis. Its public finances were manageable until the U.S.-originated Great Recession migrated across the Atlantic. The plunge in GDP slashed government revenues needed for debt payments. But recessions end. This one will by 2014, as European leaders de-emphasize the false hope of austerity and instead focus on reviving growth and household incomes. That transition has already begun, in the spring, spurred by grassroots sentiment.
Oh good, this recession will be over by 2014.. because.. because.. we're de-emphasizing false hopes of austerity! So there isn't a debt crisis, the crisis is there isn't enough debt! And geez, focus on growth? Right! Because we haven't tried that yet, now have we?
5— Euro leaders have been ridiculed for meeting constantly with little to show for it. Actually it’s a marvel that 27 heads of state representing scores of cultures have peaceably, relentlessly assembled to experiment with solutions.
Translation: At least we're not at war! It really is amazing that these leaders can continue to wine and dine on their citizens backs and have nothing to show for it. That in itself is something to show, don't you think?

Given the complexity of Europe, the agreed-upon bailouts to date of Ireland, Portugal and Greece have been giant work. A $1-trillion permanent assistance fund has been created. Governments have come and gone in Athens, Madrid, Dublin, Rome and most recently Paris. Yet the rescue work, with its admitted setbacks and frustrations, has continued apace.
Translation: Austerity was a stupid idea, but the fact they implemented it and further destroyed their economies is quite frankly amazing.
6—The calibre of European leadership is outstanding. That is notably – and thankfully – so in the eurozone’s three largest economies.
Merkel has deftly sold her coalition government on far more German taxpayer assistance to Greece and other bailout beneficiaries than Athenian demonstrators acknowledge.
The austerity expedient hasn’t been killed by the recent replacement of Nicolas Sarkozy with Fran├žois Hollande, as widely reported. France’s Socialist Party leader is far more of a realist than that, though of an agreeably progressive bent.
And Mario Monti, new Italian PM, has drawn up a blueprint for austerity balanced with spurs to economic growth worthy of emulation in the U.S. and elsewhere.
Like Monti, a veteran of EU headquarters in Brussels, Draghi and Christine Lagarde, managing director of the International Monetary Fund (IMF) and a stand-out former French finance minister, have bulging Rolodexes of key players worldwide.
Translation: The leadership is amazing! They've implemented the wrong policies successfully. They've installed technocrats, and as we all know technocrats are good for business. I really like Mario Monti, he knows how to draw up blueprints that lay out ideas I've already admitted don't work. These elites only have other elites in their rolodexes so think of the calls that could be made! Christine Lagarde could call up Mario Monti, tell him to make a blueprint for a plan that won't work, and then implement it all while holding a summit! How do these people do it?
7—Solutions abound. If implemented, they will make Europe even more of an economic powerhouse than before the onset of crisis.
Translation: Solutions, once created, will be really really good. Not like our previous dumb ideas.

So there you have it, those people that think the Eurozone will fail have obviously over-looked these 7 very insightful points and have ignored the solution which doesn't exist. Idiots, they should have faith in how important we think this crap is. It can't fail, it's too big to fail.

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Richard Fantin is a self-taught software developer who has mostly throughout his career focused on financial applications and high frequency trading. He currently works for CenturyLink

Nazayh Zanidean is a Project Coordinator for a mid-sized construction contractor in Calgary, Alberta. He enjoys writing as a hobby on topics that include foreign policy, international human rights, security and systemic media bias.

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