Europe has taken
to making comments and engaging in either great promises of future events or
the denials of any epitaphs on any gravestones in the days that separate Friday
from Monday. The markets are closed these days and it has become an obvious
strategy to swing the various banners of national interests or to offer such
schemes and plans as would suit the people who live and die based upon bold
faced headlines and who give no thought as to their meaning. The propaganda
machines spew sweet cakes and sweet meats and hope that no one recognizes that
someone must clean up after the retching that will invariably take place. I
suggest to each of you that your concentration should not be placed upon offers
of Nirvana but squarely and solidly upon what is actually implemented for it is
there that the truth is found and it is from there that future events may be
predicted.
The Spanish
Finance Minister calls for unlimited bond buying by the ECB and schemes are
floated of tying the yields of all of the periphery debt to that of Germany and
each is heralded as brilliant in its conception and without consequence in the
real world as if the blue fairies in some Elfin Kingdom are going to pick up
the tab. Please notify me, contact me immediately day or night, when this Kingdom
is discovered because it will be at that precise moment when I change my view
on Europe and come to the conclusion that all can be righted without
consequence and that the ECB is an institution outside of the boundaries of
this universe as many people seem to think these days. When this Magical Land
is found I will also believe, along with so many others, that the capital of
Europe is unlimited, that Germany receives money from the mines of the Dwarves
beneath Stuttgart and that the proprietors of all of the restaurants in Europe
always pick up the bill and free lunches have been brought back to our world in
a flurry of pixie dust and wizard’s incantations. I am in France
now; send me the Hobbits, Peter Pan is invited to any meal, I will go to any body
of water and converse with Merlin and the Lady of the Lake, I will meet with
anyone from Harry Potter’s Ministry of Magic upon a moment’s notice and having
seen the proof of “Money for Nothing and Chicks for Free” I will recant at any
Inquisition, Spanish or otherwise, and confess the errors of my ways.
Some who wander about in the lands of fantasy and make-believe point to the lack of Inflation and proclaim this the Rosetta stone of all of the grand designs for Union. Inflation is but one indicator, one consequence of many that are to be found under the heading of VALUATION which is the correct barometer for the success or failure of the plans in the offing. Here it is not just a discussion of Inflation or Deflation but valuation and its implications and consequences where the costs of goods and services vies with the capital to afford them at any price and where just who has what in their purse, past a promise of the coins that are in the purse, meets the reality of actually opening it and pouring out the contents on the round table of Camelot in front of the perhaps not so Joyous Garde.
For a thousand
years and longer the Alchemists have promised that lead could be turned into
gold and I have yet to see the proof of this oft promised accomplishment. Germany
is responsible for 27% of the European Union and 22% of the European Central
Bank and how Germany would not be affected by an unlimited balance sheet at the
ECB or the cost of some Firewall of all Firewalls is an economic equation that
eludes me. I suppose that when Keynes, or Galbraith or Friedman won’t suffice
that one must return to Gandalf and the Lord of the Rings for economic wizardry
and the magic of creating money from thin air. It is generally recognized that
Quantitative Easing has consequences but here we have a new type of magic, we
are told again and again, where capital can be freely distributed and no one is
responsible or accountable for the disbursement.
Perhaps we have
entered a new land where balance sheets only contain assets and where
liabilities do not exist nor are they counted. In this Never-Never Land
contingent liabilities will not be allowed to occur and bonds are always paid
in full and on time and the markets’ rally and rally some more in recognition
of our having enter into this new universe of fantasy and make believe. It is
no longer a question of risk on or risk off because there is no risk at all and
money is waved into existence by some new spell concocted at the end of Frau
Merkel’s magic wand. Spain is not being bailed out it is only the banks and not
all of the banks but just certain banks that are no longer important as they
are guaranteed by the government who is in great financial shape and is not in
recession and who has no unemployment as that is an old paradigm from some
other universe that no longer exists.
I have been
credited with some foresight from time to time and I now can see where all of
this is going in our new universe where economic laws and fiscal policy have
entered some black hole of a new kind of fiscal warp. The ECB will pay off all
of the debt of Spain and Madrid will be free of all obligations. All Italian
debt will also be paid off by the ECB and two of the core countries in Europe
will require no firewalls at all or fiscal restraint or any measures of
austerity since debt no longer exists for these nations. Germany, in a grand
gesture, will forgive all of the debts of Greece and each electric utility in
the world now can use olive oil in a new process invented by Apple and Athens
replaces London as the monetary capital of Europe. This new plan will not only
be promised but implemented for all of the nations of Europe and the ECB, whose
liabilities would normally be in excess of seventy-five trillion dollars will
have none either because the printing presses are rolling and money is arriving
from the new, new universe that will replace the new, new normal in everyone’s
thinking. Magic will have returned to the Continent and diamonds are glittering
upon the streets of St. Tropez and the Champagne flows, without cost of course,
at each and every restaurant in the town square. I admit, I was there the other
evening and did not see it but then I am an American and inhibited in my
abilities to see such things. The Euro will be worth fifty times the value of
any other currency when the debts of the Continent are erased and the banks
will all be re-capitalized with the diamonds shipped in from St. Tropez. The
products of Germany will have buyers without end and the new market for German
goods, recently discovered on a small planet slightly to the left of Alpha
Centauri, miraculously also has Euros to pay for them.
Buy everything I
say without limit. Leverage each purchase to the maximum allowed under the law.
The markets will only go up and not down and 100,000 is the next stop for the
S&P. It is to be Dow without Jones, assets without liabilities and wealth
without poverty. The Middle Class has been evacuated and everyone is wealthy
beyond belief. It is just there, of course, that the truth lies in this merry
old land, “beyond belief.”
“I like fantasy---it wakes up the brain cells.”
- Dr. Seuss
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