'..the Greek debacle of 2015 was not the end of the euro crisis, but its real beginning.'<blockquote>'The third and final truth will be the hardest one of all for those responsible for the euro to accept: that this is not just about one country. It is in Greece that the fundamental tensions created by a single currency have first broken through, because Greece is a particularly indebted and less competitive country. But the same tensions will ultimately surface in other nations facing a less immediate crisis but a similar prognosis.
Across southern Europe, governments such as those in Italy and Spain are making brave efforts to enact long overdue reforms. They might not achieve enough, however, for their people to prosper when required to compete equally with their northern neighbours. There is a clear risk that the economic performance of the south will diverge from, not converge with, the north. Unless this is averted in the coming years, it will bring problems to Europe for which Greece has only been a minor rehearsal.
In future decades, in the very business school where I spoke in 1998, I believe students will sit down to study the folly of extending a single currency too far. Sad though it will be to see it, their textbook is likely to say that the Greek debacle of 2015 was not the end of the euro crisis, but its real beginning.'
- William Hague,
Greece does not mark the end of the euro debacle, merely the beginning, July 6, 2015</blockquote>
'..The end result was only bigger Bubbles, greater resource misallocation, more acute fragility and heightened risk of a global deflationary bust.'<blockquote>'..I was again reminded of comments from eminent German economist Otmar Issing back in 2004. The ECB’s Chief Economist wrote a WSJ op-ed, “Money and Credit,” in a pushback to Fed policies that were clearly promoting asset Bubbles (CBB “Issing v. Greenspan, February 20, 2004).
Issing from the WSJ: “Huge swings in asset valuations can imply significant misallocations of resources in the economy and furthermore create problems for monetary policy. Not every strong decline in asset prices causes deflation, but all major deflations in the world were related to a sudden, continuing and substantial fall in values of assets. The consequences for banks, companies and households can be tremendous… Prevention is the best way to minimize costs for society from a longer-term perspective. Central banks are confronted with this responsibility, but there is no easy answer to this challenge. So far, only some tentative conclusions can be drawn. First, in their communication, central banks should certainly avoid contributing to unsustainable collective euphoria and might even signal concerns about developments in the valuation of assets. Second, the argument that monetary policy should consider a rather long horizon is strengthened by the need to take into account movements of asset prices.”
“Huge swings in asset valuations can imply significant misallocations of resources in the economy and furthermore create problems for monetary policy.” He was prescient. More than 11 years ago Dr. Issing recognized the key issue for 2015. “Prevention is the best way to minimize costs for society” went unheeded – in Greece, the U.S., China and the world. “All major deflations in the world were related to a sudden, continuing and substantial fall in values of assets.” Time will tell.
It was another market week with well-defined Bubble Dynamics. With Grexit at least off the table for a number of weeks, speculation ran wild. Stocks reversed sharply higher, and the more speculative the stock or sector the more spectacular the move. Biotech stocks (BTK) surged 6.2%. The Morgan Stanley High Tech Index jumped 5.0%. Google added $65bn of market capitalization - on Friday alone. The Nasdaq Composite ended the week at another all-time record high. MarketWatch: “Nasdaq surge is triggering tech-bubble flashbacks.”
..
At this point, central bank efforts to sustain the Bubble rather conspicuously feed Bubble excess. And in the post-Bubble post-Mortem, there will be a strong case to be made that central bank measures to fight deflation risks were self-defeating. The end result was only bigger Bubbles, greater resource misallocation, more acute fragility and heightened risk of a global deflationary bust.'
- Doug Noland,
Lessons of 2004, July 18, 2015</blockquote>
'..$5.3 trillion of government debt trades at subzero interest rates. In today’s fiscally profligate world that is a thundering tell..'<blockquote>'Zero Hedge recently revealed that $5.3 trillion of government debt trades at subzero interest rates. In today’s fiscally profligate world that is a thundering tell. What it signifies is nothing less than financial regime change. There are no markets left in any meaningful sense of the word—–just a raging casino infected with the madness of the crowds and the central bank pied pipers who mesmerize them.'
- David Stockman,
It’s A Mania—–Behold The Red Chips And The Big Macs, April 22, 2015</blockquote>
Context '..the development of money and Credit..'<blockquote>
Greece and the King of Asteroid 325 (and The One Lesson to Learn Before a Market Crash). July 13, 2015
The China Syndrome, July 17, 2015
China Margin Debt Is Soaring—–Like Its 1929, April 14, 2015
China (Part 1), September 19, 2012
Boom, Bust and Emigration Statistics, July 17, 2015
'..present violation of law..' - Otmar IssingHitler’s Specter Inspires Bill White to Battle With Greenspan - By Alan KatzCredit Bubble Bulletin - (Debt Crunch)(Global Credit) - 'China is going to face some serious issues in the next decade or so.'(Banking Reform - Monetary Reform) - '..The Theory of Money and Credit .. an invaluable guide for ending the business cycles of our own time.'</blockquote>