By John Galt
August 14, 2011 – 15:15 ET
Well, tonight’s edition from Ambrose Evans-Pritchard is a depressing look at the reality facing the floundering European Union. All indications are that it is about to implode and the markets can smell it.
The latest from the UK Telegraph (Click on the title to read the full article):
ECB is euroland’s last hope as bail-out machinery fails to resolve crisis
The leaders of Germany and France have three bad choices as they decide whether to save EMU this week, or pretend to do so.
They can agree to fiscal fusion and an EMU debt union, entailing treaty changes and a constitutional revolution. This implies the emasculation of Europe’s historic nation states.
They can tear up the mandate of European Central Bank and order Frankfurt to go nuclear with €2 trillion of `unsterilized’ bond purchases until the M3 money supply in Italy, Spain, Portugal, Ireland, and Greece stops contracting at depression rates and starts to grow again at recovery speed (5pc). This might destabilize Germany.
Or they can try to muddle through with their usual mix of half-measures and bluster. This will lead to a rapid disintegration of monetary union and a banking collapse. It risks a repeat of 1931 if executed badly, as it most likely would be.
They have days or weeks to make up their minds, not months.
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Sadly, I think the ECB and Eurozone political elites will do what they always do:
Half measures and lip service.
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