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One Trader Weighs In On ‘The European End Game’
By Kevin Muir of “The Macro Tourist” fame; reposted here with permission
We all know the famous Getty line about “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.” Today the numbers Getty used seem a little quaint, but we understand the sentiment.
I doubt that when Getty uttered this line more than half a century ago he ever imagined it would apply to countries, yet here we are.
Too many pundits believe Germany holds
Graph all the central bank balance sheets you want, it’s still not going to fulfull any obligations to earn and spend in the economy.
The bloated equity markets both here and overseas are premised on the belief that QE willl persist indefinitely. Looking at the EU balance sheets, I think that perhaps QE will persist indefinitely and high debt, slow growth, bloated financial assets will become more of the norm than ever. The financial psychology has already veered in this direction.
What I find most interesting is the arrogance of the equity investors, at least here in the States. Arrogance primarily rooted in the Fed put.
As Warren Buffets partner indicated , equity investors have been given a free undeserving gift from the Federal reserve. 10 years. The savers and fixed income investors came out with the short end of the stick. Equity investors should be far more humble in light of the catalyst behind their windfall. Nonetheless, in the end there’s truly no free lunch. Leverage always inevitably brings things back down to reality.
If the USA is having trouble digging out of the QE hole, EU certainly will have much more of an issue. The debt trap......