Use Rallies Wisely
Friday's relief rally appears to be just that. Obviously, the cause was direct aid to prevent a collapse of the Spanish banking system, but remember that liquidity does not equal solvency, and they merely traded creditors. There is no math that works for relieving the European debt crisisother than default, so I expect last week's gains to be short-lived.
The crisis is growing more dangerous now, because most of the eurozone is lining up against Germany and practically daring them to withdraw support to the EMU. Simultaneously, we are seeing multiple trial balloons going up, suggesting a better solution would be for Germany to exit the euro rather than Greece et al. This actually might not be a bad idea, and the Germans may realize it soon, too. Clearly, the problem would be a soaring Deutschemark crushing the nation's ability to export, but the reality is that Germany's export markets are shutting down whether or not it stays in the euro. The periphery needs to devalue in order to restore labor competitiveness, and forcing Germany out of the euro, with the attendant euro collapse, may be the most palatable way to accomplish this....75 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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