- The fissures — if not outright failure — in the Euro Zone become realized. I fully expect one or more nations to leave the Euro and there is a non-zero chance of an outright collapse. Timing is the problem — I’ll go ahead and stick this in 2012 but may be early a year. We’ll see. Incidentally because of how I worded this Greece leaving is a “score” but I’m not thinking Greece here — try Spain or Italy on for size.
Greece, for those who aren’t paying attention, has apparently elected enough Neo Nazis to get them into Parliament — comfortably so with somewhere around double the minimum representation required (3% is required.) The bailout-friendly parties got shredded and no longer have a majority. The next thing that will come is a “middle finger” to the Troika, which is going to prove quite interesting.
France has apparently tossed Sarcozy in favor of socialist Hollande. This is possibly far more important, as it means the German-French “line” on holding the Euro zone together with bailouts was just flushed down the toilet. Merkel has no prayer in heck of being able to do this alone.
The odds are now very high that we get a Greek Euro exit (on their terms, not on anyone elses) and a massive dislocation in the Euro zone banks. Germany cannot hold this together on their own — it’s impossible.
As for France it will be quite interesting to see exactly what “socialism” means in their context. One thing it doesn’t mean is being friendly to how the Euro “core” has basically bludgeoned people up until now.
The simple fact of the matter is that we had better get our act together here in the United States, and fast. The idea that we’re going to be able to play “QE to the moon Alice” is an utter load of crap. We both can’t and won’t, and what’s worse is that we’re about to see the worst of the European economic dislocation come at us fast, hard, and now.
The market will start pricing this in tonight. It already has begun, as the /ES futures are down 1.3% and the DOW futures are trading under 13,000, down 161.
Those who believed that “they” would hold everything together through the election while willfully ignoring 2008, when the precise same projections were made and turned out to be crap, might want to re-think their expectations just a wee bit.
As I schedule this post on Sunday evening, I am afraid to see what the markets will be like on Monday morning. My prediction – it’s not going to be pretty.