Diary of a Financier

The Hail Mary

In Economics on Mon 14 Nov 2011 at 09:23

Let me unload all the cliches now so I can preserve some journalistic nobility throughout the latter part of this entry: Extend and pretend. Kick the can down the road. Sweep under the rug. Hail Mary.

Turns out that Americans are not the only creatures in Earth who (in the words of Winston Churchill) “always can be counted on to do the right thing after they have exhausted all other possibilities.” In that vein, Europe’s treatment of her domestic crisis suggests all of those aforementioned clichés portray fundamental human habits that seem increasingly universal, as opposed to national/cultural phenomena like Mr. Churchill would suggest.

The American TARP and QEs eluded inflation because of the offsetting deflationary anchor from housing–among other asset/derivative price collapses. Aside from a lack of central Treasury, Europe’s malaise differs from 2008/09 America’s because of the bifurcation between a vigorous Germany and the rest. (For some reason, I feel a need to keep repeating this.) Mass monetary intervention in the Eurozone risks sparking inflation in Germany, where the memory of the Weimar Republic haunts constituents as if they were subjected to it per the Ludovico Technique in A Clockwork Orange.

For the last nine months, I’ve maintained this German phobia as the greatest hindrance to the Euro’s continued survival. In deferring resolution to its crisis, broad Europe has begun to drag on Germany herself. Goldman Sachs has followed the trend of recent macro data out of German to deduce that recent positive GDP was Germany’s “last hurrah before recession.”

Were Germany to slip into recession with negative GDP prints, the EU would still struggle with the issue of imbalance: Greece with -5.45% GDP (most recent y/y release), Italy -2% (hypothetically) and Germany -0.5%. A liquidity bazooka targeted at any combination of the PIIGS states would ultimately seek bastion in German banks. While that temporarily patches-over the liquidity holes in fringe states, it also stokes German inflation. Plus, it fails to resolve the burgeoning insolvency issue.

For some reason nobody can describe to me, the Eurocrats seem wedded to their monetary union. Depending on which of the 17 finmins or 17 PMs is talking, they relate their commitment either explicitly or implicitly. Perhaps the Germans know something. Perhaps the coverup of a systemic vendor finance issue will level the contours of Europe’s disparate economies. Perhaps that’s the grounds for deferring resolution, the Hail Mary Angela Merkel called in the huddle: wait for Germany to recouple, then monetize the system-wide debt(?!).

All so speculative, but I cannot rationalize the shenanigans any other way. I’m exhausted with this Eurocrisis. (I can’t imagine what this is like for Europeans themselves.) There’s little else of consequence of which to write, since the EMU holds the world’s trump. The half-life of every news-bite has been reduced to a matter of hours. I find little progressive insight in every media outlet’s latest print. I feel like we’re at a standstill, which usually means the market is ready to breakout/breakdown. If that’s the case–a Hail Mary on its way–then the quarterback has only a short count remaining before he’s sacked.

I’ve got to return to my roots here. This is a Diary with the intention of crystallizing my thoughts and experiences. Europe has overtaken both since this Spring, but it mustn’t oust what substance remains.


  1. Nice read for 3 main ideas:
    – Idea of Germany getting sucked into the mess in order for them to colaborate
    – Idea that this entire mess is indeed making a lot of people very tired, exhausted with this situation (imagine european policy makers…)
    – Idea that we cannot forget to analyze other possible macro trends / trades / risk-premium-collection, etc.

  2. Out of curiosity, what does “You just went Abe Lincoln on my Gettysburd address” mean? 🙂
    Hopefully something nice!

  3. Found the description of your expression! Would you be interested in direct contact for exchange of ideas / reading material? Cheers.


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