Recreating Mercantilism In Europe, Europe's Deflationary Torture, And The L-Shaped Recession

Tyler Durden's picture

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Anonymous's picture

Going up in tapering volume, the new normal.

godfader's picture

Where are the EUR bulls who were screamign 2.00 price targets not too long ago? I'll go long the EUR when Peter Schiff declares on CNBC that this is more than a temporary Dollar rally and he foresees further EUR weakness. THAT'S my buy signal. Until then... short the EUR, it's a PIIG.

Gunther's picture

How do weaker currency and deflation go together?


bugs_'s picture

MS 1.25

Albert Edwards 1.10

Andy 1.00

asdf's picture

mauldin also sees parity in his latest newsletter

godfader's picture

Every downtick in the EUR is met by applause from the Palais de l'Élysée and a "Qui qui" can be heard from Sarkozy's office.

THE DORK OF CORK's picture

Airbus will kill Boeing when / if it goes 1 for 1.

The people of Toulouse will be singing in the streets

Stranger's picture

They won't be singing that their fuel costs 50% more. They will be striking.

THE DORK OF CORK's picture

Point taken Stranger but in a zero growth world the elimination of your competition is the only game in town.

anarkst's picture

Regardless of the outcome, it is only money you will be left with.  Until people begin to seriously consider this abstraction and how it is used to impoverish the vast majority, only the degree of appropriation will change, much like the tide.

godfader's picture

All this political pressure on the ECB will run into a wall once it becomes clear Axel "The Ax" Weber becomes next chairman. The guy has brass balls and will lead the EUR into a deflationary nightmare that will dwarf anything Japan has seen. Once Axel is done Europe will be largely de-industrialized.

Anonymous's picture

I thought European manufacturers just charge what they can in separate markets and the relative value of the currencies means nothing. That's why German cars are so inexpensive in the USA compared to the rest of the world but a 1 dollar Euro is not going to make BMWs less expensive. So why would an A380 cost less?

Anonymous's picture

There's a fairly vigorous secondary market in airliners, isn't there?

Anonymous's picture

Can you not see the forest for the trees? We have a global indigenous country devaluation race occuring with all the bells and whistles... short euro while long dollar then reverse trade or hedge. Rinse and repeat many several times as gold laughs step-stairing higher. Trust no one during these strange days!

Anonymous's picture

Larouche has been pounding the table about Spain and Banco Santander being set to blow. He seems to be one of few voices warning about Spain.

Bill DeBurgh's picture

Larouche was pounding the table about the real estate bubble as far back as 2003.

Then again, he's just a wing nut, right?

Anonymous's picture

1) The frickin' Economist was rapping the table about the housing bubble back in 2003. It didn't take exceptional insight to notice it, even if many people didn't notice it anyway.

2) Larouche spreads his nut over both wings, if I recall.

3) Larouche claims that Queen Elisabeth is the secret mistress of world finance and politics. If people tend to ignore him as a lunatic then he has only himself to blame.

DavidC's picture

Why is deflation considered the evil of evils and why is inflation considered to be the state we should always be in?

From 1800 to 1912 in the US the overall average inflation rate was -0.35%. It didn't stop growth or technological advancement in the US.

Inflation suits Central banks with a debt based system.



aus_punter's picture

if you can't understand the ramifications of deflation take a look at Japan

ThreeTrees's picture

If you can't understand the ramifications of government policy in fighting deflation take a look at Austrian economics.

Anonymous's picture

> From 1800 to 1912 in the US the overall average inflation rate was -0.35%

That 112-year average conceals major inflationary and deflationary swings, and the enormous average growth in GDP over that time conceals depressions and big financial panics. That doesn't in itself show that deflation is a bad thing, but it's certainly the case that plenty of plenty of people were very upset about it at the time: see the Free Silver movement in particular. (And note that the banking interests were lined up behind the gold standard.)

jeff montanye's picture

not to mention two, largely forgotten, presidential assassinations.

Anonymous's picture

And a few serious wars, some better remembered than others.

Side note 1: even Victorian Britain's age of peace didn't feel like Happy Days at the time. Victoria's reign kicked off with a Tiananmen-style massacre of demonstrators, and for much of the time people were braced for a big war, often with the US.

Side note 2: in some ways the bimetallism controversy looks a bit more like the current Eurozone crisis than the currency situation in the present-day US. It's not as if the Federal government was doling out transfer payments to ease the pain of deflation-stricken farm regions.

Manbarepig's picture

The problem is (and I have to give credit to another commenter on this site) is that the things you don't care about get cheaper, but the things you do care about get more expensive.

iPods get cheaper as it is. In a deflationary environemnt, you'd expect them to get cheaper faster.

Housing (or any major, physical asset) gets more expensive if you own them since the debt needed for the average person to afford them gets pricier as the value of the asset goes down. See today's housing market and the numerous underwater mortgages and short sales.

So deflation works out great, if you dont own anything meaningful.

no cnbc cretin's picture

L shape, duh! And never going back up. What pisses me off, is why American's think we'll come out of this. The usual stupid comment is, America always has been able to rebound - really? Sorry folks, things do not last forever.

Missing_Link's picture

But wait  ...  I thought if something happens a few times, that means it's a permanent pattern, and guaranteed to always happen that way forever into the future  ...?

three chord sloth's picture

Personally, I think a good case can be made that the whole Western world went into an "L" shaped recession back in the 70's (and that suited certain groups just fine), and everything since then has been only financial manipulations to cover it up.

Anonymous's picture

This is absolutely bullish EU for stocks, buy buy buy!!!

Anonymous's picture

TD -

Good post. You sound as if you've retreated a bit on earlier support for the gold standard and for strong money, am I right? (It's not as if Montagu Norman was a great advertisement for either.)

Anonymous's picture

Thanks for taking a moment to reiterate exactly why a Gold standard was problematic, too often we get an "End the Fed!" "Hard Money!" cry without any meaningful evaluation of the alternative's shortcomings.

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