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Why A French Triple-Dip Recession Is A Bull's Dream Come True

Tyler Durden's picture




 

The possibility of a French recession is not exactly new: even the venerable Economist penned an an extensive article - with a humorous cover - over a year ago describing just such a possibility (the French were unamused). Yet to this date, not only has France managed to avoid the dreaded "Triple Dip" but its bonds continue to be well-bid, with the yield on the 10 Year well inside the US, at only 2.53%, nearly 1% below the wides seen in 2011. However, and especially now that Hollande's 75% millionaire tax has finally been enacted, the fuse on the baguette time bomb is getting shorter.

As GaveKal's Francois Chauchat rhetorically asks, "Is every country in Europe recovering, but France? This is the question raised by a third consecutive month of disappointing French manufacturing Purchasing Managers Indices (PMIs), which plunged to 47 in December even as the eurozone-wide PMI expanded to 52.7, a 31-month high. Such a large divergence is peculiar, since France and eurozone PMIs have historically been aligned. It could be that

France’s recovery is just a bit more painful and taking that much longer—but what if the real story is that the country is slipping back into recession?

 

Judged by the PMI surveys alone, and the economy indeed looks to be contracting, a pretty worrying development since the rest of the advanced economies are firmly in growth territory. Another recession would suggest that socialist President Francois Hollande’s targeted high tax agenda has hit a wall, and that a messy revision in economic policy, possibly preceded by financial market pressure, could be in store.

The divergence between France and the rest of Europe can be seen vividly on the European PMI chart below:

So a French recession would be a bad thing, right? Well, yes - for the French population, and certainly whatever is left of its middle class. However, as has been made clear repeatedly, in the New Normal in which only the trickle down effects from the wealth effect of the 1% matters, what the broader population wants and needs is hardly high on the list of priorities of the central planners. What does matter are stocks. And it is the wealthiest 1% and the stock market which, in keeping up with the old bad news is good news maxim, that may be the biggest beneficiary of a French triple dip.

The reason, at least according to GaveKal and increasingly others, is that a French re-re-recession would be precisely the catalyst that forces the ECB out of its inaction slumber and pushes it to engage in what every other "self-respecting" bank has been doing for the past five years - unsterilized quantitative easing: an event which the soaring European stocks have largely been expecting in recent weeks and months.

Quote GaveKal:

But even if the country is slipping back into recession, it is not clear that the “French tail risk” would reignite a broader euro financial crisis — a fear that has been raised repeatedly in the past few years. Would not a shockingly weak French GDP number rather increase pressure on the European Central Bank to act, weaken the euro and push Hollande to deliver more quickly and efficiently on his new pledge to regain business confidence? If this is what a still very hypothetical new French recession produces, not much lasting damage would be done to eurozone financial markets. Rather the opposite.

And there you have it: spinning bad economic news as more hopium for market bulls, and in fact setting the stage when the latest surge in risk assets just happens to coincide with that negative French GDP print, an outcome predicted by BNP two months ago, and an outcome which Draghi and the other ECB doves and which the Hawks on the ECB will theatrically complain about, but in the end, do nothing as usual. And with Merkel incapacitated, well: vive la recession!

 

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Mon, 01/06/2014 - 15:04 | 4305069 So Close
So Close's picture

So a third heart attack and or stroke are also a good thing?

Mon, 01/06/2014 - 15:15 | 4305118 Popo
Popo's picture

This article fails to understand that ECB stimulus doesn't actually help France.  The problem with a centralized bank, using clumsy tools like stimulus in order to selectively stimulate nations with vastly different economics is that there's no way to 'just' stimulate France.  And if you do, it doesn't change the general flow of capital out of the country and towards Germany.  In fact, it just acellerates the wealth disparity between rich Europe and poor Europe (of which France is a member of the latter, and only just now discovering it).

Mon, 01/06/2014 - 15:04 | 4305070 RockRiver
RockRiver's picture

We need more QE!

Mon, 01/06/2014 - 15:02 | 4305074 madbraz
madbraz's picture

Correction:  France 10yr bond interest is 2.33%, not 2.53%

Mon, 01/06/2014 - 15:05 | 4305085 ebworthen
ebworthen's picture

Makes me hungry for a French dip sandwich.

I've got that "bad news is good news" deja vu feeling all over again.

Mon, 01/06/2014 - 16:02 | 4305255 Colonel Klink
Colonel Klink's picture

Yeah but can you eat 3 of them.  Looks like they can!  When do they pop?

Mon, 01/06/2014 - 16:06 | 4305282 disabledvet
disabledvet's picture

does give new meaning to the term "too big to fail." Germany said "we'll buy Greece for 5 billion." 600 billion later and "it's time to make the taxpayer...er, depositors" of Cyprus pay. "now lets all chip in here and get 'er done!" http://www.fas.harvard.edu/~histecon/crisis-next/1907/timeline.html hmmm. "create the Fed, get World War I."

Mon, 01/06/2014 - 15:16 | 4305106 B.J. Worthy
B.J. Worthy's picture

Not to worry; the wealthy will do their civic duty and stick around for Hollande's 75% tax grab.

Mon, 01/06/2014 - 15:34 | 4305167 The Heart
The Heart's picture

Anyone that actually thinks they will have a normal world to spend or hoard gold in the near future is living in a dream that will NEVER come true.

It is almost annoying to KNOW there are so many intelligent people? in the world, and yet this Extinction Level Event continues, while they play war games and hoaxology in the lying dying lame stream media. THIS IS THE MOST PREVALENT ISSUE OF THE DAY, AND IT AIN'T NO DREAM!

Canadian Medical Association Journal Blasts Japanese Government: "Culture of Coverup" Exposing Japanese Citizens to "Unconscionable" Radiation Risk:

http://mr-absentia.soup.io/post/385488541/Canadian-Medical-Association-J...

Skeena Sockeye Fishery Closed Due to Low Returns:
http://ospreysteelheadnews.blogspot.com/...ue-to.html

Sockeye Fisheries Closed Following Historic Lows In Skeena River, B.C.:
http://www.huffingtonpost.ca/2013/08/12/...44088.html

(SitNews) Thorne Bay, Alaska – Due to a low sockeye return, the US Forest Service Thorne Bay District Ranger is acting immediately to protect sockeye salmon in the Hatchery Creek drainage on Prince of Wales Island:
http://www.sitnews.us/0613News/062713/06...losed.html

Diseased Alaska seals tested for radiation:
http://www.wikileaks-forum.com/animal-ri...1#msg54931

"There was not one of the 28 days on that portion of the trip when we didn't catch a good-sized fish to cook up and eat with some rice," Macfadyen recalled. But this time, on that whole long leg of sea journey, the total catch was two. No fish. No birds. Hardly a sign of life at all.":
http://www.theherald.com.au/story/184843...is-broken/

Dead Sea Creatures Cover 98% of Ocean Floor Off California Coast; Up From 1% before Fukushima:

http://thedailyblogreport.wordpress.com/2014/01/05/dead-sea-creatures-co...

Japanese Senator: “The Path That Japan Is Taking Is The Recreation Of A Fascist State”

http://www.washingtonsblog.com/2013/11/fukushima-radiation-will-hit-fish...

Japanese cars banned in Russia:
http://japandailypress.com/russia-bans-1...n-0641885/

Japanese Government Raises Severity Rating of Fukushima Leak:

http://ifclmedia.com/feeds/?p=9579

 

BIG RADIATION COVERAGE ON THE ALEX JONES SHOW RIGHT NOW!!!

http://www.infowars.com/listen-on-the-internet/

Mon, 01/06/2014 - 16:02 | 4305257 Colonel Klink
Colonel Klink's picture

Stop spamming every article with these posts.  What a DICK!

Mon, 01/06/2014 - 20:32 | 4306111 Non Passaran
Non Passaran's picture

The Dick

Mon, 01/06/2014 - 16:03 | 4305260 Sudden Debt
Sudden Debt's picture

we are investing in every european country besides france. we don't even talk about france.
do you know how much it costs to fire somebody in france? you need to be crazy to hire anybody!

Mon, 01/06/2014 - 16:21 | 4305325 Rising Sun
Rising Sun's picture

French women are such whores.

Mon, 01/06/2014 - 20:58 | 4306183 Big Johnson
Big Johnson's picture

Just to keep it real, I wouldn't limit that statement just to French women....

Mon, 01/06/2014 - 16:24 | 4305337 Iam Yue2
Iam Yue2's picture

France has to undergo a severe adjustment . Another revolution will probably suffice.

Mon, 01/06/2014 - 16:33 | 4305372 Spungo
Spungo's picture

Number of years until France goes 100% communist?

Mon, 01/06/2014 - 16:50 | 4305419 Greenskeeper_Carl
Greenskeeper_Carl's picture

Do we really need to call this a "triple dip recession"? Isn't depression a more accurate way to describe it?

Mon, 01/06/2014 - 20:36 | 4306118 Dr. Destructo
Dr. Destructo's picture

"However, as has been made clear repeatedly, in the New Normal in which only the trickle down effects from the wealth effect of the 1% matters"

I mentioned it in another thread, but this "Human Centipede" version of economics will kill those further down the chain. The first person (1%er) consumes the Fiat before interest rates kick in, and as the fiat goes down it becomes worthless to the person at the end.

Nobody wants to be on the first floor in a two-story outhouse, so why in God's name would anyone support this "trickle-down" theory?

OOH DANCING WITH THE STARS!

Do NOT follow this link or you will be banned from the site!