Biderman & Santschi On "Why Germany Should Leave The Euro"

Tyler Durden's picture

While some have discussed the game-theoretic dilemma that Germany faces relative to the 'rest' of Europe, David Santschi of TrimTabs (Biderman's balder buddy) digs into the details as a potential solution (hard as it may be) as Europe's fatal flaw (the currency unionization - but not fiscal or banking union -  of a group of nations with strong sovereign identities). The imbalances are so great right now that the only practical solution David sees is to breakup the Euro-zone, and simply put the best way to achieve a break up would be for Germany to leave voluntarily - establishing a strong currency and in turn saving itself financially. The clear implication is that if Germany continues down the path of printing and bailouts it will be dragged down along with the rest of Europe. The EVP does not minimize this as a 'good' or 'easy' solution - many people would lose their livelihoods and many would lose a lot of money -  but it is the only practical solution that he sees (as Eurobonds, banking unions, and fiscal unions are simply impractical in terms of both effect and timeliness).

Of course this would have painful implications as the Euro would fall sharply but given the yields on Spanish debt (and previously on Greek, Portuguese, and Irish), it would appear markets are pricing this in as a string possibility and as we have noted Germany's CDS are starting to rise (whether on risk-transfer or contagion concerns). Reflecting on the press (and in our view, the politicians), Santschi quotes W.C.Fields quite appropriately: "If you can't dazzle them with brilliance, baffle them with bullshit!" as he opines on the sheep-like reporting from the mainstream media of politicians 'lies'. Europe remains a solvency problem not a currency problem and it seems journalists do not understand the difference between a grant of money and a loan of money - as the latter needs to be paid back!

In one of the most sane discussions of the reality in Europe, Bidermantschi note that it appears investors have finally wised up to the fact that "bailout loans are nothing but a shell game replacing old debt with new debt" and the heretical proposition that central banks perhaps cannot solve all the world's problems.

Well worth the 6 minutes or so for a lot of food for thought on what is going through Merkel and Schaeuble's heads (especially at half-time in the Germany-Holland game)...

 

for the short-version (though we suggest listening to the entire piece), fast forward to 4:00 and understand the difference between solvency and liquidity and why central bank largesse has to fail.