When the founder of the world's largest currency hedge fund FX Concepts says that Greece will be out of money by June and out of the Euro soon after, people should listen. While we disagree with the premise that Greece's exit will not be chaotic, his general thoughts on the situation in Europe, espoused in this Bloomberg TV interview, are summed up by his reply when asked if Europe is a sell "I do. I also feel passionately that the euro is effectively a break up." Taylor also points out that the stability of a post-Greece Euro landscape is really up to the ECB noting that "I think the ECB should let the Euro go down. To hell with Germany." Covering whether the Euro will crater, the contagion effects, and how the rest of Europe will behave, the non-Duran-Duran Taylor who readily admits his mistakes on misjudging the Fed's excess, sees the timeline for exit as soon after the next round of elections in Greece this summer.
Taylor on whether Greece will leave the euro after the next round of elections:
"There is another round to go yet as I believe they will have another election in June. Then it will come out the same way or perhaps even worse…This summer I think is very likely. The Europeans will not give them the money. The IMF will not give them an ok. They will be out of money in June."
On whether Germany, France, Spain or Italy will mobilize in an effort to keep Greece in the euro:
"I think that people are feeling the implications of a Greek exit are not so bad. I think Angela Merkel is in a position where she cannot go too far to push the Greeks to stay in or give too much money to them."
On whether there will be chaos if Greece leaves the euro:
"I do not think so. I don't think it will be absolute chaos. I think what will happen instead of them trying to rescue the Greeks, they will turn around and huddle together and say how do we help Portugal and Spain?"
On whether Greece leaving the euro would trigger more nations across Europe to leave:
"There will be a bit of that, but if you talk to not only the political elite, but the political class in all of these countries, they are all in favor of staying with the euro, so I do not they think they will do that until Greece is one year out. No one is talking about Iceland yet. Iceland threw the whole thing in the face of Europe and said to hell with it, we're not going to pay the savior's back, we're going to let our banks go bankrupt, and they've done wonderfully…that is a model for [Greece]. But I must say that Iceland has a lot more assets than Greece does."
On whether now is the time that the euro will crater:
"I have been wrong. There is no doubt about it. A lot of the reason I have been wrong is because of the U.S. The U.S. is determined to help the euro, not to just depreciate its currency, but to give them all the swap lines and the push money out to keep Europe strong. The net effect of the whole thing is that the dollar and the euro have basically been locked together."
On what happens to the euro if Greece leaves:
"I believe it is really up to the ECB. I think the ECB should let the euro go down. To hell with Germany. Germany has a great economy and it's doing wonderfully. So they have a little inflationary problem if the euro goes to $1.10. It will not kill them, but it certainly helps Spain, Italy, and all the other people fight off the Asian import menace that they have."
On what the central banks should do:
"I am not arguing they will stop printing money keeping interest rates at zero. The ECB could get rates lower. Maybe in the next month they will do exactly that. I wrote yesterday
that if they had some pluck, some chutzpah, to go out there and say I am going to cut rates and do something different, that would be a very smart thing for them to do. Even if QE3 comes, I do not think it makes any difference. We are basically on this track. We are kind of on a Japanese track. We will have very low rates for a very long time."
On why Greece will be better off outside the euro:
"If they drop the drachma, people will actually go to Greece on vacation. The hotels are not wonderful, but they are nice enough especially if they are marked down 50%."
On whether he still believes that Europe is a sell:
"I do. I also feel passionately that the euro is effectively a break up."