From Mark Grant, author of Out Of The Box
CATASTROPHE
"Where we're going, it's gonna get colder than Hell."
-Five Easy Pieces
For those that wanted the world to remain in a status quo position it can only be said that the European elections over the weekend were a disaster and a disaster of the first magnitude. The anti-bank, anti-wealthy, anti-fiscal pact, anti-austerity Francois Hollande is to be the new President of France. “Merkozy” is now officially dead; long live the Chancellor. The close warm and fuzzy ties between France and Germany as they cooperated to rule Europe are now a thing of the past. In a second, what was; is now all gone. Finished and all of the King’s horses and all of the King’s men can’t put it back together again.
“It wasn’t just a story was it?”
-The Adventures of Baron Munchausen
Now that France has a Socialist President the story is not over, not even close to over as the next French elections, for Parliament, will roust the nation once more into the spotlight as Ms. Le Pen and her allies assume a new role, a higher ground, and as the financial situation in France deteriorates they may get an even bigger slice of the pie than thought at present. It is not just that Europe is going to be governed in a different fashion but that France will be run differently and with more difficulties I predict than currently thought. The recession and the anger directed at Germany are rousing the spirits once thought dead; France for the French, the Netherlands for the Dutch, Greece for the Greeks and soon we may find the same dreaded tale in Germany as Nationalism rings in the death knell for European unity and for the political parties that flaunted it. It is a rolling thunder all across Europe, that much is known, and the implications of it all will be felt by the people of each separate country. The dream is fading into the reality of a different sun and daylight will mask that which was dared to be dreamed years before.
"I do wish we could chat longer, but I'm having an old friend for dinner. Bye."
-The Silence of the Lambs
The Great Game
To date it has not been played out in the streets but at the ballot boxes. In Greece the second most winning party was not part of the prior coalition at all. Both of the heads of the two major parties in Greece are now calling for either a renegotiation of the Greek bailout package or to overturn it all together. This, my friends, is a recipe for disaster in my view and one that could lead Greece to exit its obligations with whatever calamities that will accompany that move. Quite soon it will come to renegotiate or default and that puts the Germans and the IMF in an untenable position. I fear it is going to become a quite serious game of “Chicken” pitting Greece against the previously formed dictates of austerity and the EU agreement to come up with another $14 billion in new savings by June; which will not be happening. On the other side of the argument Merkel cannot be seen as backing down without a tremendous loss of credibility in her own country so the stage is set for a tragedy of the first order with either a default within the Eurozone or outside of it as Germany could end up demanding that Greece exits or Greece could preempt them and do it themselves. The Lords of Chaos have returned.
"Nobody's looking for a puppeteer in today's wintry economic climate."
-Being John Malkovich
America: The Knock-In Effects
To think that the United States will not be affected by the recession in Europe is fantasy. As the economies on the Continent worsen caused, in part, by the austerity measures then it will be both Germany and America that will suffer as the cutback in demand for both goods and services has a telling effect. Then as Germany and France march to different drummers and as Greece could default on its obligations and send shockwaves through the EU, the ECB and the IMF given the losses they would all have to take; the scenario for America being led back into recession squares. The world is also facing a wholesale downgrade of the banks by Moodys which will cause a very unlevel playing field with the banks thought safe, a small group now, being able to fund with relative ease while the rest of the banks struggle with funding and at levels that will certainly impact their earnings. I imagine that all of this will not help Mr. Obama and that Mr. Romney’s cause will be assisted by the impending economic downturn in America as we roll into the Presidential elections in November.
“Fasten your seatbelts---it’s going to be a bumpy night.”
-All about Eve