On the Circus in Europe

 

I'm flabbergasted that Cyprus is the cause of the circus in Europe. Cyprus was an avoidable problem in my opinion. That view is supported by the fact that all of the words, actions (and threats) by the deciders in Northern Europe have been decidedly negative. There was no "Can Do" talk. All I heard was, "We won't do" or "Here is a deadline" - "Here's a gun to your head".

Two possibilities - Either this was a completely bungled effort in Brussels. Or this this was a deliberate effort to weed out the weak members of the EU. If the intent was the latter, this will not stop will little Cyprus.

Next week there will some broad confusion following the resolution in Cyprus. Either Cyprus is out of the Euro zone by Wednesday, or the +E100k depositors are going to get whacked big. There is no soft landing potential any longer. If the folks in Brussels and Berlin who are pulling the strings are really serious about stabilizing the Euro zone they will respond with a series of "positive" measures next week. Things that might be considered to ring-fence Cyprus include:

 

- Doubling the deposit guaranty to E200.

- Creating a Transaction Account Guarantee. This would insure all accounts that were related to the settlement of goods and trade. (protect the economy)

- Financial measures - From some minor stimulus stuff, to monetary measures like LTRO or a cut in % rates.

 

These would be "calming" steps. They would be proactive in that the intent would be to get ahead of any contagion. We could also see "nothing" from Brussels. That silence would be a "tell" that "they" don't want to resist gravity any longer. The most significant sign would be if capital controls were established more broadly in Europe over the next few weeks. These will scare the crap out of folks, especially those in Spain and Italy.

 

- Restrictions on the amount of withdrawals at an ATM.

- Restrictions on money transfers.

- Restrictions on the ability to acquire foreign exchange (Dollars Swiss Francs, etc)

 

Three possibilities. "They" either (1) act in a coordinated way to head off any problems, (2) do nothing, or (3) they turn up the heat with more scary stuff, and the SHTF.

I'm not sure what comes next, Door #1 might buy some time. Doors #2 &3 are trouble. Bad odds.

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The Circus

 

ThreeRing

 

Europe looks like a three ringed circus to me. Think of it, the tent is packed with awe stuck patrons. In the center stage is a clown show. Slapstick comedy. Clowns running clumsily with their big shoes carrying rubber mallets, chasing after other clowns who have buckets filled with confetti, ready for a water fight. A riotous scene that many in the audience cheer and applaud. But there are also those in the audience who fear clowns - the reasons vary - the results are the same. They are revolted by the antics of the clowns. The clowns are the politicians and technocrats in Berlin and Brussels.

 

joker-girl-stephen-king-it-clown-scary-131665

 

 

On one side is a smaller ring. This one has a large metal cage, in it are a bear, a lion and a dozen "little people". The wee ones are dressed in funny, colorful outfits. They carry miniature whips and are desperately trying to get the beasts to perform the hoop jump and barrel rolling tricks. The lion swats with a paw, knocking the bear off its perch and onto one of the little ones. A rescue squad of more little people comes up with a stretcher and carries off the "injured". Some children watching are crying, they think the little one has been crushed. Mothers try to soothe sobbing children with, "Don't worry, it's only make believe".

 

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In the final ring is the high wire act. The famous Estes family from Milan is the main attraction. Three generations are balanced on a small wire. The family forms a pyramid three levels high. A young boy, the youngest Estes, climbs to the top and does a handstand. Most in the audience stand and cheer at this amazing feat, others turn their heads in fear. There is no safety net below the Estes family. How could they take such risks with their youth?

 

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Off to the side of the final ring are a troop of actors. Some are dressed in brown shirts, others white. The stage has a back drop of the famous fortress in Toledo, The Alcazar.

Toledo-Alcazar antes del incendio

 

The circus show is a re-enactment of the 1936 Siege of Alcazar. This battle was the start of the Spanish Civil war. The Brown shirts, led by Franco and armed by Germany defeated the defenders. The battle was fought over the control of a munitions plant. There were many heroes of this battle.

 

alcazar -bk

 

 

Few in the circus audience understand (or care) about this portion of the show. But some of the older ones do remember, others know that this siege was an important step to a much larger war.

 

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