Art Cashin On The Way To The European Egress

If there was one analogy we had not heard so far to the deplorable European situation, it was that to P.T. Barnum's infamous "Egress." Following this morning's Art Cashin note, that is no longer the case. Granted, since it references a museum exhibit, such as what the EUR, not to mention European socialism which recently ran out of other people's money, will soon be, it is about time...

From UBS Financial Products

This Way To The Egress - One of the more famous stories about the showman, P.T. Barnum, concerned a ploy he used at his American Museum.

The museum was hugely popular back in the 1800’s. The trouble was that it was so popular that visitors would revisit exhibits over and over again. Some would spend nearly the whole day there.

That frustrated Barnum on two levels. The dawdlers had paid only one fee so Barnum wasn’t making any more money, regardless of how long they stayed. Second, and more importantly, the dawdlers kept the museum so crowded, that new clients (and their new money) could not get in.

Barnum’s solution was to set up a series of signs reading “This way to the Egress”. Most clients were poor immigrants with limited vocabularies. Not knowing that egress was a fancy word for “exit”, they followed the trail thinking it was some exotic animal.

When they followed the signs and pushed through the door marked Egress, they found themselves outside and a locked “Egress” door behind them. If they wanted to see more, they would have to pay another fee and they had made from for new clients.

 Traders wondered if the Greek people were headed for the egress. Frustrated with austerity, they might find themselves suddenly locked out of the Euro and the Eurozone.

Their pain is palpable. Industrial production has fallen for 47 straight months. Unemployment is over 25% and near 50% among youth (some towns are said to have 80% unemployment).

The Greek mood seems a bit paradoxical. Nearly 80% of the people say they want to remain in the Euro, recalling various disasters under the drachma. In the recent election, however, 70% of the people voted for parties whose stated position was to reject the terms of the EU agreements. In short, they love and need the Euro but don’t want the imposed and painful austerity that may be the price to stay in.

Paradoxical attitudes pervade the Eurozone. Germans complain that the Greeks have already received more aid than they did under the Marshall Plan after World War II. But, even if Greece could exit the Euro quickly and clearly, the Germans and others would not want them out. Without Greece, the Euro might firm to a level that could cut the legs out from under German exports.

But, as noted earlier, Greece cannot exit cleanly. The contagion risk is evident. There are reports of plans to control currency flows. Banks would be closed for a week while drachmas are printed and distributed to replace current Euro deposits. There are discussions of how to deploy the police to protect the shuttered banks. ATMs would be restricted to allow de minimis daily distributions (20 Euros?) to meet daily needs. Transfers outside the border would be forbidden.

Like Barnum’s clients, the Greeks don’t want to leave the building, but an accidental slip on the wrong path could find them suddenly outside with the door locked behind them. Beware of the Egress.


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