304 North Cardinal St.
Dorchester Center, MA 02124
Last week equity markets rallied on the combination of euphoria that the possibility of a European style Lehman was taken off the table…However, nothing has changed in the sense that Europe is still undergoing a painful private/public sector debt de-leveraging cycle and still faces years of harsh austerity measures. In case you didn’t know, the combination of fiscal austerity and financial sector de-leveraging certainly does not lead to economic growth. In summary, it’s time to curb your enthusiasm and prepare yourselves to be disappointed yet again by European leaders. After all, they are not superhuman and cannot create money out of thin air – only the ECB could do such a thing and they appear to be wholly unwilling to even entertain such an idea. As Peter Boockvar so succinctly explained it last week: Europe will either have to write down the debt, pay it off, or inflate it away. ECB will not allow it to be inflated away, they don’t have money to pay if off, so the only alternative is to write it down. – Here’s What’s Going To Happen