From Chart of the Day:
Concerns over the ongoing European debt crisis continue to weigh on the markets. For some perspective, today's chart compares the 10-year government bond yield of the second (France) and third largest (Italy) euro zone economies to that of the largest (Germany). As today's chart illustrates, the crisis for these two relatively large economies really began to escalate in Q2 2011 and again in Q4 2011. Notice how the French 10-year government bond spread really began to increase over the past couple months as the severity of the Italian situation began to approach extreme levels. This is due in large part to the fact that French banks hold a great deal of Italian sovereign debt – and Italy has a great deal of debt outstanding (€1.9 trillion which equates to $2.6 trillion). While there are clearly no good solutions to the crisis, one of the least bad solutions has the European Central Bank printing out significant amounts of euros in order to buy a significant amount of European debt.
My View:
So even Chart of the Day thinks that printing money is a solution to a crisis of too much debt.
This non-solution will not work since, in a fiat currency world, money is debt!
This is like saying the house is on fire and we will put out the fire by throwing crumpled newspapers on it.
What do you think happens next??
From the chart above we see that France is in a position that Italy was 4 to 6 months ago based on yield spreads.
Given the present conditions, it is reasonable to assume that France will likely have an "Italian" like crisis some time in the next 6 months.
Like Italy, France is too big to bail out, so it makes one wonder, who is going to eventually be left in the Euro? Just Germany?
Concerns over the ongoing European debt crisis continue to weigh on the markets. For some perspective, today's chart compares the 10-year government bond yield of the second (France) and third largest (Italy) euro zone economies to that of the largest (Germany). As today's chart illustrates, the crisis for these two relatively large economies really began to escalate in Q2 2011 and again in Q4 2011. Notice how the French 10-year government bond spread really began to increase over the past couple months as the severity of the Italian situation began to approach extreme levels. This is due in large part to the fact that French banks hold a great deal of Italian sovereign debt – and Italy has a great deal of debt outstanding (€1.9 trillion which equates to $2.6 trillion). While there are clearly no good solutions to the crisis, one of the least bad solutions has the European Central Bank printing out significant amounts of euros in order to buy a significant amount of European debt.
My View:
So even Chart of the Day thinks that printing money is a solution to a crisis of too much debt.
This non-solution will not work since, in a fiat currency world, money is debt!
This is like saying the house is on fire and we will put out the fire by throwing crumpled newspapers on it.
What do you think happens next??
From the chart above we see that France is in a position that Italy was 4 to 6 months ago based on yield spreads.
Given the present conditions, it is reasonable to assume that France will likely have an "Italian" like crisis some time in the next 6 months.
Like Italy, France is too big to bail out, so it makes one wonder, who is going to eventually be left in the Euro? Just Germany?
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