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TGI Fixed Again – The Rube Goldberg Solution

Posted on the 09 December 2011 by Phil's Stock World @philstockworld

While we are, of course, thrilled (again) – the final solution that Germany has come up with this time for some reason reminds me of a Rube Goldberg machine – with way too many moving parts that all have to work together perfectly in order to get something (a bailout) that you could have gotten from a sane person in one step (borrow/lend money at low rates).  

The European Union and the euro area have done much over the past 18 months to improve economic governance and adopt new measures in response to the sovereign debt crisis. However, market tensions in the euro area have increased, and we need to step up our efforts to address the current challenges. Today we agreed to move towards a stronger economic union. This implies action in two directions:
- a new fiscal compact and strengthened economic policy coordination;
- the development of our stabilisation tools to face short term challenges.

That’s the official statement from the European Council, which goes on to outline 16 intended changes, which boil down to a Declaration of Interdependence except it’s not the people of Europe that this new treaty is meant to protect, but the holders of European debt (PIMCO, et al), who have been asked to give up nothing while being given every possible guarantee that even really atrocious behavior – like lending Greece money at 20% interest – will be rewarded.  

TGI Fixed Again – The Rube Goldberg Solution

Behold the power of bond-holders!  Merkel, at first, insisted that the private sector share some of the pain but, less than a year of manipulation later and the Masters of the Universe have brought even Germany to their knees as EVERY OTHER EU NATION insisted that bondholders be made whole – except the UK, who are so disgusted by this new treaty that they have opted out – all 26 other Euro Zone Nations have signed on.  

We ended ended our day playing bullish yesterday on the assumption that there would be some sort of agreement reached either today or over the weekend but THIS agreement does nothing to convince me to stay bullish into the weekend so we will be back to cash on this news – as I’m really not sure this ridiculous mechanism will stand up to a weekend of scrutiny.   

TGI Fixed Again – The Rube Goldberg SolutionFortunately, we picked up…



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