Three Questions for Super Mario Draghi
Politics / Eurozone Debt Crisis Aug 30, 2012 - 10:14 AM GMTBy: Graham_Summers
Mr Draghi… a few questions for you…
You say that whatever measure you take… it will be “enough” to support the Euro. Seeing as you’ve already spent over €1 trillion via your LTRO 1 and LTRO 2 schemes only to find that:
1) The uptick in EU banks shares lasted less with each new scheme
2) The bond and credit markets punished those banks who sought funding via these vehicles
…my question is… what exactly is “enough”? Obviously €1 trillion wasn’t. Would €2 trillion be? What about €5 trillion? Seeing as banking deposits at the troubled PIIGS banks exceed €5 trillion alone, it seems even €5 trillion wouldn’t be enough to backstop the EU and get it out of this mess. So could you quantify “enough” please?
My second question would be… if you were to announce some “Hail Mary” policy of monetizing trillions of Euros worth of sovereign and banking debt, how would you stop the Euro from imploding?
You’ve no doubt observed the impact that QE 1 and QE 2 had on the US Dollar. How would you stop the Euro from collapsing if you were to announce an amount that would indeed be “enough” to contain the EU Crisis? As the below chart shows, the Euro is already on the ledge of a very big cliff.
My third and final question… thus far the ECB, when acting in concert with Germany and the IMF, has failed to contain the Greek crisis (there is now talk of Greece needing a third bailout)… how exactly do you intend to handle Spain or Italy (economies and banking systems many multiples larger than those of Greece)?
After all, if the ECB didn’t have “enough” to handle Greece, what makes you think you have “enough” to handle Spain or Italy? I note regarding this last point that Spain’s bonds are falling again despite a shotgun bailout of €100 billion just a few months ago.
If you actually have answers to these questions, I’m sure the world would love to hear them.
Make no mistake, the crisis in Europe is far from over. If anything, we’re fast approaching the REAL storm over there: when countries actually start defaulting and leaving the Euro.
When this happens, we will see the return of systemic risk. And the US will not prove immune to it. Europe is the single largest economy in the world. It’s also China’s single largest trade partner. If the EU goes down, it will send ripple effects around the globe. And with China entering a hard landing and the US re-entering a recession the potential for another 2008 type event is higher than at any point in the last three years.
Those investors looking for actionable investment ideas could also consider our Private Wealth Advisory newsletter: a bi-weekly detailed investment advisory service that distills the most important geopolitical, economic, and financial developments in the markets into concise investment strategies for individual investors.
To learn more about Private Wealth Advisory… and how it can help you navigate the markets successfully…Graham Summers
Chief Market Strategist
Good Investing!
PS. If you’re getting worried about the future of the stock market and have yet to take steps to prepare for the Second Round of the Financial Crisis… I highly suggest you download my FREE Special Report specifying exactly how to prepare for what’s to come.
I call it The Financial Crisis “Round Two” Survival Kit. And its 17 pages contain a wealth of information about portfolio protection, which investments to own and how to take out Catastrophe Insurance on the stock market (this “insurance” paid out triple digit gains in the Autumn of 2008).
Again, this is all 100% FREE. To pick up your copy today, got to http://www.gainspainscapital.com and click on FREE REPORTS.
Graham also writes Private Wealth Advisory, a monthly investment advisory focusing on the most lucrative investment opportunities the financial markets have to offer. Graham understands the big picture from both a macro-economic and capital in/outflow perspective. He translates his understanding into finding trends and undervalued investment opportunities months before the markets catch on: the Private Wealth Advisory portfolio has outperformed the S&P 500 three of the last five years, including a 7% return in 2008 vs. a 37% loss for the S&P 500.
Previously, Graham worked as a Senior Financial Analyst covering global markets for several investment firms in the Mid-Atlantic region. He’s lived and performed research in Europe, Asia, the Middle East, and the United States.
© 2012 Copyright Graham Summers - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.
Graham Summers Archive |
© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.
