6 September 2011

The Euro Struggles On

I continue to be amazed at the naivety in Euroland (see my July post about why the Euro will never reliably work in the current format).

Politicians don't yet see the magnitude of the problem, it seems to me. There is a classic investment cycle which tracks investor attitudes, and one of the stages is "Denial" which is pretty much where politicians are. There will have to be some more pain before there is serious action (like allowing a country to (properly) default on its debt.

In the meantime investors should avoid dodgy countries, and banks with exposure to them. Not very easy to find out, though. Personally, I'll just avoid banks!

Apart from a default or two (like Iceland did), economic growth would be a way out, but there doesn't seem to be too much of that around the world. Otherwise inflation is the economist's friend (but not the investor's).

What is NOT possible is devaluation - at least not in a selective way. Whoever thought it could work??!!

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