Monday, November 28, 2011

On Europe & The Euro

Futures are screaming higher this morning because....Surprise! Another Bailout...This time its Italy. Also The Federal Reserve will commence a half trillion $$ mortgage purchase plan which is the unofficial start of QE3. You got love backstops, backdoor bailouts, front door bailouts, overt in your face asset price manipulation, ZIRP, and Central Planning.

Somewhere in the afterlife (If It Exists) Engels and Marx are high fiving and chest bumping.

Who knows if this stems the vicious downdraft the markets had the last few weeks, for the time being its Risk On!

Keep in mind that the bailouts and Fed Mortgage buying are all rumors but looking at the 3% mark up this morning - does it really matter? I would actually choose to fade this rally once the actual news comes out.

As I have said the Italy bailouts are just another way of kicking the can down off the cliff. The Euro and the EU can not survive in its current state. Its inherently flawed and needs to be totally restructured.

As I have previously stated...

If Italy gets its bailout it still doesn't fix the Euro's problems. It's a temporary respite. I figure without this bit of news coming out of Europe over the weekend, Europe was headed towards a death "Lehman" like spiral.

Europe needs to do the following immediately:

1-The ECB needs to provide unlimited funding repo or otherwise. An unlimited backstop is needed.
2-The EFSF needs to expanded.
3-A definite time table for a Eurobond mechanism
4-Some sort of framework for fiscal union.

If German policy makers continue this "hyperinflation" talk I am sure that Italy/Greece will be printing out Lira's and Drachma's real soon.