Friday, June 29, 2012


My best guess for the 52nd state would be Cuba.

Its effectively dollarized, close in proximity, and already has a significant American military presence.  Coupled with Puerto Rico (51st?) it would provide a nice nod to the growing latin American constituency.

No to mention those wonderful 50s era cars and Baseball...

Wednesday, June 27, 2012


...In her position, I would be much more circumspect regarding my convictions...history has a way of testing them.


That man...

I have disagreed with him in the past for many things (not least of which is his propensity to claim that the future of complex systems cannot be predicted...while simultaneously proclaiming the future of Western Civilization is dire), but the following passage is flat out true.

In his most recent work, the statistician and options trader turned
philosopher Nassim Taleb asks a wonderful question: “What is the
opposite of fragile?”

The answer is not “robust” or “strong”- which is probably what you
were thinking - because those words simply mean less fragile. The true
opposite of fragile is anti-fragile.

A system that becomes stronger when subjected to perturbation is
anti-fragile. The point is that regulation should be designed to
heighten anti-fragility. But the regulation we are contemplating today
does the very opposite: because of its very complexity – and often
self-contradictory objectives – it is pro-fragile.

Over-complicated regulation can indeed be the disease of which it
purports to be the cure. Just as the planners of the old Soviet system
could never hope to direct a modern economy in all its complexity, for
reasons long ago explained by Friedrich Hayek and Janos Kornai, so the
regulators of the post-crisis world are doomed to fail in their
efforts to make the global financial system crisis-free. They can
never know enough to manage such a complex system. They will only ever
learn from the last crisis how to make the next one. Is there an
alternative? I believe there is. But I believe we need to go back to
the time of Darwin to find it.

Friday, June 22, 2012

It would be fantastically...

ignorant or willfully panglossian to view the Bo Xilai controversy as an isolated incident.  Nor would it be prudent to think that the ilicit transfers of Billions of dollars is not "business as usual" in the Middle Kingdom.

Imagine if a truly indepedent and incentivized audit or investigatory agency got involved.

As above so below.  The culture is "different".

Thursday, June 21, 2012

"When the facts change...

...I change my mind."  Keynes was certainly right about that one.

Most of the "game changers" in this article can be subsumed into the point regarding "competitive forces".  The interesting thing about this article is that the author wrote a book entitled "The Emerging Markets Century"...and now appears to be re-evaluating that position...

Vendor financing...

...a continuing series.  This time, Teutonic style.  Merkel must be re-evaluating her stance on generous bail-outs as this crosses the wires.

(Markit) Flash Composite Output Index at 48.5 in June from 49.3 in May, Flash Services Activity Index at 50.3 from 51.8, Flash Manufacturing PMI at 44.7 from 45.2, and Flash Manufacturing Output Index at 44.9 from 44.6. Reduced business activity reflected a marked fall in manufacturing production in June. Meanwhile, service sector activity was close to stagnation during the latest survey period. The latest drop in incoming new work reflected reductions in both the manufacturing and service sectors. Manufacturers indicated a steep and accelerated downturn in new export business during June, with the pace of reduction the fastest since April 2009.

Tuesday, June 19, 2012

About those Optical Backstops...

Swapping assets...sound familiar?  The problem is the asset swaps have different maturities, rates, ratings, and prospects.

Moreover, parking the assets with the ECB will alter the provisions of the various EU treaties, but hey, the Cat seems out the bag at this point.

Once again, the reason that Sovereign Currency Issuers enjoy top status on my Sovereign Debt Tier List is the massive flexibility afforded to domestic debt.

From The Telegraph:

Two rescue funds are to be used to buy the debts of the troubled economies, the cost of which have reached record highs in recent weeks.
It is hoped that the move, which represents a substantial shift in policy for Germany’s chancellor, Angela Merkel, will send a strong signal to financial markets that Europe’s biggest economy is finally prepared to back its weaker neighbours.
Mrs Merkel and other European leaders have come under intense pressure at this week’s G20 summit to take radical action to stem the growing euro crisis which has pushed up the cost of Spanish bonds to unsustainable levels. The communiqué issued at the end of the G20 summit, which finished in Mexico last night, said that European leaders had agreed to take action to bring down borrowing rates.
Under the proposed deal, two European rescue funds – the £400 billion (€500  billion) European Stability Mechanism (ESM) and the £200 billion (€250  billion) European Financial Stability Facility (EFSF) – will buy bonds issued by European countries.
Previously, money in these funds — which has been provided by members of the single currency — has been used to bail out smaller European countries such as Greece, Portugal and Ireland. Governments in these countries were offered money directly in return for agreeing to austerity programmes. Under the new plan, the money in these funds will not be given directly to governments but will instead be used to buy up debts on the financial markets.

AAA Macht Frei

What a spectacle.  The assymetry between these reactions regarding the pretext of "concern over conflicts of interest" and the total lack of concern when ratings on the most toxic of assets were AAA is just hilarious.

At this point, its simply censorship of a perceived lackey who dared bite the hand that feeds.  As for exacerbating the Euro crisis, the ratings agencies were predictably late to the party that was in full swing once they arrived.  To say the agencies "exacerbated" the problem is to blame organizations that were already looked upon as rubber-stampers to smart money.  This is bad comedy.

European Union lawmakers sought to scrap most of a proposal to force businesses to rotate the credit-ratings company they hire to assess their debt, while backing tighter restrictions on sovereign-debt ratings.
The European Parliament’s economic and monetary affairs committee voted today in Brussels to scale back the proposed rotation requirement so that it would apply only to securitizations and other kinds of so-called structured finance. The stance brings the Parliament’s position largely into line with that of EU national governments, which must also approve the new rules proposed by the bloc’s regulators last year.
The European Commission, the 27-nation EU’s regulatory arm, proposed the rotation rule last year as part of a draft law to toughen regulation of the ratings industry amid concerns that some of its decisions exacerbated the euro-area debt crisis. The commission said rotation would boost competition and solve potential conflicts of interest.

Gold as "safety"

A real-life example that dovetails nicely with my recent discussion regarding gold's exalted status as a "safe" asset.

Its value is highly contextual on events, because smuggling large amounts of gold is problematic, to say the least...especially when Sovereigns are on high alert for assets leaving the country.

Italian tax police have seized 50kg (110lb) of gold from an Italian businessman at the Swiss border.
The gold, worth around €2m (£1.6m), was found in a hidden compartment in his car last Thursday, the police said on Monday.
The man and his daughter, who was also in the car, were both charged with smuggling.
Italians are believed to have billions of euros in undeclared wealth stashed in Switzerland – funds that Italy is trying to have the Swiss authorities tax retroactively.
Many Italians have also bought gold as a refuge from a worsening European debt crisis.

Monday, June 18, 2012

The ties that bind...

...include quasi-religious doctrines that are designed to keep the discussions regarding global integration properly lubricated.

Dissolving national interests will be a much more difficult task and will require more powerful instruments than "sustainability", "global warming", and "income equality".

And of course, what would be the point of saying this if it did not include first-class tickets (or a private jet, whatever the IMF uses these days..their travel budget for fiscal '12 is over 100 Million Dollars) to Rio.

The world faces triple obstacles to a green future, with the global economic crisis smothering action on global warming and feeding an expanding gap between haves and have-nots, IMF Managing Director Christine Lagarde warned. She said that the three different crises on economic, environmental, and social fronts feed off each other and cannot be addressed each in isolation.

“The global economy is still rocked by turmoil, with uncertain prospects for growth and jobs. The planet is warming rapidly, with unknown and possibly dire consequences down the line. Across too many societies, the gap between the haves and have-nots is getting wider and strains are getting fiercer,” she said.
Lagarde addressed an audience of policymakers and journalists at the Center for Global Development in Washington, D.C.
With these formidable challenges facing the world, Lagarde urged efforts toward economic growth, environmental protection, and social progress at the same time. “Different economic, environmental, and social objectives can be seen as distinct aspects of a single vision, essential parts of a connected whole,” she said.
Twenty years after the 1992 Earth Summit in Rio de Janeiro, Brazil, Lagarde will be taking this message back to Rio where the Rio+20, United Nations Conference on Sustainable Development is taking place next week.

Its just business...

...or more appropriately, the business life cycle.  I wrote about the trajectory of High Frequency Trading groups years ago.

From a "Frequently Tiresome" publication...

Many high speed trading companies that have reshaped equities trading in recent years are restructuring due to low market volumes and fierce new competition.
Some of the most successful companies of recent years on both sides of the Atlantic are cutting jobs and consolidating technology as they seek out new markets and asset classes, like foreign exchange and fixed-income trading.

The industry upheaval, amid regulatory scrutiny, is a further sign of the impact of the prolonged slump in trading activity on equity markets. Last week it emerged Getco, the US group, was cutting 10 per cent of its workforce.

Where are they?...

...a continuing series...

All the pundits who loudly proclaimed that the dollar was doomed, etc., must be flabbergasted.  It was all too clear for readers here.

While the Fed has created more than $2 trillion under its stimulus programs since 2008, the flows signal that there may actually be a shortage of dollars to meet demand as Europe’s debt crisis deepens and the global economy slows. The dollar has risen 3.5 percent since the end of April against a basket of the most-widely traded currencies even amid speculation that the Fed, which meets this week, may undertake the type of stimulus measures that weakened it in the past.

Reading the wrong signals...

...and interpreting them in the wrong fashion.

The following excerpt comes from an "economist" with a book (yes, he forsees "DOOM" in 2013) out and who also helps to run a money management fund.  He benefits from vivid predictions and media exposure.  Probity, accuracy, and intellectual vigor are simply not incentivized behavior.

My comments are in italics.

"Maybe you believe it too. But, let me ask you a question: If having the Fed buy massive amounts of government bonds with printed money, doesn’t create inflation, why don’t we do more of it?

The QE described here is an asset swap with two assets yielding zero (cash) or near zero (treasuries) returns.  This is not "money printing".  And asking a rhetorical question does not prove the opposite of the (unstated) conclusion.  The Fed has its own decision function and self-imposed limitations on its operations.

There are few economist who wouldn't agree that if we eliminated all taxes tomorrow — including corporate and Social Security taxes — while maintaining all federal government spending, that we would boost the economy right out of the current slump and into a period of enormous growth. 


All we have to do is borrow that money instead of taxing it. How do we borrow it? By selling bonds to the Federal Reserve. It’s exactly what we did in the past with QE1 and QE2. With the Fed buying the bonds, it won’t stress the bond markets. They just buy whatever it takes to fund the government each year. No more. No less. 

If you "loan money" to yourself, is that "borrowing"?

Since the deflationists strongly assert that massive Federal Reserve purchases of government bonds (as they have done in the past few years with QE 1 and QE2) won’t create inflation, then what’s the downside? It seems like all upside to me. I don’t like paying taxes and I don’t know many individuals or corporations that do. I also know that getting rid of all taxes will be an enormous boost to the economy. 

Abrogating taxation in an economic upswing or in a period of GDP growth is incredibly inflationary, but please note the distinction between monetary and fiscal policy here.

But we all know in our gut this if a fraud. We all know such money printing will create inflation. There really is no such thing as money from heaven and having the Fed buy our government bonds with printed money is NOT money from heaven. It is the fuel for inflation. 

If it was money creation, it would probably be inflationary in periods of high and increasing GDP growth.  However, the entire planet is mired in a debt-deflation cycle (with very, very few exceptions).  This is not simply giving every citizen $20,000 to spend fresh from the printing press, or using "printed money" to purchase real assets.  Its an asset swap.

Inflation doesn’t start immediately, but that doesn’t mean it doesn’t happen. 

Inflation doesn’t start at a high level, but that mean it won’t get higher. 

The converse and obverse of these statements are equally meaningless.

That’s where we are today — we are far enough along that inflation has started, but it has not gotten to a high level yet. Ask anybody who’s been in an inflationary environment and they will tell you that low inflation is no protection from higher inflation. Low inflation is simply the beginning of high inflation when you are printing massive amounts of money."

Whatever.  The academic literature regarding historic inflation is fairly clear:  low inflation begats low inflation which is punctuated periodically by confluences of bad actors and bad events.  Once again, and asset swap should not be considered "printing massive amounts of money".  The distinction is crucial to understanding the impotence of current monetary policy.

Optical backstops...

Notwithstanding the democratic coalition's victory in Greece, until the ECB provides unlimited liquidity and gets in front of the constant headline risk in the Euro area, this euphoria will be short-lived.

Sunday, June 17, 2012

One of the problems with Mercantilism... that you are completely dependent on the stability of demand from foreign markets.

BEIJING--Chinese President Hu Jintao has urged the members of the Group of 20 (G20) to address the European sovereign debt issue with concerted efforts, the official Xinhua News Agency reported Sunday.

When Judges overextend...

...into matters with which they enjoy no obvious expertise...

Richard Posner (of my glorious Alma Mater) is by all accounts a brilliant judge and a multi-faceted first rate intellectual.  Unfortunately, it is impossible in this world to be an expert on every subject so invariably short-cuts and heuristics to smooth over the premises that lead to suitably brilliant conclusions.

Such is the case with one of Judge Posner's recent posts concerning interest rates and the Fed.  I have included the relevant section with my comments in italics.


"But there are three reasons for doubting that the Federal Reserve’s using its monetary authority to reduce interest rates at this time is a good idea. The obvious ones seem to me weak: that the necessary measures would create serious inflation risk and that they would increase the already enormous federal debt. The rate of inflation is at present very low, and, judging from the interest rate (less than 2 percent) on long-term Treasury securities (for example, 10-year Treasury bonds), is expected to remain low for some years. This expectation is influenced by beliefs about whether the Fed will try to reduce interest rates; but since no one thinks the probability zero, it seems unlikely that the 10-year interest rate would be so low if action by the Fed to reduce interest rates were expected to cause inflation, which of course would raise interest rates. Moreover, as long as interest rates are low, increasing the federal debt is a low-cost proposition. At 2 percent, the annual cost of borrowing $1 trillion is only $200 billion. That is a large number, obviously, but only about half would be borrowed abroad, and $100 billion is a small fraction of the annual federal budget. The half borrowed from Americans would be an internal money transfer rather than a transfer of money abroad. "

Math is wrong...its 20 Billion, not 200 Billion, but whatever.  Again, this talk of "borrowed" needs to be re-thought.  The very concept arrogates the economics of exchange into a derivative of household economics.  With Sovereign Currency Issuers, the "borrowing" is more accurately described at the desire of foreign nationals to net save U.S. financial assets (for the myriad reasons constantly discussed on this blog).  The U.S. government does not need to "borrow" U.S. dollars from anyone.
"The more serious objection to the Fed’s pushing down interest rates is that it probably would have little effect on borrowing, consumption, production, and employment. The reason is that interest rates are already very low, yet borrowing is lackluster. One reason is that, in part because of pressure from regulators, banks have raised their credit standards, so that many individuals and firms, though they would like to borrow and would be willing to pay the current interest rates, cannot persuade banks to lend to them. Another reason is that household savings are still below historic standards because of the depression in housing prices (and as I said a house is the most valuable asset that most households have) and because of continued economic anxiety people want to increase their savings—and savings are the obverse of borrowing. And finally concerns with bank solvency and new federal regulations are inducing banks to increase their cash reserves, which is an example of hoarding rather than spending. "

Banks have raised lending standards because they need to conserve capital in an intensely competitive environment where any false move destroys any retained earnings and brand value they have left.  I agree with the balance of this paragraph.
"If banks are reluctant to lend and consumers to borrow, increasing the supply of money will not lead to a big increase in borrowing. Instead the banks will use the money to buy Treasury securities, which are riskless assets. The money will go in a circle: the Treasury will buy securities from banks, and banks will use the money to buy securities from the Treasury. Or the Treasury will buy securities from nonbank owners of them, who will deposit the proceeds in banks, which will use the additional cash to buy Treasury securities or increase cash reserves. This is an exaggeration, but can help one to see why increasing the money supply need not increase productive activity. "

An increase in the supply of "money" is not happening.  What is happening is swapping zero interest assets (cash) for extremely low interest assets (bonds).  The net effect is near zero and does nothing to stimulate the economy.  This notion of the "money supply" increasing is following false assertions that only "cash" is "money" in a fiat currency system with a massive and liquid bond market.  Ask yourself, dear reader, what is the difference between cash and a Treasury but for the tiny bid/ask spread to complete the transaction (which nicely offsets the interest spread of cash and Treasury assets in the first place).  This whole "money supply" notion should be re-thought when a zero-interest rate policy in emplaced.  I agree its circular, but its akin to the circularities of Copernicus and Kepler...yeah, they are similar, but the dissimilarities explain everything.
"The idea that increasing the supply of money must stimulate economic activity, though mistakenly thought to be an idea of Keynes’s, is actually an echo of “Say’s Law,” which Keynes famously attacked, though he was not the first economist to do so. Say’s Law, rather confusingly paraphrased as supply creates its own demand, treats money as a medium of exchange and a standard of value, but nothing more. This is essentially a barter theory of the economy. But modern economies are not barter economists. In a modern economy, receiving money in exchange for some good or service doesn’t dictate that you exchange the money forthwith for some other good or service. You can save the money indefinitely. If you put it under your mattress, it makes no contribution to productive activity. Similarly, money can pile up in Federal Reserve Banks if people are disinclined to spend, without contributing to economic activity. "

I have no idea how we go from supply creating its own demand to stating it (whatever "it" is) is "essentially a barter system".  The point of this exercise is that Judge Posner has the correct conclusion from entirely wrong premises...and would benefit from expanding his grasp of just what is a fiat currency system and how it completely changes the game.

Chinese Capital Flight and FX Reserves

A recent paper is making the rounds which seeks to illustrate the risk of mass capital flight in China.  The Recapitulator has warned readers regarding similar flight risks for years.

The important point regarding the level of reserves is their composition and ownership rights.  The problem with Foreign Direct Investment (“FDI”) is that it gets listed as “foreign exchange reserves” under national accounting standards, but those standards to not account for the transitory nature of FDI, or who ultimately owns the stock or flow of cash resulting from such investment. 

Much ballyhoo has been made over the massive notional amount of Chinese FX reserves.  The total figure appears to be in the  1 Trillion range, but again, who owns those reserves, how portable and fungible are they, and what is the physical location (be it in cash or accounts in respective countries) of these reserves?  Bear in mind China is under no obligation to disclose any of the above, and the fact it has not done so given the total amounts involved should induce disquiet in China bulls.

It is somewhat similar to capital reserve rules under Basel II with respect to what assets are considered respectable collateral.  FDI is by definition capital that can quickly move in to or out of a country.  It serves no master and has been the bane of many nations who sought to open previously constrained and controlled markets.

I have maintained that global properties being purchased by Chinese nationals could very well serve as colonial ensconcements once domestic policy disfavors wealthy Chinese in favor of more “traditional” communist ethos.  The problem is, once Freedom is experienced, it cannot be un-experienced.  The slope is slippery and the U.S.S.R. serves as an example of utilizing half-measures in front of the Tsunami of public opinion.

The world has yet to discount the possibility that foreign "hard" asset purchases by Chinese nationals may serve as "factories" (to use the English East India Company term for "semi-sovereign trading posts owned by resident aliens") for wealthy Chinese looking to park assets in safe jurisdictions.

My instinct informs me the tethers of control in the middle kingdom are dissolving quickly.

Saturday, June 16, 2012

A popular...

....definition of sovereign external debt from a popular book on the subject goes as follows:

External debt:  The total debt liabilities of a country with foreign creditors, both official (public) and private.  Creditors often determine all the terms of the debt contracts, which are normally subject to the jurisdiction of the foreign creditors or to international law (for multilateral credits)

Pay special attention to the jurisdictional portion of the definition and you will begin to understand why being a Sovereign Currency Issuer with zero External debt is leaves you in an extremely powerful position relative to foreign competitors.

Friday, June 15, 2012

It is clear...

...that the investing world gives little credence to further EU "optical backstops" until the ECB swoops in and provides a credible bulwark.

The U.S. proves once again that it is the preferred destination for capital under stress.

Thursday, June 14, 2012

Exploding U.S. "Debt"

A simple mental exercise:

Is it true that massive sovereign debt issuance necessarily causes the corresponding interest rate of that debt to rise?  For purposes of this credit analysis type of exercise, let us ignore the national assets of countries (for example, the hydrocarbon deposits currently sitting on U.S. Federal land approaches Arabian levels of abundance, if not as easily extracted)

If so, how can one reconcile a simple stylized fact:

in 1980, total U.S. national debt was 800 Billion.

Rates at the time hovered around 20% (TWENTY percent)

in 2012, total U.S. national debt is 16 Trillion.

Rates now hover around 0% (ZERO percent)

How can this be?

Clearly, there is something going on with the notion of national rates being linked to the total debt stock in any significant fashion.  I have attempted to remind readers over and over that Sovereign Currency issuers play by a completely different set of rules than those of say, the Euro area, which must fund obligations in a currency divorced from national interest and control.

The power to issue currency is one of the primary powers of a sovereign.  This is something the Euro area will be reminded in one fashion or another.

Moving costs

If you have to ask “if my government could get away with x where (f(x), x=”draconian, lack of due process law or edict”), would they do it? 

…and the answer is “yes”, then Houston, we have a problem.

If you think your government only lacks external restraint in its execution of power amplification and not a temperate internal constraint, then why are you living in said country.

Most of the time, the answer is moving costs, both in monetary and sentimental terms.

Because history has given its verdict time and time again:  the outcome is not favorable for peace-loving men, and judging the time where rule phase-transitions from a republic or democracy into something "else" is notoriously difficult to accomplish in practice.

Not quite.

A fiscal crisis is not the problem.  Once again, holding onto analogies to "household" economics (wherein actors must "get" currency in order to spend it) produces erroneous conclusions.  In the current environment, the stock or level of debt is of little consequence.  Now, transport the same levels to an economy with vastly greater GDP growth and there will indeed be inflationary pressures.  However, there would still be no "fiscal crisis".

In addition, the CBO doth protest too much...what happened after 1946?

The U.S. government risks a fiscal crisis unless it makes significant changes in tax and spending policies, the Congressional Budget Office said.
The nonpartisan agency said that without policy changes, the national debt within 15 years will top the historical peak set after World War II. In 1946, government debt amounted to 109 percent of the economy. This year, it’s projected to reach 70 percent of the gross domestic product, up from 40 percent in 2008, according to CBO.
By 2037, the debt would be almost twice the size of the economy, the agency said. That would mean higher interest rates, slower economic growth and far more painful choices for lawmakers than they face today.

The downward spiral...


On the positive side of the ledger, the ECB continues to float "lender of last resort" trial balloons that  are well-received by those seeking short-term solutions to the Euro problems.

But without a uniform policy, the challenges to "optical backstops" will proceed.

(Reuters) - Spanish house prices fell at the sharpest pace since
current records began in the first quarter, data showed on Thursday,
deepening a property market slump and serving up more bad news for the
country's battered banks.

Prices dropped 12.6 percent year on year, national statistics
institute INE said. The fall was the biggest since the data series
began in 2007, easily beating the previous trough of 7.7 percent in
the second quarter of 2009.

Saturday, June 09, 2012

A bit late... the party as always.

Moody's Investors Service said Friday that it may consider downgrading debt ratings for some eurozone nations if Spain seeks a bailout for its banking sector or Greece ends up dropping the euro as its national currency.
The ratings firm said it is assessing the implications of a bailout for Spain and is prepared to make rating changes to reflect any heightened risk for Spain's government creditors.
There's growing speculation that Spain could decide within days or weeks to ask the European Union for a bailout for its banks, which have been crippled by soured real estate investments.

Wednesday, June 06, 2012


A quick question for my readers.  Given global turmoil and chaos, what is better:

1.     A billion “dollars” (or whatever value metric you wish to impose) which would weigh approximately 25 tons?
2.     U.S. Dollars denominated in thousands weighing in at 2000 lbs?
3.     Several pieces of rare impressionistic art weighing 120 lbs?
4.     An international currency bank account weighing zero pounds?

Lets also just assume the Billion dollars experiences no security cost “decay” (does anyone think that insuring 25 tons of gold is the same as insuring a bank account?) that effectively inflates the discount rate of its future value. (for the option guys out there, lets assume zero theta)

Of course, all of these have their strengths and weaknesses, and I realize the decreasing utility of weight given its portability costs, but who really thinks that gold is “the” safe haven in times of instability?

It is fascinating to see the gymnastics put on the gold bug crowd.  We have heard the doom knell of "inflation is coming because of QE and such!" for years now...and yet the statistics do not bear this out (I have said repeated times here that without the wage pressure that appears to be a pipe dream, it ain't gonna happen).

So Au is now just a "safety" play.  


Let it go.

Breaking up is hard to do.  Those of us (read: “everyone”) who have experienced the profound and indeed sublime pain of lost love understand this. 

The European Union is a marriage drawn up with the best intentions and derived from the imaginations designs from the keenest, far-looking minds.  But this is more a tale of star-crossed lovers than it is a celebration of sober commitment.

That the tale has several players is of no consequence, the relationship is going through its “double down” phase.  The participants cling hopefully to any ephemeral string of connection…regardless of probability and no matter how ridiculously positive outcomes are extrapolated into the future.

Here in the United States, the phrase “cut bait”  (a reference to that most challenging, frustrating, and ultimately rewarding experience of fishing) is sometimes used to describe a situation where cutting one’s losses is preferable to any other outcome.  It is an admission of defeat and is typically avoided at all costs by optimistic folk. 

But there are poignant times in history where a wise and avuncular elder must use his powers of persuasion and effectively communicate his experience upon youthful aspiration.

Thus far, no such leader has emerged with respect to the Euro “crisis”. (I use quotations because the realization of a permanent defect should not constitute a “crisis”)  A piece of paper will not transform the region into a culturally sustainable region.  It might have made sense economically, but as we have all learned, compatibility cannot be manufactured.