|
"In a book published two years ago (The End is Not Nigh), we argued that, because of the constant currency manipulation by Asian central banks, production in Asia had been subsidized to the detriment of Asian consumption for the past decade. Meanwhile, consumption outside of Asia (especially in the US and Europe) has been subsidized to the detriment of American and European production."
(...)
"As François Fillon, the current French Prime Minister, recently put it: "I run a state which now stands in a situation of financial bankruptcy, which has known deteriorating deficits for fifteen straight years and which has not voted a balanced budget for twenty-five years. This cannot last." We tend to believe that François Fillon is right: The excesses in European government spending are not sustainable, especially when you consider that most of the European government's debt is actually "off the books" in unaccounted pension liabilities, and that Europe's demographic picture is set to deteriorate very rapidly in the years ahead."
"Now as you may know, we have argued for a while that the Euro was a train heading to nowhere. Thus far, however, this has not been one of our most stellar recommendations. In fact, this call has moved so far against us that, since 2002, Italian government bonds have outperformed the S&P 500 by some +43%, despite the fact that a) Italy repeatedly breached its Maastricht promise of keeping its budget deficit under 3% of GDP; b) outstanding Italian government debt moved from 105% to 107.6% of GDP; c) Italy's average debt maturity has moved from a little over two years in 1999 to well over five years today; d) Italy's population is set to shrink starting this year; and finally e) Italy moved in 2006 to having a communist president, a communist leader of parliament and communists running 9 out of 20 ministries."
|
