Europe has decided to emulate the USA’ is the trillion-dollar news, which translated into ‘a single step by the EU, a giant leap by the global markets’. The European union was established with the main motto of being a different and better economic model than the US. However, at the sign of the first crisis, EU decided to outdo the US in the lunacy called quantitative easing (QE), the cryptic term for ‘creating money out of thin air’.
The most visible effects of the announcement of a trillion dollar bailout is a massive rally in global equity and bond markets effectively erasing almost all the losses from the week before. However the cost of borrowing for a prudent country like Germany has leapfrogged by a huge margin. German polity has assumed the role of the guarantor for the profligate PIGS (Portugal, Italy, Greece and Spain) and many other EU countries with unsustainable expenditures ignoring the strong opposition by the German taxpayers.
If Germany succeeds in turning around Greece and other PIGS into profit making entities, it would be the greatest success story ever since Blitzkrieg conquered continental Europe. Germany might have to reopen the concentration camps (of the Third Reich) for the lazy overpaid government employees in Greece and other such countries. Police might show the street protestors in Athens against the austerity measures, a container train bound for Auschwitz. EU could become one big Zimbabwe if the Germans fail to prove their (blitzkrieg) mettle.
‘The buck goes up when someone is in a crisis’ is the new version of the adage, ‘Making a buck off a crisis is as American as an apple pie’. The US dollar continues in its state of devaluation until and unless forced by a financial crisis. As EU financial crisis is in the rearview mirror now, Chinese leaders can resume breaking their heads about controlling domestic inflation and disposing the humongous stash of devaluing US dollars on their hands.
Since the central banks in the US (FED) and the EU (ECB) have decided to enter the financial markets with their infinite wisdom, sorry money (out of thin air), the lesser mortals like us can take a break and read a short (Panchatantra like) story.
Once upon a time there lived four pigs called Portuka, Spainka, Italika and Greeka. They were jealous of a bull called Amerika that lived across a pond in their area. Amerika, the bull was grossly obese and extremely lazy from overeating the choicest meals he was provided by his keeper, Chinaka. Chinaka was a very diligent worker but strangely he was happy to collect and preserve the droppings of Amerika despite the reek. The pigs did not understand why Chinaka gave Amerika all that food in exchange for droppings. They too wished to get a similar treatment and were in search of a faithful keeper like Chinaka. They concluded that there is strength in unity and so formed a group with a fancy name, club-med but everyone still called them and their group PIGS.
PIGS tried to emulate the ways of Amerika but unfortunately they could not match Amerika in size. One day, the unfortunate PIGS caught the attention of a pack of hungry wolves called the free-marketers. The wolves chased the pigs in hope of a tasty and sumptuous meal. The PIGS were scared to death and ran for life to their neighbor Deutschursa or simply Ursa. Ursa was a very prudent, introvert hardworking bear. She rebuilt her home after a great destruction brought about by the enemies of her lunatic father who was engrossed in a maniacal pursuit for world domination.
Ursa was reluctant as she neither wished to protect the slothful PIGS nor witness her neighbors being mauled by the wolf pack. At that very moment, Franka, the jackal who also lived in that area, approached them with an idea of Eureka. The idea was to form a union of all the inhabitants of that area and call it Eureka and Ursa was to be the guardian angel of the union and everyone had to pay their allegiance to her. Franka’s idea of tempting the reluctant Ursa worked and she agreed to guard all of Eureka by keeping the wolves at bay albeit they did not pose any threat to her. However one resident of the area, Ukka, the haughty crow decided not to join Eureka as it was happy to be Amerika’s stooge.
The PIGS had a great time and they grew fatter by the day under the aegis of Ursa. However Ursa’s kids felt that their mother had been duped by the indolent members of Eureka and wanted her to abandon the union.
Following the tradition of Panchatantra stories, here are a few questions for you dear reader.
1) Did Chinaka get disillusioned with Amerika?
2) Were Ursa’s kids successful in dissuading her ?
3) Could the wolf pack hunt down the PIGS?
Dinakarananda and the Arthayantra team would be happy to know your answers. We wish you happy investing and wealth preservation.