The Eurozone continues to dominate the mood of the market and it will do so until it breaks apart. The European Central Bank is under mounting pressure to buy unlimited amounts of Italian and Spanish bonds to keep the Eurozone together.
Apparently that will fix things. But the problem is these countries’ competitiveness relative to the German economy. Bailing them out and forcing reforms that call for internal devaluation to restore competitiveness just won’t work.
But that won’t stop self-interested politicians from wasting billions more euros in trying. German chancellor Angela Merkel is even prepared to sacrifice German sovereignty to Brussels to help ‘solve’ the crisis. We wonder what her people think of that?
The European leaders are like a bunch of two year olds trying to jam a piece of the puzzle in where it doesn’t fit. An adult needs to come along and tell them to go and play outside where they won’t hurt anyone, or themselves This is a slow-motion train wreck of epic proportions.
But right now this doesn’t seem to be worrying the Aussie market too much. After all, our banks are strong and China will be able to engineer a ‘soft landing’, meaning the good times should continue rolling for resource companies.
Or maybe it’s just the Obama effect. But he’s leaving da house soon, so where does that leave the US …and us?
According to Murray Dawes’ latest free market update, markets are precariously positioned. You can check out what Murray has to say here.
for The Daily Reckoning Australia