Will European Governments Tighten Up?


Not much to report from yesterday. Dow up 78 points. Gold bouncing around.

All eyes are on Europe. If the European governments can pull off a save…well, we’re all saved. At least for a few weeks. Maybe through the holiday season.

The euro has been remarkably stable. It has never collapsed — despite all the talk of Europe falling apart. Apparently, people with money don’t think it is in real danger. They think it is too important to let go. They may be right. And the more people talk about the ‘end of Europe’ the more it doesn’t end. Instead of letting it go, the authorities become more and more stubborn in trying to hold it together.

It’s hard to know how this will play out. But we feel we know how this week will go. Frau Merkel and Monsieur Sarkozy will put together a new plan… It will include promises of fiscal tightness along with monetary looseness. The EZ money is expected to put short-term investors’ fears at ease. The fiscal austerity, it is hoped, will help long-term investors sleep better at night.

European governments will pretend to tighten up. The ECB will lower interest rates and print up some new ersatz money. What could go wrong? The combination of mendacity and counterfeiting should do the trick…for a while. The liquidity from the central bank will come like Christmas pudding, or perhaps more like spiked eggnog. It will put some cheer into the markets during this ‘dark passage’ of the winter solstice. And then, the promises of austerity will allow everyone to think that things will be fine in the long run too.

So…keep your eyes on Europe…and your hands on your wallet.


Bill Bonner
for The Daily Reckoning Australia

Bill Bonner

Bill Bonner

Best-selling investment author Bill Bonner is the founder and president of Agora Publishing, one of the world's most successful consumer newsletter companies. Owner of both Fleet Street Publications and MoneyWeek magazine in the UK, he is also author of the free daily e-mail The Daily Reckoning.
Bill Bonner

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