An Education
Greece is like a pampered, misbehaving child who threatens to burn down the house if you don’t give her another pack of sweets, pronto. Indulging the child has now given us a screaming little terror.
Politicians everywhere have promised - and spent too much - and a childish electorate has always rewarded them with another term in office. Now we are coming to the end of this road. Greece is the canary in the coal mine, but the toxic methane has already seeped out and is threatening the whole area.
We are watching a fight between the ideas of two long-dead economists - the Austrian Schumpeter vs. the Englishman Keynes. To put it very simple, Schumpeter advocates to let the incompetents, imbeciles, profligates and unlucky self-destruct. Out of this destruction, something new and healthier will be born, eventually. Keynes holds against that and proposes to smother every major crisis caused by nature or human folly by means of massive money creation. Carpet bomb the idiot losers with tons of money and pain will go away.
And this works in the short term. But Schumpeter wins in the long run. Because throwing money around like a drunken sailor will definitely lead to debasement and bankruptcy. But what do we care about all that? We just observe and recommend. At this particular moment in time, it’s obvious that the euro is still on its way down and gold still shines. There are also some upcoming opportunities in banks (Goldman, Deutsche), oil (BP) and other stumbling giants. We’ll just have to wait a little bit longer, sitting on some cash dollars.