Here’s the clip from yesterday afternoon’s Capital Account with Lauren Lyster. I am on as a guest in the first part, talking about Europe. If you have been reading Credit Writedowns for the past few months, then nothing I said here was really news.
I am not particularly shocked or worried about the cancelled European finance ministers meeting. I still think this bailout gets done because Europe and the markets are not prepared for a disorderly default and politicians cannot risk the fallout one would create. Where my concern lies is the medium to longer-term. The austerity approach has created a depression in the periphery, with Greece being the hardest hit. Eventually this will lead to political extremism and nationalism.
In the UK, the Chancellor got the wrong message from the downgrade by Moody’s. He will re-double austerity efforts as a result and that will weaken the economy but be bullish for government bonds.
Video below