What European Union?
The EU needs to unify its stock markets, create a common banking system, and issue European bonds that can absorb all the fractured debt.
By Sheldon Liber
Ever since the creation of the European Economic Community and the European Union, there hasn't been much sense of community or union.
The adoption of the euro helped. However, it has been a major flaw that countries can't print currency but everyone can issue debt -- and they did, as much as they wanted. The biggest problem in Europe is the people are not united and this keeps the markets separate, including their stock markets: the DAX, FTSE, CAC, and Athens Exchange to name a few.
Consider how the markets and the people in the United States respond to both good and bad news. If investors learn that General Motors (GM), Ford (F) and Chrysler (FIAT) beat earnings estimates, the stock market moves up in celebration. Now envision what would happen if German automakers BMW, Mercedes and Volkswagen beat earnings estimates. The stock market would also leap up -- in Germany. The French might be jealous, the Greeks would feel oppressed and the Italians would not let it interrupt their vacation plans. The Germans prosperity is theirs alone.
When Americans witnessed the devastation of Hurricane Katrina, they did not leave the people of New Orleans to fend for themselves. Individual citizens and private groups and companies immediately started loading up trucks with food, water and supplies and drove off to help. It was a national effort toward healing. Would the people of any country in Europe respond in the same way? Government agencies and organizations might, but would the people? I'm not so sure.
The EU needs desperately to unify its stock markets, create a common banking system, and issue European bonds that can absorb all of the fractured debt. Fractured, as in separate and broken. If they do not stand together how will they stand at all?
Look for "Safe places to hide" in an upcoming feature.
Sheldon D. Liber is the CEO/CIO of Chasing Value Asset Management. He recommends consulting an adviser before making financial decisions. Follow him on Twitter: @chasingvalue.
"The EU needs to unify its stock markets, create a common banking system, and issue European bonds that can absorb all the fractured debt. Now envision what would happen if German automakers BMW, Mercedes and Volkswagen beat earnings estimates. The stock market would also leap up -- in Germany. The French might be jealous, the Greeks would feel oppressed and the Italians would not let it interrupt their vacation plans. The Germans prosperity is theirs alone."
The above was written by a true socialist. The Germans should be the only ones that benefit from their successes and the Greeks, Italians and Spaniards should suffer for their excesses. Next they're going to be calling for a a unified global order so they don't lose money when they make bets on the wrong sovereign debt while be tempted by high returns. Nobody is too big to fail.
The European countries are already "States" by definition.
In fact the 50 "States" in the United States of America were originally established as separate countries bound by an agreement (the Constitution) with a limited Federal government. It took the Civil War to bring about the strong Federal Government and basically make the individual States virtually obsolete.
We are seeing an economic setup in Europe right now that is similar to the economic disparity that existed between the industrialized financial centers of the North and the less densely populated, agricultural centers in the South during that time. Will the outcome be different this time?
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Tighter regulations and the end of a lengthy bull market in bonds have changed the landscape forever.
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