EU fatalists put Dow 8,000 back in play

The Germans appear resigned to an eurozone collapse, and they'd rather let the market dictate the destruction than risk hyperinflation.

By Jim Cramer Nov 18, 2011 10:54AM

the streetThere was always an assumption that the Europeans would do what is necessary to preserve the banks, the union and the countries that are a part of it.


The assumption seems to be unraveling before our eyes.


The unraveling makes more sense than the containment, even though the consequences are unfathomable. That's because, in fits and starts, we are seeing a simple outline of the German point of view: The European Central Bank has no ability to control the finances of any country and it has no ability to tax people to finance the printing presses, so what is the point of trying to save the system?


The fatalists seem to be taking over. What's the fatalist game plan? Let the markets take care of themselves and let's see what happens.


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The Germans are the fatalists here. They now think the printing presses lead to Weimar-style hyperinflation no matter what, and given the lack of fiscal austerity in the countries' finances that they would be papering over, you can see their point. The fatalists would rather have destruction of capital by deflation than by inflation.


The fatalists think this because they now know that destruction is occurring either way. To them we have moved past the point of no return. To the fatalists you can get out of a no-growth, no-discipline environment in two ways: printing presses or collapse of the institutional framework of sovereign debt and those who hold it -- talk about a Morton's fork. They are going for the latter. They would rather have a collapse of the system at the hands of the market than a collapse of the system under hyperinflation.


So here's where we are. If the fatalists win, we have to go back to Dow ($INDU) 8,000, where I feared we would go when the fatalists looked like they might win at the end of September.

If the fatalists lose, we can hold it together and muddle through here, although their currency will go down to parity and their problems will be worked out over time in a way that transfers wealth to the poorer nations in return for risk to the wealthy, which the fatalists have decided is too unpalatable.


Thus in one fell swoop of a Spanish bond auction, the fatalists are making it known that they would rather choose the unknown of the market than the known of hyperinflation. The idea that they could bring down the Western world of finance -- even if it is just for six months as everyone adjusts over here and whole nations get crushed there -- is appealing to them. Because the fatalists know it is going to happen anyway, so they would rather just get going with it.


I think the fatalists regard both paths as potentially suicidal, but in the "let the market decide" option, they have a better chance of coming back faster from the apocalypse than by letting the central bank print money it doesn't have. They recognize the problem is too big and too out of control to do anything else.


Looks like Angela "Lucy" Merkel has taken the ball away for good and told Charlie Brown to go home. It didn't have to be this way. The Europeans had their chance. To the fatalists, they blew it.


And now we all have to suffer, with the U.S. coming out of it down the road, and maybe the Germans, while the rest are left to fend for themselves. Triple-AAA preservation for the French?


Triple-BBB destruction is more like it.


The fatalists have put Dow 8,000 back on the agenda.


Let's hope, if they win, it holds.


jim cramerJim Cramer is a co-founder of TheStreet and contributes daily market commentary to the financial news network's sites. Follow his trades for his charitable trust.

Nov 18, 2011 8:29PM
How many of you old timers remember Phil Harris singing: 'Smoke, smoke, smoke that cigarette?"  Our Washington DC folks need to change the words to:  Spend, spend, spend that billion dollar bill".
Nov 18, 2011 8:11PM
Nov 18, 2011 7:42PM
Good now I'll have something good to buy for Christmas cheap equities!!! :)
Nov 18, 2011 7:23PM
Fact is the Federal Reserve loaned money to Germany by the Billions after WWI.  It financed Hitler's entry into WWII.  Tis Better to Leave them be to muddle out of it.  One should never make excuses for Hitler insanity.  Germany didn't  need anything Hitler just wanted everything. 
Nov 18, 2011 6:30PM


We gotta put a fresh coat of paint on Ellis Island.  We've got company coming!



Nov 18, 2011 6:29PM
What is astounding about the German nightmare after WWI with hyperinflation (Berlin want ads for bookkeepers/auditors: "Wanted:  Men wanted -- good with zeros...")  in the early 20s and beyond was the high number of boys born who 20 yrs later were the Wehrmacht from '39 to Year Zero, 1945.  Obviously German mothers did their duty for the Fatherland.  For the last time I'll mention this, but northern European nations are far better off than those in the the African country of Zimbabwe still engulfed in hyper-inflation with billion dollar bills.....? 
Nov 18, 2011 6:21PM


Hi Just Enter, how are you doing?  We had fun back on the old MSN money pages.


I feel Merkel is just stalling.  She wants the world's investment rating agencies to sink Italy and Greece with BBB ratings instead of Germany being the bad guy.  But only being the bad guy in the eyes of the press.  The rest of the world knows better.  I've said it before and I'll say it again, the ECB and the EU can do whatever they want, but Germany is not handing over the checkbook, the credit card, or the keys to the car.  Germany belonging to the Union is like Germany signing a one-year health club membership.  They'd walk away in a minute.  They've got the cash and the nards.  They are like the old phone company.  They don't care, they don't have to.  Hard working Germans can get really mad.  And when they are watching other country's pensioners on television protesting and tipping over cars because their booze allowance is going to be reduced, that can make hard working Germans really really mad.

You have to remember that the Germans got no help when they were in financial trouble after WWI and the rest of Europe were asking them for money to repay the war debt. Long story short the Germans kicked the Wall Street bankers out of their country got their economy rolling again and when the rest of Europe and their colonies refused to trade with Germany , Germany had to attack other countries on it's way to Russia to get raw materials. Hence WWII

There is no way the hard working Germans are going to cover the bill for French and Italian and Spain writing hot checks to pay for luxury goods while the Germans do without and are working.

If the ECB prints monies to cover the bills then Germany is leaving the EU and then the EU will truely collapse. 

Printing money does not solve anything it makes matters worse. 

Germany tried printing money before WWII and it did not work so they let their economy collapse and rebuilt it in just two years.
Nov 18, 2011 6:00PM

What entertained me about Cramer's article is that he actually summed up the entire matter with his question, "The European Central Bank has no ability to control the finances of any country and it has no ability to tax people to finance the printing presses, so what is the point of trying to save the system?"


Answer: Nothing.

Nov 18, 2011 5:42PM
I'm not sure where they get this DOW number at.  Every stock that I'm tracking is at about the same as is was when the DOW was at 9,000
Nov 18, 2011 5:42PM
Let the Germans put on a half-priced sale! All Porsches, BMWs, Audis, Mercedes Benz, and Volkswagens at half price (to other countries) would quickly prevent a meltdown and bring financial stability for the Germans! This would be the very best plan to rescue themselves!
Nov 18, 2011 5:38PM

The Germans are realists.

Our current governemnt gurus apply a bandage to a decapitated economy and are hoping it holds.

Nov 18, 2011 5:26PM
cramer,s says market headed for 8000. that's great news coming from a guy who had no idea the market was about to crash the last time .time to buy , buy , buy !!!
Nov 18, 2011 5:23PM


Somebody could probably come up with an estimate of lost sales in Europe for U.S. goods as their economy contracts.  Give us an idea of what this is going to cost us.  Perhaps translate those lost sales figures into lost jobs as layoffs happen.  8,000 for the Dow sounds like a reasonable estimate.  This could be a good real estate buying opportunity.   Deep discounts on French chateaus and Italian villas.



Nov 18, 2011 5:13PM

Have you ever balanced a spinning plate on your finger?????




What happens when the plate stops spinning?????




Nov 18, 2011 5:13PM
All of a sudden I am nervous about my bear fund.
Nov 18, 2011 5:03PM
Hope the fatalists prevail-I think they will this time, because the rest of us who've been working our tails off and being smart about our hard earned money is sick to death of being 'on the hook' for laggards,sloths and parasites. We here in the US sure are'nt going to suck it up for those slugs over there that only have to 'work' at public service jobs for 20-25 years and get to retire with full bennies and nice pensions. Let them have the inter-generational battles that are brewing here between the well-heeled already retired parasites of Medicare, Medicaid, SSI and get nice Social Security bennies besides their pensions and us younger boomers who're paying for their self-importatnt butts. Can't wait for it to officially start since it's being conveniently and intentionally swept under the rug and nobody's got the balls to bring it up.
Nov 18, 2011 4:50PM
only the strong should survive...fortune 1000 hasnt created a new job since 1980, and is responsible for a small part of our GDP...lets make sure the small guy survives and we will see jobs created and the economy will improve. Small bus has accounted for 98% of ALL new private jobs...lets let the big guys fall...worldwide
Nov 18, 2011 4:44PM
Yee-ha, the dow at 8000, what a hoot. Just sittin on the sidelines watching now. BOOMERS get a grip, get out of this market now!
Nov 18, 2011 4:40PM

Yes,   It's time to let the chips fall across the board.  Let the losers loss and the rest go on with life.  That is what I have been thinking for the pass three years.   This up and down and all around it making everyone to worry to the point they are just going to stop spending.   When it really comes down to it everyone owe everyone else.  


Maybe we should put a limit on how many bonds can be sold by our school systems because they are the next to fall.

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