Germany says a new Continental banking nanny won't be on the job until next year, or whenever they get around to it. Normally those Germans are sticklers for timeliness, so this should be a worrisome sign for any hedge fund managers who were dumb enough to buy European debt this year.
That new banking supervisor will have a full plate of stuff to do on day one. The first task will be to explain Moody's continuing downgrade of the EU's credit outlook. Even Germany can't escape the harsh eye of Moody's this time. I like to think that Warren Buffett has admonished Moody's not to miss another brewing debt crisis like it did with the U.S. subprime mortgage debacle. I'm probably wrong but it's a cute fantasy.
Spain's more intelligent investors aren't waiting for another Moody's downgrade. They're pulling their savings out of Spanish banks and decamping for more stable climes and currencies. It's too bad some Spanish folks chose England as their safe haven, because that's one of the countries that just saw Moody's cut its credit outlook. The coming breakup of the eurozone will leave a lot of investors very sad for not moving out of a worthless currency while they had time. Americans will have some time to enjoy the dollar's reserve status after the euro dies but this will not be a long-lived reprieve. I have purchased some foreign currency ETFs and I will definitely open some kind of foreign bank account very soon to hold a stable currency. The handwriting is on the wall in big bold letters.
I had some fun playing with The Economist's global debt clock. It's kind of jarring to see both Australia and the U.S. colored red for high debt, as Australia's public debt burden isn't nearly as onerous as ours. Calling Libya a low-debt country is hilarious. I would not want to own Libyan currency as a hedge against the dollar, especially given the likelihood of a Muslim Brotherhood takeover there.
The Economist has some other fun signals to send us this week. "Charlemagne" tells us not to expect any game-changing moves from the ECB as long as national governments (read: Germany) can veto any pro-euro money printing. The Economist's regular columnists are anonymous because they are insiders of the highest caliber, so these articles are really quasi-policy statements. Reading between the lines is a test for those market analysts (like Yours Truly) who add value. The ECB isn't the only central bank to watch here. That's the real meaning of comments like "single-handedly" and the passing mention of the Fed's Jackson Hole conference in the second paragraph. Just because the ECB can't save the euro doesn't mean the Fed won't step in and give it a try.
Here's one more tidbit from The Economist: Spain is still in line for a bailout after Greece. Even Captain Obvious can see that. What we can't see takes some textual analysis. Greece's tranche payments have been delayed until October, so the "troika" is unwilling to call Greece's bluff and refuse further loan modifications. This "extend and pretend" playbook is now being handed to Spain so European leaders can pretend to bail out Spain and the Spanish can pretend to remain solvent. Europeans have thus bought themselves a few more months of breathing room after some hurried shuttle diplomacy from Tim Geithner convinced them not to breakup the Eurozone before the U.S. elections in November. I hope I haven't confused my dear readers too badly. The "limited hangout" from The Economist tells me that the euro crash can't be put off much longer than two or three months, so it may even coincide with the U.S.'s fiscal cliff. Prepare accordingly.
This article needs a rallying cry. Sarcasm today! Sarcasm tomorrow! Sarcasm forever!