Steen Jakobsen, chief economist for Saxo Bank in Copenhagen, pinged me with a personal thought regarding Europe:
"I am just back from Italy and Russia and what really strikes me is how people have given up, and I mean totally given up. To my mind we are entering extremely difficult time where balancing EU, US debt and social tension makes for a black Swan event."
On his blog, Steen writes: Time is Running Out for Europe
Europe is close to losing a generation of youth in Spain, Ireland, Portugal and Italy, with between 20 and 45 per cent youth unemployment. To avoid losing this generation, European politicians and the ECB need to come up with a radically new game plan.
First, we need to stop pretending we can dance around the word â€œdefaultâ€ Let me help: if your income is less than your expenses and you canâ€™t borrow money, you are done, finito, insolvent and in default.
That is another lesson from Greece; the longer you avoid facing the truth, the more you solve debt with debt, the deeper the hole you are digging as your new beginning necessitates a larger and large initial trauma.
Politicians tend to underestimate their voters ability to deal with a crisis. If the population at large knows itâ€™s coming, they can and will deal with it. Many of todayâ€™s generation of politicians forget that their grandparents lived through two wars, the depression and several stock market crashes only to create the most robust growth era in modern history.
Yes, there will be some contagion and some short-term high volatility if Greece goes the default rout, but as they say in the world of sports: no pain, no gain.
In fact, a crisis 2.0 could be what is needed to create both the economic and political platform that will solve Europeâ€™s problems: namely, a fiscal union. Do not misunderstand me â€“ I am agnostic on the EUâ€™s existential question, but the EU was created as a political institution, not an economic one. Europe is a house without a financial foundation: no ministry of finance.
The time has come for some major decisions if the great European experiment is to survive. The Euro Zone needs a Ministry of Finance, one that should probably issue Euro Bonds from EFSF/ESM.
The idea that one day the voters of Europe will rise up and embrace the EU idea is fading fast. The rising social tension in all of Europe shows us that â€“ similar to my impatience with the Danish national football team â€“ time is running out. Letâ€™s for once hear some straight talk from the EU and the ECB and letâ€™s put an end to the extend-and-pretend nonsense and attempts to pull the wool over the publicâ€™s eyes. Otherwise, Europe will continue to score own goals. Thatâ€™s a pity, as a new start â€“ even if painful at first â€“ could set up decades of sustainable growth as more transparency and less leverage would bring more stable financial markets.