Euro Reprieve or Detonation? ~ The Risk Averse Alert

Tuesday, November 05, 2013

Euro Reprieve or Detonation?

Someone of considerable repute is likewise anticipating trouble in the euro-zone on account of its currency crushing the prospect of economic growth necessary to sustain the illusion that, the EMU's burdensome debt can be managed. This past weekend the Telegraph's Ambrose Evans-Pritchard wrote of Southern Europe being on the precipice on account of a curse a strong euro represents. We noted the same prospect for systemically threatening trouble originating in the euro-zone here on October 25th.

Curiously enough the U.S. dollar caught a bid at the expense of the euro, yet only short-dated U.S. Treasuries appear to have been bid up. This could mean a bomb is about to be detonated. Were the likelihood otherwise, then longer-dated U.S.Treasuries, or corporate debt, or equities, or even gold might have seen more positive action on account of capital's flight from Europe starting late last week. Not that money parked in short-dated Treasuries couldn't be promptly moved into these other investment alternatives. Yet that these were not the first choice and instead short-dated U.S. Treasuries were bid at the very least speaks for razor thin confidence, righteous though this be in the midst of trapped central banks and tapped sovereign treasuries straight to the core of the trans-Atlantic banking system.

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