Saturday, May 22, 2010

Part 3: European Dominos: Global Cascade?

Has Germany saved the Euro?  Leo Isaak (www.minyanville.com) thinks not.  Click on the link to read the full story, but here is another precis: "As Greece was the first domino in Europe, Europe will be the first domino for the rest of the world."  To wit: "Europe is China's biggest customer....their economies will forcibly slow...and...that means lower spending on imported goods from both China and the US....The first sovereign default will set off a debt devaluation that will rock the continent and more....it could happen in 2011 as just Europe and the US have between $7 trillion and $8 trillion in debt to rollover by the end of this year...Slower China will reduce demand for hard commodities....reduced demand plus a higher dollar equals lower prices for crude, copper, cement, steel, etc.  These sectors are by far the most dangerous right now....Collapsing Euro will eliminate any chance for a Yuan revaluation....[otherwise their goods will be too expensive for Europeans]...Slowing Europe and continental Asia will also hit Japan....Japan is a titanic mess with debt problems that are actually worse than everyone else's...A lower Euro and slower China make it tougher on export-oriented Japan....its debt service will become unbearable, causing a true collapse in the Yen and possibly even a default for Japan....That is staggering."