Time to Short the Garlic Eaters

The garlic eaters don’t want to repay their debts, and the beer drinkers don’t want to lend them any more money. That pretty much sums up the financial tensions that exist within Europe right now. The PIIGS countries of Portugal, Ireland, Italy, Greece’s, and Spain are lurching from one emergency financing to the next. European interest rates are sky high. Never mind that much of that money was borrowed to buy Mercedes, BMW’s and Volkswagens, which enriched Germany’s economy mightily.

This is one of many reasons why I think the Euro will continue to fall against the dollar, possibly to as low as the mid $1.10’s sometime in 2012. The US is growing, and Europe is not. End of story. American interest rates are rising, while Europe’s are not. Another end of story.  This always attracts capital to flow out of the low yielding currency and into the high yielding one, which is creating a rising tide of buyers of greenbacks and sellers of Euro’s.

On Friday, Italian, Spanish and Portuguese bonds traded better than expected. Germany’s Chancellor Angela Merkel hinted they might bend a little on terms. The  China and Japan have said they would happily take down a chunk of the high yielding European debt. With ten year Japanese Government Bonds yielding a paltry 1%, can you blame them?

 

 

Would You Want to Owe Her Money?