Stocks and currency prices crashed in Italy earlier this month, again, as the country continues to hemorrhage money and threaten to leave the Eurozone. Many hedge funds are making a profit on this, or at least trying to, as Europe continues to crash. Quoting a recent New York Times article:
From 2010 to 2012, a parade of investors, deeply skeptical about the eurozone’s ability to hold together, wagered that the bonds of debt-plagued countries like Greece, Ireland, Italy and Spain would keep falling. It became a self-fulfilling prophecy as pension funds, mutual funds and banks sold these suddenly risky securities.
Yep. As Lew Rockwell correctly pointed out many years ago, the big banks have their foot on Europe’s neck, and are continuing to slowly crush it. And what is Europe’s leaders and voters doing about it? Embracing more big government socialism and importing millions of third-world immigrants.
Great. I’m sure that will work out well.
For hedge funds that were wagering on a new Italian debt crisis, the market turmoil was a profit bonanza. And they are betting there is more to come.
Hedge funds have been building up their short positions for months, betting that Italian bonds will face another bout of selling pressure once investors recognize that the new government might consider taboo topics such as adopting a currency other than the euro and restructuring Italy’s debt.
Yep. Countries collapse, citizens get screwed, and a few of the super-rich get richer. This is exactly what eventually happens to cultures that worship government power the way the Europeans have for most of human history. And now this zeitgeist has been exported to the US. Cool.
The Continentwide fire sale was halted only when Mario Draghi, the president of the European Central Bank, put in place an aggressive program to buy the bonds, which made their prices soar and their interest rates fall.
Now, as the E.C.B.’s bond-purchasing program draws to a close, the same strains that prompted the earlier bout of selling — weaker countries running up potentially unsustainable debts — are showing again.
This precisely is why I call it Suicidal Europe. Europe is doing exactly the things that will destroy itself, over and over again. It’s even worse than what the USA is doing, which is saying a lot.
Near-bankrupt Italy’s response to all of this?
In Italy, for example, the new government is promising an aggressive spending program to spur the country’s stagnant economy. The populists are not deterred by the fiscal restraints imposed on eurozone countries by Brussels.
“These people feel very strongly that deficit limits make no sense,” said Jens Nordvig
Yeah! Let’s spend even more money and do more socialism and go into even more debt! That will fix everything!
Watching Europe implode is like watching an insane man dying on the operating table, repeatedly stabbing himself with a small knife while laughing hysterically.
It really is amazing to watch. We have the very rare opportunity, not experienced by most humans who have ever existed, to watch a once great civilization, Europe, actively destroy itself. It will die not because of external threats, wars, barbarians, Nazis, or aliens, but because of itself; its own insane and suicidal voters and politicians. It’s a dumpster fire of historical proportions.
My advice, as always, is to not get mad (which is useless), not try to stop it (it can’t be stopped at this point), but instead get far away (both literally and financially), grab a lawn chair and a lemonade, and watch the show from a distance.
It truly is the greatest show on Earth.