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Jitters over Greece’s increasingly
dire financial plight are waxing yet again, taking Wall Street traders by
surprise if no one else. The Dow Industrial Average dove 303 points Friday on
speculation that Greece would fall into default when the new week began. As
of late Sunday night, however, there was barely a word about Greece on
Google’s news page – only a story about rioting in the streets
following enactment of a new, $2.7 billion property tax in the name of
austerity. That’s the relatively good news. The bad news is that
France, of all countries, was generating scary headlines of its own: Woes at French Banks Signal a Broader
Crisis, declared the Wall Street
Journal. “France’s largest private-sector banks will likely
suffer further credit-rating downgrades this week, the latest sign that the
debt crisis on the euro zone’s periphery is slowly infecting the core
of the region’s financial system,” noted the article. Just when
we thought the panic was about to engulf Spain and Italy, the spinmeisters insert France into the picture as a buffer,
a default risk calculated to be at least somewhat less thinkable than the one
threatening to inundate France’s two large neighbors to the south.
We doubt the diversion, if that’s
what it is, will last for long, however, since, as everyone but the Powers
That Be seems to understand by now, we’re all in this together --
Europe, the U.S., China, Japan, South America, Russia et al. That fact
hasn’t stopped U.S. banks from choking off lending to their European
counterparts in recent weeks in a delusional attempt to distance themselves from the coming euro-implosion. Do Citibank,
J.P. Morgan, Chase, Bank of America and their ilk actually believe their
timid, eleventh-hour avoidance maneuvers will keep the blood-dimmed tide at
bay when market forces ultimately overwhelm the central banks, as seems inevitable?
The bankers might as well be piling sandbags against a nuclear blast. Note
the steep trajectory of the dollar’s rally in the chart above. We told
subscribers last week that if it pierced the 77.38 peak labeled in red, a major breakout was in the offing. As of Sunday
night, the peak had been exceeded by a decisive 0.14 points, implying the upthrust is just getting started. If so, from a financial
standpoint it is August 1914 in Europe, with bleak implications for the rest
of the economic world.
Rick Ackerman
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