Monday, January 2, 2012

Interesting Perspective on Euro Crisis

I had dinner last night with an ex-guitarist friend who's currently a hot prodigy in the financial analysis industry. He had an interesting perspective on the European crisis: The Greeks and the Portuguese (and perhaps others) may go off the Euro for a while, and there will be incredible fiscal pain in those places, short term, as their economies, previously propped up by the currency union, spin into depression.

But when other countries have undergone massive sudden currency devaluation (e.g. Russia and Mexico), economies tend to lean up, creating stronger roots, and outside investment eventually floods in, attracted by bargain prices (finance abhors a vacuum!).

So, in his view, these European crises were inevitable, will be shorter term than most people expect, and will put the individual countries - as well as the Euro community as a whole - on stronger footing in the long run. This is, in other words, nothing but a correction; a comparatively brief release of negative pressure, healing to the entire system in the long run.

That said, pity the working classes in these places, which, as usual, will bear the brunt. But if you have savings to invest, you could do a lot worse than Greek and Portuguese bonds. Because investors tend to flock, and the flock is now avoiding those supposedly doomed locales....but may not for long.

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