Germans and Euros and Bears

Oh my.

It looks like the bears have gotten loose again. Just when we thought it was safe to go back into the market, along come the Germans to shoot down any dreams of a comprehensive fix to the euro-area debt crisis. Angela Merkel has said that dreams of a solution as early as this weekend are likely to be disappointed, and in Greece Finance Ministry workers began a ten-day strike. Hey, if the IRS doesn’t collect taxes, will people file?

The Germans are pressuring peripheral countries and private investors in order to increase the odds that their taxpayers will be paid back. It also doesn’t hurt that every time they threaten to pull their support from the rescue fund the Euro falls, making German industry more competitive.

Still, what the Germans want is budget discipline, and budget discipline is important. Cutting expenditures enough so that they fit within the revenues the government can reasonably collect is, well, reasonable. It can lead to a stronger financial sector, better allocation of capital, and improved consumer confidence. In the short-run, austerity hurts. Unemployment rises and consumers pull in their horns. But in the long run, living within your means means more sustainable living. It’s worked in Canada, Mexico, Sweden, and it looks like it’s working in Ireland.

The Germans will talk down their currency right until the crisis point. By then, the bears will be out. Let’s hope they don’t end up in a bear trap.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-11T09:35:34+00:00 October 17th, 2011|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. - Leave a comment if you have any questions—I read them all! - And Follow me on Twitter @GlobalMarketUpd

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