The Greek "Fix"

It was a clear sign of hot air and no action. German Chancellor Angela Merkel, ECB President Jean-Claude Trichet, and Greek Prime Minister George Popandreou announced a deal that does nothing.

In a sign that the market partially bought it, Greek bonds were up, and the Euro was down. Gold is up, but no new bailout (and the associated money-printing) is actually bad for gold longer-term.

The details of the story are a little more interesting. It seems Germany has clearly commandeered EU monetary policy, as "the declaration was issued in the EU’s name before other leaders were consulted." It seems that Germany is determined to keep the Euro strong. Greece still needs to sell $72 billion in bonds this year, which is 20% of GDP. Now that Germany has hinted at a bailout (possibly loan guarantees) investors won't want to wade into the market until there is one.

So my thinking is that the Greek market will be tested again, but also that the bailout at that point in time would probably be swift. This time, though, I think I will hold my Euro short (EUO) a little longer, as the "bailout" really isn't a bailout (yet).

I was reading Russ Winter's blog today, and I posted the following comments:

re: China.

I Don’t believe currency exchange tax is viable. Isn’t 90% (we import 10 times as much from China as we export to China) of Dollar-Yuan exchange taking place in China? How do we tax that?

Instead, I believe we should look for U.S. policy to devalue the dollar (causing inflation in China) and trade restrictions designed to punish U.S. companies that move capital to China.

Everyone’s worrying about China dumping Treasuries. I think Ben and Obama can’t wait for this to happen. What better way to pay off our debt with a printing press?