OUTSIDE THE BOX
THE Greek election on Sunday was hailed in the global financial press and by the markets as a breakthrough in solving Europe’s financial problems.
Nothing could be farther from the truth.
The Greeks decided to give the political group, the New Democracy (ND) party, a slight edge in the voting.
The ND campaigned it would agree to the austerity measures imposed by the European Union (EU) in return for continuing to use the euro currency and for additional EU money to keep the country running.
While the Greeks were voting, so were the French. In France the anti-austerity Socialists won big. But the French Socialists also are committed to the euro. And it is the euro and the bureaucrats’ and politicians’ jobs that all of this is about.
The Greeks, French, Spaniards and Italians have absolutely no intention of putting programs in place that will significantly reduce government expenditures to a level necessary to stop the debt crisis. The only viable solution is drop the euro, print local money, and devalue out of the debt problem. That is the solution that has always worked before but it will not happen.
But if even one country returns to its former currency, the euro and, in effect, the EU, is dead. There would be no need for a European Central Bank, a European Commission, or a European Parliament, putting thousands of politicians and bureaucrats out of jobs.
There is no intention at this point on either side of the Atlantic Ocean to solve the debt problem with a rational government economic growth policy. It is all and only about political power.
The new leader of Greece said the vote was “a victory for all Europe.” Not quite. It was a victory for politicians of the wild spending countries against the people of the few hard-working nations.
What was revealed on Sunday is how the game is going to be played in the coming months.
Spain, Italy and Portugal (and perhaps France before long under the Socialists) need massive amounts of bailout money. But the citizens of those countries are not going to accept anything more than minimal financial pain.
The credibility of every major political party in all the EU countries dies if the euro goes.
The people wanted cradle-to-grave government benefits without having to pay for them. The politicians told them lies to get elected. When people want the impossible, only liars can satisfy them.
The vote on Sunday was nothing less than blackmail. The voters said, if you want the euro to live, you must pay us to stay. And everyone, the central banks, the financial markets and the politicians, are all happy with this arrangement.
The Federal Reserve, the ECB and the Bank of Japan are now able to create as much money as they want. There cannot be any sort of hyperinflation if all the major currencies are being printed. All three currencies, the dollar, euro and yen, will maintain their relative value against each other.
The debt crisis will continue as will the money printing.
But the true winners of Sunday’s elections are countries with sound fiscal policies and a sound currency. Like the Philippines.
Although the government is doing all that it can to discourage foreign investment with the total disaster of its mining policy, foreign money will come to this country. The PSE will go to 5,800 to 6,000. The peso will appreciate to 40. Economic growth will continue at relatively high levels.
While the ignorant say that our stock market is not “cheap,” that will not matter because of peso appreciation. You are willing to pay a higher price for your stock if your gasoline price is lower. Some worry about a nonexistent property bubble. They ignore the intrinsic value of PHL condos and office space against other countries.
The party is not over. The Greeks just bought more hard liquor for everyone and the central banks are glad to print the money to pay for it.
E-mail to email@example.com, Web site is www.mangunonmarkets.com, and Twitter @mangunonmarkets. PSE stock-market information and technical analysis tools provided by COL Financial Group Inc.