Truth About Europe Edition

By Graham Summers Given the ridiculous number of rumors (and ridiculousness of some of the rumors) related to the US and EU debt talks that are circling the financial community, I thought it best that we confront the realities these two economies face. Regarding Europe, we still don't have any details regarding the Greek bailout, nor do we have any real sense of how the mega-bailout fund will really work in terms of solving any of the EU's problems. However, the fact remains that everything related to EU bailouts hinges on Germany. Germany is the most solvent member of the EU. And without its backing, NO EU bailout scheme will work in any way. With that in mind, we need to consider that the majority of Germans now want out of the Euro. As I have noted in previous articles, politics is the name of the game in the EU, so the next round of German elections in September could dampen Germany's interest in backstopping more bailouts (current Chancellor Angela Merkel's party took a serious beating in the March elections already). A second element that needs to be focused on is Germany's economy. Any threat to the German economy could quickly hinder the debt talks/ bailouts in the EU for the following reason: 1) Germany is the largest, strongest, most solvent, member of the EU, so if it's in trouble, the less solvent members will be in major trouble. 2) A weak German economy will fuel the political fires for those Germans who see little benefit in remaining in the EU (subsequently the heat will turn up on those politicians pushing for continued bailouts). In simple terms, if the German economy breaks down, then the EU and the Euro are in big trouble. With that in mind, Germany has recently seen three economic releases that show the "recovery" is slowing (the IFO Business Climate, Manufacturing and Services, and the ZEW Economic Sentiment). If any of the negative issues mentioned above become worse, the EU experiment would fast approach its end. This would result in the Euro taking a hit, which would push the US Dollar higher. Comment: Let's face it, Europe is screwed, and we're next. As of Monday, the U.S. is officially in default. I guess those Chinese tanks will be rolling down Main St. USA to repossess the country. That's OK. I love Chinese food. LOL Seriously, the government hasn't come up with a stop-gape solution to put off the inevitable collapse of this country for a little while longer - at least not yet. Let's see if they come up with anything over the weekend. But then again, maybe they don't want to work this weekend. They probably have a good time planned on their yachts and beach houses. Come Monday, even if no solution has been reached, I'm sure it will be business as usual - for awhile. How long remains to be seen. As Homer Simpson said a couple of years ago, "America is still the greatest country on Earth for a few more years." Dan 88! To answer a question someone had regarding California's new Gay Studies requirement, yes, if you put your children in ANY private school, be it religious or non-religious, as well as Home Schooling, they will be exempt from having to participate in the program. Dan 88!