Industry NewsMarkets & Economy

Forecasting fallout in European disunion

Commentary: Economic lifeboat is too small to save all
Published on May 7, 2010

Nothing matters right now except Europe. The technical and real failures in the stock market, better jobs numbers, quibbling about recovery sustainability -- all sideshows. Default in Europe is not merely inevitable, but under way. Sometimes default comes in one "swell foop," and other times progressively or displaced, as now: a bank run in Europe is gathering speed, anticipating ultimate default. Hence the 10-year Treasury note to 3.39 percent, mortgages at 4.875 percent. Europe coming apart confirms three large and acutely human lessons: the game-theory of bailouts, the morality of lifeboats, and the Newtonian physics of hot stoves. Imagine that your house is on fire. Further, the tinderbox next door is inhabited by a neatnik-retentive who has hoses stacked at every bib. YOU: Could I borrow a few? NEIGHBOR: Use your own. YOU: I only have one, and it burned up. NEIGHBOR: You shoulda thought of that. YOU: But, your house is going to catch fire. NEIGHBOR: Not ...