Much has been said and written about the surreal figure of the bad banks. This strategy of creating or designating a bank to take on all the toxicity of the rubbish that has been securitised over the last decade has been a recurring theme over the last three years.
It is like being able to concentrate the illnesses of many in a single dying person, bury him and... live the dolce vita again, which is two days. A Machiavellian transfer of insolvencies whose aim is to free the balance sheets of the financial system (banks) whose collapse would have systemic or very harmful effects for the longed-for economic-financial recovery. It is like digging a hole to bury a large accounting hole concentrated in certain entities created ad hoc. Pure «liquidators»The "Chernobyl and Fukushima" countries, which sacrifice their future so that others can survive. Purely a transfer of problems between accounting communicating vessels, such as debts and toxic assets.
Well, if we stop to think about the role the Euro is playing in the world's major currencies, the situation seems to me to be strangely comparable to the above. Currency exchange rates are just another communicating vessel, but this time it is not about balance sheets but about currency cross rates. Because as we have been saying for many years now, all developed economies have needed to reduce the value of its currency as the air they breathe, and by a ma-tan external devaluation.
More than two years ago, we christened it as «The Era of Devaluations«and a few months ago this financial phenomenon was popularised in the media as a «currency war». No matter the name, the essence was the same already at the end of 2008, and today it is clear to everyone that the strength and weakness of the currency are concepts that the New Normal has been responsible for turning upside down. As we said in that article: «....and that's what the currency war is, it's a Darwinian warfare in which there is not a moment's hesitation in making firewood out of the fallen tree. No more today for you and tomorrow for me. It is, unfortunately, a case of it's either you or me. And in troubled waters, devaluators win.«
That fallen tree is none other than the Euro, with its now undisguisable peripheral insolvency, and the communicating vessels of huge amounts of insolvent debt fatally cross-billed by irresponsible politicians. And the «strength» from which the major developed currencies are fleeing must be concentrated in the rising price of some nerd to infinity and beyond. A fallen tree shot into the sky for the convenience of the rest, who need to devalue against someone or something that plays the same role as the aforementioned sinkhole. A perfect bad currency to enable the recovery of the developed economies that are not yet evicted.
Obviously, for those of us who have the Euro as a currency, this role of bad currency, bad currency, a catch-all, blow-up doll or whatever we want to call it, is nothing more than the chronicle of a long and painfully foretold death. That's what it is to spit up our bad currency.
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An upside-down world, but a world nonetheless.
From New Normal to New Abnormal
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The Euro: strong or expensive currency?
Euro: The Robin Hood of the Eurozone
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