Jon, I have no additional arguments on top of those I mentioned before to back my point of view that the EURO will cause a calamity in Europe short term. I will add only that changing the "socialistic attitude" in Europe will bring with it "Strike and Strife". Any sudden change like that will be problematic. Think only of the massive asset reallocation required to move from national to pan European economies. Look at Germany, it is almost ten years since "Unification" and they still have not straighten out that problem. Take this on a European scale and you will get economic contraction.
As for Japan, the problem is a little different, the liquidity is there, but is locked in by lack of confidence that the economy will revive. Once this confidence comes back, the liquidity will flow (yes, some of it into the US bond market, thus my view that later next year the dollar will strengthen again), but a lot will go into consumption and revival of their moribund economy, IMHO.
I think that in both cases people forget to take into account mass psychology impacts on the respective economies.
Zeev |
