This piece from Ambrose Evans-Pritchard is about as hard-hitting an analysis of Cyprus as I have read and really makes an interesting introduction to this week’s Outside the Box. No messing around:
Capital controls have shattered the monetary unity of EMU. A Cypriot euro is no longer a core euro….
The complicity of EU authorities in the original plan to violate insured bank savings – halted only by the revolt of the Cypriot parliament – leaves the suspicion that they will steal anybody’s money if leaders of the creditor states think it is in their immediate interest to do so.
The IMF doesn’t get off easy here, either:
The IMF’s Christine Lagarde has given her blessing to the Troika deal, claiming that the package will restore Cyprus to full health, with public debt below 100pc of GDP by 2020.
Yet the Fund has already been through this charade in Greece, and her own staff discredited the doctrine behind EMU crisis measures. It has shown that the “fiscal multiplier” is three times higher than thought for the Club Med bloc. Austerity beyond the therapeutic dose is self-defeating.
I want to amplify Ambrose’s comments by excerpting from another piece, by my über-liberal friend Yves Smith over at Naked Capitalist (although she might characterize herself as mainstream reasonable). But we share a healthy skepticism of large banks.
As we say in Texas, it ain’t over till the fat lady sings. And that would be Italy, as Ambrose points out. (Which given the original intent of that quote and that Darrel Royal of the University of Texas (way back in the day) was referring to Opera Italiana, it is appropriate – in fact, we said it first!)
I have been spending a few moments here and there the last few days with my new granddaughter, Addison (and her parents). I’m now officially in a hotel room in Dallas for the duration until we can get the new place actually bought and construction done, which at best will be late summer; but I will be traveling a lot anyway the next three months, so it’s just another hotel room. I am using it as an opportunity to learn minimalist living.
But I am having to become acquainted with a new knowledge domain, that of architecture and design. If I was just looking at another fund or investment manager, I would feel pretty comfortable doing it on my own, but I clearly need help here and no shame in admitting it.
Many of you may be in a similar boat when it comes to investing. You can leave it to the professionals entirely, but then you get the results that they design and not maybe what you really want. It works a lot better if you spend some time getting familiar with the rules and communicating your objectives.
Most of you would not think (or your wives would not!) of building a home without a great deal of input. Someone has to learn that language if you want to have something that really works for your situation and budget.
The same is true of investing. It is a knowledge domain that is unfamiliar to many, but it is critical to your future happiness. You really do need to get the basics down. The more you learn the better off you will be. And using professionals is important – unless you are going to spend a whole lot of time learning the rules and the tricks. In fact, it takes more than a minor investment of time and effort just to develop adequate skill to be able to pick the right professionals. Not all investment “designers” are the same level of expertise or appropriate for what you want and need.
I did a lot of construction as a young man and can understand the basics even today. But I was never skilled enough to do finish work or design. We will see if I can learn enough to pick the right team in short order! Thankfully, most of you have more time to choose investment professionals.
Have a great Easter weekend. I see more family coming my way and maybe Mavericks and Stars games in our future.
Your can’t believe what everything costs analyst,
John Mauldin, Editor
Outside the Box
Cyprus Has Finally Killed Myth That EMU Is Benign
By Ambrose Evans-Pritchard, London Telegraph
The punishment regime imposed on Cyprus is a trick against everybody involved in this squalid saga, against the Cypriot people and the German people, against savers and creditors. All are being deceived.
It is not a bail-out. There is no debt relief for the state of Cyprus. The…