Europe, In Layman’s

So, France and Greece elect some new pollies and some meaningful terms are being thrown around; socialist, nazi, etc., and you’re probably wondering what it all means and how it relates to the U.S. market.. Here’s your simple and easy guide:

Before these latest elections: Europe was suffering. The trade surplus and financially well countries, mainly Germany, were forcing the bad apples to eat their own shit. Austerity, which is basically the opposite of the U.S. policy, laden with budget cuts and devoid of stimulus, was the name of the game. The theory is that by mending the financial image of a subject, confidence will return and the recovery can be substantive. But before austerity measures could even effect themselves fully, Europe’s numbers were dropping. Consumer confidence, manufacturing and GDP numbers made it rather definitive that Europe’s bad apples were entering recession; and more over, it was affecting some of the better countries too, with Germany and UK on the brink or, arguably, in recession as well. Most importantly, the people were suffering. Unemployment was sky high, and the largest demographic of unemployed were the ones most likely to revolt or show disdain: the young 20 somethings. An unaccommodative central bank was also playing the game plan, sending just about the smallest amount of money to insure the avoidance of complete disaster, which, seeing the results, would have to be defined as a revolution.

What these elections mean: The ousted leaders of France and Greece were the ones in compliance with the rules set as they were; Hollande and whatever you want to call the Greece political sphere will attempt to defy, or at least change, the prescription. They will demand and work for stimulus, an attack plan much more akin to the U.S.’s. The problem is that, different from the U.S., the central bank in Europe, or more abstractly, the financial planning of Europe, has to obey the wishes of many countries. In the U.S., if the Fed wants to install stimulus plans, they do it. In Europe, if France and Greece want to install stimulus plans, but Germany doesn’t, then they have a dilemma. Basically, even with new leaders in France and Greece that may push for stimulus, it all comes down to whether or not the ECB plays along.

After these elections: Here’s the kicker: even if the ECB plays along and decides to print, you will see the EUR/USD cross move towards parity, probably with great speed. Some may look at that and say stocks and commodities alike will decline, as a strong dollar is deflationary and against the wishes of Bernanke and co. However, conversely, the stock market if healthy should move in sync with the dollar; if both move up it’s good. Additionally, the best stimulus right now, it could be argued, is relief at the gas pump. And as the dollar strengthens, oil should definitely fall, and gas too. It’s basically the best tax cut we (Americans) could get.