It seems clear to me that in order to really solve the debt crisis in Europe one of two things need to happen.
The obvious is what the world has called for; in that Germany and France have to head up a money printing scheme within the EU. This of course has been an ongoing debate that has lead us to this crossroad.
The other obvious solution would be for sovereign wealth funds to unite with the IMF and World Bank to create a 100 year fire wall bond fund.
Let’s face it, nobody can focus on growth if they constantly have to implement austerity at the worst possible time.
A joint effort of white knights would give markets time to relax, avoid a $LEH style blow up and provide enough time for countries to work out deficit problems while paying back money borrowed with interest.
Otherwise expect a $LEH style event.
It would also behoove the largest sovereign wealth funds to do so as it would steady the world economy and bolster manufacturing as well as help to avoid deflation in commodity money making economies. It would also save the Euro ultimately as a viable currency. Countries could exit without real serious systemic risk.
In the mean time the world can work on a new Bretton Woods deal and figure a way to help growth increase while wealth is created right down to the little guy.
By the latest count the top 10 sovereign wealth funds have $4 trillion in liquid cash. That is a lot in a fractional reserve world banking system.
JMO
GLT
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