Europe Caught Double Dipping

What has been apparent to anyone with a $5 calculator purchased from a gas station is now official in the grand eyes of professional statistics keepers. Europe is back in recession.

For those of you who’ve been following along, this is no shock. Many many many people have laid out the situation and explained that this was unavoidable – myself being just one of them.

Sadly, for the EU citizenry, the pain will not stop anytime soon. The persistent problem the whole of Europe faces remains unfixable; which is a mountain of short term financial claims for redemption. What’s more, because of the means that these bonds and entitlements have been structured, the ECB cannot intervene.

The ECB’s intervention would be a moot point. They cannot roll the claims over into long term debt, as we have here, because so many of them are maturing in the front months that to do so would put the continent so awash in currency, hyperinflation would drown the populace.

There are only two ends to the Europe game that would avoid this death by prices:
1) Vast segments of the population agree to rollover their debts into long dated maturities, helping create order and price stability
2) Defaults are used to create selective order through attrition

Soon, expect another trillion euro injection to try and bridge the problems. It won’t work, like the last massive maneuver did not work. But they have to try. And upon attempting this prices will spike, confidence in the EU will collapse, and the EU members will find the recession deepens.

The $EURUSD is ready to make the next leg lower, I believe. Soon.

And Mario Monti’s exasperated insistence that the euro is irreversible will fall on deaf ears.