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Is the Euro Crisis happening ahead of schedule?

December 1, 2010

Yes it is.

I suspect the Eurozone thought they had a few more months to dally about as the Schronedingers Currency, neither alive or dead.

It appears the market is forcing their hand early.  With spreads blowing out all over the place, and lending rates in Spain and Italy skyrocketing, the Eurozone doesn’t have the luxury of playing stupid – it is costing these countries real money.

My guess is that the announcement tomorrow will be less than the market wants, but have the essence of the agreement spelled out.   It will say something like “The ECB has the ability put market rates where it wants in the interest of market stability. ”

The markets will not take this at face value, and it will seem to be a sign of weakness.  In reality, it is the triumph of the political nature of money over the financial nature of money.

Tyler Cowen thinks that the financial markets will win.  He is about to find out that financial markets are only a small fraction of the total human experience.

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