"Concerned" Billionaires Can't Save the Euro Right Now...

by Jason Jenkins

"Concerned" Billionaires Can't Save the Euro Right Now...

by Jason Jenkins, Investment U Research

Wednesday, October 19, 2011

George Soros - the man who helped bring you the Quantum Fund and sold short more than $10 billion in pounds to break the Bank of England - is now turning his attention to the European Union sovereign debt crisis.

In the Financial Times, Soros, along with 95 other notable officials from the world of government and finance, sent an open letter to Europe Union hierarchy demanding fiscal integration in order for the EU to continue.

The group, calling themselves "concerned Europeans," appealed to governments to establish an institution that can provide liquidity to the whole Eurozone, a strengthening of financial market oversight and a revised EU growth strategy.

Here is the segment of the letter we should be focusing on:

"We, concerned Europeans, call upon the governments of the Eurozone to agree in principle on the need for a legally binding agreement that would:

  • "Establish a common treasury that can raise funds for the Eurozone as a whole and ensure that member states adhere to fiscal discipline;

  • "Reinforce common supervision, regulation and deposit insurance within the Eurozone; and

  • "Develop a strategy that will produce both economic convergence and growth because the debt problem cannot be solved without growth."

The EU's attempts to enforce a common monetary policy without a common treasury was heavily criticized as the principle reason for their current crisis. However, many Eurozone member states are terrified that a common treasury would infringe their sovereignty.

Nationalism Trumps Practical Solutions

And here lies the problem. The EU wants a common currency, but no common practical solutions in case problems arise. Well, problems have arisen and the global economy is being held hostage over feelings of nationalism.

Is it me or didn't Alexander Hamilton see and address this problem about three and half centuries ago with the colonies and the need for a bank of the United States?

Soros and the other concerned Europeans went on to say that until such a legally binding agreement is in place, Eurozone countries should empower the European Financial Stability Facility (EFSF) and the European Central Bank (ECB) to cooperate in bringing the crisis under control.

The EFSF and the ECB could then guarantee, and, over a period of time, recapitalize the banking system and enable countries in need to refinance their debt, within agreed limits. This could take place at practically no cost by issuing Treasury bills that can be re-discounted at the ECB.

Most importantly, the Eurozone crisis needs a European solution, they said. "The pursuit of national solutions can only lead to dissolution," the letter concluded.

Talk is Cheap but the Problems Are Real

Remember, pay no attention to all the market news coming out of Europe until a statement of restructuring and consolidation is made regarding the make-up of the EU. This market reacts any time Germany or France makes a promise to help Greece.

The real issue is that if the status quo remains the status quo, these issues will continue to resurface in the face of bigger issues. And until these changes are made, the dollar will keep making gains against a euro with an uncertain future.

Good investing,

Jason Jenkins

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