Looking at the long-term trends, says James Dailey, the current troubles with Greek and Irish sovereign debt mark “the end of Bretton Woods II,” and he suspects that the European Central Bank, “with the Chinese and the Fed, will do a version of quantitative easing to bail out the banking sector in Europe.”
In an interview on Tuesday focusing on the current troubles in Europe, the global macro approach followed by Dailey and his colleagues at TEAM Financial Managers in Harrisburg, Pa., suggests that the “fiat currencies are at their end,” he said, and that the “massive” sovereign debt problems in Europe “are a symptom of this ending,” warning that “it’s going to be messy” in a process that might take decades to play out.
Caused by “global overconsumption fueled by debt,” Dailey (left) said that while “austerity is great in theory,” he suspects that the most likely response to the European debt problem will be a monetary one at first that won’t solve the underlying problem. “Politicians can’t print gold or oil,” he says only partly tongue in cheek,” but “they can print money.” He uses a Thomas Jefferson quote to illustrate the global problem: “The problem with democracy is that the people will always vote themselves benefits they can't afford.” While quantitative easing won’t change the “economics, it will liquefy the banks enough to kick the can down the road with Greece and Ireland, with the countries able to pay back with a devalued currency over time.”
The big question, says the CIO of TEAM Financial, which runs money in both separate accounts and a newish mutual fund, is whether “the European elite in northern Europe,” especially Germany, “can assuage their populations in order to digest continuous bailouts of southern Europe and