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Wells Fargo Chief Economist John Silvia and Euro Pacific Capital Senior Market Strategist John Browne on the European debt crisis and its impact to th...
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Markets remain laser focused on Europe's debt crisis despite -- Second vote of confidence for the new Italian prime minister police in Milan clashed today with demonstrators.
-- testing new austerity measures.
And in -- more than 30000 Greeks took to the -- showing they are not necessarily ready to accept spending cuts and tax increases.
Despite parliament's backing of austerity measures.
European crisis is now prompting calls for the European Central Bank to come to the rescue.
Joining us now tonight's market masters from Charlotte, North Carolina John Silvia -- the chief economist for Wells Fargo.
And needs to get tonight John Brown senior market strategist for Euro Pacific Capital and a former.
Member of the British parliament -- Begin with you since you put the rest of us to -- with the Borchardt tonight -- so -- -- And charming.
What are your thoughts on where we stand in Europe all the -- -- in the austerity that's being demanded are we any closer to a solution.
Well I think through when you say laser focused on the debt to default problem they are absolutely right out of but I think this is an act -- Financial people to do that's really the debt default problem as big as it is Israeli camouflage for currency crisis which is in itself -- camouflage -- Huge political struggle.
You behind over this and the reason why people.
And and that -- -- to say wider these politicians in Europe get their act together is because as a huge struggle going on.
Germany is trying to dominate Europe and each of the member countries do not want to yield as sovereign to I'm very assume.
I think next week Thomas amount will be giving.
Prime minister Cameron his marching orders and he's not even in the -- that.
-- quickly currency crisis you mean the risk up intervening so much -- just devalue the currency to where the entire region suffers.
Yes one of course you know that that the problem is for the first time in most people's calculations the Euro is a question mark there is a risk of death of a complete collapse of the and that it would this contagion of debt spreading to France and Belgium this is a real risk.
Indeed -- -- -- your thoughts on what -- true US.
Exposure is to the European sovereign debt crisis that's been ongoing for years now SI MF global globe goes he's -- belly up and others lot of concerns that other.
Firms of that size Jefferies even Morgan Stanley -- an -- so where we stand here with with what our risk is here in this country.
Well I'd make two points to for -- when I certainly agree with John.
That if the Euro Powell becomes a really big question and -- of its survival.
Then you've got a huge problem in terms -- contracts that have been written all the business that's being done.
In that currency.
The second point is from an economics point of view.
You've -- interest rates now than it clearly higher than the growth rates of many of these countries.
That's unsustainable on an economic basis going -- -- and because of that.
Questions -- rise in terms of exports from the US to Europe.
There's question locks with respect that a profitability.
Of US companies operating in Europe so that kind of an as a currency issue.
And economic growth and profits issue as well if.
You look at they yield to Italy and Spain Greece blew out weeks ago compared to the US benchmark ten year note.
The spreads between them I mean it's just shocking and that really shows you believe -- me to graph of this how tenuous this situation it's.
Idea but of course that it be Euro rates a free market and American ones put off.
These are held -- by the Fed and we -- Federer is represented the other day talking about the Fed trying to force people to take risks the very thing they shouldn't be doing.
The Fed by falsely manipulating the price of money.
What caused the spreads of the German bund is a real free market rate and as it is a much more of an indicator wanna see the ECB intervene in Europe I know my god I did this is Germany sell gave up the Deutsche Mark in return for the Euro as long as it was -- soundly along dramatic lines -- and -- that forced by the other central banks to intervene which is -- code -- but stating a wealth.
Basically I mean that just devaluing indeed -- currencies and is a race to the bottom and this Israeli the -- and assassins of middle class well.
Not too optimistic pessimistic -- doesn't say I don't -- -- meantime the US economic picture's looking a little better initial jobless claims.
-- a little bit of a bright light some of the leading economic indicators index also.
-- a little more encouraging yet markets investors.
Are still very uncertain about where to their focus on if you just look at this stock market volatility of recent weeks your thoughts on this sort of -- taken.
What investors you're in your -- to really focusing on.
-- I I think we have sustainable economic growth about to -- happens on the United States.
Some the retail sales data has been very good industrial production.
Data has been -- and as you say jobless claims.
But I'd like to go back to John's earlier pointed to -- that we've talked about a lot in united states air.
Is that the current level of treasury benchmarks.
Rates are very low but they're very converts right.
And I agree with John I mean -- these are not.
Free -- -- open market interest rates they really.
Being suppressed by the Central Bank.
In the short run I I guess that's okay.
But over time that creates more and more distortions in the pricing of financial assets in the United States encourage real problems down the -- We need to be very careful about that.
-- we could talk about the Federal Reserve and monetary policy here in the US for hours to on so yes so they yelled.
Caught -- die tonight shares -- shrimp and grits at that economics conference and it's still much you wanna go is wonderful and -- settlement it was it was wonderful to chat with both you have a wonderful weekend thank you I'm not.
