Will the euro outlast the recession?
T. Dale on growing financial problems abroad
- Duration 6:59
- Date Jul 9, 2012
T. Dale on growing financial problems abroad
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Of talk about -- last -- actually mostly with Europe they've been in a debt crisis for like three years now right.
There -- finally really starting to probably show up on our corporate balance sheets as we kick off Q2 earnings season after -- -- -- -- -- today.
And we have -- -- -- joining us.
-- T how Oreo that they Lauren and doing well are you today banks here in Atlanta.
Looks nice behind -- correct.
Come you know you say here that.
You think the Euro is going to stay in -- distances that -- Well I think it'll be a smaller Euro -- what's clear what's being priced in the markets already is that Greece will be the first.
Country to leave the Euro right emulated -- aren't.
It -- right at this point would you say that that's priced and.
Well it's priced into their stock market and their fixed income markets I don't think what has been recognized is the losses on Greek sovereign debt.
Held within the greater eurozone banking system and -- -- in places like France and Germany.
Okay gotcha RAT care to comment or make a prediction on Spain and Italy the number three and four economies in Europe.
Well I could see a situation where Spain would be the next ago and perhaps with Portugal.
Is all did not recognize though if if Italy -- -- ever.
Come to the plate to perhaps leave the Euro -- which I don't think it's likely.
But when you think about the fact they have the -- world's largest economy with the third largest sovereign debt market.
So you'd be talking about now if if Italy were to leave and defaults were -- happen there that's.
Something on -- -- 2008 scenario that we had here are our banking system.
Yes maybe Europe should look at what happened.
Tell us for years ago and take some notes -- what do you think about Germany where they -- who.
Well you know it's there's no painless way out for Germany Germany is perceived to be the growth engine but what is often on recognizes that.
So much of their growth and exports has been to other Euro zone countries which are over indebted.
So if Germany stays they have to be willing to continue to bail out prolific get spenders of the pigs nations.
If Germany leaves -- have to be prepared to take write downs on.
Debts and loans that they've made both in their private sector in the government sectors to.
Other eurozone members that are clearly going to be re valued at much lower.
Violation levels and current in terms of -- their country.
Yeah stuck in between a rock and a hard place right now.
And that says products used say that you US made that if Germany were to leave the Euro -- It would cost one point two trillion with a T dollars had -- figure.
Well we make the assumption that number one of Germany leaves and goes back to the Deutsche Mark they would have a reevaluation.
Of their new currency to a much higher -- so in other words strong that's correct there yes alright press.
-- that's right BMW's and -- -- exactly center so part of the part of that number does come from.
The assumption that the EU valued assets that they own both in the public and private sector of the German.
Balance sheet will be worth less and secondly.
There's also an assumption -- that number that their exports would be hurt tremendously over the next three to five years.
As they're -- as you just mentioned would be far more expensive.
-- That's a pretty that's a pretty big price -- let's go -- On to China and and I want to do Citic securities stock markets -- more than 2% and one and once they got inflation reading that was.
Pretty good 2.2 percent less than expected.
And you know you want inflation to be -- right you don't want things to cost to run out of money you don't want inflation is public enemy number one for the Federal Reserve here in the US.
And an -- bank in China as well now thinking is okay put in place in -- We can see maybe for the third time in like two months China Spain cut interest rates once again to fuel economic activity so that would be a good thing yet.
There's reason Chinese stocks this thing today to.
Lowest level -- like a month.
So -- -- China help Natalie are they slowing down inflation sure and terrible yet the stock market tanks.
Well I think -- it's hard to read from China now what's going on in China when you get the numbers from their government their -- -- I say that.
The yes -- I don't trust the numbers that the government puts out and China all really what the activity is really going all over there I did not.
That you when you look at the fact that they just had a real estate bubble that is substantially larger than hires real estate bubble was -- clearly deflating.
I really think the justification for lowering interest rates.
Is really just in response to the fact that that real estate bubble over there is clearly deflating and has probably got.
Much more -- ago when you consider they've built over two dozen cities over they -- million to hold.
A million more people -- and there's only thirty to 40000 people live and then there about people that I've talked to that have actually been harassing them.
So -- -- China is let's say three years from now.
Well that's a good question I do think the risks to -- hard landing in China when you think the think about the fact that they.
Coming out of the 2008.
Downturn they spent well over a trillion UUS dollar equivalents there and infrastructure spending.
So I could see a China that actually has to go through some type of financial crisis on their own within the next two to three years which at that point.
It should likely be an attractive place to invest and again.
This is pretty dismal how we and I happen.
An equally and well you know with the US or no yes and.
Yes we can he -- behind take.
Even though -- -- over indebted as we are hearing good shape compared to Europe and Japan and we are even though we're growing at a stall speed -- percent growth rate right.
We are we have seen real estate prices appear to put in a bottle don't don't that take that to -- that -- that drill states about to take off now it's not we are.
-- yeah we are seeing some job growth not not alive again but.
I think we've already crossed the -- came in so to speak in terms our big downturn now it's just.
As as a number of people call this a square reshaped to recovery which just means it fills a lot like a recession but.
Nonetheless it's a recovery and I hate to say but that is the positive note.
As we look around the world that we could be enough and far worst place to live then that if we were not living in the United States right now.
Again us if you accept I'm saying growth an 80000 jobs but thank you -- nice -- nice -- Thanks Lauren Citadel with -- -- -- coming on at a good -- -- in Atlanta.