Friday, August 17, 2012

European Economic Crisis: France is the lion in the Grass

John Mauldin, a renowned financial expert, a multiple New York Times best-selling author, and a pioneering online commentator whose weekly e-newsletter  Thoughts From The Frontline reaches a million+ people, was in Singapore last month and he has given a speech  for OCBC Bank, called "The Lion in the Grass." In his article with the same name, The Lion in The Grass, he summarized this speech (follow the link and subscribe to his newsletter, he is one of the few unbiased economists in the world to get some good information).

What John Mauldin says is that the lions we can see are not the real problems, we still have some chance to take action against them. The problem is the lion we do not see. The lion lying camouflaged in the grass and waiting for the time to attack and kill (see the photo below).

How many lions are there in this picture? 2? Look carefully and find the lion in the grass. There are 3 lions in this picture (look careful to the middle left).
- Source : The Lion in the Grass
We can now all see the lions, large and small, of Greece, Portugal, Ireland, Spain, Italy, and now Cypress and Malta. These are the visible lions of European debt crisis and attracts nearly all the focus. But Mauldin says that the real killer is the lion we cannot see, the lion lying in the grass. And that lion is France:

"Don't look now, but the lion that lies hidden in the grass is France. Yes, the France that is supposedly a big part of the solution to eurozone woes and Germany's stalwart partner in guaranteeing all that debt. AAA France. Rated that way by the same people who turned the nuclear waste of subprime CDO squareds, composed 100% of the worst sort of BBB junk, into gold.


It won't be this year or even in 2013 (I think), but within a few years we will be writing about France in the same way we are writing about Greece and Spain, et al., today. And French banks are massively larger than French GDP (some four times, or so I seem to recall). France cannot backstop its banks any more than Spain can.
Source : The Lion in the Grass

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