Chaos

News. May 19 (Bloomberg) -- Stocks around the world dropped and metals fell as the euro traded near a four-year low after Germany banned speculators from some bets against government bonds and banks. Treasuries and German bunds rallied.

Merkel’s coalition stopped traders buying default protection on government bonds they don’t own, so-called naked swaps, as German lawmakers prepare to debate a bill authorizing a $1 trillion bailout to backstop the euro. The unexpected ban, done independently of the European Union, came after the rescue package failed to stop the 16-nation common currency from weakening to a four-year low and as banks became increasingly reluctant to lend to one another.

My view. The markets are in disarray. The markets are catching up with ineptitude. The initiative of fixing the markets has been in the USA in the past two years.

The Europeans waited, saying the financial crisis was our problem. The markets are finally catching up with them and with a bad idea -- the European Monetary Union.

I have been writing for years that you cannot put in the same monetary union countries with major differences in productivity growth. Always and everywhere currencies are dictated over the long run by productivity differentials. Make no mistake about it.

People who do not understand this simple law are bound to destroy nations. And the European are finally succeeding in this historic feat.

The markets always win.

George Dagnino, PhD
Editor, The Peter Dag Portfolio. Since 1977
Ranked Top Market Timer in 2009 and 2010 by Timer Digest

To find out more about my in depth views of the markets and my strategy just visit our website https://www.peterdag.com/ where you can subscribe to The Peter Dag Portfolio. You can also call me at 1-800-833-2782 to discuss your specific investment portfolio.

Disclaimer. No material here constitutes "investment advice" nor is it a recommendation to buy or sell any financial instrument. Actions you undertake as a consequence of any analysis, opinion or advertisement on this site are your sole responsibility.