I urge you to follow the euro crisis today and see how the marketplace deals with what is essentially a failed system. With the sovereign bond markets now in crisis mode as Germany stumbles at the auction block, the market is sending a clear signal that we are in crisis mode. As readers of the Daily Capitalist know, we have been discussing the unsolvable nature of the crisis and the European Monetary Union for a long time. The marketplace never lies; it may not always be right, but it is the most accurate measure of what money thinks.
So now, with the mighty Germans failing to sell all of its bonds in today’s auction (€3.644 billion—$4.92 billion—of the €6 billion in 10-year bunds on auction for an average yield of 1.98%), money is flowing out of Europe seeking the safety of our leaky boat, and European sovereign yields are climbing.
This clip today from CNBC has an interview with Oliver Sarkozy, The Sarkozy’s half-brother, who is managing director and head of Carlyle’s global financial services group. (The Sarkozy family name is: Sarkozy de Nagy-Bocsa.) His observation is that there is a $10 trillion banking crisis that will probably end with a TARP type bailout and monetization of debt by the ECB. It is a very interesting interview.