China Enters Currency War - Devalues Yuan By Most On Record

Risk assets got back in the groove last week, as policy makers once again managed to keep spooky realities from coming out of the closet. Greece not only chickened out but also surrendered to Troika, in order to secure more debt from Euro zone to repay Euro zone and IMF. The fear of unknown has become so great for Greek policymakers that all their year and half talk of “fire and brimstone” proved hollow. Germany managed to call the ‘big bluff” of Greeks right at the moment, when it mattered most. US, then IMF and even ECB made some noise about offering Greeks a way out to future in the Euro zone, through debt haircut, by Germany and other northern European nations snubbed it. Therefore, the ‘kicking the can” down the road exercise, continues, but we believe now with every kick the can is becoming too heavy to do so in the future. While economists may find it difficult to accept how the obvious choices are becoming too difficult to accept in the Euro zone, one being large-scale debt restructuring, other being reforms in south and retooling of economic model in north and finally a move towards political union and fiscal union, but politicians find it easier to drag the status quo as long as they can. After all the ex-PM of Luxemburg and current President of the European Commission, Jean-Claude Juncker captured it well in his statement, “We all know what to do, but we don’t know how to get re-elected once we have done it.”

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