There has been no shortage of shocks for the market in the past few weeks. The U.S. has lost its triple-A rating. Italy is struggling to stay in the euro. The French banks are running into trouble because of the loans they have made to the continent’s peripheral countries.
But in fact none of those should have surprised anyone much. The U.S. had been running up too much debt for a couple of decades and the dollar was already on the way out as a reserve currency. The Italians struggled to stay in the lira — no one expected them to survive in the euro without a few problems. And it would hardly qualify as a financial crisis if the French banks weren’t losing money. Each of those events was about as unexpected as Andy Murray getting knocked out of Wimbledon in the semi-finals.
In truth, the really worrying news is coming out of Germany.
Read Full Article »