Euro : ce que les marchés ne veulent voir

C'est avec beaucoup de tranquillité que je suis les tribulations de l'euro sur le marché des changes. Sa baisse rapide comme sa montée tout aussi vertigineuse ne m'émeuvent pas.

Voici plus de trente ans, lors d'une conférence publique, j'avais prédit la fin prochaine du dollar comme monnaie de réserve.

Lers faits m'ont donné tort et, depuis ce triste constat de mes limitations intellectuelles, j'ai fort opportunément appris à la fois la modestie et que les marchés ont souvent tort dans leurs mouvements à court terme.

Une des raisons qui justifient selon les marchés la baisse de l'euro et la difficulté de certains Etats à financer leur emprunts est l'endettement excessif de pays comme la Grèce ou l'Espagne, pour ne rien dire de la France, de la Belgique ou de l'Italie.

L'Europe s'est tiré une balle dans le pied en interdisant à la Banque centrale européenne d'agir comme un banque centrtale normale et de financer la dette souveraine des Etats. Par un subterfuge, elle le fait désormais indirectement mais le mal est fait.

L'euro est juste en dessous de 1,20 dollars et tout porte à croire que sa chute va se poursuivre.

On est encore loin de son minimum, à près de 0,80 dollar.

Je ne suis donc pas inquiet du tout.

Les finances des Etats menacés sont-elles en danger ?

Non car le fonds d'intervention est prêt à agir et la BCE intervient à tour de bras pour racheter de la dette chaque jour que le bon Dieu fait.

Si les banques américaines retiraient en bloc leurs fonds d'Europe, notre continent aurait-il assez de dollars ?

Oui, car les accords entre la BCE et la Réserve fédérale fonctionnent admirablement et ont déjà opéré voici peu.

Alors pourquoi ce vent de panique sur les marchés ?

Il n'y plus de panique. Nous sommes entrés dans une toute autre situation. Nous avons des agents qui parient à la baisse de l'euro et qui font fonctionner à plein régime la machine à rumeurs comme, par exemple, le Financial Times ou le Times ou encore le Daily Telegraph. Il est intéressant de noter que leurs confrères d'outre-Atlantique sont bien plus mesurés.

Dans un climat de crainte nourrie par la presse anglaise qui déteste le projet de construction européenne en général et l'euro en particulier, tout est bon pour tenter de noircir le tableau.

Ces rapports alarmistes sont parfois si ridicules qu'on a peine à croire qu'ils peuvent être publiés par un quotidien responsable. Le courrier des lecteurs n'est pas en reste et celui des blogs du Daily Telegraph en offre un des meilleurs exemples.

Voici quelques jours, j'ai eu la surprise de lire un correspondant disant vivre « sur le Continent » expliquant que ces connaissances liquident leurs avoirs en euros et vident leurs comptes en banque pour acheter de l'or.

Quand on sait que le marchand moyen intervenant sur le marché des changes n'est pas une culture générale très développée et que sa technicité monétaire ne compense pas un manque de sens commun élémentaire (il suffit d'observer Jérôme Kerviel), l'impact de ces bobards est considérable.

Mais comme l'observait le sinistre Abraham Lincoln, on ne peut pas mentir tout le temps à tout le monde.

Les marchés, les opérateurs et ceux qui les manipulent vont finir par se rendre compte que l'euro ne va pas s'effondrer, que l'Union européenne ne va pas disparaître et que le marc, lma peseta ou le franc ne vont pas réapparaître au détour de la prochaîne crise européenne.

Déjà, les analystes américains commencent par se rendre compte que les grandes netreprises européennes sont soldées et que les fondamentaux ne sont pas forcément ceux que l'on dit.

Robert Barone a les yeux ne face des trous et sait compter. Voici la comparaison qu'il établit entre la dette de certains pays européens et celle de certains Etat américains. Eclairant.

Forget PIIGS, US Debt Is Out of Control


Editor's Note: This article was written by Robert Barone, head of Ancora West. Barone currently serves on AAA’s Finance and Investment Committee, which oversees $5 billion of investable assets. This column was originally posted on AncoraWest's Market Insights.

The markets are in turmoil because of worry about the so-called PIIGS (Portugal, Ireland, Italy, Greece, and Spain) debts. In Fiscal Crises: The Next Shoe, I opined that Greece is just the canary in the coal mine and that when we look homeward, we have our own huge debt issues, which aren't significantly different from those of the PIIGS countries. I believe that the only reason the European contagion hasn't yet spread to America is because of the dollar’s status as the world’s reserve currency. That era is coming to an end, and it would behoove America to get its house in order.

A May 14, 2010 Barron’s piece entitled We’re Not Greece -- Yet (D. Henniger) referred to a Royal Bank of Canada (RY) study that concluded that “Although the states of California, New York, New Jersey, Massachusetts, and Illinois are comparable in terms of economic output and population to Portugal, Ireland, Italy, Greece, and Spain, RBC finds that states’ debt burden are nowhere near that of the PIIGS.” This, “even after including unfunded liabilities for states’ employees’ pension and other benefits.” As you'll see below, I take issue with the above conclusion, and the first half of this piece will deal with why. Basically, citizens of each US state are responsible not only for the debt burdens of their states and localities, but they're also responsible for their proportionate share of the federal debt. As you'll see, the combination of the two produces debt ratios far in excess of those of the PIIGS.

Table 1 shows the PIIGS data that the markets are concerned with.

Table 1

Table 2 shows estimates (for fiscal year 2010) of the Population (1), State GDP (2), State Debt/State GDP (3), Local Debt/State GDP (4), Unfunded Pension/State GDP (5), Other Unfunded Benefits/State GDP (6), Total Debt/State GDP (7), and Per Capita Debt (8) for the states mentioned in the Barron’s piece plus Michigan.

Table 2

Using California as an example, the population is rapidly approaching 40 million, the state’s GDP is estimated at $1.87 trillion, the State Government Debt/State GDP is 7.4%, Local Government Debt/State GDP is 17.2%, Unfunded State Worker Pension Liability/State GDP is 27.8%, Unfunded Other Health and Benefit Liabilities/State GDP is 3.3% for a Total Debt/State GDP of 55.7%. Translating this into Debt Per Capita reveals that every California citizen owes $26,000 for debt or liabilities contracted by their elected officials. Looking back at Table 1, this isn’t too different than the Debt/GDP ratio of Spain. And looking down the Total Debt/State GDP column of Table 2, it becomes apparent that both New Jersey and Illinois have Debt/GDP ratios equivalent to that of Spain.

But wait! Citizens of the states in the US are also responsible for the debt piled up in Washington, DC. So, to the debt of the states and localities, one must add the national debt. The first three rows of Table 3 show an average of all State (row 1), Local (row 2), and Federal (row 3) Debt/GDP and the Per Capita dollars owed by each US citizen.

Table 3

Using the table, look at the intersection of the "Cumulative (%)" column and "+Agency" row, which represents the recognized public debt of the federal government and its agencies and an average state and local burden. One can see that at 134.6% of GDP, debt burdens are higher than those of all of the PIIGS countries that have given the markets so much heartburn. Table 4 substitutes the debts of the states shown in Table 2 for the "Average State" and "Average Local" and shows the indebtedness of the citizens of these states per capita and as percentages of both State and US GDPs. All of the states shown have Debt/GDP ratios significantly higher than that of Greece.

Table 4

Now, I'm not an expert on debt levels in European countries. And, it could well be that citizens of those countries have taken on public debt that would be similar to US State and Local debt that isn't in the figures shown in Table 1. But, because the absolute levels of the Debt/GDP shown for the PIIGS have been a cause for concern, then the debts of the citizens of the US, and, specifically those states shown in Table 4, should also be cause for grave concern. For the most part, the European states are at least considering austerity measures. And while some US states are being forced into austerity because of their inability to print money, the major contributor to the indebtedness, the US Congress, doesn't seem all that concerned. This is a major difference from what's occurring in Europe.

So far in this piece I've only talked about public debt. Usdebtclock.org estimates total personal debt at $16.6 trillion, mortgage debt at $14.1 trillion, consumer debt at $2.5 trillion, and credit card debt at $848 billion. (Amazingly, of the four types of private debt, only consumer debt is shown at usdebtclock.org as expanding; the other three categories of consumer debt are contracting. I wish I could say the same about public debt!) So, on top of all of the public debt, each US citizen, on average, owes privately $53,525. Adding the public and private debt together totals $117,181 per capita, or a total Debt/GDP ratio of 248% (see Table 3). Wow! Now that's a lot of debt!

Finally, the unfunded liabilities of Social Security and Medicare are nearly $109 trillion, or about $352,000 per US citizen (see usdebtclock.org). That number alone is a Debt/GDP ratio of 745% and is so outside the realm of rationality that I didn't bother to put it in the table. Clearly, the recipients of these promises can't possibly hope to receive such benefits in current dollars. Depreciation of the currency or significant cutbacks in the promises (or both) is inevitable. The recognition of the real magnitude of these irresponsible promises should be enough to cause a loss of confidence in the dollar. In my view, unless the US moves to at least begin to address these issues, that day is closer than anyone might think.

All of the public debt was originated by governments and most of the private debt by banks or other financial institutions. In feudal times, serfs owed a significant portion of their toil to their lords. Have times really changed? The lords are now the politicians and "Too Big to Fail" bankers. Many ordinary people are serfs, highly indebted either voluntarily (private debt) or involuntarily (public debt). Looking at debt in this way helps to explain the unholy alliance between Washington and Wall Street (see The Unholy Washington-Wall Street Alliance) and why the "Too Big to Fail" and Washington politicians get richer and richer at the public's expense.

While US citizens are drowning in debt, the political system appears incapable of reducing it. In fact, the politicians continue to expand it in the erroneous belief that more debt will help. There are only two ways out: years of austerity or currency devaluation/inflation. The political system won't allow the former. Buy Gold!