Frypan to Fire

An IMF sponsored period of 15 per cent unemployment and 15 per cent inflation would allow Europe to survive intact and make the adjustments necessary to combine the spendthrift economies with the thrifty in a way that genuinely works. It would be a protracted but endurable adjustment period but it would not be a catastrophe.

Please click on the link above to a excellent article in today's Business Spectator from Mark Carnegie. I would content that Mark's best choice "Plan C" will end up being more of a global choice than one confined merely to Europe. Unsustainable global indebtedness is only now finally being brought to account. The flight to quality to the US dollar that we have recently seen is truly a frypan to fire scenario.

Global interest rates will soon rise and this will be a phenomenon largely outside the control of individiual reserve banks.

Five years of 15% inflation would indeed be the best outcome for debtor nations by facilitating a structural default on their debts. The concept of sovereign risk has even begun to be comprehended by global markets.