So my wife said, "What do the elections over in France or wherever have to do with our stock market?"
Because she is polite and was trying seem interested, she probably listened to about half of what I said during the next five minutes. She caught the part about the Greeks not wanting to get jobs, which is most likely the part she will repeat to her sister when she phones her later.
Of course, it is a little more complicated than that. European countries have always given government more sovereign control of their lives than Americans felt comfortable doing. America has, since the Second World War, provided most of the military support for Europe, allowing the northern European countries to concentrate on domestic welfare and industry. All the cradle-to-grave care is also cradle-to-grave control. People have come to expect benefits.
But the world has changed and is changing demographically. There is no youthful population of upcoming workers and entrepreneurs to support the rapidly aging populations in their retirement, to pay for their medical benefits, to buy their houses and condominiums, and their stock portfolios, or to support their investments with consumer spending. The same is true to a lesser extent in America and to perhaps a greater extent in Japan. The ponzi scheme has run out of suckers.
Despite the billions in poverty in India, Africa, and China, the developed world is in decline in terms of population. There is youthful fodder for wars in Africa and in the Middle East across to India and China. That will be the locus of the next large-scale conflicts. War will not break out in Europe. Who would fight it? The Muslim immigrants, perhaps? There will be unrest and protests. There may even be a form of civil war, but no battles between Germany and France or any other countries. At least, I think it is unlikely. No, Europe will go under mostly with a whimper.
But it will go under. The consequences of the arithmetic are inevitable.
The euro is doomed in its present form. As we saw today, the dollar stands to benefit, at least in the short term. We could see oil prices and other commodity prices slip. A stronger dollar could encourage Bernanke to crank up the printing press -- and he may have no choice. As recession -- even depression sweeps Europe and cools China further, who else would be in the market for U.S. bonds?
It will be an interesting year.