Europe and the politics of economic nonsense
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Europe and the politics of economic nonsense

Continental European equity markets have rallied hugely since the US Federal Reserve began to cut interest rates. It's an opportunity to sell.

The conjuncture of ostensibly good news about "new" IMF funding, Japanese and Asian bank bail-outs, and the Fed printing dollars to save the world, will fade along with global growth and corporate profit hopes. And in the next leg down in the global equity bear market, European equities will be the hardest hit.

The reason is this. Germany's shift to the unreformed left shifts the balance of power in Europe. It liberates Europe's other governments - predominantly socialist - to pursue the politics of economic nonsense.

It may take time, but the result will be bigger public budgets and deficits, higher taxes (particularly for corporations) and lower growth for economies and profits - and a weak euro/Deutschmark rate.

Booming European financial markets have been conditioned to believe that economic management in Europe has been depoliticized. They are mistaken: it has just been repoliticized.

New German chancellor Gerhard Schröder seems little more than a puppet of the much more leftist Oskar Lafontaine. Once the election was won, Lafontaine got the finance ministry for himself and took over all the significant powers of the economics ministry.

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