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Alternative Market Briefing

The Big Picture: How will currency devaluation and cracks in the Eurozone affect hedge funds

Friday, December 07, 2012

An Opalesque column for global macro investors.

Benedicte Gravrand, Opalesque Geneva:

According to Brian Lawson, Chief Global Economist at Exclusive Analysis Ltd., a specialist intelligence company based in London, in a slow growth, difficult global environment, the ability to identify and trade on high impact, low probability events will be key to hedge fund outperformance. He explained why at Terrapinn’s Hedge Funds World conference in Zurich last month.

Policy failure

The Eurozone is a club where almost nobody followed the rules, Lawson started.

"Estonia is the only country which actually kept the rules within the Eurozone," he noted. "Nobody else managed to make the 3% deficit and 60% debt stock on a consistent basis every single year."

"The single message I’d like to give is that the conventional economic policy is not working in Europe. It did not in 2009 when the classic intervention recipe of spending money was thrown in the pot. Monetary policy also has not worked. Very large sums of money have been printed… in Europe, the LTRO was €1.1tln. And that has not done more than paving over the cracks of a financial system that is unable to finance itself."

So the heavy fiscal pump priming in 2009-10 failed to restart growth, but government spending possibly avoided deeper collapse......................

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