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Alternative Market Briefing

China-based hedge fund beyond bearish on the fate of the Euro and Europe

Tuesday, November 15, 2011

by Beverly Chandler, Opalesque London:

A paper entitled An Academic Review Behind the Rationale for the Creation of the Euro published by Beijing-based Acacia Capital Management, spells out the extreme cost and chaos a departure of a currency from the Euro would cause.

Luke R. Diaz, partner and director of investor relations at the firm and Ryan Weidenmiller, author of the review, both point out that Europe has been here before with the Euro with the Latin Monetary Union of 1865 which collapsed, ironically enough, because of the activities of Italy. Diaz says: "Those who can not remember the past, as the old saying goes, are condemned to repeat it".

Weidenmiller says: "We still think the current European monetary experiment (in its current form) is likely to fail as it did in the late 1800’s / early 1900’s, i.e. the Latin Monetary Union". "We are executing our strategy in light of this belief."

Weidenmiller also quotes UBS, who appears to agree with him. "Under the current structure, and with the current membership, the Euro does not work." The UBS report estimates that the cost of a weaker country leaving the European Union would be roughly 40-50% of GDP in the first year with considerable costs thereafter.

Weidenmiller says: "While we have been negative on the outlook for Europe, and have called for a potential restructuring of the Euro for quite some time, these cost estimates cited by UBS to restructure the Euro are considerable and would likely hav......................

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