The Shift from Public to Private Assets in Europe

QUESTION: Marty, at the Rome WEC you put up that chart that showed historically private sector yields have gone below public. That really demonstrated your point on this shift from public to private. Now with Deutsche Bank on the ropes, here in Denmark, even mortgage bonds are going negative. Is this the real panic you were speaking about with the EU elections?

I’m coming to Orlando too. This is getting really dangerous here.


ANSWER: Yes. Just look at this from a practical standpoint. If the government is the culprit and the crisis in banking is driven by this policy of Austerity, then you want to put your money where you just preserve it. This is what I was talking about. When confidence in government collapses, people turn to the private sector. It makes perfect sense that some capital will shift domestically into private mortgages for they are at least backed by property. If they go bust, you get something. If government defaults, you get nothing.

At some point, the government must address the structural reforms I outlined in the report we handed out – the Fate of Europe.

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