Tue, September 27, 2011
The European Economic Crisis Explained…Using Legos
Michael Cembalest, Chief Investment Officer at investment bank JPMorgan, has done the world a service by publishing a graphic view of the European Crisis, courtesy of his 9-year-old son.
For a detailed explanation of the significance of each figure, see Cembalest's Eye on the Market report. (sorry - this is no longer available to the general public)
The display not only embodies some of the surreal aspects of the crisis (Cembalest writes, “If today’s diorama analysis borders on the absurd, so does maintaining the fiction that accumulation of massive public and private sector claims in Europe can somehow be engineered away.”), it also gives the non-specialist a sense of how complicated the situation is. There are 27 member states in the European Union, each with its own economic concerns. A solution that might please one nation may infuriate another. The possibility of short-term economic pain will make it difficult for political leaders in Europe to sell any solution to their constituents
The Euro crisis is as much a political and psychological problem as it is an economic one, and its resolution will require corrdinated action that does not spook the rest of the world. American financial markets have reacted both positively and negatively to short-term news on how the situation is being resolved, but the final outcome remains to be seen. Stay tuned.