Hendry then pulled up a chart of US and Europe non-financial debt to GDP, illustrating that Europe’s debt has been spiraling out of control ever since the formation of the European Union.
Participant nations, he puts it, received initial “ALT-A” rates – nice low German interest rates – for signing on. But the fixed exchange rate that the euro imposes on the peripheral nations started the time bomb ticking.
Hendry, in fact, is very down on fixed exchange rates, and believes the euro and the dollar/renminbi peg are at the heart of global economic insecurity today.
He believes the recent referendum in Greece could be a very significant event, likening it to a 1931 mutiny in England that forced the Brits off the gold standard. He things the Greek referendum could be the trigger to disengage from their fixed exchanged rate (and cited everyone’s lack of anticipation for the referendum as a classic example of irony in finance).
