What is the problem with Europe
The great Charles Gave says that two open economies with currency set up by the market should in the long run have the same stock market return.That was the case with Italy & Germany. Until the single currency the Euro the MIB & the Dax were hand in hand.what happen since the Euro inception? DAX up & MIB sideways
If we left the market forces work in the euro zone in 20 years the best place to build cars will build them all. What is the solution? facilitate the movement of labor and let Italy do only what they are best at. Turism/Leisure & Food
what happens with the people that used to build FIATs they must be subsidized a bit.
If two market economies allow currency flexibility and free flowing capital, their total stock market returns should, over time, be about the same. How could it be different? If one country’s corporate sector earns higher returns, its equities will outperform and attract capital from the lagging market. The impact will be to push up the currency of the high-return market and pull lower that of the low-return one. Over time, changes in competitiveness will cause returns on invested capital across both jurisdictions to equalize.
Charles Gave
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