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Barrons has a really good piece on Ray Dalio this weekend.  The piece does a deep dive into his macro view of the world.  We see things very similarly at present.  Europe is by far the biggest macro risk, the US economy looks OKAY in 2012, but huge risks are ahead in 2013, more neutral on t-bonds after being very bullish the last few years, golds bull market is still intact, etc.

One of the more interesting parts was his take on Europe and the way it’s analogous to the USA:

“So what is the solution to this? How will the European debt crisis be resolved?

What is happening in Europe now is essentially the same, almost totally analogous, to what happened in the U.S. in 1789. It is an interesting comparison.

Post-American Revolution?

Yes. In 1776, the colonies declared independence from Great Britain. We didn’t have a country. We had independent states that had a treaty with each other, called the Articles of Confederation, and it was similar to the Maastricht Treaty that created the European Union and the euro currency. The independent states had debt problems and they had tariffs with each other. It wasn’t until 13 years later, 1789, that those states started to form a central government, largely because of their debt problems. There was a constitutional convention, and we formed a country and we chose a president. We formed a treasury and imposed central taxation. That gave us the ability to produce revenue for the country and restructure our debts. There was the ability to have taxation and to issue bonds and to borrow. Europe does not have an ability to borrow. It doesn’t have central taxation, that’s material, and it doesn’t have a treasury. It is a collection of countries operating for their own individual needs.”

I’ve long been discussing the need for some sort of move towards a United States of Europe.  Ultimately, it is the only logical endgame for Europe’s monetary system if it is to survive.  But there appears to be a lack of unity and leadership in getting us there.  So, as Dalio said, the risk of a seismic (negative) shift in Europe is very very real at this point….

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