Peter Clemenza on recessions, Marine Le Pen, and Europe

Michael: How bad do you think it’s gonna be?
Clemenza: Pretty goddamn bad. Probably all the other Families will line up against us. That’s all right. These things gotta happen every five years or so, ten years. Helps to get rid of the bad blood. Been ten years since the last one. You know, you gotta stop them at the beginning…. From #TheGodfatherPartI

Investors are nervous about 7 May, when a run-off between prospective French presidential candidates Marine Le Pen and Emmanuel Macron is supposed to take place. If Le Pen wins the election and can persuade the Republic to leave the European Union, the costs to France for borrowing will increase and if your portfolio or your bank holds French debt, the fall in French bond valuations will negatively impact you.

A recession will go a way in cleaning out some cholesterol floating around in the global body politic. Rising rates will mean stricter scrutiny of investment proposals and loans.

The down side is the economic stress that will fall on the working class on both sides of the pond. Lower valued capital means lower valued collateral upon which to support loans. If investors are afraid to lend, businesses will be wary of expanding their labor. Lower employment would further fuel the populist rants of Ms Le Pen or her potential counterpart in the United States, Donald Trump.

I agree with Clemenza. The system needs a good cleansing. Leave the better business models available for financing.

Fire rises ….

About Alton Drew

Alton Drew brings a straight forward and insightful brand of political market intelligence. Alton Drew graduated from the Florida State University with a Bachelor of Science in economics and political science (1984); a Master of Public Administration (1993); and a Juris Doctor (1999). You can also follow Alton Drew on Twitter @altondrew.
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