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Jeff's note: The European Union (EU) is falling apart. It's inevitable. And we've been writing about it since last year (here, for example). Right now, the EU seems determined to do everything possible to keep Greece from defecting. Its exit would be the first brick to crumble. And there's no way to rebuild the fortress once the crumbling starts. So today, we're going to check in with German couple Dieter and Agnes to get their take on the situation...

A Waste of Perfectly Good Strudel

By Jeff Clark
Thursday, May 17, 2012

Dieter arrived home late from a long day at the office.
He set his briefcase down on the marble tile floor in the entryway of his home. He untied his wingtip shoes, slipped them off his feet, and set them perpendicular to his briefcase. He removed his overcoat, brushed the wrinkles off the back of it with his hand, and hooked it on the coat rack near the front door.
Dieter started to turn left toward the bedroom. But he was distracted by a warm, lovely smell coming from the kitchen. So he turned right instead.
"Strudel?" Dieter thought to himself. "It has been years since Agnes baked me a strudel." Dieter feared he had forgotten an important date. So he flipped through his mental rolodex. "Was it someone's birthday?" he wondered. "An anniversary? Graduation?"
Nope. None of the above. There was nothing important about May 17.
Dieter smiled as he entered the kitchen. He smiled partly because of the relief he felt for not having forgotten an important date... but mostly because Agnes was making him a strudel for no special reason whatsoever.
Agnes was standing by the stove, stirring a warming pot of blackberries, brown sugar, and just a splash of port wine.
"Mmmmm. Blackberry jam for the strudel," Dieter thought to himself as he approached his wife from behind and slipped his arms around her waist. "Thank you, my little lederhosen," he said. "You know how much I love strudel."
Agnes turned, draped her arms around her husband's neck, kissed him softly on the cheek, and said, "You're welcome, sweetheart. But I'm afraid the strudel isn't for you. It's for the Papadopolous family down the street. We're throwing a party for them."
"What?" Dieter exclaimed as he backed up and bumped into the granite island in the center of the kitchen. "Why would you give my strudel to those Greek deadbeats?"
"Don't call them deadbeats," Agnes retorted. "They just paid back some of the money they owed to the Homeowners' Association."
"Wait a minute," Dieter protested. "The Association loaned money to the Greeks last year. Then the Association wrote off 96% of the loan. Then the Association loaned them more money. Now you're saying the Papadopolouses paid everything back?"
"Well... no... not exactly," Agnes said. "The Greeks took some of the money from the new loan and used it to pay back a small portion of the old loan that wasn't written off."
"And for that, we're throwing them a party?"
"Of course not, silly," Agnes replied. "We're throwing them a party to convince them to stay in the neighborhood."
Dieter was speechless. He needed to sit down. But all the chairs had been moved out of the kitchen to make space for the party. So Dieter crouched on the cold marble floor at the base of the granite island in the center of the kitchen. He pulled his knees up toward his chest, wrapped his arms around them, and bowed his head.
"Look," Agnes explained. "There's a rumor the Papadopolouses have hired a realtor to sell their house so they can leave the neighborhood. We all know that if they leave, property values will drop and the whole Association may fall apart. So we're throwing a party for the Greeks to show them how much we appreciate them and how much we want to keep them in the neighborhood. I'm just hoping my strudel will do the trick."
"Well," Dieter said as he raised his head and looked at his wife's face, "you do make a wonderful strudel."
Agnes blushed.
"But let me ask you this," Dieter continued. "What's in that other pan?" He pointed to the steam escaping from a covered skillet at the back of the stove.
"That's paella for the Rodriquez family," Agnes replied. "We're having a party for the Spaniards next week."
Beste regards und gutes trading,
Jeff Clark

Further Reading:

Agnes first predicted the Papadopolouses were in trouble last year. And she was just as willing to help out then. But it hasn't done much good... See how little the Greek's situation has changed since a year ago here: There Goes the Neighborhood.
The economic situation also looks bleak back home in the U.S. "QE3 is on the way," Jeff says. "It's going to happen – as surely as we'll see QE4, QE5, and so on... Now, it's just a question of timing the announcement for maximum impact." Get the details here: Traders: Prepare for More Money Printing.

In The Daily Crux
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