As the Second Phase of Europe's Second Great Depression Rolls Forward...

Simone Foxman writes:

European Markets Get Destroyed Today with Italy—in particular, Italian banks—leading the carnage.

• FTSE 100: -1.85%
• CAC 40: -3.02%
• DAX: -3.37%
• FTSE MIB: -3.83%
• IBEX 35: -2.91%

Italian banks led those losses, with Intesa Sanpaolo halted after it fell 6.47 percent, according to Reuters reporter Michel Rose.

• Intesa Sanpaolo: -6.21%
• UBI Banca: -5.04%
• Banca MPS: -4.13%
• UniCredit: -5.48%

At this stage, what would be best would be for U.S. Treasury Secretary Tim Geithner to summon the world press to the Cash Room and say: "A strong dollar is no longer in America's interest. A strong dollar was in America's interest when capital flows into America were funding technological R&D in Silicon Valley, but now such flows are merely a drag on aggregate demand in the U.S. The U.S. is abandoning its strong-dollar policy and embracing a market fundamentals-dollar policy."

The northern European political discussion immediately turns on a dime from "we must punish those feckless southerners for daring to accept the loans we pushed on them!" to "we must expand our money supply to prevent the U.S. from engaging in a competitive devaluation to steal our jobs!"

And with more expansionary monetary policy in Europe, everybody benefits. See Barry Eichengreen and Jeffrey Sachs (1986), "Exchange Rates and Economic Recovery in the 1930s" http://goo.gl/2tnNU