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The Financial Domino Effect: How to Profit Now in the Volatile Global Economy by Ben Emons

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Chapter 7The Euro-Zone Debt Crisis in the Context of the Financial Domino Effects Framework

The events during the European Exchange Rate Mechanism (ERM) crisis followed each other at a rapid pace analogous to a snowball effect; that is, the ERM crisis had many elements of domino effects. The speculative nature of the crisis was viewed as an underlying force steering those effects. In reality, the speculative forces were a reflection of a strong connection between asset prices, economic fundamentals, and political and monetary leadership. The nature of the ERM crisis had a sequence that reveals strong parallels between the ERM and the recent debt crisis in Europe.

Two basic principles are the fundamental drivers of each crisis:

1. Monetary/fiscal ...

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