Over the last 10 years, the euro has risen against the US dollar by 5% (it was up 8% before the slide of recent days). Over the same period, each of the two main Asian currencies — the yen and the renminbi — has fallen by around 15%. This implies that over 10 years, the euro has revalued against Asian currencies by some 20%, which is a considerable move.

Now factor in the new tariffs which the US has imposed on the European Union and Japan at 15%, and which it looks likely to impose on China at a similar rate once negotiations between the two sides eventually conclude. As far as sales to the US are concerned, the new tariffs will bring the competitiveness of Japan and China back to where it was 10 years ago, before their devaluations.

But as far as the sales of European companies to the US go, the new tariffs will make Europe’s goods even less competitive than they were before. The only solution for European companies will be to close their factories and open new ones in the US.

So much for exports to the US. When it comes to exports to other countries, such as Latin America, the world’s two most efficient industrial powers have devalued their currencies by a sizeable 20% against the currency of the not-so-efficient industrial system of Europe. Manufacturers in Europe are therefore going to lose massive amounts of market share.

Logically, the adjustment will show up firstly in a fall in corporate profits for companies that manufacture in Europe, and secondly in a rise in European unemployment rates.

This suggests that some countries in the eurozone — notably France — are heading into a new recession — a recession that they cannot afford. The result could be a solvency crisis in France as soon as this autumn. History suggests we may see the first dislocations hitting as early as August.

To gauge whether a eurozone crisis is brewing, investors traditionally monitor the spread between French and German 10-year sovereign yields. But this spread is too easily manipulated. I prefer to watch the French- Danish spread, which nobody bothers with. It does not look good, with the spread currently above 60 basis points and rising.

If anyone can explain why one of the world’s least efficient industrial systems has seen its currency revalue by 20% in 10 years against the currencies of the world’s two most efficient industrial systems, I will listen with all my attention.

But frankly, I do not understand it; the euro’s 20% appreciation against the renminbi is one of the most bizarre developments I have seen in my career. And given that I’ve been in this business for more than 50 years, I have seen more than a few bizarre developments.

It seems to me that a large number of contract assets are going to take a major beating. But the world is carrying on as if their overvaluation were normal.

As John Maynard Keynes quipped, the markets can remain irrational longer than I can stay solvent. So when I do not understand, I do not play.