THE RISK OF POLITICAL UNREST INCREASES IN EUROPE
European leaders are quickly falling behind the curve as European citizens increasingly recognize that austerity is not solving their problems. The single currency system remains deeply flawed and all attempts to stabilize it thus far have been nothing more than swift kicks of the can. I’ve maintained that that can kicking can only last as long as the citizens of these nations remain ignorant of their reality – that they are suffering at the hands of austerity in order to ensure that bankers do not suffer.
In a worrisome turn of events over the weekend the Washington Post is reporting a return of the mass protests in Europe:
“ATHENS, Greece — About 30,000 people protested in Athens’ central Syntagma square on Sunday evening against the government’s tough economic austerity policies.
The demonstration, larger than many others that have taken place during Greece’s economic crisis, appeared to be the first that resulted from spontaneous calls over social media sites such as Facebook. Many others have been organized by unions or political factions.”
The biggest risk in Europe is not that Greece or any other nation will default. It is that the citizens will wake up to flaws of the single currency system and demand a complete reversal of the current course. That could result in defection from the Euro and a complete unraveling of the periphery nations. European leaders must stop focusing on ways to restructure debt and kick the can. Make no mistake – restructuring Greek debt, though necessary, will not fix the Greek economy and it will not stop the austerity that is causing this unrest. More importantly, none of the solutions that have been conceived thus far come close to fixing the inherent flaws in this single currency system.
Interestingly, there is a great lesson from the credit crisis that all leaders should heed. In America, we have a structural problem. We are a nation that has become dominated by financial interests and the result is a deeply indebted private sector that now relies on the aid of its government or its local banker to achieve growth. The American financial crisis was the markets way of telling the country to fix this structural flaw in the system. When we bailed out our banks we were openly saying that the markets were wrong. The response to the crisis has not been one of admittal. Instead, it has been one of denial.
We made a distastrous tactical error when we decided to choose the interests of the bankers over the people. Europe does not have to take that same route. We have not admitted that the system is flawed and in dire need of restructuring. And the result is that the world’s largest economy has an economic “recovery” with a laughable 9% unemployment rate and an economic strategy that is based on the same gimmicks that helped cause the crisis. Europe needs to recognize what the markets are telling these leaders that there is a structural flaw at work here. And it needs to be fixed. They cannot circumvent it with bank bailouts and can kicking strategies as the American policymakers attempted to achieve. If they do, these problems will merely present themselves at some later course in the same disastrous form.
They must find ways to make this single currency system sustainable for the long-run. And that might even involve (gasp!) haircuts for banks. Ultimately, there is only one true way to make this currency system viable and that involves the creation of a central treasury and greater political unity. We’re reaching a point where Europeans need to decide that they are either in this together or not. And the citizens are growing increasingly impatient watching their leaders try to patch together a system that clearly has inherent flaws as is currently constructed.
100% spot on. Keep up the good work.
People in Greece are unlikely to move to Germany for employment opportunity. European nations have tribal/ethnic roots that go back thousands of years. For that reason, I believe the Euro is a mistake. A single currency implies that people within your nation state are mobile. For ethnic, religious, linguistic, and cultural reasons many peoples of Europe will not move.
The other implication of the Euro is that the money system is a backdoor for forcing integration among disparate peoples. What could not be done by war is done by economic means instead.
My view, like that of Thomas Jefferson, is that people should be free to live in disparate communities of their choosing. Most people will choose their ethnic homeland, but to have your peoples forced out into an alien society, or to have your society morphed by the money system is probably something Jefferson would have been against.
What is wrong with having unique cultures and languages and traditions? Europe is interesting precisely because of the differences. One money system and forced economic integration will ultimately reduce what is interesting and unique.
Then the periphery nations need to defect. End of story….
“People in Greece are unlikely to move to Germany for employment opportunity. European nations have tribal/ethnic roots that go back thousands of years.”
Migrants from Greece are the 4th largest immagrant population in Germany with more than 300K Greek nationals living there. Peak was 400K in the 1970ies at the height of labor migration. Which was about 4% of the population and now less that 3%.
What’s your point?
“What is wrong with having unique cultures and languages and traditions? Europe is interesting precisely because of the differences.”
Yes, but Europeans were continuously at war with one another from 1066 (or earlier) to 1945. Mine is the first generation that has known peace.
The architects of the EU would argue that some fiscal adjustment and loss of national sovereignty is a small price to pay to avoid a repeat of the catastrophes of 1914-1918 and 1939-1945.
Never underestimate how strongly Europe’s elites believe this argument and their determination to preserve their union.
More tosh from a yank website doing its best to deflect from the US’s moral and economic bankruptcy.
For a yank (given the US’s unsustainable debt level) to accuse anyone else of ‘kicking the can) id offensive and beyone funny.
We expect the crazies on the birther websites; you Mr Roche are giving them a run for their money.
Sleep tight,
Classic Jo comment. You didn’t even read the article. I said in the piece that we kicked the can. Why do you even bother reading? Why don’t you waste your time elsewhere. You’re just another guy with a political ax to grind. Why bother?
“What are you talking about – a regime’s balance sheet is no different from a household one.” – Jo, proving he doesn’t understand basic economics.
Michael Hudson, EU: Politics Financialized, Economies Privatized
This article is an excerpt from Prof. Hudson’s upcoming book, “Debts that Can’t be Paid, Won’t Be,” to be published later this year.
Somebody once told me that whenever you complain, you should also offer a solution. That way you become a problem solver instead of a whiner. So, what of my complaint in the above? Cullen offers a central bank as a solution, and no doubt that would fix many of the problems. I would like to suggest a third way. The third way keeps the Euro nations sovereign, yet still allows trade:
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From Wikipedia:
The International Clearing Union (ICU) would be a global bank whose job would be to regulate trade between nations. The ICU would make all international trade be done in its own currency called a bancor. The bancor would have a fixed exchange rate with other national currencies, and would be used to measure the balance of trade between nations. Every good exported would add bancors to a country’s account, every good imported would subtract them. Each nation would then be given large incentives to keep their bancor balance within a very close percentage to zero. If a nation had too high a bancor surplus the ICU would take a percentage of that surplus and put it into the Clearing Union’s Reserve Fund.
This taking of surplus bancors would encourage nations with surpluses to buy other nations’ exports, so they maintain a zero trade sum. Nations that imported more than they exported would have their currency deflated to encourage other nations to buy their products, and make imports more expensive.
George Monbiot, a contemporary critic of the IMF, has argued that the ICU’s proposed mechanisms would have given greater weight in decision-making to the less-developed countries, which were not then as heavily involved in international trade as they are now.
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My view is that money is a creature of the law. Monbiot’s complaint can be mitigated by Law. In other words, countries can agree to legal conventions and overcome his complaint. With a Bancor system if the balance of trade gets out of hand, it is very obvious to the population. Individual countries can take action to address the problem. Situations like those of Greece and the other PIIGS would never have arisen, as fast feedback would have signaled the trade problem well in advance.
Our own situation with trade imbalance with China would not have arisen as well. China would have been forced to buy our goods, or their excess bancors would have been confiscated to the reserve fund. I would imagine that the ICU’s clearing reserve fund could be used as a slush fund. So, that fund would also have to come under control via legal constructs.
Those interested in more details concerning an ICU, a concept originally proposed by Keynes, should look here;
http://www.imf.org/external/np/pp/eng/2010/041310.pdf
Personally, I’m apprehensive on the idea. A core tenet of MMT is the sovereign control of one’s national currency through, among other mechanisms, the adoption of a floating exchange rate. From above;
“The bancor would have a fixed exchange rate with other national currencies…”
In practice, this diminishes a nation’s monetary sovereignty and leaves it beholden to whomever is setting the rates. In many way the system seems akin to a global gold standard. Instead of pegging to a shiny piece of metal we affix our currencies to a centrally administered “Bancor.”
This should take care of itself naturally if all currencies would be floating freely.
“Ultimately, there is only one true way to make this currency system viable and that involves the creation of a central treasury and greater political unity”
Utterly wrong.
No amount of political unification can make an optimal currency area from very different economies of Europe.
Colonists in America once said the same thing. They were utterly wrong.
The language barrier is a problem though. Until Europe chooses an universally required language it will not be possible to get enough worker mobility for optimal currency area.
I’m sure France will offer to accept German as the official EU language, or better still, English – ROFLMAO!!!
One universal language in Europe? Maybe in a million years… The diversity is enormous and it is not a negative. What was wrong with the European Union before the Euro? What was wrong with a gradual process of further economic and cultural integration and cooperation? This process was interrupted by impatient politicians dreaming about leaving their names in the history books. The current unification of Europe is not a natural process but a grandiose Orwellian experiment commensurate only with the communist folly of the 20th century. It is imperialist in nature but using economic and mostly financial weapons of mass destruction instead of Panzers and Junkers.
Europe’s leadership is shameful. They are backing what is good for themselves and the owners of capital (i.e., debt holders) instead of what is good for the people. The is not what leadership is about. So people are finally starting to wake up and take control.
Europe’s banksters are going to push Europe as close as they possibly can to violent conflict in order to gather their pound of flesh. Before we get there though, they still have the QE card to play. It will happen when a nation seriously threatens to leave the Euro.
Doesn’t make any difference in the end. Without a true European Federation (political unity), a static single currency can only fail.
Nice article. I think Europe is the story to watch for the time being. Is a Black Swan in the cards? Or maybe a Red Herring?
So, does the dollar rally and unhinge the devaluation dream of the Fed and Treasury?
If the dollar rallies, do all asset classes plunge in the US?
Could be interesting.
“If the dollar rallies do all asset classes plunge?”
Yes but the causation is in reverse. When the asset classes plunge we will see the dollar rally all the hard money types have been hoping for. When everything is real cheap the dollar is strong. Of course when everything is real cheap we are in a depression.
The question is: Will any 401k plan be safe? (even if you are in cash) I’ve already started moving some funds into a military credit union. The govt will not let their accounts evaporate now will they?
Denial is the first response to a traumatic event. Then come anger, bargaining, and then may be acceptance and even fixing.
Greek bonds are a screaming buy right now. I have loaded my account with Greek bonds.
European politics has always been like this, things are on the brink and then eventually the politicians make the right decision.
There is no reversal of the EU integration. Things will not be easy, but the core will wake up and eventually pay up for Greece because it is so obvious that it is in their own interest to do so. Greek bonds are a great buy right now.
Very good piece Cullen.
The comparison with the US in the comment section are flawed.
Europe is an artificial conglomerate- It was created at at time when other such conglomerates (Soviet Union, Yugoslavia etc.) fell apart.
The European people are too divers in mentalities and to create a common currency in order to just “force” them together was a major mistake.
There is no common language for a start – so worker cannot and won’t move form one country to another in order to find work.
There isn’t even a common electrical socket, nor stamp nor – most importantly – educational system. Try to move your children from one country’s school system into Germany – nightmare, for parents and children.
Contrary to other nations there was never a referendum in Germany (the biggest country in terms of population and economy) whether or not the people wanted to join the Euro. Try to hold one now – it’ll be the end of it at once.
Europe may last 100 yeare or so but it’ll never last as long as the US because there was a different motivation to create the US altogether.
Mountaineer, thanks for the excellent link. A statement about how the world money system depended on liquidity from the FED during this crises, was interesting. It probably makes the world nervous having to depend on the U.S. so much. And then there is Triffin’s dilemma which is negative for the reserve currency issuer e.g the U.S.
Keynes considered the bancor system to be more like barter, not gold. When you sell a good, your account is credited up, when you buy it is credited down.
I agree that we should be very careful about keeping our Sovereignty. I’m just not convinced that Floating exchange rates do that. The bulk of money flying around the globe today is gambling and hedging. This is a tax on producers. Only a small percentage of international money flow is actually used to buy and trade goods.
That’s correct, the Bancor as envisioned by Keynes was kind of like a global real bills systems. The Bancor was kind of a clearing currency. You would still have national currencies, but if you were a trade deficit nation, you would be required to pay an interest charge to the clearing union. Trade surplus nations would receive interest payments.
The Bancor was not seen as a basket of currencies, but a way to reconcile nominal and real imbalances between nations.
If you like the idea of the Bancor, check out some of Bernard Lietaer’s work on not just one, but three additional currencies on top of our national currencies. He makes a pretty compelling case and I certainly think it would go a long ways in protecting our sovereignty, as well as helping to the concept of subsidiarity. Pretty interesting stuff…
http://www.lietaer.com/birdseyeview/
To me it doesn’t sound like Europe was quite ready for a common currency given the still quite large cultural & economic differences between the different countries.
Perhaps they should have gone for seperate Northern & Southern Euros as a better compromise?
Casanova, out of curiosity, do you still pay accrued when you buy Greece bonds now? I noticed that on Bloomberg 10 year notes carry 448 days of accrued, while convention is ACT/ACT, Annual….
Isn’t this basically what Mauldin has predicted for Europe?
“Ultimately, there is only one true way to make this currency system viable and that involves the creation of a central treasury and greater political unity. ”
This centralization will lead into a complete fashistic leadership of corporations over whole Europe,like you have it already overthere in the US and will be the final death of democracy here in Europe aswell.
we already struggle with this symptom, like i.e. gentech (Monsanzo and Bayer) targets directly EU parliament, therefore tries to undergo national law to force its establishment in Europe against peoples vote/ will. We not only get expropriated by the money system, no the final step when nothing else can generate more debts/ money, is the Expropriation of life (based on pure pseudo science).
If you vote for a centralization of Europe similar to the US, you might be pretty blind that it is destroying diversification, not that centrlization is bad, but under the current compounding moneysystem its bad. I mean you should at least admit that our current moneysystem destroys diversification in the long run, USA is a great example for this.
Thus a deeper centralization of Europe under current money system is absolutely counterproductive, it promots fashistic economic operations.
Dont you see these simple mechanics of compound interest? Again, whats your take on Gesell if ever studied?
Cullen, while I think you are spot on with your assessment of European problems with a single currency, I doubt that the typical European citizen understands or even cares about that.
The major issues with Europe is not their single currency, but rather that the welfare state their citizens demand has been grown on the back of budget prestidigitations that would have landed anyone from the private sector either in jail or blacklisted. There’s so little left of a private sector in terms of driving the economy, that any and all attemtps to rein in government spending to a sustainable level can only result in a tanking of the overall economy. the economy must tank because there’s nothing left that viable.
There is no painless solution anymore. They’ve killed and eaten the golden goose. What’s left will require at least several generations of substandard living to regrow an organic private sector that can stand on its own.
Here in America, we are slowly proceeding down this same path.
Cullen:
I don’t know to what extent greater political unity is needed. What Europe needs is a way to enable internal transfers to alleviate the pains of internal imbalances.
The less political these are the better. The EU needs the equivalent effect of the US internal transfer mechanism where California has federal spending of roughly 80% of their Federal taxes while Mississippi has federal spending of about 170% of their federal taxes.
Fortunately, we don’t hear the media complaining about those lazy Southerners living off the hard work of the coastal states (unlike Germany vs. Greece).
The better such a transfer mechanism is depoliticized and made as automatic as possible the better. A large federal government in Europe would never fly – or would take forever to implement – there has to be a better way to create a fiscal mechanism.
A default (or restructuring) of the debt is basically a default on the currency – which I don’t think is a good thing, particularly since the EU is not constrained by any supply of Euros.
The elite and the wealthy haven’t caught on.
This is not the middle ages where you can leverage the discreteness of populations to retain wealth, power and dominion over populations. Technology has turned this form dominion on its head. Citizens are increasingly using technology to bring ideas and people closer. They are no longer willing to carry austerity measures on their backs so the wealthy can retain their lifestyles.
The wealthy believe they can ride the market on the way up then rely on the middle and lower class to protect their gains when their economic plans fail. The financial markets didn’t get it on the way up and the financial markets don’t get it on the way down. These market have become a reflection of the past instead of a predictor of the future. They have been rendered useless as economic and social predictors because it the markets have been hijacked by the wealthy to be used as a tool to retain wealth instead of a means of creating production capacity and employee citizens.
Bloggers and professional market pundits make comment on how Europe is going to bring back orderly markets through taxation and inflation…its laughable.
Tyranny can be overt through dictators or it can be covert as it is in democracies where the wealthy have an inordinate share of wealth and power. Dictators are always vulnerable to revolution where societies fabric is held together through authoritative brutality. The covert social fabric that binds democracies made of lower, middle and wealthy classes is made of an implied social agreement. Reasonable economic equality and economic independence for the majority and the wealthy minorities manipulation of government and financial market is looked upon with a blind eye. The democratic fabric is now being torn apart from and the wealthy are unwilling to give back to society all the gains they have reaped from 30 years of manipulation.
The ONLY reason that people in the US are not marching in the streets is due to the continual leveraging of future citizens income. As in every NPV calc. it is the integrity of the project that matters. There is no integrity in QE1 or QE2. We’ve leveraged the future cash flows of the next generation to sustain current consumption.
The likes of Jack Welch are truly shortsighted fools. The Republicans particularly should take note.
What about an unified bond market for eurozone region? One of the issues with the Piigs its the huge accumulated debt, but too the high spread between an high quality bond (deutsch bonds) and not so reliable bonds (greek bonds) which cause a greater cost to distressed nations. Putting all together in an suspicions would be a manner to reduce costs finance all what is needed to surpass the crisis.
*where is write ‘ suspicious’ read ‘ eurobonds’. The text predictor make a little mistake.
Best Blog on the web, learnt so much from Cullen & comments.
If anyone could answer:
when the fed buys treasury’s from Banks, these treasury’s would be held on the banks Bal sheets in Current assets, therefore when the fed buys the T’s for cash
the cash is put into their reserves accounts, are the reserve accounts included in Current assets?
If a bank had a lot of MBS held in assets, but the MBS was imparied and the fed came in a bought them in QE1, that does put the banks balance sheet in better shape so even though the bank does not lend reserves it’s capital ratio is in better shape & does have a better abilty to lend if it can find qualified borrows, correct?
Wow! Hard hitting, accurate article. Well said, sir.
Casanova in the thread has made an interesting bet on Greek debt. Economically and fiscally-culturally, Greece has more in common with developing nations (e.g., a small Latin American country) than it does with a first world economic power like Germany. Greece used its access to the Euro to cheaply borrow its way to a standard of living that was not at all justified by its GDP. Its creditors have decided that Greece cannot credibly service this debt because it has reached the Ponzi phase of borrowing, to borrow Minsky’s description.
There is only one simple solution that will allow Greece to continue to enjoy its current standard of living. That is for the ECB to purchase a very large chunk of Greek debt at par with keystroke money and thus repair Greek solvency. The ECB has done so before and Casanova is betting that it will do so again, big time.
If the ECB refuses, then Greece is cut off from further credit; it cannot service its debts; its banks, pension plans etc. will fail; and there will be a disorderly adjustment, Argentina-style. This could lead to the failure of French and German banks, for starters, because Greek debt is everywhere in Europe.
The ECB has an alternative to a Greek bailout; i.e., the ECB can allow Greek debt to find its natural level and then bail out and recapitalize French and German and other European TBTF banks with keystroke money to avoid a Lehman-style shock when Greece defaults. This will lead to a drastic decline in the Greek standard of living, the return of the Drachma, and perhaps the return of the Generals. Greece will abandon the Euro; or more precisely, the Euro will have abandoned Greece.
The ECB wants to have German, French etc. sovereigns borrow money to acquire Greek debt at par; their taxpayers and voters will refuse because they believe that it is their money. As we learned in the USA, when the central bank uses keystroke money to purchase toxic debt at par, the taxpayers and voters do not seem to object, and the politicians are thrilled that the burden is transferred from the fiscal realm (where the politicians must decide and vote) to the monetary realm (where the central bank accepts the burden). Perhaps Greece will be lucky and a combination of both fiscal and monetary relief will be offered (as in TARP and QE1 in the USA), along with Greece being forced to surrender fiscal and budgetary sovereignty to the EU and ECB as the price for solvency and continued access to the Euro. The Greek street may start a revolution if the Greek government accepts such a deal. Nationalism may trump economics, and the Greeks are a proud people.
Good luck Greece, and Casanova.
Overall I agree with your assessment.
It is mind boggling to me that so many smart commenters here don’t understand that the governments are scared to death to let a small bank fail , let alone Greece. They regret having let Lehman fail and will never do so again.
Things will get completely out of control if Greece fails and the EU project will unravel with unpredictable consequences.
I feel very confident about my choice in loading with Greek bonds and will continue to do so at those levels.
Cullen has been saying that EU is not like US where the US government can print as much as they can.
What he fails to understand is that ECB is a puppet on the politician’s hands and it will do whatever the politicians decide to do in the end. The idea that CB are independent of the politicians is absurd.
ECB will eventually print the hell out of this mess. That will be the time to sell my bonds as they will rally and short the Euro, as the fair value of the Euro is indeed around parity with the USD.
People thinking otherwise are just getting excited by headline end of the world type news and have no idea how European politics work.
Eventually the ECB will cave in and print,print, print. Why people place so much faith on the unelected Trichet to bankrupt the EU countries is beyond me. People might understand economics here, but have absolutely no understanding of the politics in Europe. Politics will triumph in the short to medium term. It always does.
“it has reached the Ponzi phase of borrowing”
there is no it has reached the ponzi phase of borrowing” that is irrational, when the whole EUR is a ponzi scheme from beginning.
THere was from the beginning not enough central bank money creation, though interest rats on existing money have to be paid. From what? From air?
THats like intersts rates you have to pay on gold, from what?!
Another week, another bailout for Greece.
As long as the government budget = household budget même dominates, it will be impossible to convince voters and politicians in the core nations that a common way forward is not just beneficial for the periphery, but also very much and immediately so for themselves. We need some kind of mechanism to equitably and automatically share burdens, and we need to impose new ones to tackle the structural problems within countries as well as between them. The European version of deficit terrorism – PIIGS bashing – is not only economically detrimental, but also harmful to the common cause itself, quite apart from the fact that it’s inconsistent with reality. The story needs to be diffused. There is no single group of agents or any single country at fault, the problem is mostly systemic.
I wonder what would happen in this country if the population found out that a bailout was coming for California, New Jersey, Illinois and others?
A very topical discussion considering recent articles, like the zerohedge article that the CIA is warning of a greek miltary coup. Considering how the CIA has meddled with the Greek miltary junta before, I suspect that even this may not go down too well with the population.
http://www.zerohedge.com/article/cia-warns-greek-military-coup-rebellion-if-austerity-intensifies
Next up comes the article at nakedcapitalism and I read through the aims of the real democarcy now movement.For me the interesting thing is that those aims would find a lot of support not only in Spain, but France and maybe Germany. I would question whether what they suggest is sustainable and they may need to think through the impacts to business, but if they got the details right it might work. I ts also interesting that there is support from South America and in particular Adolfo Pérez Esquivel.
http://www.nakedcapitalism.com/2011/05/are-fissures-in-europe-worse-than-media-reports-suggest.html
It all feels a bit euthanisia for the rentier class and given time I actually think the unrest will overspill to topple the EU in its current form. In some ways this could ultimately be a positive for the EU in that it will get them to address these issues early rather than letting them fester. I get the feeling that the jig is up with democracy in its current form for a lot of developed countries.
“the CIA is warning of a greek miltary coup.”
Everything the CIA is warning about, and happened it was initiated by the CIA itself.
CIA has tzhe only task to destabilize countries where the US interacts.
Where does US interact with Greece? How important is Greece to CIA?
The CIA likes stability. Why would it destabilize?
If the CIA is destabilizing Greece why would it warn?
The fearful and lazy like to blame someone else.
Greece’s problems are Greece’s fault. I would love to retire at 45 and sit on the beach. I would love to not pay my taxes.
cause destabilized EU countries weakens/ destabilizes EUrope, thus interesting goal for the US.
Both economies are intertwined together. Both cultures are cultures of the West. Destabilizing Europe is to destabilize the US. Everytime there is talk of a Greek default the stock market in the US goes down.
Game, set, match on this issue. Seriously, the game is up. The fraying of the political will to keep this whole currency regime is starting to percolate, aided and abetted by the increasingly hostile nature of the protests that are cropping up in all these peripheral countries. I don’t think they can keep it together anymore. No idea how it ends, but it looks like the end is at least beginning now. The Euro might be a screaming buy because you’re only going to be left with the core I bet; too much pressure building on politicians in the non-core to continue with failed austerity tactics…
Currency one size obviously does not fit all.
1) Switzerland, with one of the highest standards of living in Europe, has 4 official languages, which all govt documents are transcribed into. Somehow they’ve figured out how to not only get along, but do fairly well.
2) Not all American colonists spoke the same language or came from the same country (Pennsylvania Dutch, anyone), yet still we became a union.
3) Just about every country of Europe – Germany, Italy, France, Greece – was once a disparate collection of provinces at nearly constant war with one another. Over time they realized they had more in common with one another than differences, and that a union ultimately made more sense.
4) Perhaps Americans don’t realize it, but many (almost all nowadays) Europeans speak at least 3 languages, one of which is invariably English. In fact if you’re in engineering or finance at an international firm, it’s pretty much a requirement.
5) Anyone who doesn’t think people will move to where the jobs are – despite language/cultural differences – hasn’t been paying attention to what’s been happening in Europe over the past two decades. Somewhere around half a million Poles officially, and up to one million unofficially, have migrated to the UK alone. That’s just between two countries. All I’ve been hearing about for a decade from my European family/friends is how foreigners are taking over the country, yet some commentors here postulate that what has been happening couldn’t possibly be. A cousin of mine has worked in 4 different EU countries in the past 10 years. Believe it or not, Europe has indoor plumbing, trains that work (far better than ours), and a fairly vibrant economy (other than the debt crisis which is affected the entirety of the Western world), where people do move to where the jobs are, even across borders.
Mind you, none of the above guarantees unification will ultimately succeed. But I get the feeling some are commenting about history channel documentaries and not modern day realities. People who think that all Europeans hate one another are not living in the present (some do, to be sure, like anywhere). I would even go on to say that Europeans are for the most part far less xenophobic than Americans. At present, Europeans generally hate their govts more than they hate their neighbors.
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I’ve thought about casanova’s gamble. Europe has delayed the “inevitable” for 3 years already, why not another 2? A speculative gamble, to be sure, but for a 20%+ 2 yr yield … not completely crazy.
to 1) Swiss federalism is in many ways (while not so in others) the opposite of Neoliberal efficiency dogma. The amount and intricacy of transfer payments and subsidies to peripheral regions within the country is mind boggling. Up until recently every last mountain backwater had its own post office, regular bus or train service, subsidised farming community (no matter how small and inaccessible the land), well maintained hiking paths, systems of chair and ski lifts, free schooling, preservation of and pride in local dialects etc.. It’s coming apart slowly, as everywhere, but is still good enough to keep the social fabric of the country somewhat in tact, while the bank and the pharmaceutical sectors spread their corporate love throughout the world (I believe it has one of the highest rates of direct investments oversees worldwide). Anyway, it’s a far cry from the superficiality of the EU, the Swiss are very much ‘in it together’, but I guess the founding mothers and fathers of the EU had something similar in mind when it was conceived. It just hasn’t happened in an adequately profound and lasting way – yet. Not least thanks to its unforgiving monetary arrangements.
Very well said. “optimal currency area” theory is way over-rated.
No thanks – a central treasury means a new Imperium in Europe – we have enough centralised decadence in Europe , anything further would merely lead to a new Caligula / Nero.
The monetory priesthood knew exactly what they were doing when they created the Euro – a crisis was inevitable.
They will use this great opportunity to further their twisted ends.
The new financial papacy is rotten to the core – its time for a new reformation and possibly another 200 year religious war to rout these bastards out.
And no more overly complex financial engineering such as MMT either – they are all a product of a global post war oil glut and are merely vehicles of capital destruction that prevent depletion being registered on their books.
Its time to simplify finance to real bills so that all can understand a new financial bible and not reley on holy men to interpret the word for us as they see it through the medium of financial latin.
dito dork:
i wrote similar:
Cullen wrote:
“Ultimately, there is only one true way to make this currency system viable and that involves the creation of a central treasury and greater political unity. ”
This centralization will lead into a complete fashistic leadership of corporations over whole Europe,like you have it already overthere in the US and will be the final death of democracy here in Europe aswell.
we already struggle with this symptom, like i.e. gentech (Monsanzo and Bayer) targets directly EU parliament, therefore tries to undergo national law to force its establishment in Europe against peoples vote/ will. We not only get expropriated by the money system, no the final step when nothing else can generate more debts/ money, is the Expropriation of life (based on pure pseudo science).
If you vote for a centralization of Europe similar to the US, you might be pretty blind that it is destroying diversification, not that centrlization is bad, but under the current compounding moneysystem its bad. I mean you should at least admit that our current moneysystem destroys diversification in the long run, USA is a great example for this.
Thus a deeper centralization of Europe under current money system is absolutely counterproductive, it promots fashistic economic operations.
Cullen,
Dont you see these simple mechanics of compound interest? Again, whats your take on Gesell if ever studied?
Cullen wrote:
“Ultimately, there is only one true way to make this currency system viable and that involves the creation of a central treasury and greater political unity. ”
I think you missed the “to make THIS currency system”. Cullen and any MMT’er just wants to point out that if you want a single currency zone you also need a central treasury and fiscal authority to make is sustainable in the long run. I think most MMT’ers are calling for default and exit of the Euro.
Right. You either have to go full bore ahead and create sovereignty or disband and create sovereignty. Most MMters are calling for disbanding, but I think the Europeans are heading towards unity. And that means going full bore and create sovereignty via a United States of Europe. There is no other way this can work….this problem is FAR from over.