Global Economic Intersection
Advertisement
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
  • Home
  • Economics
  • Finance
  • Politics
  • Investments
    • Invest in Amazon $250
  • Cryptocurrency
    • Best Bitcoin Accounts
    • Bitcoin Robot
      • Quantum AI
      • Bitcoin Era
      • Bitcoin Aussie System
      • Bitcoin Profit
      • Bitcoin Code
      • eKrona Cryptocurrency
      • Bitcoin Up
      • Bitcoin Prime
      • Yuan Pay Group
      • Immediate Profit
      • BitQH
      • Bitcoin Loophole
      • Crypto Boom
      • Bitcoin Treasure
      • Bitcoin Lucro
      • Bitcoin System
      • Oil Profit
      • The News Spy
      • Bitcoin Buyer
      • Bitcoin Inform
      • Immediate Edge
      • Bitcoin Evolution
      • Cryptohopper
      • Ethereum Trader
      • BitQL
      • Quantum Code
      • Bitcoin Revolution
      • British Trade Platform
      • British Bitcoin Profit
    • Bitcoin Reddit
    • Celebrities
      • Dr. Chris Brown Bitcoin
      • Teeka Tiwari Bitcoin
      • Russell Brand Bitcoin
      • Holly Willoughby Bitcoin
No Result
View All Result
Global Economic Intersection
No Result
View All Result

Simple Explanation of Why Night Falls over Europe

admin by admin
December 14, 2011
in Uncategorized
0
0
SHARES
5
VIEWS
Share on FacebookShare on Twitter

by Guest Author  Fabius Maximus

Note: At the end of this article you will find a brief analysis of the proposals from the lastest euro-summit.

night-falls-over-europeSMALLMillions of words have been spent describing the crisis slowly destroying the current political structure of Europe, making it seem complex beyond understanding. While full analysis will require decades of study – with its combination of personalities, politics, national animosities, high finance, and economics — the basic elements are simple.  Click on picture for larger image from Vladimir’s Blog, Pretty Blue Eyed Planet.

  • Europe’s leaders gambled, attempting monetary unification before fiscal unification as a step towards full political union. The fatal flaw was its lack of a mechanism to modify the treaties, correcting design errors and adapting to changed conditions.
  • Germany exploited its control of monetary policy for its own benefit, allowing rapid growth in their exports to southern Europe — financed by its loans to southern Europe. All prospered.
  • All good things eventually come to an end. The system started to collapse from a combination of the too much accumulated debt AND malinvestment in southern Europe, plus the shock of the great financial crisis.
  • Banks are the vulnerable part of a capitalist system. French and German banks hold much of the southern european debt; defaults (soft or hard) would bankrupt them.
  • Europe’s banks own Europe’s governments, as American banks own America’s government. Hence in 2009 recapitalizing the banks became the primary imperative.
  • The crisis might allow Germany to push Europe another step towards unification, giving Germany the power to influence individual national budgets in the EU or EMU, allowing them ever great ability to exploit their neighbors (this is the traditional way nations use power).

Since the Greek crisis began in early 2010 Europe’s leaders have sought ways to rebuild the banks. Guarantees and loans from their government have proved insufficient. The only remaining alternative to nationalization (as done in Sweden, Russia, and to US S&L’s) is ECB printing hundreds of billion euros for the debtors, so they can pay the banks. Any resulting inflation would also help in this great work.

Not realizing that bankers are western civilization (or own it), Germany’s people refused to see the wisdom of massive ECB printing. Europe’s leaders despise public opinion, but shirk from taking so large a step in the face of such strong opposition. They see lamp posts and fear what the public might do.

Instead they resort to increasingly baroque proposals, hoping to create a facade behind which the ECB can print sufficient euros to save the banks. This effort ignores the actual problems afflicting Europe, burning scarce political capital and still scarcer time. But they encounter two obstacles:

  • The creditor nations are not stupid, so they will not all monetization without some form of fiscal unification (otherwise the core nations finance fiscal deficits in the periphery without the ability to control them)
  • The debtor nations are not stupid, and so will not allow fiscal unification on Germany’s terms (as they did with monetary unification).

The end game will come eventually, as they pass some invisible tipping point. Continued capital flight will create disorderly markets. The coming recession will scuttle the austerity plans. And the austerity programs will intensify the coming recession — drastically increasing social stress throughout Europe (imagine Spain starting a recession with 23% unemployment).

This will get interesting for Europe. Survival is always interesting; all their political regimes might not survive.

Addendum

On a deeper level, a driver of this crisis is a misreading of history by the German people. They believe that the NAZI rise to power resulted from the hyperinflation six years earlier (1921-24). They don’t see the proximate cause: Weimar imposed austerity during 1929-32 (after the crash). For details see A lesson from the Weimar Republic about balancing the budget.


Update: About the results of the latest euro-rescue summit

(1) The real results concern aid for the banks (see the Financial Times). Necessary actions to improve bank liquidity, but ineffective without broader policy action.

(2) Approval for more and deeper austerity policies. In fact, locking EU fiscal policy into a straitjacket as a recession looms ahead. Europe’s leaders have learned nothing from 1929-32, and nothing from the great progress in economic theory since then. This could have horrific results! Future generations will not understand.

(3) They hope (again) to get more aid from the BRICs (Brazil, Russia, India, China) via the IMF. This is delusional. The BRICs did nothing earlier this year, when hopes were higher for effective EU action AND the BRICs were stronger. Now all four BRICs have serious problems at home; substantial help for the rich folks of Europe from the poorer BRICs seems unlikely.

(4) Most important, they have done nothing to address the imbalances within the EMU that caused the crisis — and drive the current downturn.

(5) “Never let a crisis go to waste”, so they wisely use this opportunity to push for Treaty changes. But the emphasis on this is bizarre. It is, as others have said, like the Captain of the Titanic convening a seminar on metallurgy after they hit the iceberg (later analsyis showed that its steel became brittle when cold).

(6) For details see Europe’s disastrous summit“, Felix Salmon, Reuters, 9 December 2011.

Articles about Europe

Here is the Plan:

  1. Letter from Angela Merkel and Nicloas Sarkozy to European Council President Herman van Rompuy about the European debt crisis, 7 December 2011
  2. Introductory statement to the press conference by the President of the ECB, 8 December 2011 — He explicitly refuses to help.
  3. Statement by the Euro Area Heads of State of Government, 9 December 2011

Reactions to the Plan:

  1. “The Euro Debate Gets Philosophical“, GaveKal, 29 November 2011 — A look at the philosophical differences underlying the two sides of the euro-crisis.
  2. “Anxious Greeks Emptying Their Bank Accounts“, Der Spiegel, 6 December 2011
  3. “Europe Shudders at Germany’s New-Found Power“, Der Spiegel, 6 December 2011 — Europe hopes to imitate German’s success as an export power (every nation can become a net exporter if they try!)
  4. “China to create $300 billion FX investment vehicle“, Reuters, 9 December 2011 — This story has been widely misunderstood. China probably plans to make equity investments in strategic industries, not buy Italian bonds. It is not a bailout of Europe, and perhaps a plan to take advantage of a bust in the developed nations.
  5. “A Summit to the Death“, Kevin O’Rourke (Prof Economic History, Oxford), 9 December 2011
  6. Krugman explains one of the great misunderstandings wrecking euro-policy: “The Long And The Short Of It“, New York Times, 10 December 2011
  7. “Europe’s blithering idiots and their flim-flam treaty“, Ambrose Evans-Pritchard, The Telegraph, 9 December 2011
  8. “No Draghi Ex Machina“, Paul Krugman, New York Times, 12 December 2011 — “So last week European leaders announced a plan that, on the face of it, was pure nonsense. … It’s remarkable how many sensible people base their analyses on the presumption that the ECB will do what has to be done. … But as far as anyone can tell, the monetary cavalry aren’t coming.

Other posts about the crisis of Europe

  1. The post-WWII geopolitical regime is dying. Chapter One , 21 November 2007 — Why the current geopolitical order is unstable, describing the policy choices that brought us here.
  2. Can the European Monetary Union survive the next recession?, 11 July 2008
  3. The periphery of Europe – a flashpoint to the global economy, 8 February 2010
  4. A great speech by the PM of Greece. How soon until an American President says similar words?, 3 March 2010
  5. Governments cannot go bankrupt, 2 April 2010
  6. Our government’s finances are broken. How do we compare with our peers?, 8 April 2010
  7. The EU does Kabuki for Greece. Is it the next domino to fall?, 14 April 2010
  8. About the Euro crisis: the experts are wrong; the German people are right., 7 May 2010
  9. Former Central Bank Head Karl Otto Pöhl says bailout plan is all about ‘rescuing banks and rich Greeks’, 20 May 2010
  10. The Fate of Europe, nearing the point of decision, 13 September 2011
  11. Europe drifts towards the brink of a cataclysm, 26 September 2011
  12. Delusions about easy fixes for Europe, dreaming during the calm before the storm, 30 September 2011
  13. Every day the new world emerges, yet we see it not. Like today, as Europe begs China for loans, 15 September 2011
  14. Is Europe primed for chaos, as it was in July 1914?, 7 October 2011
  15. We see the outlines of the next cure for Europe. Will it work?, 14 October 2011
  16. Today Europe’s leaders took another step towards the edge of the cliff, 27 October 2011
  17. Where to from here, Europe? Some experts share their views., 8 November 2011
  18. Status report on Europe’s slow re-birth (first, the current system must die), 10 November 2011
  19. Europe begins its endgame. Watch and learn, for Europe’s problems are the world’s., 11 November 2011
  20. Looking ahead to see the new shape of Europe, 22 November 2011

Other Related Articles

Analysis Blog and Opinion Blog articles by Fabius Maximus

Previous Post

Investors had Bigger Role than Thought in Housing Bubble

Next Post

Fox News Reacts to Time Person of the Year

Related Posts

US Banks: The Good, The Bad, And The Ugly
Business

US Banks: The Good, The Bad, And The Ugly

by John Wanguba
March 27, 2023
8 Ways AV Technology Helps You Build A Successful Business
Business

8 Ways AV Technology Helps You Build A Successful Business

by John Wanguba
March 27, 2023
How Is Bitcoin Impacting The African Banking Sector?
Business

How Is Bitcoin Impacting The African Banking Sector?

by John Wanguba
March 27, 2023
What Are Bitcoin CME Gaps And How Do You Trade Them?
Business

What Are Bitcoin CME Gaps And How Do You Trade Them?

by John Wanguba
March 27, 2023
Zero-Day Spells Doom For Bitcoin ATMs
Economics

Zero-Day Spells Doom For Bitcoin ATMs

by John Wanguba
March 26, 2023
Next Post

Fox News Reacts to Time Person of the Year

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Browse by Category

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Browse by Tags

adoption altcoins bank banking banks Binance Bitcoin Bitcoin adoption Bitcoin market Bitcoin mining blockchain BTC business China crypto crypto adoption cryptocurrency crypto exchange crypto market crypto regulation decentralized finance DeFi Elon Musk ETH Ethereum Europe FTX inflation investment market analysis Metaverse mining NFT nonfungible tokens oil market price analysis recession regulation Russia stock market technology Tesla the UK the US Twitter

Archives

  • March 2023
  • February 2023
  • January 2023
  • December 2022
  • November 2022
  • October 2022
  • September 2022
  • August 2022
  • July 2022
  • June 2022
  • May 2022
  • April 2022
  • March 2022
  • February 2022
  • January 2022
  • December 2021
  • November 2021
  • October 2021
  • September 2021
  • August 2021
  • July 2021
  • June 2021
  • May 2021
  • April 2021
  • March 2021
  • February 2021
  • January 2021
  • December 2020
  • November 2020
  • October 2020
  • September 2020
  • August 2020
  • July 2020
  • June 2020
  • May 2020
  • April 2020
  • March 2020
  • February 2020
  • January 2020
  • December 2019
  • November 2019
  • October 2019
  • September 2019
  • August 2019
  • July 2019
  • June 2019
  • May 2019
  • April 2019
  • March 2019
  • February 2019
  • January 2019
  • December 2018
  • November 2018
  • October 2018
  • September 2018
  • August 2018
  • July 2018
  • June 2018
  • May 2018
  • April 2018
  • March 2018
  • February 2018
  • January 2018
  • December 2017
  • November 2017
  • October 2017
  • September 2017
  • August 2017
  • July 2017
  • June 2017
  • May 2017
  • April 2017
  • March 2017
  • February 2017
  • January 2017
  • December 2016
  • November 2016
  • October 2016
  • September 2016
  • August 2016
  • July 2016
  • June 2016
  • May 2016
  • April 2016
  • March 2016
  • February 2016
  • January 2016
  • December 2015
  • November 2015
  • October 2015
  • September 2015
  • August 2015
  • July 2015
  • June 2015
  • May 2015
  • April 2015
  • March 2015
  • February 2015
  • January 2015
  • December 2014
  • November 2014
  • October 2014
  • September 2014
  • August 2014
  • July 2014
  • June 2014
  • May 2014
  • April 2014
  • March 2014
  • February 2014
  • January 2014
  • December 2013
  • November 2013
  • October 2013
  • September 2013
  • August 2013
  • July 2013
  • June 2013
  • May 2013
  • April 2013
  • March 2013
  • February 2013
  • January 2013
  • December 2012
  • November 2012
  • October 2012
  • September 2012
  • August 2012
  • July 2012
  • June 2012
  • May 2012
  • April 2012
  • March 2012
  • February 2012
  • January 2012
  • December 2011
  • November 2011
  • October 2011
  • September 2011
  • August 2011
  • July 2011
  • June 2011
  • May 2011
  • April 2011
  • March 2011
  • February 2011
  • January 2011
  • December 2010
  • August 2010
  • August 2009

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized
Global Economic Intersection

After nearly 11 years of 24/7/365 operation, Global Economic Intersection co-founders Steven Hansen and John Lounsbury are retiring. The new owner, a global media company in London, is in the process of completing the set-up of Global Economic Intersection files in their system and publishing platform. The official website ownership transfer took place on 24 August.

Categories

  • Business
  • Econ Intersect News
  • Economics
  • Finance
  • Politics
  • Uncategorized

Recent Posts

  • US Banks: The Good, The Bad, And The Ugly
  • 8 Ways AV Technology Helps You Build A Successful Business
  • How Is Bitcoin Impacting The African Banking Sector?

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

No Result
View All Result
  • Home
  • Contact Us
  • Bitcoin Robot
    • Bitcoin Profit
    • Bitcoin Code
    • Quantum AI
    • eKrona Cryptocurrency
    • Bitcoin Up
    • Bitcoin Prime
    • Yuan Pay Group
    • Immediate Profit
    • BitIQ
    • Bitcoin Loophole
    • Crypto Boom
    • Bitcoin Era
    • Bitcoin Treasure
    • Bitcoin Lucro
    • Bitcoin System
    • Oil Profit
    • The News Spy
    • British Bitcoin Profit
    • Bitcoin Trader
  • Bitcoin Reddit

© Copyright 2021 EconIntersect - Economic news, analysis and opinion.

en English
ar Arabicbg Bulgarianda Danishnl Dutchen Englishfi Finnishfr Frenchde Germanel Greekit Italianja Japaneselv Latvianno Norwegianpl Polishpt Portuguesero Romanianes Spanishsv Swedish