I know it's not very original, but I think the biggest news story of 2011 has been the currency crisis in Europe. For those who remember all the promise and fanfare around the idea of one government for all Europe, of which the new currency was the cornerstone, and the tremendous debates -- especially in Britain -- over how closely to integrate with the Eurofederalists, it is a remarkable debacle.
Among the more ambitious Euro-dreamers, especially those from the little countries who always saw a federal Europe as their way to positions of influence in the world, there was the hope for a united Europe, free from the Russian threat, able to cast off the gentle overlordship of the Americans and return to being the centre of the world as they had been a century ago, before the First World War swept that world away.
It was always a fable of course, as some of us warned, and it was compounded by a policy of not hearing, seeing, or speaking any evil about the European ideal that was bound to end in tears. The idea that debt issued by Greece would have the same elements of risk as debt issued by Germany, just because they were in the same currency, was insane and contradicted all laws and precedents of public finance: It's the issuer that is rated for the credit and the yield, not the currency.
The addiction of many of the Eurozone countries to excessive welfare, coupled with collapsed birthrates, assured that there would be too many people on benefit and not enough producing income and paying taxes in many of the countries. And some of the countries fluffed up their assets and papered over liabilities to be taken out of their soft currencies (drachmas, lire, pesetas, escudos) at overvalued rates of exchange.
The problem has been aggravated by the practice of imposing hair-shirted deflationary policies on the wrongdoers, which just increases the deficit (except for the Irish who are incentivizing investment and growing out of the problem); and by the unbidden Mephistophelean advice of the U.S. administration to throw money out of the windows, increase the money supply, and inflate the currency. Germany, to its credit, will not allow that.
It should be possible to let the weaker countries default, make the best deal they can with their bond holders, and stay in the Euro. Meanwhile, Germany can back the private banking sector that is exposed to bad sovereign loans, in exchange for reforms that reform entitlements, encourage investment, and ensure labour market flexibility. But it is a tense and intricate struggle that will carry well into the new year.
The Euro-dreamers will not be heard from again for a long time.
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A little back-handed swipe at Bilderberg there Conrad?
For it was Bilderberg, that assembly of a 135 of the most powerful people on the planet, whose stated mission, as early as 1953, was to establish the EU, control its currency by using PRIVATE Central Banks that were directly interlocked to the Rothschild/Rockefeller syndicates.
Mr. Black strived mightily for Bilderberg membership with his control 53% of the Canadian Print Media that resulted in that massive NAFTA con which served only to accelerate the powerful International Corporate State emanating out of Wall Street.
I could never understand, given the power of Bilderberg, how Mr. Black succumbed to his legal troubles for they could have quashed any investigation anywhere given the absoluteness of their international power.
I can only assume that the Bilderberg cornerstone membership of David Rockefeller was frustrated because he could never comprehend some of those 75 word paragraphs, as noted in the 2nd one above, written by Mr. Black.
I do hope that Mr. Black's next book explodes the Global Crimes of Bilderberg from the inside!
This is simply a result of countries having lost the ability to devalue their currencies, since they no longer borrow in debt that they themselves issue. The same thing happened in Argentina, and it will happen in any currency union with heterogeneous economies.
The welfare state isn't bankrupting these nations, and the reason I know this is that Sweden, with the same economic fundamentals, has no problem selling its debt. Nor does the supposedly profiligate, downgraded, pound-printing, United Kingdom.
When Canada hit the wall in the early 90s, it was due to a ridiculous attempt to defend purchasing power during a recession that pushed interest rates up to five-hundred basis points over what US debt was retailing for. John Crow was the bond vigilante, not the bond holders.
Once again, the curious Nelsonian knowledge required of Manchester Liberalism is on display, in this instance, presented by Lord Crossharbour.
(BTW, is there a process involved to submit blogs to HP and if so, where might I find it?
I think Mr Black is a little too quick to kick dirt on the union.
"That which does not destroy me, makes me strong"
I am living in France, and despite what can be said about the Euro from mostly the other side of Atlantic Ocean, it is a well known and used currency in the world. The sacro sanctum green dollar is loosing gradually its power.
If the Euro zone was in a real bankruptcy to come, the Arabian Emirates and Arabian countries, as well as China wouldn't invest in Europe.
The fear to come is when the Yuan will be "corrected" against the currencies.