America Should Bet on Berlin, Not the Basket Cases
Rarely has the establishment been so unified, and misguided, in its ever-more-frantic efforts to promote a Euro bailout. Today’s Daily News Brief from the Council on Foreign Relations writes:
G20 leaders, meeting in Los Cabos, Mexico yesterday, urged European members to jumpstart growth in the beleaguered eurozone (al-Jazeera) by easing austerity measures and allowing the European Central Bank to play a more active role. A draft of the G20′s official statement, to be finalized and published later today, called on members to “take the necessary actions to strengthen global growth, amid increased concern that the eurozone sovereign debt crisis could plunge the global economy back into recession.”
The CFR highlights the following items:
“Since the euro crisis has escalated, the chancellor [Angela Merkel] has been more isolated than ever before. Everyone, from U.S. President Barack Obama to French President François Hollande, British Prime Minister David Cameron to Italian Prime Minister Mario Monti, together with an army of international economists, financial experts and journalists, is demanding that the Germans take on a greater financial burden,” notes Der Spiegel.
“But a eurozone collapse would be a disaster that might define our era. Its prospect must focus the minds of all at the G20 summit on action. Non-Europeans must persuade Europeans that the rules change when the stakes rise. The ECB’s credibility will mean little if there is no longer a common currency,” writes Lawrence Summers for the Financial Times.
“With the global economy again weakening, we need a strong G-20 now more than ever. The leaders of the world should take the opportunity of their meeting in Los Cabos to put aside political incentives and do what is best to ignite the global economy. By setting real membership standards, world leaders could build a better G-20, one capable of facing the challenges ahead,” Alex M. Brill and James K. Glassman for the Wall Street Journal.
“Growth” according to the G-20 and the foreign policy establishment means a massive bailout of bankrupt debtor nations, mainly at the expense of the German and Dutch taxpayers. It sounds sort of reasonable until you look at the numbers: it’s a hoax, a goof, a scam. Spain, the crisis du jour, is a Ponzi scheme, a property market bubble that dwarfs America’s subprime problem.
Spain just asked for a Euro 100 billion bailout for its banks, whose bad loans reportedly are just under 9% of their total book. That’s bad enough, but the real number is two or three times as bad, as we infer from the fact that Spanish banks tripled their lending volume since 2008, lending money to zombie borrowers to pay interest on their old loans. Spain’s official response has been to delay a promised audit of the banks and go on vacation. No joke: the Wall Street Journal reports this morning:
The deadline for a group of auditors to present full reports on the capital needs of Spain’s financial sector has been delayed to September from July 31, a Spanish central bank source said Tuesday. The move has been agreed with Spain’s government, the International Monetary Fund and the European Central Bank, as well as the auditing firms — Deloitte, KPMG, PwC and Ernst & Young — themselves, this person added. The delay seeks to provide the auditors with more time to complete their evaluation of the banks’ books and also responds to the fact that many Spanish companies and government institutions are only thinly staffed in August, a traditional holiday month when the cabinet and parliament rarely meet, this person said.
All the pious pronouncements from the policy elite amount to a plea for more money to keep scams going that should have been shut down a long time ago. Americans, after all, lost $6 trillion in net worth (a 40% decline for the average family) between 2007 and 2010, and municipal workers are taking pension clawbacks. The problem is not monetary, but political.
As I wrote in an Asia Times essay June 18:
Europe’s nominal wealth is embodied disproportionately in national debt and in the banking system, especially in the debt of the banking system. To reduce the paper value of wealth would be an overtly political act, rather than a quasi-market phenomenon as in the United States. All of Europe’s politics now revolves around the question of whose wealth gets taxed. If Spanish pensioners are told that their pensions will be reduced by a big margin because the Spanish banks made too many bad loans to construction companies while the government looked on, they rightly will blame the government. This may destroy the delicate fabric of Spanish political life. That is unfortunate, and it may be unavoidable.
There are many ways to write off the nominal wealth to levels that correspond to economic reality. The simplest and best would be for Spain, Italy and so forth simply to impose a wealth tax. But wealthy southern Europeans have been hiding their wealth for generations precisely in order to avert such an eventuality. Another way to have a de facto wealth tax is to devalue the currency, which makes everyone (but especially people of modest means) much poorer, while reducing the real liability of debtors (mainly the government). And yet another way to tax wealth is to wipe out the value of assets.
Americans accepted the overall reduction in wealth because the housing bubble was a people’s Ponzi scheme, as I wrote in this space (See The people’s Ponzi scheme, Asia Times Online, August 16, 2011). Americans speculated on their own houses, and lost. So did the Irish, who glumly accepted the consequences.
Not so the Spanish: the massive misdirection of credit to the construction sector focused on corporate rather than household lending. Financial institutions issued debt in the astonishing volume of 109% of GDP (about three times the level in the United States). The construction sector ballooned to a size large than manufacturing (vs a fifth of the manufacturing sector in Germany and a quarter in the United States).
The massive issuance of financial institutions’ securities constitutes a large portion of the wealth of Spaniards; they sit in pension funds and life insurance portfolios. Wipe out their value, and Spaniards will have to accept pension reductions. That is precisely what should be done: the banks are valueless, and their liabilities should be erased so that an external buyer can recapitalize them. The Spanish won’t like it a bit. Nor will other Europeans.
The Spanish elite with the connivance of the Spanish government gambled with the retirement funds of the Spanish people and lost them speculating in property. If the nominal wealth of the Spanish people is written down to its fair value, a whole generation of Spaniards will suffer a penurious retirement. If the banks are put through a proper bankruptcy, new capital can be injected by foreign investors to restart the economy (as in Thailand after the 1997 real estate market crash). But the Spanish will be poorer. Will Spain’s fragile social fabric hold together? Probably not; the Spanish are still fighting the terrible civil war of 1936-1939. Spain well might descend into political chaos. But I’m not going to write them a check to prevent that. I don’t see why Chancellor Merkel should, either. With a fertility rate of just 1.4, Spain won’t be around much longer in any case.
The alternative to letting the nominal wealth of Spain sink to its fair value is to make the Germans poorer. As I wrote June 18 in Asia Times:
The alternative is to place a de facto wealth tax on the frugal and industrious northern Europeans, by extending Germany’s (and Holland’s) balance sheet until the euro weakens drastically, raising the cost of imported goods for the Germans. It is unfair to tax German wealth in order to maintain the wealth of the rest of Europe, and the Germans won’t like it.
Why should America want to prop up the fictitious wealth of the Spanish by making the Germans poorer? What possible purpose can that serve? America should be strengthening our alliance with Germany, rather than badgering the Germans to bail out the basket cases. We share a fundamental interest with the Germans — containing Russian influence. The European community will shrink to a smaller and more prosperous core. We should be more concerned with strengthening NATO. Economics isn’t always a positive sum game. The slow and terrible decline of Spain during the 16th and 17th centuries was good news for the Dutch, who opened their doors to talented immigrants from all over Europe (notably the Spanish and Portuguese Jews). There are plenty of smart Spaniards, and a lot of them (along with a lot of smart Greeks) will be working in Germany.
There just aren’t enough Europeans to go around. Europe’s working-age population will shrink by a third by mid-century. There are plenty of prospective immigrants from Africa and the Middle East, but few of them are educated and many of them are culturally unassimilable.
Exhibit 1: Europe’s working age population (15-59) shrinks by a third while population over 65 doubles
Source: United Nations World Population Prospects (Constant Fertility Scenario)
Exhibit 2: America’s working population grows but retired population grows faster
Source: United Nations World Population Prospects (Constant Fertility Scenario)
Germany’s biggest economic problem is a shortage of skilled labor, and that likely will be solved the way it was solved in the 17th century after the Thirty Years War: through immigration. America should bet on the winners, provided that the winners share our democratic values and our strategic interests.
Epiphany, Why not export illegal immigrants from here to there? (“Over there, over there” ouch). The mostly Hispanic-Catholic peoples already speak something akin to Spanish (Just as American English is akin to British English) and actually have a greater work ethic than much of Spain.
We could probably spare a few for Germany as well.
All for free, we could even buy the plane/ boat tickets.
Talk about a net win-win?
Nah, too easy.
ta
We need to invigorate our existing immigrants and attract many more who are motivated and productive. If they have been educated here, let them stay and put them to work. That is how we built our nation before and it is the path forward. Europe has no similar culture of assimilation. Spengler is right. It is a cruel world out there. Dog eat dog and the skinny dog gets skinnier.
You know – that is not a bad idea……
Illegal immigrants need to GO BACK WHERE THEY CAME FROM!
While Spengler is likely correct about the long-term effects of low birth rates, the reality is that the European nations which are failing to replace their populations are also failing to employ the young people they have. Various reasons may be cited for this (I favor socialist labor laws, and the EMU), but whatever the reason, the failure of these nations to reproduce does not, as yet, translate into a need for more workers.
That’s an extremely good question; here’s the answer I sent to a friend to raised the same issue.
Part of the answer is that there’s an chronic global shortage of skilled labor. I wrote about that in a paper for my consulting clients last year:
http://www.macrostrategy.com/uploads/Macrostrategist_9-2-2011.pdf
If we take two extreme ends of the spectrum, CalTech and Cairo University, there are several jobs available for every graduate of the former, and almost no jobs available (outside of government make-work) for graduates of the latter. Top American software engineers are hard to find, as are skilled machine operators (earning $50 to $60k a year, with a lot of math skills). MBA’s and lawyers are in oversupply, not to mention gender studies majors.
But failure to train young people for the right kind of jobs is only part of the story.
When populations age rapidly, usually there is a surfeit of savings (as aging people save for retirement) relative to investment. That was true on a global scale starting in the late 1990s. A surfeit of savings too often turns into a bubble; $600 billion of the world’s savings flooded into the US economy every year between 1998 and 2007. This contributed mightily to the housing bubble, along with misguided government policies and financial industry cupidity. The collapse of the bubble wipes out wealth and frightens investors, leading to less commitment of capital (especially when the government response makes matters worse). So US corporations have built up $2 trillion of cash rather than investing it.
Perversely, the global surfeit of savings due to aging let — via the housing bubble in the US and a parallel bubble in Europe — to what Keynes called a “liquidity trap,” in which investors are afraid to take risk and make the sort of investments that employ young people.
Does anyone remember a CIA projection that the EU would disintegrate by the mid 2020s/
Mr Goldman,
There are other reasons for the US to stand closely with Germany. I believe you have written before about a developing axis of Germany, Russia and China, clearly the opportunities for Germany in the development of the Chinese economy far outweigh Whatever the PIIGS can offer. With the resources of Russia and the market of China Germany sees a very prosperous future, whereas the PIIGS only offer a continual drain of German resources.
With the US political leadership a circus of amateurish idiocy, the US could find itself in some trouble if it continues to ignore these trends.
http://www.israelnationalnews.com/News/Flash.aspx/242596
Arutz Sheva: Israel closing King David Hotel for Putin/entourage
Nothing to see here folks, move on…
Not content on spending only our money, Obama is demanding that he be allowed to spend Germany’s money as well. Who is Obama to make demands on Germany? I really don’t understand why Germany puts up with any of them. Its economy is certainly big enough to stand on its own, so why don’t they just tell the poorer European countries to take a hike? It may be a moot point soon, anyway. With more and more countries in the EU going down the drain, I don’t know how much longer the Germans are going to want to keep subsidizing failure. Seems to me the Germans have had enough, and rightfully so.
Dear Mr. Goldman
For over 20 years I spent 3 to 5 months per year in Spain and the rest in Germany (forgetting forays into France). I also studied and promoted at the Universidad de Salamanca and even taught there a bit. I know Spain from the inside, at least inside universities. I also live permantly in Germany and pay taxes here. What you have painted relative to Spain is a most depressing vision–I am afraid correct (and some of my Spanish colleagues know it). You advise Germans (and monetarily I am one) not to support Spain ruined by the Partido SOCIALISTA de Espana, but now in the hands of a potentially rational rightest party of Rajoy. But Rajoy is faced with a mess not of his making. He has a burden and needs help. (And I do not want a replay of the Civil War — I know too much about it including some surviving participants.) So, I look at myself as an American/German/Spaniard, i.e., a countrywise schizophrenic nut. To take your advice hurts a land that I adore. To pay for it not only damages my financial security but also offends my capitalistic sense of business. I do not know how Merkel withstands the pressure on herself. Even a Niall Ferguson, who is generally free market in outlook, shames Merkel for not overcoming the old German fear of inflation. Is such a fear a figment from the past better forgotten? I think not.
I have written the confusing sentences above to illustrate, so to speak, the “two souls in my breast” (to misquote Goethe). But, I am not alone with such a duality. Merkel also has two souls, i.e., she is a German, yet want deeply to be an European. Reason stands against mthe heart in both cases. When people are such, and that is Merkel’s lonely situation, I do not know what they will do. I suspect eventually submission.
At any rate, I thank you for another enlightening analysis. I just sent the article as an e-mail to the profesora who was on my committe for my doctorado and has become a good friend. That will ruin her day, perhaps. I have cries of desperation flying from Spain in my direction. I do hope that Spaniards learn that one cannot get something for nothing. I bet, however, that the “socializing” forces a la Obama will win the upper hand.
Last question: Where should I place my money. The dollar is threatend, the euro is suicidal and I want to enjoy my money before it evaporates in an Obama-like plan.
It’s hard to find good investments. American utilities have been very resilient and pay The Euro is likely to deteriorate especially if the Germans are bullied into inflating away Eurozone debts. I own a bit of gold (a bit less than 10% of my portfolio), and I think that’s a good thing to do in general. Longer term I think Asia should do well which means that the Aussie and Canadian dollar, the commodity currencies, should do reasonably well. The S&P SPDR ETF (ticker XLU) pays a dividend yield of about 3.7%. Those are slim pickings but better than cash.
Thank you for the suggestions. I only wish now that I had married year ago that Chinese beauty (and, wow, she was so) that wanted to drag me to China. No, I had to slip away to Spain. Your advice about Asia echoes words of wisdom of Faber, Schiff, Rogers and others who live now in the East. But, is Eastern production, necessarily connected with selling in the West, a solid bet if the West blows itself up, viz., inflates? Asia must sell to someone. Please, do not feel obliged to answer. I am an intellectual with the derivative handicap, namely I just cannot decide to put risk decisions into reality. I once told my son (who is quite wealthy and has saved my economic a.. more than once): “My son, I’ve studied and read alot. I know WHAT money is and you do not.” My son answered with a knowing smile: “Yes, Dad, you do know WHAT money is and I do not. On the other hand I have it and you don’t”. I have proved him right with “my” heavy investments here in Europe that were dragged into the whirlpool of post-2008. I have concluded that we intellectuals are not of this world, alas. (I am thinking here of Marx, that economic flop in life.) I will take your advice to heart.
Prof. W., you might recall Kierkegaard’s admonition that whatever you do, you will regret it (hang yourself, you’ll regret it; don’t hang yourself, you’ll regret it). You regret not having married the Chinese girl. No doubt if you had married her, you also would regret it.
Or she’d regret it!
No-one can save Spain except the Spaniards. The party’s over and everyone wants the Germans’ to pick-up the tab. There is no economy that can. Hard times are coming to Club Med, no way around it. The socialists have run out of other people’s money. Now they will want blood.
As for where to put your money, you’re a little late off the mark. When Greece first went wobbly gold would have been your answer. Gold is still the answer, but you won’t be salvaging much.
When I see the citizens of these stricken countries demanding less government, then there may be some hope for improvement.
This folly starts on a fiction that German and Greek bonds should always be treated as par for the purposes of lending. This folly/fiction was used to hyper-inflate local housing markets. The bubble has burst and everyone is desperate not to book the losses.
This all reminds me of D.H. Lawrence short story “The Rocking-Horse Winner” “…and the house whispered there must be more money.”
Spengler, where is the American gov’t efforts to promote easy access mortgages to minorities located in the housing bubble blame department? And, how is it the fault of those Americans who did no more than purchase homes at market value, at public interest rates? Isn’t that how a people should participate in the housing market? I understand the bankers bundling bad mortgages and selling them is morally wrong but I can’t get a grip on where the American middle class sinned and thus were responsible for this collapse? Does the gov’t's efforts to force/require bankers to make these loans to people who they knew couldn’t meet the mortgage requirements have any culpability in this matter?
There’s a huge literature, and a good account is in the Morgenson-Rosner book “Reckless Endangerment.”
http://www.nytimes.com/2011/05/29/books/review/book-review-reckless-endangerment-by-gretchen-morgenson-and-joshua-rosner.html?pagewanted=all
Delightful! Directing us to an NYT review by Robert B. Reich.
(Note, readers, the whitewash at the end, wherein the good professor blames capitalism, after naming a tightly knit family of his own Party’s operatives.)
Spengler, you are a master of subtlety.
(p.s.- I have noted of late that your heart and humanity are really beginning to show. I suspect you might actually be one of the good guys.)
Thanks Spengler. I visited a few websites and got a history lesson (sadly my eyes glaze over when econ is spoken) but I did see the historical line-of-meaning from the ‘dot com bubble’ to 9/11, the efforts of the Fed to stave off recession, Fanny/Freddy, CRA, and banksters cheating, derivates, investment monies moving from the market to housing, deregulation, easy –liar loans, low rates, every family in their own home, etc! And, when coupled with a severe decline in business and personal ethics (not to mention morality), it seems like the perfect economic storm.
Herr Spengler, one more query. Is there any movement toward punishing the people responsible?
Robert Cheeks is correct. The US Housing Mess was created through subprime mortgages and is supported by the fact that only 10% of housing is delinquent. However, that 10% has reduced the value of ALL housing. The banks were forced by the Democrats to loan money to people that could not pay it back. The banks were smart enough to sell those loans to Fannie and Freddie and through government guarantees the banks could resell those federally guaranteed mortgages in bundles. That house of cards was destined to collapse and did.
Democrat policies gave us this horrible economy. Democrat policies have hurt middle class Americans through loss of home value, loss of employment, and the confiscation of wealth through inflation.
Democrats and banks weren’t entirely responsible for the debacle. Middle Americans chasing the Dream had their hand in this as well…….
http://www.slate.com/articles/business/moneybox/2008/04/inside_the_liars_loan.html
Thank you so much, Robert Cheeks.
I could not have put it better.
We are being punished for following the rules given us by our betters.
Too many buying houses- or cars, or toasters- destroys an economy?
The Euro is likely to deteriorate especially if the Germans are bullied into inflating away Eurozone debts.
What now? Nobody’s bullying Germany into anything. Germans will act as their own perceived interest dictates. The calculation — simple to state but hard to perform — is whether the country comes out ahead by staying in the ezone and encouraging others to remain. Or not. That is all. Is there any reason to doubt that the analysis is/will be objective and dispassionate (and is likely already complete, just waiting for the catalyst)? The situation is too complicated for easy answers, and likely turns on information that isn’t in the public domain. Who trusts Der Spiegel to get it straight?
It’s reasonable to suppose that Bill Gross’ reluctance to invest in German bonds is partly based on similar reasoning. Some detail here: http://tinyurl.com/bp2ztl4
Interestingly, he only warms to the idea of bunds if Germany leaves the ezone.
The German tendency towards self-pity and the weird Stockholm-syndrome-like pathologies of some supporters fretting in the US don’t alter any of this, and never will. But if flailing away makes you feel better, go for it, I guess.
So the Socialists, sweeping into power with a few auspiciously placed bombs, rob the country blind with corrupt ‘development’ contracts- and the pensioners and private sector simply must accept this with no clawbacks considered.
Spain isn’t broke. Europe isn’t broke.
Their governments and public unions are broke.
Ain’t restauranteurs rioting.
A Euro collapse will work to their advantage. The MBS trigger gave our socialists control and entrenchment of government structure.
We are seeing internal colonization.
How do we break the immunity of Crime.gov?
It was plain as a pikestaff from the first that the attempt to bail out Greece was just throwing good money after bad. The Euros needed to let Greece go, as a horrible example, and quickly reform their own economic behavior in a massively less statist direction. But they didn’t. German went through reforms years ago. The ones now in dire straits did not.
There is no way German taxpayers can carry the whole of the Eurozone by themselves, and that is what they are being asked to do. Obama and Geithner are urging them to do so, but those two are innumerate and, judging by their handling of things here in the US of A, totally ignorant of what will work and what will not work. Hollande backed off the minor and inadequate reforms Sarko made, and the French have given him a big win in the Assembly voting. So France will be no help in managing the problems, quite the contrary.
If Merkel listens to those urging her to immolate Germany’s finances on the altar of the Euro, Germany will also face economic disaster. I see that “growth” has become the fashionable word for the socialists and other statists to use, but it merely means, in the mouths of Obama and the others, bloating up government expenditures even further. None of them has the slightest idea of how to encourage actual economic growth. Why should Merkel listen to such clowns?
As for Germany cozying up to Russia and China, that strategy has been tried before and worked splendidly for Germany, if for nobody else in Western Europe. The Germans got into trouble when they abandoned cozying up to Russia. So from Germany’s point of view it’s a fine idea. Bismarck would approve. I expect Rathenau would too. For the rest of us, it’s a pretty grim prospect. I expect the Poles are worried about it, and who can blame them if they are?
Crikey, what a mess.
There had been talk of bringing RICO to bear on the banks for side stepping the county recording of the deeds of trust with the MERS system.
This is what the state Attorney General settlement is trying to get around.
Just think ALL of this could have been avoided COMPLETELY if people the world over had just practiced Biblical principles about money & debt.
ALL of it.
Wealth cannot be created by debt. We’ve all been living a massive Ponzi scheme, and it’s coming undone.
This is ONE thing the Muslims have right. Debt is ALWAYS a bad thing.
no, debt happens
how do you deal with it?
The Knights Templar found out how. Then King Phillip tortured and burned them at the stake for their ability to circumvent feudalism.
The Knights Templar were proto-Lutherans..
beware Catholicism.. especially since the Pope today sees fit to pander to islam
remember Jacques De Molay
proto-protestants?
hmm rather say ‘freemassons’ though still under the Roman Catholic church control
You neec to distinguish debt for productive investment – it has happened historically – and debt for ponzi speculation on asset prices.
Young people want to buy houses and raise families. Old people want to live on the interest of their savings. Old people lend money to young people via mortgages. Do you really want everyone to wait until they can buy a house for cash? Everyone’s happy, unless…
There aren’t enough young people forming families and old people lend money to speculators instead, and banks cheat on credit standards, etc. etc.
Young people want to buy houses and raise families.
They could if the prices were reasonable for both and they were not crushed by debts. Personal, city, county, state and federal debts.
If people is crushed by debts they will not be able to borrow and buy anything.
Personal debts end with the man death but governments don’t die and they could continue to imposed taxes to repay the debts long after the people responsible and enjoying the debts is death.
Old people want to live on the interest of their savings.
Old people made or allowed the debts to be made. In essence they ate their children’s children before they were born. Now they want eat their children, so they are able to live off them for their last years?
Old people lend money to young people via mortgages.
They lent it to the banks; the banks wasted the money in bad lending to increase the bankers bonuses. The money is gone and no amount of tantrum will make it back.
Do you really want everyone to wait until they can buy a house for cash? Everyone’s happy, unless…
Take out the subsides to bankers, let them go broke and they will be forced to sell off the houses to the higher bidder. Then people will be able to buy a home for a reasonable sum.
There aren’t enough young people forming families and old people lend money to speculators instead, and banks cheat on credit standards, etc. etc.
Young people don’t form families because the laws of the land make marrying a bad arrangement for a male (and in the end everyone).
Because there are too much taxes and too much regulations useful only to protect insiders from competitors (to protect the old from the young in essence) so young people is out of jobs and earn not enough from them (due to imposed costs).
Because there are too much people working for the governments instead to work in the private sectors. Too much people controlling and regulating instead of producing and innovating.
The government’s parasites destroy near 9/10 of our ability to produce wealth. Get away with government’s parasites (the large part of governments) and you will be able to see family formations, wealth formations and kids in just a few years.
The Baby Boomers boomed because they parents had healthy economic growth and rising standard of living (after the Great Depression and WW2).
If you go to Turkey which has no mortgage system, you’ll see half-finished homes literally all around you. The owners had to stop building because of inflation and the inability to borrow money.
And I bet they will resume to build as the economy (their personal economy) will get better. No need to government intervention there. They could buy the bricks when money is available and continue the building during week ends and vacations. They could start small and grow later. The main problem is government interference with building codes and other trash.
Debt is a bad thing if you misprice it. Debt is also a bad thing if it turns out your expected returns are not enough to cover it. If you are TBTF then none of this matters… until it does…
The real issue, on BOTH sides of the Atlantic, has been the mispricing of risk via bailouts and the perverse incentives they bring (United States) and/or government policies designed to blow asset bubbles. (Euro zone).
Either way the era of endless spending/extending/pretending/bail-outing and printing is coming to an end regardless of who is in the White House and the wishes of politicians in the Eurozone.
The can WILL slam up against the wall during the next presidential cycle… vote accordingly.
There’s nothing wrong with the Euro and Europe that can’t be solved with a good old fashioned group of Gauleiters….
The house of cards is down.
The Eurozone was a bad idea from the get-go, and it is well and truly DOOMED.
Bailouts NEVER work.
All they do is prolong and worsen the agony, and minimize the likelihood of any recovery at all.
That is the lesson of the American experience 2007-2012 and counting.
The more I think about it … Screw Spain. Screw Greece. Screw Scandinavia (is that a country?). Screw the whole lot of them. And screw Germany, most definitely. Let the muzzies have them. They’re useless as allies.
Dr. Lippenheimer,
It’s ‘fuzzy wuzzies’ not ‘muzzies’! ‘Muzzies’ is very politically incorrect. If Spengler’s demographics are accurate, and I believe they are, I’m really going to miss white folks. I mean, they weren’t all that bad, and most have a sense of humor. And, yes, I think you’re right: the ‘muzzies’ will have Europe.
Sorry, you don’t eradicate thousands of years of warrior culture by immigration over a generation or so. Europe is ripe for conflict, if past history is any guide. The panzers are rolling…
Dear MOD,
To be honest I was thinking the same thing: it does seem White folk like nothing more then a damn good war, particularly those White folks who live in the northern areas of the continent formerly known as Europe (now officially, “The Camp of the Saints).”
However, not all, but too many Europeans appear to be lazy, listless, and living in a state of alienation. I don’t see them standing up to Muslim Mujahadeen or the Girls of the Veil Brigade.
“Europeans appear to be lazy, listless, and living in a state of alienation.”
That’s true. Same as the, uh, “folks” (a portion of whom are White) who support Obama & the leftist agenda over here in America. Lazy, shiftless, stupid, welfare-state losers that most “folks” don’t want anything to do with.
Irrespective of all their other antics, it seems that Lou Dobbs and Newt Gingrich were the most vocal in arguing against TARP, or at least a delay in TARP. They were right? If Spaniards are in the same panic as US investment bankers prior to TARP back in the fall of 2007 then I feel sorry for the Spaniards. Although much of the focus is on the differences in debt between the US and Spain, one could argue that it’s the quality of the printing press that differentiates the two countries most. Notices of the death of the dollar were premature. Maybe the Euro (Spain) could be saved if China is thrown under the bus. As far as I can tell, the pecking order wasn’t changed so China might have to sleep with one eye opened. The European elite are not going down without a fight.
Just like the US government gave the poor cheap credit so did China. And if Western governments figure out how to buy time then China will take the fall. When you kick the can down the road it is likely that the can will end up in a different country.
Europe will buy time. The can will continue down the road heading East.
The Irish love the German virtue:
“The evidence of German financial prowess in the long gone years of 2008 and 2009.
How Deutsche Bank, Commerzbank, IKB, WestLB, HSH Nordbanken and Hypo Real Estate made the world a better place for everyone not contributing for the cratering of the world’s economy and not requiring to be given hundreds of billions (most probably trillions) nearly free of charge from the ECB plus Fed plus the Irish tax payers plus the very own German gov, in order to spare Germany from financial Armageddon at the expense of the irresponsible sucker tax payers from U.S. and Europe”.
-http://www.huffingtonpost.com/2010/12/01/fed-opens-books-revealing_n_790529.html
-http://www.forbes.com/2007/08/21/germany-landesbanks-subprime-markets-equity-cx_po_0821markets20.html
“ECB injected an extra €529.5bn into the eurozone financial system, taking the total supplied to banks under the three-year loan programme beyond €1tn.
The broader collateral rules used by the ECB helped to draw smaller banks into the scheme, with take up from some 800 banks edging ahead of demand in December, when 523 banks borrowed €489bn.
More than half of the institutions that borrowed were German, according to people familiar with the auction.”
A brief story of German financial responsibility in Ireland.
http://www.creditwritedowns.com/2010/11/bankers-gone-wild-ireland-germany.html
Oh BTW, Merkel finally seems to agree on bailing out Spain and Italy, I wonder why ? may-be cuz of the german banks !
-http://apps.facebook.com/theguardian/business/2012/jun/19/germany-eurozone-bailout-countries-debt
“Germany, Greece and the Marshall Plan”
https://www.economist.com/blogs/freeexchange/2012/06/economic-history
Albrecht Ritschl is professor of economic history at the London School of Economics and a member of the advisory board to the German ministry of economics.
Spengler:
Let me ask the obvious:
As a proud Euro-hating Jew, why should I ever feel sorry for the Germans or support them, even as a conservative?
Personally, I think this may be Ha-shem’s punishment to them – support your fellow anti-Semites until you are ALL broke.
Dear Eric R.,
i don`t know why but New Spengler has in my eyes a love affair with old German culture. That does not mean there is a future. German area has a future when it will be a useful hub for many people in a wider territory but not by complete sacrificing its own interests. That is really difficult to reach.
Above that New Spengler is right in most his conclusions, economically, demographically and maybe in theopolitics. So I like his thinking very much.
There is some hope and reality in it, even for us the bad Germans.
not quite a love affair, but a deep interest.
http://www.tabletmag.com/jewish-news-and-politics/53221/faustian-bargains
Fellow Zeropa-hating lantzmann here.
The Germans are actually the good guys here, I think. They have worked hard over the past couple of generations to rehabilitate their image and make restitution for their crimes. They have far outperformed just about every other nation with a similarly embarrassing history; the Poles, Russians, Japanese, Spanish, etc. are still all in utter denial of their own bloody pasts against other nations. And, today, they serve as an abject reminder that the EU dirigiste model lies in ruins and needs to be abandoned toot-sweet.
that’s right, the Germans behave/d, when the contextual economical situation was/is all right too. Happens a problem in this well organised engine, they tend to repeat their former patterns, austerity, deflation, unemployment, civil unrests… and nationalism
Some say, that that now their reunification has abecome a two decades anniversary (which was their goal since 1945, hence their good behaviour), they don’t need to appear as the good boys anymore, and would openly fare for only themselves.
They benefitted of the Allies leniency, like none other populations did, Eastern Germany was considered as a de facto EU funding member, as such got the EU investments funds as much as the new EU member Spain, that no other Eastern republics could pretend to, our currencies that were indexed to the former EMU -> ERM, saw their borrowing interests rise, like, later, ECB rules were adapted to the need of the “sick man of the EU”…
Now that’s the flu reached the weakest members, Germany would like to give them a radical medecine, which results will be a slow economical death, no matter, if these countries become cheap Urlaub/Vacancies places, the Germans like to roast in sunshine
That “flu” of which you speak is really a stage 4 cancer! And it is completely self-inflicted by decades of the “weakest members” living beyond their means for too long. Even the strongest chemotherapy cannot help them now. The PIIGS are going to get slaughtered, roasted and served up with an apple in their mouths and there’s not a d@mned thing anyone can do about it!
“And it is completely self-inflicted by decades of the “weakest members” living beyond their means for too long”
yes, but thegerman bankers (and the french’s, the Dutch’s, the Brit’s) were not reluctant to advance them cheap money, they should have been a bit more rational and careful, oh well, nevermind, the EU was the warranter !
of course, the Spanish, Greeks… will have to swallow the bitter pills, dunno how they will perceive the roastbeefs, roastkrauts… on their sea-side resorts then, me think that these northeners will have to pay extras extra-services!
“yes, but thegerman bankers (and the french’s, the Dutch’s, the Brit’s) were not reluctant to advance them cheap money”
So, the junkie with a needle in his arm is not at fault for his addiction? Only the pusher who sold him the smack? You cannot be serious!
“on their sea-side resorts then, me think that these northeners will have to pay extras extra-services!”
Those hard-currency johns will pay with DMs which the PIIGS will be chomping-at-the-bit to get their grubby hands on. No need to travel to the Third World to get cheap accommodations anymore.
“So, the junkie with a needle in his arm is not at fault for his addiction? Only the pusher who sold him the smack? You cannot be serious!”
NO, they are EQUALLY responsible, since the EU was encouraging them, and as the las resort warrant
“Those hard-currency johns will pay with DMs which the PIIGS will be chomping-at-the-bit to get their grubby hands on. No need to travel to the Third World to get cheap accommodations anymore.”
someone has to pay for the other’s sins
It’s interesting to speculate how the CFR (Geithner, Paulson, unsurprisingly Blankfein and Dimon but also, disappointingly, Krauthammer) could keep a straight face while admonishing Europeans to “put aside political incentives and do what is best to ignite the (global) economy” – but then Americans don’t do irony, do they?
Krauthammer confuses me. One minute he’s enthusiastic about drones all over the Mideast, the next he seems to realize some of them could be for us and agrees with Judge Andrew Napolitano. People are funny like that.
What would the consequences be if the Drachma or Peseta was newly introduced at an exchange rate of 2 Peseta’s / Euro? Would there still be an immediate bank run and wealth exodus to safer countries and different global banks? And at the same time if Government debt was 1/2 written off, the other 1/2 paid in Peseta’s to the countries debtors? To me this seems like a logical compromise that the man on the street would understand. Also everyone feels the pain so blame could be shared everywhere. Any thoughts?
There has never been a separation between the financial system and politics. To make money requires freedom; to take money requires dictation. As Frederic Bastiat pointed out over 150 yrs ago, people instinctively crave free money, and politics is the way to seize it. Socialists have never been comfortable with the law, but they are right at home with unearned wealth. Prosperity by politics. Substitute Karl Marx for John Locke, and there ya have it.
As we debate who’s gonna pick up the tab for southern Europe, we should also mull who’s gonna do the same for California, another financially and morally bankrupt polity. My guess is the other states, less NY, MA and IL. There are solid socialist voting blocs there, and they must be protected.