Guest post: Don’t cry for the Euro, America
Mark Jurkevich
Since the euro crisis began, the euro zone, like a terminally ill patient, has had its bad phases and its bearable phases. With this month’s bank failures in Spain and the election results in Greece and France, it has entered into a very bad period. More than at any time since the crisis began, world financial and political leaders are openly speculating whether Europe’s common currency has now begun a death spiral. Contrary to liberal media coverage of this potential death watch, dissolution of the euro is in America’s medium- and long-term interest.
In recent decades a bipartisan U.S. movement has championed the virtues of global economic competition. So far, the result for Americans has been a mixed bag. On the plus side, it has helped keep U.S. inflation and interest rates low, while letting Americans enjoy a lot of reasonably good quality Chinese consumer products. On the minus side, globalization has gutted American manufacturing, suppressed income growth and caused massive trade deficits. The U.S. is now the world’s largest debtor country, a politically disadvantageous position vis-à-vis its creditor nations.
For now, the U.S. has hung on to its greatest political and economic advantage; the dollar continues to be the leading global reserve currency. This is hugely important. If the global economic competition were a poker game, it would be as if the U.S. is playing with five aces up its sleeve. The dollar’s privileged position helps America maintain price stability, low interest rates and virtually unlimited liquidity.
The dollar became the world’s sole global reserve currency after World War II by virtue of the fact that it won the war and then played a dominant role in putting the world’s economy back together again. Sadly, many American policy makers don’t understand that it’s not America’s birthright to control the global reserve currency. Rather it’s a privilege that has to be earned every day through transparent liquid markets, a strong and stable legal frame work, and a Federal Reserve Bank that will not debase the currency with gimmicks like quantitative easing and zero interest rate policies which hurt creditors and savers.
For decades, other countries have resented the advantages that the dollar gives America. Russia, China and the Europeans have been continuously exploring ways to develop alternative global reserve currencies. Early examples were the ruble in the Warsaw Pact countries, and the IMF’s SDR (Special Drawing Rights).
But the first credible threat to the dollar is the euro. In fact, throughout the euro zone crisis beginning in 2010, the euro has behaved like a global reserve currency. This is why the euro continues to perform well on the global foreign exchange markets, a fact that has confounded many analysts whose models suggest it should have collapsed much earlier in the crisis.
Clearly, in the global economic competition, the dissolution of the euro would be a great benefit for the U.S. As in sports competition, the U.S. should take advantage of its competitor’s turnovers and unforced errors, with no apologies and no guilt.
In his recent New York Times essay “Apocalypse fairly soon” Paul Krugman claims there is only one solution for rescuing the euro. His solution is a set of measures that would require Germany to agree to inflation of greater than 4%, among other bitter medicine. Krugman, a leading liberal economist, concludes by declaring that we should hope that Europe will rise to the occasion and save the euro.
To the contrary, we Americans should hope it doesn’t. Although there would be some short term negative ripple effects on the U.S. economy, it will be manageable. U.S. business and financial institutions have been preparing for the potential euro dissolution for two years. Further, in the event of euro dissolution, the European Union will certainly continue as a free trade bloc. The UK wouldn’t shed many tears either. It has always argued for limiting the EU to a free trade bloc structure.
It’s worth noting that in the U.S., many liberals and Democratic operatives are very concerned about the risk of dissolution of the euro in the coming months. They believe it could add just enough domestic economic disruption to drive the final nail into the coffin of President Obama’s reelection campaign. Many conservatives argue that such an outcome would also be good for the dollar.
Simply put, the sky will not fall if the euro falls; but, the dollar would be left standing once again as the undisputed almighty global reserve currency.
May 29, 2012 - 5:00 PM
Wow! I couldn’t agree more, but I am stunned that the largely liberal audience here that so seems to wish to emulate the European model hasn’t jumped on this with both feet, berating the authors clearly “imperialistic” point of view.
He lost me at “liberal media.”
Chuck,
There is only one author. Mark’s an old skiing and backpacking pal of mine; he was in my wedding and I was in his, which should give you an idea of how close we are apart from those activities.. He’s a smart guy, and wily, too. In this essay, he’s casting a liberal/conservative net over an issue that isn’t a neat liberal/conservative issue. Probably the reason that you haven’t seen much response is that this blog doesn’t often focus on international issues.
Btw that is one of Mark’s criticisms of the American media and populace; Americans are pretty damn myopic on international politics.
That’s why you haven’t seen much of a response.
Yep, “clearly”.
Re: Comment by Dan Casey — May 29, 2012 @ 8:49 pm
Btw that is one of Mark’s criticisms of the American media and populace; Americans are pretty damn myopic on international politics.
That’s why you haven’t seen much of a response.
——
FWIIW, I noticed that same lack of response to my earlier links to BBC, FP, FT, SPIEGEL-ONLINE, etc.
Other that wars/conflicts in which the US is involved, no one seemed very interested in international politics or economic issues.
I remember a reporter asking a Islamic leader what effect the last US Presidential election would have on opinions of the US in that region of the world and the reply was about as much as their elections had on the opinion of people here about them.
All I could think about was the line in a country song Where Were You.
“I watch CNN, but I’m not sure I can tell you
The diff’rence in Iraq and Iran.”
Good article/opinion piece. The world doesn’t live or die by the euro and my personal opinion is the EU kept the Euro artificially inflated with high interest rates and a false sense of economic growth/stabilithy when the US first began their stimulus with stimulus refund checks to taxpayers in the early 2000′s and into the mid-decade.
Not surprised by Art becoming lost. The fact he is unable or unwilling to acknowledge the liberal media is mildly disturbing even for Art.
*stability
Merkel’s brand of austerity doesn’t seem too popular in Europe. Any idiot with two brain cells to rub together knows you don’t lower spending in a recession. Elections in Greece and France have shown the people blame crooked financiers more than government. Boehner and Ryan would do well to listen before they find themselves selling used cars.
“checks to taxpayers in the early 2000′s”
What were you…like 10? The only people who want Europe to fail are those invested heavily in it’s failure.
#8 Even Romney has now admitted that he really can’t lower federal spending too fast because it might put us back in a recession. Not what the right wingers want to hear.
#6 Poor BM can’t get through what was going to be a rational reply without throwing a little hate toward someone.
@8
Switch “government” and “crooked financiers.” That’s what I get for doing two things at once.
My personal opinion is that The Euro Zone will do what they want, or what they can.
Dan, I am sure your friend is an unsung genius, but I do not see where he has the credentials to discount anything anyone says. Stunning as his analysis may be, I’ll stick with Krugman.
In the last year the Euro vs. Dollar exchange rate has dropped from $1.49 to $1.25. That exchange rate was that low in 2010, 2009, 2008 & 2006.
I certainly don’t think in some parts of the Eurozone any tears would be cried if the Euro went away. That doesn’t mean I think it should.
Finally, I dont’ object to the dollar being the go to currency around the world. That doesn’t mean I dont’ think we should get control of expenditure, including tax expenditures. I have no desire to emulate the European model.
@9 Art,
I received a “stimulus refund” thank you.
I will also thank your grandchildren and mine when they get to pay it back.
You continue to grow in your ignorant and delusional state.
@8
Switch “government” and “crooked financiers.” That’s what I get for doing two things at once.
Comment by Art Hill — May 29, 2012 @ 11:07 pm
Hahahaha,
That is what you get for being old, delusional and incompetent. We forgive you. Those that still grant you access to a computer, I have a much harder time granting such forgiveness.
Can’t wait for all those ancient rivalries to begin anew with the de-coupling of the EURO.
I got news for you all. The U.S. is an economic union of all the 50 states. When the U.S goverment default on the U.S obligations it’s made to it’s borrowers who are mostly it’s citizens and fail to honor the promises of SS and the social network built up over the past century, the US will be done. States will go their own way and this time, no way to stop them.
What happened to the USSR and could now possibly be happening the the EURO could well be the harbinger of what will be coming our way soon. They failed because they could not meet their commitments to their citizens.
The GOP better get off their duffs and relearn the word compromise and begin to work in the best interests of all Americans and not just the Plutocrats who are in charge at the moment.
Cry for the EURO, no I cry for America.
#6 Poor BM can’t get through what was going to be a rational reply without throwing a little hate toward someone.
Comment by gdad — May 29, 2012 @ 11:02 pm
In honor of the crumbling Spain I say, “Igualmente”
@17 Cold,
“When the U.S goverment default on the U.S obligations it’s made to it’s borrowers who are mostly it’s citizens and fail to honor the promises of SS and the social network built up over the past century, the US will be done. States will go their own way and this time, no way to stop them.”
Oh lord Cold. I agree with you on the point regarding the US will fail to honor its promises to the US citizens and the SS burden than has been created. While owed and due I agree, I also am smart enough to realize the IOUs back by government bonds are empty promises.
To this we agree Cold, Richard J. Beason my fellow CPA does not agree to as much. He has succumb to the KoolAid.
“I received a “stimulus refund” thank you.”
They gave checks to toddlers? Even I’m against that.
To add to my last post, the point where I disagree with Cold. He stated “the US will be done” and I completely disagree.
I believe the United States of America will prevail under an circumstances. The States may be disillusioned with the false believe of governmental support, but in the long run the entrepreneurial spirit will prevail.
I truly believe in the spirit and I pray the US is not too far down the path of Greece and other EU Countries. I believe we can be turned around, but it is close and we are at a tipping point at which the population can either vote for the opportunity for success or the short term guarantee for a government provided minimum standard of living. My fear is that the majority will choose for the candidate that promises the most most government benefit in which no one thrives but everyone suffers and becomes dependent on the government.
(Krugman’s) solution is a set of measures that would require Germany to agree to inflation of greater than 4%, among other bitter medicine.
I’m sure the Germans will love working until age 67 so that Greeks can retire at 50. Krugman wants “austerity” for everyone except those who were irresponsible.
It’s funny. Greece got into its current straits by doing exactly as Krugman wanted the past five years. Now they’re failing and he wants them to spend even more.
He says so many stupid things, you really have to wonder why anybody listens to him except the dumb Oprah-watchers who don’t pay attention.
Stunning as his analysis may be, I’ll stick with Krugman.
I rest my case.
I almost never respond to off point messages, but Sandi’s is a real beauty – “Dan, I am sure your friend is an unsung genius, but I do not see where he has the credentials to discount anything anyone says. Stunning as his analysis may be, I’ll stick with Krugman.”
Given the countless hours Sandi spends on this blog discounting what other people say, I would like to know what credentials she has for this that the author does not.
Thank God neither Sandi nor anyone else on this blog follows her advice. Otherwise this blog would be empty. We would go back to living like midieval Christians passively pretending to listen to our priests and bishops. I guess Krugman is Sandi’s high priest for economics. He certainly is not everyones.
@Mark Jurkevich
Mark, I am very interested in knowing how you have positioned your personal investment portfolio. What are you investing in given all the instability in the world/markets these days?
A case that weak needs to rest Suzie. You have no point and you are speaking of things you obviously do not understand, as per usual. Time will certainly tell us what happens.
I do not believe I need credentials to recognize when someone else lacks them. I also do not believe I gave anyone any advice or foretold the future…albeit one already and better told.
You are the one who needed to throw Krugman into the mix (since your analysis cannot stand on its own perhaps), so do not be surprised when his stature in economics and yours, is pointed out.
Germans are feeling really screwed they have to subsidize lazy-ass Greeks. A falling out like this is inevitable when the industrious support the idle. But Krugman thinks they should continue to do it, and he also thinks Greece should not be forced to control social spending.
As I’ve said Nobels are worthless measures of achievement. Apparently the only qualification needed today is being a socialist. They’re certainly not based on accomplishment or competence.
Suzie, be careful, you are about to incur the wrath of Sandi for daring to use Krugman’s name in vain. She will tell you that your stature in economics does not qualify you to disagree with his economic and political agenda.
Mark Jurkevich – IMHO, the final fall of the euro will not be a pleasant experience for globalized American banks like JP Morgan Chase… the amount of money that has been lost in the derivative markets [which I believe has either been ignored by American media or simply downplayed] will look like child’s play when or if the euro is finally put to rest. All the debt incurred by European nations and held by the ECB will have a major impact on the American taxpayer, who will inevitably be called upon to “bail” out those US banks’ international losses – and although the dollar will remain “mighty”, the American banking industry, followed by the American economy, will be devastated. The more American banks are unregulated, the more risk they have been willing to take – a future of the nationalization of US banks should not be out of the question.
China, I am sure, will be cheering the downfall of the euro so the yuan can begin competing with the US dollar as second to it.
Unfortunately, whether the US benefits or not, the doomsday clock has begun to tick – for both the US and Europe.
By the way, IMO. having money in 401ks or any investment tied to the stock market would not be a safe place to park any retirement funds.
This is a very interesting analysis. Thanks for posting it. I am not a finance guy, but I came across much the same point about the importance of keeping the dollar as reserve currency in Kevin Phillips’ “American Theocracy”. Maintaining the dollar as the world’s reserve currency may have been (probably was) the overriding factor in the Wall Street bailout.
Bill:
I recommend overweighting on high dividend paying US large cap stocks, as well as high quality US corporate bonds. These are conservative plays for capital preservation in the medium term and continue to offer reasonable returns.
Chuck, please tell me, in the context of this post, what “European model” we liberals wish to emulate?
“Germans are feeling really screwed they have to subsidize lazy-ass Greeks.”
I wouldn’t be happy bailing out the Greeks and working until age 67 so they can continue to retire at 50, either.
Hillary, I do not know what IMHO and IMO stands for. Sorry for being so old fashioned. Not everyone shares your doomsday opinion. Clearly I do not. A couple days ago I saw a quote in WSJ Europe of the Philadelphia Fed Chairman saying that the impact on the US is way overstated in much of the media. I recall his point was that unlike Lehman which was a sudden shock, for most, the slow motion euro crisis is no longer a shock for the key institutions. He went on to talk about the steps US financial institutions have taken in preperation of various scenarios. It was a very sober view. I just spent 20 minutes searching for that article, but could not find it.
Mark,
IMO = In My Opinion
IMHO = In My Humble Opinion
Thanks Mark!
Dan, how come Mark Jurkevich looks so much younger than you? Have you lead a hard life?
LOL, Suzie’s “stature” does not qualify her to disagree with a rock.
From what my limited “Oprah-watcher” unknown pseudo economist brain can comprehend:
Germany does not want the Euro to end. So why then would it?
We have spent over 30 years building a “global economy” and any collapse or catastrophe here affects Europe and vice versa. There is no way around that. Are they not our largest trade partner? Is there no American money in European banks who stand to lose a lot with any tumult and certainly with any collapse? There is no way a Eurozone collapse does not hurt America.
And finally, if indeed the dollar is top dog again, does it register that might be a problem in the long run? A strong currency will cause our exports to become very expensive for the rest of the world. Why do you think people complain about China’s currency manipulation? If the rest of the world cannot afford our products…guess what? We won’t be making any. The loss of jobs after what we have already suffered will be devastating.
No, I am no economist, but I still say you are wrong. And if Suzie agrees with you, I know I am right.
Old Blue,
He does look younger, no doubt about it.
Sandi:
1. A collapse of the euro, does not mean a collapse of of the EU. Many, led by the UK have always argued for the EU to limited to a strong trading bloc. For global and US commerce, that is indeed a great convenience that facilitates trade. History is litered with disparate countries linking currencies, and the schemes fail quite quickly, usually during an economic down-cycle. The sky is not falling. Besides, Europe has the resource to decide how it wants to be, regardless of whether or not the US, China, Russia, Brazil etc. throw them candie or not.
2. A global reserve currency does not have to be artificially high or artificially low. China happens to be manipulating its currency to keep it artificially low. That’s illegal, according to WTO, but the world community is to divided and doesn’t have the balls to do anything about it. Why they were let into WTO is material for 1000 essays. Regardless, nobody but nobody, including your hero Krugman, disagrees with the fact that a country whose currency is the global reserve currency is playing with 5 aces up its sleave.
The sky is not falling. The best way to make things better in America is for American leaders to focus more on the things they can improve in America, and stop spending billions a week in Afganistan/Iraq, channeling billions through the IMF into Europe, etc.
Mark Jurkevich – I apologize for the internet slang [IMHO etc]…
Now, do you have an opinion about the ‘one-size-fits-all’ model being used on the economies of the Eurozone? Germany, which has a unique cultural and social structure, and is an export based economy, surely cannot be the model for Ireland, Greece, Spain, et al. Most of the EU cannot imitate the German model and be successful economically. How do you view the austerity measures? How does one explain countries like Sweden, Denmark, or Norway that have indeed not lessened the “safety nets” and are still doing well? If cutting, cutting, cutting social protections to prop up lagging economies has not made the majority of the economic systems in Europe more stable, why continue to use this austerity model?
.
Isn’t there a danger in the interdependence of global banking to, in effect, cause credit problems in US banks if/when the euro is eliminated? Isn’t it logical that a recession of one country in the Eurozone will spill over to other weak economies [Italy]? Isn’t some of the difference between the US and the countries within the Eurozone that the US makes it own [national] currency, whereas those within the EU – for example Greece – simply use the the euro without any control over it?
The media as I said in my earlier post, is complicit in the ignorance of the American populace. I do however, still disagree, and disbelieve, “the steps US financial institutions have taken in preparation of various scenarios…” – that any banking institution has made serious attempts to lessen the impact on the American taxpayer. As a matter of fact, I believe their plans will protect themselves – the banks’ CEOs – but will do little or nothing to alleviate the misery on its way to everyday Americans. I hope you are right and I am wrong…but past behavior of banking and financial institutions [Lehman, AIG] and their ability to hide the “tsunami” heading our way, seems to predict their future actions.
Sandi, the other scenario is that Americans would make more domestic-consumed goods. When the dollar was strong, that is what we did. I’d like to go back to that. Are we now our international brothers’ keepers too?
John W., throughout the post-war period, the dollar, while the unchallenged global reserve currency of the world had its strong periods and its weak periods. During one weak period in the early 1970s the legendary John Connolly, then Nixon’s Secretary of Treasury, famously told European leaders at a conference that “he dollar is our currency but it is your problem”. You can not look at currency exchange rates in a vacuum and draw conclusions about a country’s economic competitivness.
Hillary,
One size fits all works for the United States because there is enough common culture, a fiscal union, a political union, as well as the monetary union. Within euro zone has proven to be severly flawed because it’s a monetary union lacking all of these other uniting characteristics. And it is hard to imagine that the EU can acquire these other characterstics. So, in my opinion its just not meant to be. Try as you may to mix oil and water, they are going to seperate.
To maintain the current eurozone structures (and EU structure to a lessor but significant extent) you need a permanent wealth transfer scheme with countries designated as donor countries and recipient countries. Naturally the donor countries are eventually going to demand something in return for this wealth transfer. In the current situation, simply put, the donors, led by German, are demanding that the recipient countries be more, well, like Germans.
I think the more interesting question is whether the Germans really want the euro zone to survive on the trajectory that its been on from the start, or whether they are ready to kill it in its current form, but in such a way that they do not leave their fingerprints on the murder weapon. I explore this subject in my December, 2011 essay “Merkel Ends The Post War Era” which was originally published in the Washington Times, and later linked to by this blog. You may wish to Google it.
Why do I feel Markj is holding a fistful of swaps and derivatives?
I absolutely agree with your characterization of Germany, “they do not leave their fingerprints on the murder weapon…”
and the countries that were bullied into economic strategies that are unsustainable for their unique culture and economic systems.
Thanks for the response – and I will reread your 2011 essay.
Smaller nations have always had a problem competing and being heard with the “elephants” in the world. While the EU is a great theory, each nation within it has very distinct and varying cultures, economies and POV’s. Choosing their own currency was a mistake IMO as it gave them one more thing to be contentious about and while it became the #2 reserve currency rather quickly due to their combined size and economic reach, it also made them vulnerable in ways that they perhaps did not foresee. Even a good marriage is tested in tough economic times and they need to decide what to save and what to let go in the restructure. I do believe the EU will survive as the benefits still remain when they get past this economic crisis, but the euro might be a casualty.
The US and our dollar is still “an average of two thirds of the total Allocated foreign exchange reserves of countries” and will remain so. We have always had other currencies and other nation’s economic issues to deal with as well.
I think the world is still big enough for us all to succeed, if people can accept that like a good marriage, compromise for the greater good is still the ideal. That still means the minority bending to the majority, right or wrong.
http://en.wikipedia.org/wiki/Reserve_currency
Big Momma and Cold n P – Since Big Momma chose to bring me into the discussion, I will explain that SSN that she says will fail is not in dire straits as she presents. US bonds held by SSN will be moved to other buyers of US debt simply because the US Bonds remain the strongest in the World. SSN only needs a minimal fox to make it creditable for a long period of time. The GOP scare tactics are ridiculous.
MJ – The Euro has been doomed to failure since its inception by the many restrictions posed by its members. Typical of Europe, they simply put too many protections of each individual country and that is causing the partnership to fail. Those here comparing this to the USA should realize that we did the opposite. We made the currency the Federal Reserve’s and the US Treasury’s and removed controls from the states. That has made all the difference.
Failure of the Euro, as Hillary has stated, will disrupt at a time where minimal disruption can have huge consequences. Any unknown at this time in the economy is dangerous and can be fatal to the world economy. The problem is no one knows what will happen if the euro fails and no amount of planning by corporations and banks will totally remove the risks. However, it certainly looks like Europe, as it always has) is failing to see the big picture and is resorting to its Nation State mentality. Will the failure of the euro lead to the failure of the Common Market. Certainly, it will have a major affect on how the European Nations relate and trade individually and may indeed cause the ultimate failure of their trade pacts. Is Europe’s lack of cohesiveness great enough to collapse one of the World’s biggest trading markets?
The answer is no one knows, but the failure of the Euro certainly establishes the beginning of a failed marriage that could catestrophic for the Continent.
Richard:
Such drama – “fatal to the world economy”… “catestrophic for the Continent”. Lordy Lordy. These are the kind of headlines that the 24×7 news industry needs to produce to fill the time and space. Where is the substance behind these claims?
Take a deep breath. There will be a restructuring in Europe and then life will go on. Germany, a key actor is playing now to influence the possible directions of the restructuring. The Finance Minister earlier this month, as widely reported in financial media, reported to his government that Germany is now ready for all scenarios – I.E – Merkel is free to pursue her agenda. U.S. Federal Reserve officials are saying the same privately about the U.S., and some, like the Head of Philadelphia Fed are quite public about it.
Even World War II wasn’t fatal to the world economy. Let’s keep things in perspective. Deep breaths. But do get ready for some stormy weather. And remember, for those of you under 50 – take the long view of your 401k and IRA portfolio. Those older, capital preservation may not be a bad priority right now.
Suzie, be careful, you are about to incur the wrath of Sandi for daring to use Krugman’s name in vain. She will tell you that your stature in economics does not qualify you to disagree with his economic and political agenda.
Sandi’s a punchline around here, Mark. You’ve probably figured that out, tho,.
50. MJ – I believe I said “can be” fatal and unfortunately neither you, nor I, nor anyone else knows for sure what will happen. Yes we survived WWII and WWI and the Cold War but it was pretty tough going. We survived the Great Depression and so far the Great Recession, but it has been pretty hard. For the Euro to fall apart at this time in a recovery will cause many problems for many people. In the short term, that cannot be good. Will it cause nationalism to rise again in Europe, I think so. Is that good? I don’t think so. As I said, I think the Euro was doomed from the beginning, but the consequences and timing of its demise may indeed be catastrophic for the World’s economics and the US recovery in the short term. I have no doubts about the US in the long-term. We remain the strongest economy in the world and we have the ability to survive even the falling apart of the European Union. But it will be hard on a lot of people worldwide at a time when governments cannot or are refusing to help those suffering the most.
What is the basis of your prediction that the European Union will fall apart? Further, all that hullabaloo about a return to wars among EU nations if the euro falls apart is backward looking at previous centuries. Come live and work in the EU and you will see why the educated main stream views such scenarios as laughable. We might as well be speculating about whether the Goths will pillage Rome again.
Bottom line, the EU will certainly continue, at minimum as a very tightly integrated trading block. Indeed, the sky is not falling. The US should let the Europeans sort out their mess their way. Meantime, the US should put its energy and treasure into sorting out its domestic mess, which is no where near as bad, but still qualifies to be called a mess.
Mark, what is the basis of your saying Richard predicted that the European Union will fall apart? That is not what he said in context.
Suzie, you come here with nothing, offer nothing and source nothing…we do not have a “punch line” on this blog, but we do have a punching bag and for good reason. I offer more substance in one post than you do in 100 and everyone knows it. Even you.
I don’t recall Mark’s politics back in the day. But I do recall that he was no fan of Ted Kennedy. Back when Kennedy was challenging Carter for the 1980 Democratic nomination, Mark gave me a bumper sticker that said, “Ted Needs Driver Ed.”
Based on the riots in Greece and the rising nationalism in Germany, Spain, Italy, Greece and some of the Eastern Nations, the European Union would appear to have some cracks. The educated main stream has little control of the masses that will dictate the leaders of the nations for, example Greece. Education and intelligence have little to do with selecting leaders, but rather, leaders are selected based on who can influence the masses to push for them, i.e. Hitler, Arab Spring, Syria.
There is no question that there are many disgruntled Europeans because of the recession and the pain is spreading as they fall into another recession caused by the Euro. Add in the ethnic problems and you have the match to start a fire.
I believe that allowing a major change in the midst of economic troubles creates additional problems that could easily explode whether in Europe of the USA. There is no reason to think Europe or the USA are exempt from uprisings of unemployed people.
I don’t know why it’s a surprise to anyone that socialist Europe’s chickens have come home to roost. When your workforce retires at age 50 and takes a whole month off each year, and you have socialized welfare, why would you be surprised when that’s unsustainable.
But Paul Krugman calls for even more government spending. Can you imagine?
Socialized medicine in #57 not socialized welfare. Although European countries are big on welfare as well.
Richard:
I share your view that social unrest can get a lot worst in the hard hit countries, like Greece. Greece has a history of military coups, most recently in the 1970s. Frankly speaking, I don’t blame the ordinary Greeks for being furious. It is amazing that they are on the hook for repaying the so-called bailout of Greece, when in fact most of the bailout money cycles electronically through Athens and straight back out to the debt holders led by French and German financial institutions.
That said, I take issue with all of the claims that a failure of the eurozone will lead to rising nationalism (which is code word for all the bad wars of centuries past). That is not serious.
Yes Dan, I realize there was only one author. I apparently didn’t strike the apostrophe key hard enough. Sorry about that.
Kristen, I was referring to the socio-economic model that provides for a gov’t funded single-payer system of medical care as well as other government welfare services that require enormous tax rates on the citizenry, whether it be an income tax, a VAT, or a corporate tax. I’m also referring to the notion that it is the duty of the government to take care of its citizens daily needs and that the government should bail out everything through deficit spending until the debt accrued becomes unsustainable and the system completely collapses. I’m referring to the basic philosphy of MODERN socialism (not the boogey-man USSR socialism) that feels like it is the job of the government to nsure an equal lifestyle through it’s overtaxation and redistribution of wealth. I’m referring to the philosophy that thinks you can borrow and spend your way out of debt. The simple fact is, liberals in America have embraced and are now in some instances clamoring for the same things that Europe has already tried, the same steps that are currently failing miserably in Europe and are presently holding back the rest of the world’s economic recovery.
It is just my opinion, but I think it is a unique combination of arrogance and insanity to think we can do the same things that have already failed in Europe and realistically expect a different outcome because we are America. The fact is, socialism as an economic philosophy only works in theory and yes, Scott M. is wrong. Governments can and do run out of other people’s money to spend. Sure, they can continue to print money so they may always have currency, but eventually it gets to the point that it isn’t worth the paper it is printed on. That’s the European model I’m talking about.
mj – Let’s hope you are right.
Suzie – you are off your rocker again, please pop the pill and lock the keyboard.
mj- David Brooks of NYT agrees with me. See today’s editorial.
David Brooks of NYT agrees with me. </em.
Big whoop. Brooks is a liberal RINO. He supported 0bama. That tells you a lot right there.
#61 Chuck posted, “The fact is, socialism as an economic philosophy only works in theory and yes, Scott M. is wrong.”
Sweden, Norway, and Denmark are not “in theory”… and are socialistic societies – what you would in a derogatory way call a “nanny state” – here’s an example…
“Apart from social democracy itself, the Swedish/Scandinavian model of society is a matter which has excited outsiders. In an Anglo-Saxon context, its tenets of high taxes, active employment policy, generous welfare, centralized wage bargaining and the mixed economy seem a political impossibility.”
http://www.history.ac.uk/reviews/review/1184
“Aided by peace and neutrality for the whole of the 20th century, Sweden has achieved an enviable standard of living under a mixed system of high-tech capitalism and extensive welfare benefits. It has a modern distribution system, excellent internal and external communications, and a highly skilled labor force.”
Inflation rate (consumer prices): 2.5% (2011 est.
CIA – The World Factbook
Look up the other two “socialist” countries, compare them to the US and I think you will have a different interpretation of socialistic societies [which is not synonymous with Socialism or Communism]
In other words Kristen, Chuck “was referring to” a fantasy the right wing dreamed up to pin on anyone not like them.
Its ok Suzie…lots of people like you
supported Obama till you/they found out
he was born in Hawaii or another foreign country..
or maybe when you found out he was very off white.
Folks like you are , unfortunately , very run of the mill,
and quite uninteresting on the whole.
Yeah well, Suzie supported McCain/Palin, THAT tells you a lot too!
and Suze…Sandi may be a punchline to you..
problem is you couldnt understand a joke if
it was a diagram on paper.
Sandi has beaten you point by point on every
issue I’ve seen. She actually thinks before writing
and has substantiation of her points.
You , on the otherhand , are just what you seem.
A basement hanging , mildew smelling, ” Punching Bag” .
Re: Comment by Richard J Beason, CPA — May 31, 2012 @ 10:17 am
“The Euro has been doomed to failure since its inception by the many restrictions posed by its members.”
———-
Rather like prenuptials, eh?
63.. Suzie – What does who he voted for or his political leanings have to do with this discussion? I refer you back to 61.
69. Dave Hicks – good analogy. No one realized there were huge problems until the arguments started.
Richard,
David Brooks is not the only one towing this line. It is the accepted politically correct thing to claim…especially in the US. Kind of like the old line in the tech industry -”Nobody ever got fired for selecting IBM”.
Hillary wrote: Sweden, Norway, and Denmark are not “in theory”… and are socialistic societies – what you would in a derogatory way call a “nanny state”…
Interestingly – Interestingly, none of the 3 small European countries that Hillary complements are members of the euro zone. Switzerland is another small country in the heart of Europe which is consistantly successful and not a part of the euro zone.
There is something else that is very notable about these 4 countries – the core economic drivers of all four are quite different from each other. This suggests, that their success is not some freak one off set of circumstances that other countries in Europe have no hope of duplicating.
Clearly, European states can do just fine without the euro if that will be the outcome of the current crisis. The sky will not fall if the euro falls; but, the dollar would be left standing once again as the undisputed almighty global reserve currency. And, in the medium and long term, that is a good thing for the good folks of Roanoke, VA!
Chuck, everything you list predates the Euro. This thread was originally about the Euro.
David Brooks gets little respect from me. He’s certainly no Krugman or Stiglitz.
#73 Markj – that was my perspective in my original post – that fitting square pegs into round holes is not an ecomonic philosophy. Each individual country has it own set of economic woes, based on culture as well as economy, they each can not become a “German” model, UK model, nor French model. The experiment into the euro had a modicum of success in an arena that can’t afford “small” failures [like Ireland, Greece, Portugal...then Spain, and probably Italy] – when taken together the failed economic policies send ripples globally. A conclusion may be drawn that the euro does not need minor adjustments…but maybe its elimination.
The northern European countries, in my opinion, demonstrate [albeit on a smaller scale] that austerity needs to be tempered with a social net that enhances the life of individuals, while at the same time, taking into consideration the economic reality of what is happening within that particular country.. cut and gut seems highly impractical in most cases.
George Soros has some interesting points in his speech today:
George Soros Remarks
Festival of Economics
June 2, 2012
Trento, Italy
Re: Comment by Richard J Beason, CPA — June 1, 2012 @ 10:32 pm
Yup.
Plus a strong lack of trust in the “institution”, IMHO.
Sandi:
Thank you for the link to Soros’ speech. While, naturally, I do not agree with all of his points, the speech is brilliant and insightful. I would like to bring to attention two of my take-aways:
1. Obama’s promises that his financial reform legislation, if passed, will prevent financial bubbles from happening again have as much chance of achieving their goal as a Lake Wobegon world really existing where “all the children are above average”. Bubbles will always form and always burst.
2. The longer the euro crisis (Soros calls it a bubble) continues before it bursts, if it bursts, the less chances it has of causing a global crash. Below is a small cut and paste from his speech:
“At the onset of the crisis a breakup of the euro was inconceivable: the assets and liabilities denominated in a common currency were so intermingled that a breakup would have led to an
uncontrollable meltdown. But as the crisis progressed the financial system has been progressively reordered along national lines. This trend has gathered momentum in recent months…”
it figures that you are a soros fan..marxist !
Pammala, so you believe George Soros is a Marxist?
Ha, ha! You never fail to disappoint!
#80 Now THAT one was funny, pammalalalalapdog.
Interesting from BBC:
http://tinyurl.com/6nxboa4
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3 June 2012 Last updated at 19:34 ET
Five ways the eurozone could break up
The Wolfson Prize offers £250,000 to the economist who comes up with the best plan to manage a potential break-up of the eurozone. The five ideas in the running are summarised here.
The conundrum posed is this: “If member states leave the Economic and Monetary Union, what is the best way for the economic process to be managed to provide the soundest foundation for the future growth and prosperity of the current membership?”
Lord Wolfson, whose family charity puts up the prize money, has said there is a serious need for a solution to any euro break-up. Here are the short-listed entries:
SNIP
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For the resident know-it-all bloggers go for it — unless a mere £250,000 is below you standard charges for telling folk what to do.