May 252018
 
 May 25, 2018  Posted by at 2:20 pm Finance Tagged with: , , , , , , , , , , , ,


René Magritte The therapeutist 1937

 

The Spanish government is about to fall after the Ciudadanos party decided to join PSOE (socialist) and Podemos in a non-confidence vote against PM Rajoy. Hmm, what would that mean for the Catalan politicians Rajoy is persecuting? The Spanish political crisis is inextricably linked to the Italian one, not even because they are so much alike, but because both combine to create huge financial uncertainty in the eurozone.

Sometimes it takes a little uproar to reveal the reality behind the curtain. Both countries, Italy perhaps some more than Spain, would long since have seen collapse if not for the ECB. In essence, Mario Draghi is buying up trillions in sovereign bonds to disguise the fact that the present construction of the euro makes it inevitable that the poorer south of Europe will lose against the north.

Club Med needs a mechanism to devalue their currencies from time to time to keep up. Signing up for the euro meant they lost that mechanism, and the currency itself doesn’t provide an alternative. The euro has become a cage, a prison for the poorer brethren, but if you look a bit further, it’s also a prison for Germany, which will be forced to either bail out Italy or crush it the way Greece was crushed.

Italy and Spain are much larger economies than Greece is, and therefore much larger problems. Problems that are about to become infinitely more painful then they would have been had the countries been able to devalue their currencies. If you want to define the main fault of the euro, it is that: it creates problems that would not have existed if the common currency itself didn’t. This was inevitable from the get-go. The fatal flaw was baked into the cake.

 

And if you think about it, today the need for a common currency has largely vanished anyway already. Anno 2018, people wouldn’t have to go to banks to exchange their deutschmarks or guilders or francs, they would either pay in plastic or get some local currency out of an ATM. All this could be done at automatically adjusting exchange rates without the use of all sorts of middlemen that existed when the euro was introduced.

Americans and British visiting Europe already use this exact same system. Governments can make strong deals that make it impossible for banks and credit card companies to charge more than, say, 1% or 0.5%, on exchange rate transactions. This would be good for all cross-border trade as well, it could be seamless.

Technology has eradicated the reason why the euro was introduced in the first place, and made it completely unnecessary. But the euro is here, and it is going to cause a lot more pain and mayhem. Any country that even thinks about leaving the system will be punished hard, even if that’s the by far more logical thing to do.

Europe is not ready to call for the end of the experiment. Because so much reputation and ego has been invested in it, and because the richer nations and their banks still benefit -hugely- from the problems the poorer face. The one country that got it right was Britain, when it decided to stay out of the eurozone.

But then they screwed up the next decision. And found themselves with the most incompetent ever group of ‘chosen few’ to handle the outcome. Still, anyone want to take out a bet on who’s going to be worse off when the euro whip comes down, Britain or for instance Italy or France? Not me. Close call is the best I can come up with.

 

The euro was devised and introduced, ostensibly, to solve problems. Problems with cross border trade between European nations, with exchange rates. But instead it has created a whole new set of problems that turn out to be much worse than the ones it was supposed to solve. That’s how and why M5S and the League got to form Italy’s government.

In Spain, if an election is called, and it looks that way, you will either get a left wing coalition or more of the Rajoy-style same. Left wing means problems with the EU, more of the same means domestic problems; the non-confidence vote comes on the heels of yet another corruption scandal for Rajoy’s party.

And let’s not forget that all economic numbers are being greatly embellished all over the continent. If you can claim with a straight face that the Greek economy is growing, anything goes. Same with Italy. It’s only been getting worse. And yeah, there’s a lot of corruption left in these countries, and yeah, Europe could have helped them solve that. Only, it hasn’t, that is not what Brussels focuses on.

Italy for now is the big Kahuna. The EU can’t save it if the new coalition is serious about its government program. But it also can’t NOT save it, because that would mean Italy leaving the euro. And perhaps the EU.

If Italian bonds are sufficiently downgraded by the markets, Mario Draghi’s ECB will no longer be permitted to purchase them. And access to other support programs would depend on doing the very opposite of what the M5S/League program spells out, which is to stimulate the domestic economy. Is that a bad idea? Hell no, it’s just that the eurozone rules forbid it.

 

The euro has entirely outlived its purpose, and then some. But it exists, and it will be incredibly painful to unravel. The new game for the north will be to unload as much of that pain as possible on the south.

Europe would have been much better off of it had never had the euro. But it does. The politicians and bankers will make sure they’re fine. But the people won’t be.

The euro will disappear because the reasons for it not to exist are much more pressing than for it to do. At least that bit is simple. The unwind will not be.

 

 

Home Forums This is the End of the Euro

This topic contains 13 replies, has 8 voices, and was last updated by  tabarnick 6 months, 2 weeks ago.

Viewing 14 posts - 1 through 14 (of 14 total)
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  • #40832

    René Magritte The therapeutist 1937   The Spanish government is about to fall after the Ciudadanos party decided to join PSOE (socialist) and Pod
    [See the full post at: This is the End of the Euro]

    #40834

    zerosum
    Participant

    “… painful to unravel…”

    ???for The elites????

    #40836

    seychelles
    Participant

    “[the Euro] creates problems that would not have existed if the common currency itself didn’t. This was inevitable from the get-go. The fatal flaw was baked into the cake.”

    Hard to be charitable and think that the money masters didn’t foresee this from the get-go. That would be similar to arguing that implementation of the Federal Reserve was an altruistic political move. Chaos = opportunity, especially when it can be engineered over the long term so that cause and effect are masked.

    #40838

    VietnamVet
    Participant

    This is all true. But, the USA and UK do not have the Euro and are splintering apart all by themselves. Western political leaders are incompetent at best and insane at worst. To me the underlying problem is that nations are now subservient to trans-national corporations and oligarchs. The politicians serve them not the people. The Euro, debt, refugees, early death, endless wars will all get worse until either democracy is restored or the Dark Ages return. That is if a nuclear war is avoided.

    #40840

    V. Arnold
    Participant

    VietnamVet
    Western political leaders are incompetent at best and insane at worst. To me the underlying problem is that nations are now subservient to trans-national corporations and oligarchs.

    You forgot criminal. Otherwise, I agree.
    I’d put capitalism as the root problem; exploited and criminalized by the political leaders.

    There are some remarkable things going on in Russia; the 19 kilometer bridge to Crimea was finished 6 months ahead of schedule (the 4 lane roadway) and opened last Tuesday. This is a project some said couldn’t be done al all.
    Putin cut defense spending for infrastructure construction and Russia has the lowest debt and highest cash reserves of any 1st world country.
    Rather in stark contrast, no?

    #40851

    Charles Alban
    Participant

    Just do what Hitler did in the 1930s….kick out the bankers and take control of the currency. Works wonders. I’m living in Italy after the US. I’m surprised how much is still made here. “Made in Italy,” in English, is a slogan for quality. The shoes are first rate…way better than what I bought in US. Many clothes are still made here, all of excellent quality. And no Walmarts, I’m pleased to say.

    And now I’m wondering about fascism. Never really understood what it meant. When you see what was accomplished in the 1930s, i’m starting to think that we have not been told the truth about these things.

    #40852

    tabarnick
    Participant

    @seychelles
    A modern conspiracy theory often starts with the assumption of omniscience from malevolent overlords. “They could not NOT have known how it would turn out”. Hmm so the money masters were scheming years in advance to unleash a potentially catastrophic financial crisis with unpredictable effects because, what? In chaos lies opportunity? In chaos also lie financial assets being annihilated. Sorry, this makes no sense to me.

    A school of fish turns on a dime in unison, and yet the fishes in it do not receive marching orders from a fish king. They just conform to what other fishes near them are doing. In the days of Europe construction, everyone who mattered was drunk on the same ideas. They would build the United States of Europe! They were creating a New European Man! They would ban war and conflict forever! Peace, Prosperity and Unity for all!

    Oh actually, in those days there were some economists that argued that the expanded euro zone was far from an optimal currency area, and predicting the difficulties currently ripping through Europe. But those dour party poopers and their prosaic concerns about labour mobility or productivity differences within the euro zone were duly ignored if not trampled in the rush to the European Utopia.

    #40853

    seychelles
    Participant

    @tabarnick

    “They” like the way you think!

    #40854

    tabarnick
    Participant

    @seychelles
    Who is “They”? Can you name them? We wnat names! And what evidence do you have that “they” set up the Euro so the ensuing chaos after its crash would benefit them?

    #40856

    John Day
    Participant

    @tabarnick
    If I were clever enough to be “they” , I would be clever enough to remain safely covered by the cloak of invisibility. Read history much?

    #40858

    seychelles
    Participant

    ” Read history much?”

    Probably only “their” version of history. Masters of discourse, etc etc

    #40861

    tabarnick
    Participant

    @john Day
    I am not asking anyone to be they! Just to let us know who “they” are.

    @seychelles
    You claimed knowledge about nefarious actions of mysterious money master people only known as “they”. I asked just who, specifically, these people are. Human beings tend to have names. Are “they” jewish bankers? Mark Zuckerberg? Reptilians? Elohim? Apparently, you have no idea. I asked what evidence you have. Crickets. How would you know? Crickets.

    Names! Or it didn’t happen.

    #40862

    seychelles
    Participant

    “Names! Or it didn’t happen.”

    That sounds very much like a Zio-trollish mandate. Good for you if you feel comfortable with such claims, but they are of no use if other people don’t believe them or power can’t be usurped to make other people pretend to believe them. The neoZioglobalist con is fading into oblivion.

    #40868

    tabarnick
    Participant

    *I* made no claim whatsoever. You did. You claimed that unknown persons sabotaged the euro. I asked for any sort of falsifiable information about that claim of yours. Who? When? How? Your only response is to collapse into babbling about zio-globalist agents. Thanks for clearing any doubts anyone could have about how much attention your claims deserve.

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