Looks like the Euro will survive

[ivanm]

--I have no objection to Europe being a collective force in international trade. I just believe that they can do it the way they always have – through trade treaties (Look how well the EEC worked). They have no need of international civil laws, constitutions, and courts to go along with it.

I see you pov on the issue and I share it to a point.  I was merely trying to point out the relative power of the EU in the economic sense.  One on one, many of those small countries just cannot compete with larger ones in the EU or with America and the Pacific countries.  So banding togehther gives them a synergy they cannot have otherwise.

When I look at the many little countries of Europe it brings to mind the fiefdoms of the early medieval days.  So what we have is larger fiefdoms, so to speak, that are probably tightly held and controlled by one or more wealthy and influential families.

I can understand the importance and influence of nationalism and yet when war breaks out most of the Euro coutnries cannot well defend themselves, so what happens, they look to the UN or to NATO for help. As with the EU economic and political organization, the larger members carry most of the load.

Down thru modern times it has been typical for the large powerful countries to help or protect the small weak ones, and maybe it is due to the international communist threat.  America has diligently protected or helped the small vulnerable ones in hopes they did not go communist, so it is not entirely and altruistic act on our part.  Call it geopolitics.  If for example, we were to let the small countries of Europe fall to Russian control it would set up a very
dire situation for the rest of the free world countries of Europe.  If we were to let Chavez work his number on othe South American coutries than that would bring communism a step closer to our shores.

So there is a rationale behind helping others just as there is a rationale behind little countries banding together. I think you had mentioned the possible influence of communism in the EU, and that does concern me.  However, many of the Euro countries are already very socialistic so unless the EU becomes a malignant communist org. I don't see much change.   

We bad mouthed mainland China for years, even fought against her troops in the Korean conflict, but now we trade with Red China and borrow heavily from them.  So I really wonder at the consistency of our foreign policy. We still fear the Ruskies but for some reason the Chinese hordes do not bother us. It doesn't add up for me.

[Mornac]

The EU is as doomed as its currency – let's get out from under this collapsing monstrosity

By Gerald Warner
May 19th, 2010

The European experiment has failed and is only artificially being kept alive on a life-support system of taxpayer-funded bailouts. The euro is now a zombie currency: only the political will of the European nomenklatura keeps it nominally in existence. That is the exact reverse of the proper relationship between a currency and the state: the currency should be the expression of a healthy economy testifying to the legitimacy of the government it represents. Instead, a synthetic European super-state is showing its non-viability and moribundity through the implosion of its currency.

Do you see that smoking slag-heap of smouldering, toxic debt? The polite name for it is the European Central Bank (ECB). It is a landfill site being used by bond investors to dump Greek waste paper and other unwanted garbage. It resembles the back yards of Fannie Mae and Freddie Mac when the sub-prime time-bomb exploded. Steptoe and Son would turn up their noses at such a tip. As the ECB’s president, Jean-Claude Trichet, despairingly confided to Der Spiegel on Monday, Europe’s economy “is in its most difficult situation since World War II or perhaps even since World War I”.

That was an unwarrantedly optimistic assessment. The European economy is in its worst situation since 1789 and the eve of the French Revolution. Indeed, the parallel is uncanny. Jacques Necker, the Vince Cable of his day and similarly the darling of every armchair fiscal reformer in France, was the father and paradigm of all the debt-loving, statist, spendthrift finance ministers of today.

He squandered a fortune on supporting the American War of Independence, the consequence of which was the importation of revolutionary ideas into France; ratcheted up government debt; dispensed largesse to create a dependency culture; insisted on opening the books to the public but cooked them heavily before doing so; and retired to Switzerland when the balloon went up. It is hard to believe Gordon Brown did not have a portrait of him on his office wall. At least Vince Cable did not sire a Madame de Staël, Necker’s daughter who bored for Europe in the early 19th century.

We live in an age of mass communication: people have noticed that Europe has a few little local difficulties. The US Senate has just voted by a robust majority of 94 to 0 to veto IMF rescue packages for hopeless cases. American legislators are determined that, whoever stumps up their hard-earned cash to keep Zorba in his lifestyle of siesta and ouzo, it is not going to be Joe Public, of Main Street, Peoria. Joe has already been sufficiently mugged by Wall Street hoods to feel that his contribution is more than adequate. As European ideologues throw more and more billions into the bottomless pit of Greek, Spanish, Portuguese and Irish indebtedness, they are running out of stashes of cash to plunder. The IMF is now the final resort and the US Senate has drawn a line in the sand.

The real-life solution to the crisis would have been to let Greece and the other PIG nations default on their debt and restructure it; to return to the drachma, peseta, etc and devalue. The euro was never a real currency: it has failed and the longer the Euro-fanatics delay in recognising that reality the more they will be punished. Germany’s nostalgia for the security of the deutschmark is now palpable to the point of urgency. Angela Merkel, having lost the upper house of the German parliament in recent elections, is now a lame duck. As she says, “if the euro fails, it is not only the currency that fails. Then Europe fails. The idea of European unity fails.”

Exactly; except there is no “if” about it – Euroland is down the plughole. The question is: how much longer is Europe going to court economic collapse that could regress its living standards by a generation, to placate the power-mad fantasies of the Unholy Roman Emperors in Brussels? The fundamental, structural flaw in the euro from its inception was that it was a currency invented to give an appearance of substance to a political aspiration – it was Brussels Monopoly Money.

Although we are not part of it, we will still suffer from its implosion. The time has come to dismantle the whole infatuated European project. So, what are Dave and Nick going to do to retrieve Britain’s interests from this accelerating debacle?


http://blogs.telegraph.co.uk/news/geraldwarner/100040178/the-eu-is-as-doomed-as-its-currency-lets-get-out-from-under-this-collapsing-monstrosity/

[Pepsi]

As an American touring Europe I would much rather use a common currency like the Eurodollar to make my purchaeses than to have to be constantly figuring exchange rates and carrying different types of currency. 

No doubt.. just came home with the usual pocketful of UK coins I'll have to hold around for a while, I call them pirate booty because they are so big and heavy.   Travelling across Europe will suck without the Euro.. you lose a bit each time you convert and you come home with a bunch of money you won't need again.    I still have jars of the old various denominations my parents gave me as a kid when they had the same issue.

[ivanm]

"We live in an age of mass communication: people have noticed that Europe has a few little local difficulties. The US Senate has just voted by a robust majority of 94 to 0 to veto IMF rescue packages for hopeless cases. American legislators are determined that, whoever stumps up their hard-earned cash to keep Zorba in his lifestyle of siesta and ouzo, it is not going to be Joe Public, of Main Street, Peoria. Joe has already been sufficiently mugged by Wall Street hoods to feel that his contribution is more than adequate. As European ideologues throw more and more billions into the bottomless pit of Greek, Spanish, Portuguese and Irish indebtedness, they are running out of stashes of cash to plunder. The IMF is now the final resort and the US Senate has drawn a line in the sand. "

I cannot help but notice the acrimonious attitude of the author.  Economic instability can often lead to
political instability and war.  If the US didn't have cheap money from China we might be in a bind too,
so what is best for a country in stress, throw it to the wolves?

Perhaps these little countries need to reform their fiscal and political policies, but to treat them like criminals and rogues isn't the solution.  Not so long ago there was a civil type of war in Bosnia and the NATO people stepped in to help put things back in order.  So why not try to help countries with their financial problems if it will head off civil unrest and violence?  Must we wait until people come to blows before intervening?  

On a larger scale, Adolph Hitler and Nazi Germany had a bankrupt currency and his answer was to expand and simply take what he wanted by force.  I doubt that the little countries in question could mount such a world wide effort like Hitler did but the principles are much the same.  What is to keep Ireland from hitting on its neighbors, or Spain, or Portugal? And what is to prevent rioting and bloodshed on a national scale? Hungry people can get pretty darned mean.
  
And blaming the European Economic Community for the problems of these countries? Why? Did it cause their problems?  I doubt it. If a country has the productive capacity then the choice of currency has little to do with its welfare, assuming it can compete internationally.  Think not, then look at America. Are we using the Eurodollar?  We are a relatively high cost producer in many ways but just the same we have the talent and the resources to still compete in many sectors.  Perhaps one of our strong suits is our record of political stability.

[Mornac]

Fears rise as EU nations aim to raise borrowing

By David Oakley, Capital Markets Correspondent
September 5 2010

The eurozone debt crisis is about to enter a critical phase as governments prepare to step up borrowing in the capital markets to fund their faltering economies.

Some strategists are warning that some of the weaker economies could fail to raise the amount of money they need as eurozone governments attempt to issue double the amount of debt this month compared with August.

Eurozone governments will try to raise €80bn ($103bn) in September compared with new bond issuance of €43bn in August. Spain is expected to attempt to borrow €7bn in September compared with €3.5bn in August, according to ING Financial Markets.

Spain, Portugal and Ireland , so-called peripheral eurozone economies, are considered most in danger of being shunned by investors as worries persist over the health of their banks and economies. Greece is no longer a concern because it has emergency loans to cover its funding for the next two years.

Padhraic Garvey, head of rates strategy for developed markets at ING Financial Markets, said: “We are heading into a critical period as the chances rise that a government may fail to raise the money it needs.


“Spain, Portugal and Ireland are the obvious ones to worry about. Are investors willing to stay long, or buy the debt of these countries? I’m still not seeing investors willing to buy into the periphery.”

Some strategists say the return of most investors from holidays this week could increase volatility in these markets because many have put decisions on their portfolios on hold during the summer.

With most investors back at their desks, some could start selling peripheral debt in the coming weeks, particularly as the outlook for the global economy has deteriorated. In spite of some better than expected data out of the US last week, worries about a double-dip recession have increased.

But other strategists insist governments will have little difficulty in funding themselves, even if they have to pay higher premiums or yields to attract investors. They say countries such as Portugal and Ireland have already raised most of the money they need this year.

Government bond yields of the peripheral countries, however, may come under further selling pressure.

Yield spreads against Germany, the eurozone’s benchmark economy, could also widen. On Tuesday, Ireland saw the extra premium it has to pay over Germany jump to a record 356 basis points.

A double-dip recession would hit the economies of Spain, Portugal and Ireland particularly hard, although even core countries, such as France and Germany, could struggle to attract investors, say strategists.

http://www.ft.com/cms/s/0/abe5bf60-b8dc-11df-99be-00144feabdc0.html