Geral
- Bailout Of First Resort
Editorial do WSJ Europe's central bank can't save spendthrift governments Mario Draghi must wonder what he's signed up for. Only weeks into his new job as president of the European Central Bank, the Italian is being portrayed along with German...
- The Culture War Over Europe's Money
The Germans are richer and more stubborn.The French are flashier and faster on their feet. By WALTER RUSSELL MEAD, WSJ The European crisis repeats the same pattern endlessly. Bad news sinks markets, ultimately accelerating into a panicky wave of liquidation....
- A Greek Lesson In Democracy
Editorial do WSJ George Papandreou became the most unpopular man in Europe on Monday by announcing that his government would put the terms of last week's EU-IMF bailout package to a referendum, so that Greeks can decide their economic future for themselves....
- Why Europe Dithers
By HOLMAN W. JENKINS, JR., WSJ German voters don't want to bail out French banks and the French government can't afford to. 'All political lives, unless they are cut off in midstream at a happy juncture, end in failure." That morbid thought,...
- Are We Entering Into Revolutionary Times?
GaveKal Research In "A Study of History", Toynbee explains that the role of a society's elite is to rise to the challenges of the times, and find solutions fitting to those times, even if this involves a radical break with the past. Meanwhile, the...
Geral
If I were a German
Charles Gave, GaveKal Research
If I were a German, this is how I would analyze the euroland crisis:
The monetary union was supposed to transform the Greeks, Italians, French and Spaniards into solid citizens, who played less and worked more. As a German, I did not believe a word of it, but I was willing to give them a chance. Meanwhile I myself had to keep reforming because the world out there was becoming quite competitive (China, etc). So this is what I did in the post-EMU years; but my fellow members did not, of course. And guess what? They have problems—and apparently, it is my fault?
So what am I to do in such a situation? I have not been that successful historically (nor has anybody else) at telling the other countries in Europe how they should manage themselves. Even if our orders are filtered through a pan-European body, it will look about as independent from Germany as Philippe Petain or Vidkun Quisling.
Plus it will cost a lot to even try. They call it "federalism," I call it theft. The implementation of these reform policies would easily have me transferring €100bn or more of my income to these guys every year during a transition phase...which will probably last forever. This is what the East Germans cost annually during the unification, but at least these guys were Germans and I had let them down big time in the past. Anyway, lending more money to a guy managing himself in a bankruptcy is just not a good idea.
Of course, if the euro project ended today, this too would be expensive. For the last ten years, I have sold €1 trillion more to my neighbors than I have bought from them. During which time, my banks lent the same amount to EMU sovereigns. If the euro breaks now, I could easily lose half of my roughly €1 trillion in claims on the rest of the EMU. These IOUs would be worth at most €500bn—and the capital of my financial system is around €350bn.
So my choice, broadly speaking, is take a big loss up front or pay without hope some 4% to 5% of my annual income forever. I choose the first one. However, I should be careful not to be too tough for quite a while. I am perceived everywhere in Europe as the fellow who destroyed Europe twice in the last century. I do not want a third catastrophe on my head—even if the euro was not our idea, but a stupid French invention which they fed to Helmut Kohl on the idea that otherwise they would refuse the German reunification (as if they could).
It is better, therefore, to bide my time. This allows my companies to diversify their exports while my financial firms write off as much as they can. The price to pay is to go to all these stupid meetings in Brussels and accept some silly plans concocted by a bunch of guys who have never understood what a proper currency is. After accepting in principle, I then hold up the implementation on technicalities—then do it all over again at the next summit.
The objective is to wait for the French to follow the Greeks and Spaniards into bankruptcy. I was a little bit worried by the previous French president who did one or two things which were quite sensible. Fortunately, the French electorate took care to replace him with a fellow who is raising taxes and scaring away business—a socialist agenda which almost guarantees to sink the economy (see The Coming French Depression). (This incidentally is very good news for my companies, as a lot of their most dangerous competitors are being destroyed by their own government.)
The French, not known for taking a beating quietly, will be in the streets as soon as the economic demise unfolds. Their long rates will shoot up, sending the primary deficit exploding upwards. By the middle of next year France will be mired in a recession, have an out-of-control budget deficit and also need to raise a huge amount of money. Promises to rein in the budget deficit will be revealed as an absurd fantasy, and the new government will be left with no good options. In the end it will be the French who destroy the euro. Which will lead to a France very much weakened, and a very efficient and productive Germany which will survive the revaluation.
I cannot believe our luck. After all, Kohl was a genius.
The monetary union was supposed to transform the Greeks, Italians, French and Spaniards into solid citizens, who played less and worked more. As a German, I did not believe a word of it, but I was willing to give them a chance. Meanwhile I myself had to keep reforming because the world out there was becoming quite competitive (China, etc). So this is what I did in the post-EMU years; but my fellow members did not, of course. And guess what? They have problems—and apparently, it is my fault?
So what am I to do in such a situation? I have not been that successful historically (nor has anybody else) at telling the other countries in Europe how they should manage themselves. Even if our orders are filtered through a pan-European body, it will look about as independent from Germany as Philippe Petain or Vidkun Quisling.
Plus it will cost a lot to even try. They call it "federalism," I call it theft. The implementation of these reform policies would easily have me transferring €100bn or more of my income to these guys every year during a transition phase...which will probably last forever. This is what the East Germans cost annually during the unification, but at least these guys were Germans and I had let them down big time in the past. Anyway, lending more money to a guy managing himself in a bankruptcy is just not a good idea.
Of course, if the euro project ended today, this too would be expensive. For the last ten years, I have sold €1 trillion more to my neighbors than I have bought from them. During which time, my banks lent the same amount to EMU sovereigns. If the euro breaks now, I could easily lose half of my roughly €1 trillion in claims on the rest of the EMU. These IOUs would be worth at most €500bn—and the capital of my financial system is around €350bn.
So my choice, broadly speaking, is take a big loss up front or pay without hope some 4% to 5% of my annual income forever. I choose the first one. However, I should be careful not to be too tough for quite a while. I am perceived everywhere in Europe as the fellow who destroyed Europe twice in the last century. I do not want a third catastrophe on my head—even if the euro was not our idea, but a stupid French invention which they fed to Helmut Kohl on the idea that otherwise they would refuse the German reunification (as if they could).
It is better, therefore, to bide my time. This allows my companies to diversify their exports while my financial firms write off as much as they can. The price to pay is to go to all these stupid meetings in Brussels and accept some silly plans concocted by a bunch of guys who have never understood what a proper currency is. After accepting in principle, I then hold up the implementation on technicalities—then do it all over again at the next summit.
The objective is to wait for the French to follow the Greeks and Spaniards into bankruptcy. I was a little bit worried by the previous French president who did one or two things which were quite sensible. Fortunately, the French electorate took care to replace him with a fellow who is raising taxes and scaring away business—a socialist agenda which almost guarantees to sink the economy (see The Coming French Depression). (This incidentally is very good news for my companies, as a lot of their most dangerous competitors are being destroyed by their own government.)
The French, not known for taking a beating quietly, will be in the streets as soon as the economic demise unfolds. Their long rates will shoot up, sending the primary deficit exploding upwards. By the middle of next year France will be mired in a recession, have an out-of-control budget deficit and also need to raise a huge amount of money. Promises to rein in the budget deficit will be revealed as an absurd fantasy, and the new government will be left with no good options. In the end it will be the French who destroy the euro. Which will lead to a France very much weakened, and a very efficient and productive Germany which will survive the revaluation.
I cannot believe our luck. After all, Kohl was a genius.
- Bailout Of First Resort
Editorial do WSJ Europe's central bank can't save spendthrift governments Mario Draghi must wonder what he's signed up for. Only weeks into his new job as president of the European Central Bank, the Italian is being portrayed along with German...
- The Culture War Over Europe's Money
The Germans are richer and more stubborn.The French are flashier and faster on their feet. By WALTER RUSSELL MEAD, WSJ The European crisis repeats the same pattern endlessly. Bad news sinks markets, ultimately accelerating into a panicky wave of liquidation....
- A Greek Lesson In Democracy
Editorial do WSJ George Papandreou became the most unpopular man in Europe on Monday by announcing that his government would put the terms of last week's EU-IMF bailout package to a referendum, so that Greeks can decide their economic future for themselves....
- Why Europe Dithers
By HOLMAN W. JENKINS, JR., WSJ German voters don't want to bail out French banks and the French government can't afford to. 'All political lives, unless they are cut off in midstream at a happy juncture, end in failure." That morbid thought,...
- Are We Entering Into Revolutionary Times?
GaveKal Research In "A Study of History", Toynbee explains that the role of a society's elite is to rise to the challenges of the times, and find solutions fitting to those times, even if this involves a radical break with the past. Meanwhile, the...