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Jeffrey Sommers: No Exit in EU

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By Jeffrey Sommers, associate professor of political economy in Africology at the University of Wisconsin-Milwaukee and visiting faculty at the Stockholm School of Economics in Riga. Cross posted from Counterpunch.

Peter Praet, Chief Economist of the European Central Bank, defended the ECB’s policies at Levy Institute’s annual Minsky meeting at the Ford Foundation this past week in New York. In his remarks, he retreaded the EU’s wheels with the same rhetoric of inflation fighting and fiscal tightening that drove the EU off the road and into the ditch to begin with. The effect of his pronouncements of EU intentions was to only further reveal the growing gap between reality and ECB ideology over their inability to successfully address the euro crisis.

Europe risks becoming a real lived version of Jean Paul Sartre’s No Exit in which its constituent countries are locked into a dysfunctional currency union for an eternity. Euro entry has been a Faustian bargain. There is presently no exit clause once joining, except exiting the European Union itself. Entry promised membership into a rich club of nations in which Europe’s southern periphery and former Soviet bloc areas to the east would converge with Europe’s richest nations. The devil of membership, however, is in the details. Euro rules preclude a wholesale list of policies historically demonstrated to develop nations.

In short, the answer to the question of whether Europe’s periphery is merely in purgatory or eternal damnation rests with whether Europe is willing to undertake a revision of the rules guiding the relationships among its constituent members. The European Central Bank understood the currency union would be complex, but their assumptions regarding rules that create economic development and stability have proven erroneous and mitigate against convergence and growth across Europe.

Among the faulty assumptions is that markets are the best arbiters of risk and worthy investments. This is enshrined in article 123 of Treaty on the Functioning of the European Union. At best, the rule was predicated on the idea that past monetary imprudence (think Zimbabwe or Weimar Germany) of some nations meant governments can’t be trusted with monetary and fiscal independence. Not every country, however, is Zimbabwe with a dictator serving several decades, or a Weimar Germany saddled with inflation generating war reparation payments. By contrast, nations in the past, from Europe’s richest, to East Asia Tigers, to the US have used domestic credit creation to fund infrastructure that enabled wealth creation beyond the costs of expenditure on that infrastructure.

The ideology and group think resident among central bankers, however, says “halt, you can still develop infrastructure, but you must be disciplined by the ‘Father Knows Best’ wisdom of the markets.” This is highly problematic. First, it suggests there is something intrinsic to markets that always makes for better decisions than public sector managers. In effect, we are told that we must pay a fee (de facto tax) to private banks in the form of the higher prices they charge for credit over what states can as the price for the private sector’s ‘superior’ capacities of decision making on investments.

Second, it ignores the evidence from recent decades revealing that private credit has become remarkably inefficient. Private finance is supposed to be a service enabling greater growth in the real economy of production and services. This argument made more sense in the Bretton Woods era following WW II until the 1970s when economic growth was strong and financial institutions comprised some 15% of corporate profits in the US. Yet, since the liberalization of finance from the 1970s, economic growth has continued to diminish in the West, meanwhile in the most liberalized ‘finance gone wild’ economies, like the US, finance now comprises some 40% of corporate profits. The bottom line is that deregulated capital markets in recent decades have taken an ever-increasing share of our economy, while producing less economic growth. Finance no longer enables economic growth by providing a needed service, but instead impose a massive rent seeking tax on the economy.

Lastly, it ignores the different metrics by which markets and states measure investment success. Private markets prefer a quick kill, with profits coming fast and furious. By contrast, states genuinely interested in development need to make infrastructural investments where the benefits accrue to the whole economy. Thus, the benefit, or profit, is harder to capture by a specific interest. Moreover, the time horizon on state investments may be unacceptably long for private investors.

In short, European Central Bank assumptions and European Union rules on monetary have locked Spain, Italy, Greece, Portugal, Ireland, the Baltics and former Soviet bloc countries into a kind of Sartrian “No Exit.” Only a change in the rules that permit historically successful strategies for development will instead make this current crisis merely a painful purgatory stage rather an eternal economic damnation as a cost for being part of a European Union.

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69 comments

  1. Carl Miller

    “Europe risks becoming a real lived version of Jean Paul Sartre’s No Exit in which its constituent countries are locked into a dysfunctional currency union for an eternity. Euro entry has been a Faustian bargain.”

    - I tend to jump from my chair when reading analogies to Sartre Literature! If the peril of the EU is represented by “No Exit”, then I think we need something to represent what those policies mean for the people and what the citizens can do to pull themselves up from the fate of a fruitless future. May I suggest the Road to Freedom book series and in particular “Troubled Sleep” I found these books to provide great meaning when staring down the barrel of existential angst. Check it out!

  2. Matthew G. Saroff

    It’s kind of ironic.

    The Euro and the ECB were created, at German insistance, with the primary goal being to avoid the hyper-inflation of Weimar Germany in the 1920s, which indirectly led to the rise of the Nazis and the 2nd World War.

    In so doing they have adopted the policies of the German central bank in the early 1930s, which made their depression the worst in the world, and led DIRECTLY to the rise of the Nazis and the 2nd World War.

    I expect to see another war in Europe in my lifetime.

    Hopefully, it will be a “Cold War”, and not a hot one.

    1. Jim

      But there is an exit, just like there was an exit for Argentina from the US dollar currency board. At the time, doomsdayers like Domingo Cavallo argued that Argentina would implode and never recover if it left the dollar. Well, it abandoned the dollar and thrived.

      And those of you who insist on the viability of the Eurozone, what’s your recommendation?

      Inflation? 40% of German households own their home while 84% of Italians do so. Who’s going to get hurt more by inflation? Furthermore, the German voter was explicitly told that the ECB would never resort to monetization.

      Now, some of you may argue, as many in Brussels do, that the German voter is too ignorant to know what’s good for him.

      Well, isn’t that the same thing that Congressman Ryan’s supporters say about the need for converting Medicare into a defined contribution program and the privatization of social security?

      Again, the optimal solution is the dissolution of the Eurozone.

      1. Maju

        “And those of you who insist on the viability of the Eurozone, what’s your recommendation?”

        1. Expel Germany and devalue the euro.

        2. Stop all that nonsense about free market and begin nationalizing without compensation (specially if the company is bankrupt) as society needs.

        3. Stop all that nonsense about Bretton Woods and begin protecting our borders from cheap low quality slave labor polluting imports.

        In other words: a socialist Europe. It’s not the currency: it’s the regime, the dictatorship of the bourgeoisie, the implicit and explicit notion that all has to be for the benefit of a few oligarch speculators. But it has nothing to do with the currency, it has to do with politics and political decissions: is the EU for the European People or is the EU for a handful of cronyist vampires?

      2. SidFinster

        Come now, let us reason together: of course there is an exit! A country can simply leave the Eurozone, treaties be damned.

        Brussels and the remaining countries can cry and scream “you can’t do that, there is no exit clause!” but what are they going to do about it?

        Unless Brussels is ready to go take measures such as war (LOL) to impose its will on recalcitrant member states, nothing can make anyone stay.

        What really disturbs me, however, is that a purported professor of political economy in Africology, someone who ought be a realist about the limits of what law can do, would actually state that the lack of a legal mechanism prevents those in power from doing anything.

        That is ridiculous, like the discussion I had with a Belgian woman and an Israeli. The smug European was trying to tell us that a war between Eurozone members is impossible, because the treaty says so.

        A Belgian woman, of all people. Are Europeans so clueless as to forget the words Kaiser Wilhelm II used to describe the 1830 treaty guaranteeing Belgian neutrality? “A scrap of paper….”

        The only way to enforce that treaty was to go to war, which was the official reason why Great Britain entered WWI.

        What matters in life is having rockets. Ask any Russian person. Rockets are necessary to keep foreign enemies at bay, just as police and prisons and state ideologies are there to keep internal enemies at bay.

        1. Nathanael

          Rockets aren’t the dominant military tech right now…

          …I’ve actually been ruminating on a very important shift. The changing state of military technology has led to different dominant strategies through history.

          In some periods, mass conscription, relatively cheap weaponry, but large centralized organization, was dominant. “God is on the size of the big battalions”.

          In some, a small elite corps with very fancy training and very expensive equipment was dominant. (For instance, the era of “air power”).

          And in *some* periods and places, dominance was held by guerilla warfare, by local militias. The “local advantage” was massive and foreign invasions were practically impossible.

          I think the balance has shifted back to guerilla warfare recently. It can beat *any* other organized military now, except in strange situations like marching across the African desert in Libya.

          The US government is trying to overpower guerilla warfare with sheer numbers and money, the largest and most expensive military in the world, with both numbers and elite training — and failing (though it’s managing to make things drag on).

          Guerilla warfare has always been better in jungles (hence Vietnam), mountains (hence Afghanistan) and cities; cities are dominant now. But I think the thing which really changed the balance is the development of really cheap, widely available communications (and surveillance) technology. This technology change has broken the entire logistics advantage of a centralized military.

          This is good news for any community which is fairly cohesive. Communities with serious internal divisions can sink into long, debilitating civil wars which are never decisively won.

    2. Lafayette

      I expect to see another war in Europe in my lifetime.

      Wishful thinking? Because it has no foundation in reality, remote or near.

      The Euro has largely accomplished its original objective – to create a common currency for a common market of goods/services.

      The present problem is one of negligent political leadership – one that did not enforce the rules as established by the Maastricht Treaty and insisted by the Germans. That is, adherence to a total debt limit at 3% of GDP and fines for those countries that transgress that limit continuously.

      No country was ever fined, but simply “counseled” to reign in its debt. So the challenge is to institute proper budget management, which is the intent of the Golden Rule (zero budget deficit) that should be voted into national law by each EU country.

      So, pray tell, how should war arise amongst the member-states of the EU? To think it will is flagrant myopia of what is happening in Europe; given the investments, both monetarily and in faith, to end definitively the long history of a waring Europe.

      There is about as much chance of member-states going to war in Europe as in the US. I.o.w., nil.

      1. Nathanael

        The budget rules were bullshit. No country, including Germany, EVER adhered to them.

        This is because adhering to them destroys your economy.

        Someone’s got to get rid of those rules. Either those rules go, permanently, or the EU goes away. One or the other.

  3. F. Beard

    In effect, we are told that we must pay a fee (de facto tax) to private banks in the form of the higher prices they charge for credit over what states can as the price for the private sector’s ‘superior’ capacities of decision making on investments. Jeffrey Sommers

    It’s far worse than that philosophically speaking – the government must grant the banks all kind of privileges to enable them to extend much credit including deposit insurance and a lender of last resort. Thus in no way can the banks be considered “private”.

    Then why do we tolerate banking since it is the essence of a government/private sector otherwise know as “fascism”? Because we can’t think of a better way to implement money? Well, the solution is about 2000 years old or older – co-existing government and private money supplies per Matthew 22:16-22 (“Render to Caesar …”).

    1. DiSc

      Hi,

      yes, agreed. Just a remark on the term “fascism”: I see American commenters often take it to mean “dictatorship of the capital on society”. It is not so. Italian and German fascism stood for social harmony in the national and racial interest.

      Yes, nazis and fascists did not tolerate trade unions or leftist movements. On the other hand, they introduced a wide range of welfare policies and nationalized companies at will. Business – and labour – were both subordinate to the State.

      Their heirs in Europe, however sinister and dangerous, are often very socially-minded.

      Note that I do not endorse fascism in any way, neither the old variety nor today’s twisted clones.

      DiSc

      1. Nathanael

        Quite right. We currently have kleptocracy. That’s unstable.

        Fascism, with its promise of social stability, could rise as a powerful competitor to kleptocracy. So could Soviet-style communism.

  4. Maju

    I like the Sartrian comparison. It made me laugh and it’s accurate to some extent.

    I also like the acknowledging that public sector can be more efficient than markets in many cases (of course a lot depends on management).

  5. The Dork of Cork

    As far as I can tell NCB / treasuries can print their own base euros.
    It happened in a round about way to bail out Anglo bond holders.
    The CBers got a “letter of comfort” from our finance minister that we pay back this debt with less money in our pockets….. when we pay off this new money we reduce our money supply…..absurd is it not ?
    Something happened … a fudge where we now owe our money supply to bank of ireland via a goverment bond….. its more criminality really.
    The corruption in this goes very deep.
    They have no problem with monetary financing for credit deposits that want to escape intact…. then they offload the malinvestment on stupid serfs.

    I want to see the european market state experiment destroyed.
    They will however probally destroy us first via LTRO which will firmly attach the “domestic banks” back onto the states…
    They are but huge sucking ticks.

  6. Fred Grandstand

    Didn’t Iceland refuse? Does it take more people in the streets?

    “But you must be disciplined by the ‘Father Knows Best’ wisdom of the markets.”

    On a side note, Robert Young struggled with alcohol and depression, it’s amazing how much the human sprirt can endure.

  7. K Ackermann

    You’d think at some point the peripheral countries will look at a crumbling infrastructure and realize improvements will not be forthcoming. That they are treated as parasites by the core even as the core sucks the life out of them and nibbles their tasty parts.

    Under these conditions, it will be a simple thing to whip up fervent nationalism. Swept into power with the promise of German babies on the ends of bayonets.

    1. Maju

      It’s not going to be that way: this is a pan-European problem that will be solved (or not) at pan-European scale. If not solved (and looks like it won’t in the short run), the problem will shatter the EU, however I do not think it will collapse before a full-fledged revolutionary process has begun – we can still watch the first pan-European revolution ever.

      Nobody has anything to gain moving out and it’s not even legally possible anyhow. Maybe 20 years from now, if nothing has substantially changed (what I doubt) and Europe is full of slums and productivity has collapsed to near zero… maybe then some countries will break apart. But not before total collapse has been achieved: there’s nothing at the other side. I mean: Hungary or Britain or Iceland have their own currencies and they also have huge problems. IDK, Afghanistan probably has its own currency but doesn’t lack problems, does it?

      It’s not a mere problem of currency: it is a problem of who rules the EU and in the insterest of whom.

      1. SidFinster

        I somehow doubt that there was an exit mechanism from the Latin Monetary Union, the Austro-Hungarian Empire, or the annexation of Alsace-Lorraine, but these all broke up nonetheless.

      2. Calgacus

        Nobody has anything to gain moving out and it’s not even legally possible anyhow.
        No, everybody has everything to gain by leaving the Euro. Doesn’t mean leaving will create economic success, just means that economic success is impossible without leaving it, considering the overwhelming likelihood of continued destruction and theft by centrally imposed austerity – which violates many treaties itself.

        But it has nothing to do with the currency, it has to do with politics and political decisions . . . Hungary or Britain or Iceland have their own currencies and they also have huge problems. … It’s not a mere problem of currency: it is a problem of who rules the EU and in the interest of whom.Hungary, Britain & Iceland’s problems are self-inflicted. Britain is imposing austerity for no reason whatsoever, just to wreck its economy and tighten the control of its own predator elites. One vote in the House of Commons could change that.

        The common Euro currency controlled by the oligarchs is the foremost means by which the oligarchs control the Eurozone. Hungary, Britain & Iceland have normal institutions which can be made to work. The Eurozone doesn’t. The Euro cannot work as designed. The oligarchs will ignore the destructive rules, only loosen their strings around the national economies, if the nations impose suicidal austerity policies themselves. The oligarchs in their mansions use the nations as slave overseers for their own people, and their weapon is Euro debt.

        A national currency is armament in the hands of a nation. Rebellion aren’t guaranteed to succeed or to fail – but ceding all the weaponry to the tyrannical oppressor ab initio is a guarantee of failure.

        1. Maju

          Exiting austerity policies is not exiting the euro. While there’s a goal of deficit, nobody has ever been actually sanctioned for not fulfilling it, not by the EU at least.

          The problem is that separate countries cannot toy with inflation (devaluation of the euro) separately. But that should not be a problem if “contained inflationism” becomes doctrine in EU (at the expense of Germany’s manipulative “ideals” of a strong currency that helps no one).

          “Britain is imposing austerity for no reason whatsoever, just to wreck its economy and tighten the control of its own predator elites”.

          Well, that’s exactly what the rest of EU states are doing concertedly. The deficit is just a pretext.

          “One vote in the House of Commons could change that”.

          In theory only. In practice all these right-wing (and some suppossedly lefty) governments just do what the Capitalist syndicates and networks (what I call the Capitalist International) dictates them. These policies are more likely to have been agreed at, say, Davos, than at the House of Commons or even the European Commission, which are only rubber-stampers (the first) or managers (the latter).

          “The common Euro currency controlled by the oligarchs is the foremost means by which the oligarchs control the Eurozone”.

          But they also controlled the national currencies, let’s not be naive. The key is to remove the oligarchs from control of the euro, what implies a European-level revolution (even if it begins by parts), and establish a true democracy: putting the administration (I don’t care if European or Spanish or Greek or German: the actual administration at all levels) under the control of the People. And also putting the economy and the means of production under the control of the People.

          That is what Democracy means: People’s Power (and all the rest is mockery and insult).

          “A national currency is armament in the hands of a nation”.

          No. A so-called “national” (state) currency is a tool for the so-called “national” oligarchies at the best, unless previously a takeover by the working class has happened.

          Also I do not think there is any more “national” quality to Spain or France that to Europe. I do feel European but I do not feel neither Spanish nor French. I blatantly refuse to restore the power of those oppressive imperialist abhorrences! Let them die quick.

          1. Calgacus

            But they also controlled the national currencies, let’s not be naive. The key is to remove the oligarchs from control of the euro.

            The Euro makes this much harder to do than fight over a national economy. There is no Europe-wide democratic control, no power of the purse even to the extent the US Congress has with its usual sham of democracy. All the power of the purse is formally vested in unelected Eurocrats. The Eurozone is not even a formal democracy, like the USA or the UK, but much more a formally, “legally” fascist state ALREADY. I’d rather try to have a revolution in the pre-Euro formal, weak democracies than the post-Euro formally fascist Eurozone.

            The national oligarchs tended at least to live in the nation they ruled. They were easier to control, and their interests were more aligned with the nation. The record of the Euro is & will be far worse. The oligarchy & their Eurocrats have a much tighter control than they did of each nation. Now the idea is to impoverish whole nations at a time, and pretend there is no alternative. There is. If Greece had left the Euro, when the crisis started, it would be recovering, be better off by now.

            While there’s a goal of deficit, nobody has ever been actually sanctioned for not fulfilling it, not by the EU at least. If you can say that Greece hasn’t been sanctioned for its deficit spending, which in reality benefitted it & everyone else in the Eurozone, you don’t understand the economics. A sane, workable monetary union, ECB, would have supported Greek or any other state’s bonds, up to the point of full employment and demand-driven inflation, which are nowhere in sight, and haven’t been for decades anywhere in Europe.

            The problem is that separate countries cannot toy with inflation (devaluation of the euro) separately. This sort of statement, identifying government spending with inflation seems to suffer from the malign influence of mainstream/neoclassical “economics”. Sound, rational, logical, non-insane MMT/Keynesian/Institutionalist/Marx-influenced economics is not about inflationism or devaluation. Inflation or currency weakness aren’t particularly bad things, but they aren’t good things either. The ECB, the Euro is forcing millions of people to not work, just as if they had been put in cages. It’s strangling them with debts which are unpayable by design, which they make unpayable. That’s the problem. It would be easy to have basically zero inflation & zero unemployment in the advanced countries of Europe, just by using the more advanced social technology of the postwar era, instead of the childish nonsense now taught in universities.

            Sure, have a revolution. But isn’t it most likely to start locally, by each designated victim-group, like Greece, each state being attacked by the Eurocrats, because they in particular are being attacked right now? The Eurocrats are breaking up the Eurozone, by their mindlessly, insanely greedy selective attack on whole states, and the widespread economic ignorance created by academia is integral to them getting away with it as well as they have already.

          2. Maju

            I understand that EU is a national entity of sorts. Since the very moment you accept Spain, India or Nigeria as “nation”, regardless of them having ethnic homogeneity or not, you can equally accept the European Union. I don’t see why not.

            “There is no Europe-wide democratic control”…

            Nor in Spain for what matters. Actually now and then EU ammends Spanish judiciary abuses against the citizenry for the good. For example, recently Strassbourg ruled that Spain had to pay damages to a victim of police violence (17 years later… but better late than never). Such a ruling would have never been achieved in the Spanish non-democratic system. So EU is not less democratic than Spain, so EU is not worse than Spain.

            I say “Spain” (and is probably one of the worst cases) but there are other states where such things happen and the tendency towards authoritarism and totalitarian abuses is growing everywhere.

            “The Eurozone is not even a formal democracy, like the USA or the UK, but much more a formally, “legally” fascist state ALREADY”.

            Not really: it is a confederation. Fascist states do not work that way: they’d need an army and a police force to begin with and EU has neither.

            There is democratic deficit surely but it’s not “undemocratic”, if you assume that the governments of the member states are “democratic” (what you seem to do). The peoples elect state parliament and governments and these rule the EU collectively (with a minor role for a directly elected body nobody cares much about: the European Parliament). In fact the US Senate used to be that way in the past (senators were once appointed by the state governments).

            “A sane, workable monetary union, ECB, would have supported Greek or any other state’s bonds”…

            I agree with this. There is a problem in that EU does not see Greece’s problems as its own, it fails to see Irish problems as its own and it seems to fail to see Italy’s or Spain’s problems as its own. But in truth the Spanish or Italian oligarchies don’t either and so they have governments which instead of imposing their interests in Brussels keep bowing to the interests of Volkswagen, Goldman Sachs and the like.

            But they would do anyhow with separate currencies and they might also be in a complicated spiral of hyperinflation, which in the past affected France (once), Italy (a lot) and Turkey (almost systematically).

            Controlled inflation can be useful and should be implemented by the ECB and the European Commission and Germany should accept that the interests of EU are not exactly the same as the interests of Germany as a separate entity – and that if it does not like it, there is an exit somewhere.

            But if anyone must exit that has to be the state that is forcing the rest to go through alls this and falls into easy (and false) ethnic stereotyping insulting rampage and de facto colonialism among suppossed partners. If anyone must exit the euro, I have clear that one is Germany and its DM failed model.

            “The ECB, the Euro is forcing millions of people to not work, just as if they had been put in cages”.

            That happened in Spain long before the euro. You can’t blame the euro for that.

            “It’s strangling them with debts which are unpayable by design, which they make unpayable”.

            That’s also only quite obliquely related to the euro. But it has a solution: bankruptcy. There’s no EU rule by which a state can’t declare bankruptcy. Once the first outright bankruptcy is declared, the banskters and their lackeys would be forced to realize that they may not be paid after all, specially if they push things too far.

            It think that jubilees are necessary but that they can happen without blowing up the EU.

            The social advantages of lack of borders and single currency and certain commonality of laws and customs in all or most of Europe are too convenient and positive to let them to be dictated only by the economy. The economy is just a tool (if anything) to continental unification (social and political project). And many Europeans are for that convergence, even if they disagree on how it must be done.

            Current EU/IMF policies are actually trying to blow up the EU. The euro-oligarchs are basically telling Greece to go away… and punishing her for not doing it. But that is not what many Europeans want. I want to be able to go to Greece without visa or even passport at all, without need to change currency, having some rights protected by a common laws, etc. And Greeks also want that. Maybe Germans or Brits don’t but then it’s they who don’t belong.

            We are not that much in disagreement but I think that what must be done is to make EU policies for EU citizens and not just for German or other oligarchs. We were doing ok until recently, we can still do if there are statesmen and political will.

    2. Fiver

      Let’s be clear about how much the peoples of Europe will have over the Newer Europe – how does “none” sound?

      Because that’s what this is all about. Total control & total immunity, all neatly bundled in a package nobody would ccare to receive.

      http://www.commondreams.org/view/2012/04/18-12

      And I found this Wiki piece on the whole thing not a bad, short presentation of a number of views on the origin, makeup and function of its core institutions. Seems evident enough that starting up such a huge project in the rubble of the Internet Bubble added a dimension of “hurry up” that its central schism was exposed and opened for looting from the outset. Note this was a collective failure:

      http://en.wikipedia.org/wiki/European_Central_Bank#cite_note-Euro_debt_working_paper-48

      1. Maju

        But the individual states are, in most cases even worst than the whole of EU. Discussing Europe vs [insert state of your preference here] is simply pointless: they are the same thing. The consensus of (mostly) right-wing governments to squeeze the Working Class more and more in EU is deafening, and the accomplice silence, when not outright collaborationism, of much of the so-called “left” hurts even more.

        I realize that there is a (generally right-winger, typically Anglo-Saxon) current that wants to use this crisis to demolish European socio-political convergence. But that is, I believe, simultaneously naive and ill-faithed: naive because it’s not so easy to break such a historical reality, which pre-dates EU, ill-faithed because it seeks to distort and aggravate the problems in order to provoke the collapse of Europe, even if by means of war.

        We have seen this kind of junk earlier in Yugoslavia and we do not need it, thanks.

        1. Calgacus

          But the individual states are, in most cases even worst than the whole of EU.

          No, the worst of them is much, much better than the EU. The European institutions are anti-democratic, while the national institutions are not.

          The EU is currently formally & actually fascist. All the power is in the Eurocrat/bankster oligarch controlled ECB, none in the show parliament. The individual states are formally democratic & not completely fascist in reality.

          I realize that there is a (generally right-winger, typically Anglo-Saxon) current that wants to use this crisis to demolish European socio-political convergence.
          Good for them. They at least have an understanding of what is going one. Hitler was a European socio-political convergence. That doesn’t mean he was good, or that the individual nations after 1945 weren’t infinitely better than him. The Eurozone power structure is closer to Hitler’s Europe, run by a dictator, no democracy at all, than a dream of a democratic Europe or even a pre-breakup Yugoslavia. Its actuality is more like what Hitler’s initial backers actually wanted than a mad, but powerful emperor like Hitler.

          The consensus of (mostly) right-wing governments to squeeze the Working Class more and more in EU is deafening. . . But they only have the POWER to enforce this consensus, to destroy democracy by relying on the central fascism of the Euro, by the regional governors calling on Imperial troops. By institutionalizing “There Is No Alternative”. Within the original Euro design, truly, “There Is No Alternative”. Insanity is legally enforced, legally obligated within the Eurozone. The Euro system is unworkable, impossible, by design – it is made to have NO workable alternative, not even one possible path that obeys the rules.

          The Euro can only work to the extent that the central elite breaks the rules. So whatever weak prosperity comes, comes only by the largesse of the criminal elite. Since there is nothing but torture from the Euro, the oligarch Eurocrat becomes the torture victim’s best friend. Government by Stockholm Syndrome is not a good path to socio-political convergence.

          1. Maju

            No way: EU now and then protects citizens’ rights. Spain never! Certainly not for us Basques.

            EU has forced France to print signals in two languages where other language than French is common (for example the Northern Basque Country) and stuff like that. Not much but EU is democratic influence against the Jacobin authoritarian states like Spain or France.

            It is also important that if you emigrate to, say, Britain or Germany, you have some rights as European citizen, and are not a pariah like the people who immigrates from Africa or China without papers. We don’t need visas, working permits: we have rights, some rights at least, eventually we can even vote or run for office in the destination town, we have right to access to healthcare, etc.

            Whatever they do with the euro and all the unedible colored coupons they call “money”, what really matters about EU is all the rest.

            “Hitler was a European socio-political convergence”.

            Don’t hallucinate. You could say maybe that of Napoleon, but was not the case either but Hitler was a racist who thought badly of every other nation, which he considered at best as slaves and at worst a problem to be annihilated. And that is exactly what Merkel and the Anglo-Saxon anti-EU current I say think: that Europeans in general are only good as long as they serve the interest of Germany, Britain or even the distant USA.

            And that’s not the idea about European unification at all.

            “run by a dictator”

            Who?

            “The Euro system is unworkable”…

            The constraints imposed around it are unworkable but the common currency as such is not just workable but actually working and highly prized.

            Too highly for our collective needs.

            The problem is not the euro and cannot be solved by dissolving the euro. It can be solved (barred a revolution) by correcting the euro into a weaker more pliable currency: a currency more fore selling and less for buying. We do not need to import so much an we do need to export more.

            The real problem is a problem of the Eurozone’s export/import balance. We export too little and import too much and we need to correct that by weakening the euro. It’s not just inflation because of inflation, it’s devaluation to protect the “national” European business, including those of Greece, Italy, Spain, Portugal, France, Belgium…

    3. Heretic

      You wrote: ‘ Swept into power with the promise of German babies on the ends of bayonets.’ I suspect you don’t mean this, but it is such an ugly metaphor and abhorrent to most of the 99%. Substitute ‘babies’ with ‘bankers’, and the statement becomes much less distasteful.

      But on a more serious note, austerity is the path to internal and international conflict… People are flawed and easily fooled, and the veneer of general decency is quite thin. If Der spiegeleisen is correct, the ‘Brown shirts’ are marching in budapest again…

  8. Valissa

    Existentialist and religious allegory – hot damn! At least the ongoing sturm and drang with the Euro and related financial challenges is inspiring more creative use of metaphors in economic writing.

    Sartre at the movies http://www.cartoonstock.com/newscartoons/cartoonists/tmc/lowres/tmcn71l.jpg

    The prequel http://www.cartoonstock.com/newscartoons/cartoonists/tmc/lowres/tmcn2522l.jpg

    Trekkin’ http://www.cartoonstock.com/newscartoons/cartoonists/tmc/lowres/tmcn393l.jpg

    A manifesto? http://www.cartoonstock.com/newscartoons/cartoonists/cgr/lowres/cgrn220l.jpg

    1. Valissa

      More philosophy cartoons… there are so many good ones…

      Parental philosophy http://www.cartoonstock.com/lowres/jlo0198l.jpg

      The latest news http://massline.org/PhilosDog/E/Existentialism.jpg

      Existential chicken http://www.savagechickens.com/images/chickengps2.jpg

      Trading cards for budding philosophers http://www.cartoonstock.com/newscartoons/cartoonists/cgo/lowres/cgon339l.jpg

      Calvin & Hobbes http://i2.photobucket.com/albums/y46/fenderrocker/CalvinandHobbeswinter-1.png

  9. ambrit

    Friends;
    Consider that the Communist Movement started in the “Eurozone” and flowered, sort of, in the peripheral state of Russia. Marx and Engels thought that the ‘Revolution’ would break out in the more highly industrialized countries, like England, France, Germany, etc. Russia was perhaps the last place either of the Communist Prophets expected a successful Communism to take root in. They were right on that. Russia never threw off the shackles of its’ Autocratic social development. Thus, it can be argued that Soviet Russia was not a true Communist State. What’s developing now in Europe can be argued as being the breeding ground for the ‘real’ Communist Revolution. The conditions on the ground in the Euro periphery are building up to an explosion of some sort. And yes, the capitalist elites are indeed sowing the seeds of their own downfall. We are living in interesting times.

    1. kris

      Never, ever, ever, ever, ever, ever, ever, ever thought I’d read this again. I grew up with this stuff being forced upon us.
      You seem to be willing to sacrifice few other millions lives for another shot at the experiment.
      Un……..believable……

      1. Maju

        In Cuba they are fine (one of the best places to live nowadays) and, while I do detest Stalinism for many reasons (basically it’s counter-revolutionary), the black legend of the USSR is mostly black legend. Most of the violent repression was under WWII conditions, which were most harsh, as the West left all the weight of the war to the USSR, and only intervened in order to prevent them taking all.

        Capitalism has killed many many more, not just the Hitlerian Holocaust but all the colonial wars and massacres, all the workers who died without medical attention, without food or heat maybe after they were fired after they were mutilated at work, all the people who is being poisoned by pesticides or radiation. Just there are no pen-mercenaries to chant their pain, our pain… but the moutain of corpses and suffering is uimaginable.

        But some day our descendants will study all that in history class. Some day the truth will be normal.

        1. SidFinster

          Now that is ridiculous.

          I live in Ukraine, and nobody here, not even the most unreconstructed hardcore Stalinists (of which we have quite a few) say that the repressions only really took place during WWII or were a “black legend.” They were quite real.

          Rather, the Communists here say that this was simply what they had to do to build the system that won the war. My godfather’s grandmother put it that way, and she lost both her parents in the 1930′s.

          1. Maju

            In Ukraine specifically there was a famine, possibly intentional, because of mismanagement related to ollectivizations (it seems). Similar things happened for example in Ireland for the opposite reasons. We could argue like this for years… but the point of saying “black legend” is not so much that it is unjustified, the same that the black legend of Castilian genocidal imperialism in America is largely true, the problem is that those who used it as system of propaganda, notably England, committed even worse abuses and crimes if that’s even possible.

            How do the gulags compare with Guantanamo or Israeli prisons or slave labor in the largely private US prison system?

            The problem is that you only see the vices and excesses of one side and not those of the other: is it worse the Berlin Wall or the Wall of Shame in Jerusalem? I mean, seriously…

          2. SidFinster

            There is nothign to argue about. You said that most of the repression in the former USSR was associated with WWII.

            That is patently untrue, and noone in the former Soviet Union would say such a thing, not when there is plenty of living memory of those times. Ask anyone here who lived through that time and they will tell you, no need for propaganda or black legends. (What they tell you may not jive with what nice polite little European leftists want to hear…)

            As to what “capitalism” is and what its death count may be, that has nothing to do with my point.

      2. ambrit

        Dear kris;
        Well, what about the millions of lives being ‘sacrificed’ for the deification of the Rentier Class? State Socialism, Titos’ wonderful sly jab at Stalin, did indeed fail. Nothing grows in a vacuum, no plant, or animal, nor society. State Socialism was doomed from the start by its’ growth out of the Russian Oriental Despotism political system. The failure of State Socialism is no reason to stop striving for that “shining city upon a hill.” Even you must admit that ‘modern’ Capitalism is poisoning the well with its’ own excesses. That is just the situation that Marx and Engels thought would spawn the Revolution; mass misery and inequality in the industrialized world.
        Why do you think modern reactionaries fear unions so much? Because, I would suggest, they want it all, not just a fair share. Therein lies their main weakness; short sightedness. Could you be objecting to the idea that Marx and Engels had that part of it right? I personally have problems with the idea of the withering away of the state. But who’s to say?
        You bemoan the resurrection of an old ideology? Take heart, the new movements are striving to work out the problem in new ways. #Occupy and the Indignados show promise. Best of luck to them. They have my support.

      3. F. Beard

        You seem to be willing to sacrifice few other millions lives for another shot at the experiment. kris

        The irony is that the Communists had banking too, no?

        I wonder why people think we need banks to have capitalism?

        Got this from wiki:

        Capitalism is a philosophy of economic systems that is generally considered to favor private ownership of the means of production, creation of goods or services for profit or income by individuals or corporations, competitive markets, voluntary exchange, wage labor, capital accumulation, and personal finance.[1][2] http://en.wikipedia.org/wiki/Capitalism

        I see no mention of banks in that definition. In fact, “voluntary exchange” is violated by the banking system in that it is a government backed/enforced money monopoly for private debts.

        Capitalism IS the way to go. As for banking, IT has to go before it kills a lot of humanity again.

    2. Maju

      They were right and wrong at the same time: they could not foresee the future so precisely nor understand all the factors. After all these “prophets” were atheists: no “god” was inspiring them (not that “divinely inspired prophets” do any better but, well, they are supposed to).

      I think that the essence of that idea is correct: the “true” communist revolution should (not “must”) happen in the developed Core (i.e. Europe, North America, possibly Japan, Australia, etc.), where the development of both Capitalism and the Working Class itself is more advanced in all aspects and where the terms may be dictated more fully without so much external meddling (who’s gonna invade the USA if the Reds ever take the power?!)

      But, in the meantime, the Liberal ideology was replaced by a Socialist one (sometimes called “communism”) in the avant-guard of the development of nations. That’s part of the process of the Global Working Class taking consciousness of itself: if in the bourgeois revolutions of the late 18th and early 19th century, workers were little more than cannon fodder for the party of the bourgeoisie, since the Commune of Paris 1971 and very specially the Eastern European revolutions of 1917-18, the Working Class has not been anymore so much under the ideological and political control of the bourgeoisie, wich had to make concessions or even, in many cases, be totally replaced by a mere manager semi-class, the bureaucracy, with less clear distinct “class interests” (they were/are workers afer all, even if privileged).

      The key was (and is) that many countries in the 20th century neede to be socialist to greater or lesser extent, with that name or another, in order to prosper and remain mildly stable. This tendency was broken in the 1980s only but what replaced it was just a chewing gum speculative bubble.

      Now we have the Naked Capitalism of Thatcher and Reagan without the easy credit that kept it working for some time. And there’s no plan B, only the workers’ revolution (eventually).

      1. jake chase

        The only possible solution to all these problems involves noblesse oblige. The rich must realize before it is too late that they have to be satisfied with less, not more, so that workers and pensioners can have more. Any other society must descend into chaos, sooner or later. Chaos means military occupation, which at least will provide jobs to the soldiers.

        The United States took matters as far as they could go by piling debt on the workers. The debt cannot be paid and the sooner it is written off the better the chances for civil society. Talk about workers taking over is nonsense. They lack leadership, energy, discipline, arms, money. All they have is anger, bad music, drugs and sports. You can’t make a revolution with pikes any more.

        1. Blunt

          Interesting lack of insight, jake chase. Now what does good music have to do with a revolution?

          Perhaps you should study the military cases of Lynndie England and her cohorts at Abu Ghraib. Perhaps you should see contemplate where the military and the police are born and who raises them.

          Workers may not be noted for understanding the best wines, the je nais se quoi of luxury foods or the cut of a finely tailored suit. But, that IS rather much the point, is it not? Those who have less and no longer enough to survive while still knowing what life has been like are likelier to revolt.

          Check the history of those French bourgeois upstarts in 1793. It wasn’t that they had nothing, or were as ‘kultured’ as their noble betters. It was simply that they were tired of the status quo and became mad as hell and refused to take it anymore.

          The revolution will not begin in a wine bar, nor at Chatauqua. I suspect it will begin with the self-immolation of a street vendor who can no longer maintain the living that supported his family. Why would you imagine differently?

          1. jake chase

            More romantic nonsense. What you are describing will be a barbecue celebrated ten years later by leftist academics and dismissed on the spot by newscasts as either a tragic accident or a terrorist miscalculation.

          2. Nathanael

            Jake, did you actually pay attention to the revolution in Tunisia?

            I have no idea how the revolution will start, but when enough people are fed up, *anything* can be the “last straw”.

        2. Maju

          You can’t? I think you can, even barehanded… How was the revolution in Tunisia and Egypt? Were the masses indisciplinated? Could not they take on the rotten authocratic and well armed regimes above them?

          One day the people of Tunis realized that the demonstrators were many many many more than the cops and turned around and, nearly with their bare hands, removed the caduc regime overnight.

          If that happens one day in Washington, what would you do? Nuke it? C’mon!

        3. Nathanael

          Jake, noblesse oblige is the only *entirely peaceful* solution.

          If the noblemen refuse to behave that way, you end up with a revolution, French-style. That’s what history tells us. The noblemen have the choice between violence and peace; it is their choice, not the choice of the people.

          1. Nathanael

            And you sure can make a revolution with the equipment currently available in the US.

            Now, if the Army were treated as a gold-plated elite, as it is in Burma, then no revolution would be possible. But the noblemen of today seem to wish to treat the enforcers practically as badly as they treat everyone else!

    3. Nathanael

      Ambrit, while the “periphery” of Europe is likely to have a revolution, they *still* don’t really have the level of capitalist development which Marx thought was necessary for a successful communist revolution, do they?

      Anyway, I don’t think Marx actually understood how revolution worked, since his vision of communism is inherently implausible.

  10. The Dork of Cork

    @Yves
    Could you give your anylasis of what happened during the break up of the Soviet Union , in particular the issuing of currency withen each of the republics CBs as the Union began to break down.
    It might shed some light on this current Soviet construct.

  11. Hugh

    My understanding is that countries can’t be forced out of the EU but they can drop the euro. There are afterall countries that are part of the EU but don’t use the euro, Great Britain being the most obvious example.

    I often list the half dozen problems that make up the European crisis. The ECB and the banks are only two of them. Until all of them are addressed, there will be no resolution.

    And I would add that the first step to a resolution will happen when the people of countries like Germany, France, and the Netherlands realize that a problem for the Greeks or the Irish or the Portuguese is a problem for them, that is just as the Germans say see the problem of other Germans as their problem, the citizens of the North as Europeans need to see the problems of the South and periphery as their problems. If they can not do this, then there is no Europe worth keeping.

    1. Maju

      They cannot drop the euro unless leaving EU at the same time. There are EU countries that are not in the EMS but they are considered to be (in design concept) transitional exceptions. All them but Britain and Denmark are theoretically obligued by treaty to adopt the euro… some day.

      Countries can’t be expelled from EU but they can be suspended by unanimous vote of all other members. Suspension is the closest thing to “expulsion” in EU and has never been applied (not even to Austria under the neonazi Heider, which was only sanctioned but not fully suspended).

      I agree with the last part of your comment in any case: you can’t have €180 pensions in Greece and €1800 pensions in Germany (just an example). It is a pan-European problem and must be treated as such. However many in Central-North Europe imagine the EU as some sort of neocolony rather than a confederation of equals and that’s a big conceptual issue.

      1. They didn't leave me a choice

        Eh, no idea about the rest of north, but here in finland the deal was basically that after we had that heavily manipulated “vote” for joining EU, a couple of years later our elite just crudely said that the membership also demanded that we join the eurozone. No discussion, no nothing, just a declaration, and when they were challenged on it, the anti-democratic cunts simply went “Eh, it’s a representative democracy, not a democracy, we don’t need to vote for joining the eurozone.”. So yeah, we were pretty much shanghaied into this shit by our worthless trash politicos. So don’t be surprised if we treat the EU and especially the euro with little concern and even less interest: it was forced down our throats.

        1. Lafayette

          Tdlmac: so yeah, we were pretty much shanghaied into this shit by our worthless trash politicos. So don’t be surprised if we treat the EU and especially the euro with little concern and even less interest: it was forced down our throats.

          Then when it leaves the EU the Finns wont mind refunding the EU the 1.7 billion euros it has received from the EU’s development fund?

          From Finland’s Ministry of Employment and Development here :

          The EU support provides additional funding for Finland’s national development efforts. During the 2007–2013 period, Finland will receive approximately 1.7 billion euros. In addition, the EU programmes will incorporate around 2.01 billion euros of national public funding (central government 75%, municipalities 25%), and an estimated 2.3 billion euros of private funding. The benefit drawn from the funds will be greater than their total sum, thanks to new models of operation and excellence created by the funded projects.

          Joining the EU also means that countries share in the EU’s development and other aid funding, which – when added to the EU’s agricultural-aid (the EU’s largest disbursement budget) – is a considerable amount of money that arrives back into member country’s treasuries.

  12. allcoppedout

    The basic problem is criminality, much of which has been normalised as ‘business practice’. Communism has never been tried as we have never come to the point where the state has withered away. My council tax equates to just over the cost of buying and running an iPhone and this pays for much of policing, fire services, education, waste collection and so on -hardly much sign of private sector superiority there. Many past nationalisations in Britain were as a result of dire private sector practices. I don’t see the no exit issue as a currency problem – it’s about our dumb fixation with dated ideologies left and right and a failure torealise we can’t afford the rich or ‘noble class’.

    1. Nathanael

      “Many past nationalisations in Britain were as a result of dire private sector practices.”

      Indeed. Atlee pretty much saved Britain, by cleaning up a whole lot of sclerotic, defective industries with nationalization.

  13. PAUL TIOXON

    http://www.technologyreview.com/microsites/spain/hsrail/p5.aspx

    The question of national investment baed on pollcy being precluded by by Eurozone constraints needs to address the Spanish High Speed Rail plan and its execution up to now. The above link gives a hint of the massive investment for the Spanish people, the equilent in consequences with the inerstate highway system here in America. The over all concept of building national unity and identity by having the whole population within 30 of high speed rail is fundamental. The inter regional and inter Europe build out is what much of the housing bubble of Spain rested upon. While it is not entirely complete, critical links have been opened and as the tech review article indicates, it is a model for the rest of Eastern Europe. It is a smart as well as fast rail system with sophisticated software managing the system. Formerly remote areas now serve as reasonable housing options for service sector jobs. Of course the financial crisis has turned against this investment and the promise for more employment and housing options without be saddle with car ownship. But the case has to be examined for the Eurozone capacity for making and financing a national investment in electric rail as well as the formerly potent Spanish wind energy sector and solar energy build out. Greece as well was developing a global reputation for solar electric production before the financial collapse. Oil speculation and mindless attacks on the Chevy Volt as well as irrational promation of compressed natural gas powered vehicles seem to be the market based replacement. Any connection?

    http://vimeo.com/34093099

    Above link, short video, what CAlifornia can learn from Spain for Hi-Speed Rail. The link below is a PR piece in English, again short nder 8 minutes, on the rail plan for Spain.

    http://www.youtube.com/watch?v=YHf4UcMbprA

  14. steve from virginia

    This is from the ‘Porsche Cayenne is a very useful farm tractor’ department:

    – Countries can do what they want to do, they’re countries. There are no rules for countries (except don’t lose wars to nearby neighbors).

    If a European wishes to leave the euro ‘arrangement’ it will all by itself without anyone’s permission. Indeed, Germany might be the second out the door (UK was the first out a few months ago).

    “”By contrast, nations in the past, from Europe’s richest, to East Asia Tigers, to the US have used domestic credit creation to fund infrastructure that enabled wealth creation beyond the costs of expenditure on that infrastructure.”"

    Domestic credit creation begat more and more credit creation: the loans begat the infrastructure that was collateral for more (larger) begatten loans. What is described is a credit Ponzi. (One of) the world’s problems is that its vaunted ‘infrastructure’ does not pay for itself but needs an endless credit subsidy.

    Currently, the credit cannot monetize itself either. Oh dear …

    Who is repaying anything? Nobody, there is no returnable business endeavors anywhere in this world of childrens’ play and drug abuse … only the plea for more loans.

    Pressed for repayments of modest loans (relative to what is on the dock currently) the debtors simply fail and close up shop. So much for infrastructure!

  15. chitown2020

    I agree this is a dangerous ideology and that ideology threatens our National Sovereignty as well. The massive unsustainable quadrillion dollars in bankster debt fraud is being forced upon the people by an ideology that is neither Constitutional or legal. Their contracts and notes are unenforceable and unsustainable because of a quadrillion dollars in fraud committed by these banks. The United States of America was their great social experiment. The U.S. Government needs to admit that none of these banks nor the IMF/WORLD BANK lent the American people any money. The American people fund and pay for everything at the Origination via the U.S. TREASURY. The banks lend us credit and we ….. borrow them the money. The problem with socialism is the Government gets to collect the money and distribute it as they see fit. That is obviously not working so well. They created a Ponzi scheme out of our wealth that all of the Plutocrats and Oligarchs steal from to get rich off of our hard work. That is how they monopolized everything…WITH OUR WEALTH….The same with taxation and the hijacking of our Natural Resources. The IMF hijacked our gold and our birth certificates under the guise of money lending. THE LEND NO MONEY….THEY LEND CREDIT…..That is how the U.N. hijacked our land and the gold standard from NIXON…they lent credit in exchange for our land….THAT IS UNCONSTITUTIONAL !!! Are we nuts to buy our own hijacked land and pay rent on it by way of taxes? Well folks, they do the same thing with the mortgages. We fund and pay for the homes and businesses and the banks pretend to lend us money…They double dip us on everything….COLLEGE TOO….EVERYTHING they tell us is a lie and a fraud. That is why the healthcare plan wont work either. Just look at Medicare and social security. They robbed the pension funds too. We need affordable healthcare that will drive down the cost of healthcare….COMPETITION NOT MONOPOLIZATION. There is no Free market Capitalism because Free Market Capitalism has been hijacked by liars who used us to monopolize everything. Those liars are the elite and WE THE PEOPLE were used to make them elite. The truth is the Government(s) cant be trusted with the peoples money.

  16. danny

    To solve the problem in Europe you need to create demand. To do this get the CB to circumvent the banking system and conduct stimulus directly with the public. No liquidity trap.

  17. Lafayette

    A BLACK KETTLE

    JS: Europe risks becoming a real lived version of Jean Paul Sartre’s No Exit in which its constituent countries are locked into a dysfunctional currency union for an eternity.

    Balderdash. The same tiresome complaint from yet another American economist who thinks that Europe and America, since both are single currency entities, should be measured in the same manner.

    It must be very cold in Riga nowadays …

    The EU has a currency that is highly competitive. For those who do not believe that fact, they are invited to see this piece from the Economist, here . Its trade-weighted rate of exchange is well below that of most currencies, even that of the dollar.

    This does not mean Europe is without serious challenges. The first of which is getting beyond this current debt-crisis, which is largely the making of a political class (in connivance with the bankers) who kicked the debt-can down the road rather than assuming the responsibility of fixing it when times were good.

    It was certainly easier to carry the debt forward by borrowing even more in order pay maintenance charges. Which was both easiest and most pusillanimous of fiscal policies – since it guaranteed their reelection. (Chirac in France is the most notorious of culprits in such political leadership.)

    The time has come to pay the piper. And it is time for the piper to take a haircut … putting European countries on a more even keel where they can both pay their debt AND engage Stimulus Spending towards goosing Consumer Demand – which is the REAL PROBLEM of European economies.

    With heightened Consumer Demand, there is more job creation to Supply that Demand – which means more Disposable Income in the pockets of Consumers. More so, it fixes the key problem that is not in the economists’ bag of tricks – one which is both cyclical and psychological.

    When price deflation occurs, companies cut costs (meaning increased unemployment). At the first signs of persistently high unemployment, Consumer Demand weakens as people save more and spend less. It is at this point that Stimulus Spending is both appropriate and the best remedy.

    Fiscal austerity is certainly not the right solution – but for whatever political reasons it has been adopted, Sommers should be more concerned as to why American Congressional troglodytes adopted it as well.

    What sayest thou, RS? (Who seems like the pot calling the kettle black).

  18. Jose

    “Entry promised membership into a rich club of nations in which Europe’s southern periphery and former Soviet bloc areas to the east would converge with Europe’s richest nations”.

    Translation: the poor peasants were all tricked – they thought they were joining a paradise with free lunches guaranteed forever and instead they find themselves trapped by unpayable debts, robbed of their independence, deprived of their freedom.

    Their crime: naiveté. Their punishment: slavery.

  19. Gerald Muller

    The very much welcome break-up of the Eurozone is nearer than a lot of people think. Especially since French people seem to be stupid enough to be ready to elect a President, whose main qualification for the job is to have been the head of one the least populated “departements” of France and having brought it to bankrucy within a few years.
    Once France is in the soup as is expected within a few years, at the latest when the large loans made in 2008-2009 are to be refinanced, then the breakup of the euro will be inevitable and that will be the best news for the people in a great many years.

    1. Maju

      Even right-winger former President Chirac is asking to vote for Hollande, go figure! Sarkozy is just too stuck up and arrogant and authoritarian… but then, for all those reasons, he is a weak leader.

      And Europe is largely what French leadership has made of it. Sure not just France but France is pivotal like no other state, not Italy, not Britain and not even Germany.

      In this moment of crisis, Europe needs effective, creative and capable leadership, statemen who are able to nationalize the banks like Miterrand did once. Not sure if Hollande is the man (I’d rather vote for Jean-Luc Melenchon, who is third in voter intention – already above 17%). But what is clear is that Sarkozy is a very bad idea: a liability for French and European economy and socio-political viability.

      1. Lafayette

        UNIT-LABOR-COSTS

        I’d rather vote for Jean-Luc Melenchon, who is third in voter intention

        Right, all that France needs is to lurch further Leftwards to fall into the abyss.

        Indeed, Hollande might take the election. This will not change the fact that France must undertake serious measures at doing away with dysfunctional “Labor Protection” laws that protected no one and led to the present high-employment crisis. (As Monti is doing in Italy and must be done in Spain.)

        The irony of the fact is that Sarkozy would have been the perfect candidate to bring about those difficult reforms that the French pusillanimously refuse to accept. And so, the spineless French will trundle on with high-unemployment because no business – managed by intelligent people – would want to invest in building industrial production in France.

        Get real, the problem with French employment is its lack of competitiveness shown starkly in its unit-labor-cost numbers. For instance (from the OECD):

        Labor compensation per employee, total economy, in US$ PPP
        France – 43105
        UK – 40672
        Italy – 40085
        Germany – 38440
        Spain – 37721
        Slovak Republic – 21230
        Poland – 19432

        In the blah-blah-blah rhetoric running up to the present elections, not one word was said by either Hollande or Melanchon on what they would do to improve France’s competitiveness.

        Why? Because neither have the faintest idea of what could be done that would not betray their constituency – the French unions. Who are adamant at accepting NO CHANGES WHATSOEVER.

        For which, France’s youth are exporting themselves in droves to to find work.

        Vive la France!

        1. Maju

          The current abyss has been created by the right: Europe almost uniformly is under right-wing ultra-capitalist governments: Germany’s Merkel, France’s Sarkozy, Italy’s Berlusconi until yesterday and Monti now, Spain’s Sarkozy, Greece’s Nea Demokratia-made disaster and now Papademos…

          All them follwing the doctrine variedly known as Neoliberalism, Reaganism or Thatcherism, even those suppossedly on the “left” (violin governments: held by the sociological left but played by the right-wing oligarchy).

          There’s nothing “lefty” about the problems of Europe. There is however solutions.

          For example Greece now has the following dilemma: go unilaterally red, nationalize nearly everything without compensation, declare impayment and become “the Cuba of Europe” or let its people die squeezed beyond any common sense by foreign and local exploiters.

          France is not (yet) that bad but it’s clear that the perception is that the right wing is harmful and only manipulates emotions like xenophobia, fear to “crime” or national chauvinism, instead of developing viable solutions for a society in trouble.

          The last we need in Europe is more Merkel or more Goldman Sachs cronies like Monti & Draghi. We need statespeople at all levels who are willing to work for the European society and not for a handful of oligarchic vampires.

          France has been the last many decades under mostly right-wing governments, mind you. At the very least conservative presidents.

          While France may indeed have high labor costs, this is not a factor which makes the difference: Germany’s labor cost are similarly high and still does well, while Portugal’s or even Britain’s (London excepted) labor costs are lower and do poorly (source: Eurostat). France is in fact doing better than Spain, even if Spain has quite lower labor costs (which have not helped the least to reduce unemployment, the highest sytesmic unemployment in Europe). If all would be mere labor costs and not other factors (know-how, trade marks, historical and effective PLANNED role within the imperial economy), Germany would never be able to compete with Greece, Portugal or Poland. However it does because they have the pan by the handle, as they say over here: they have the effective power to impose their conditions and push the others around.

          What Hollande offers (it seems) is not so much “leftism” but to stop being a mere German satellite and to look for French and overall European interests and not just licking the boots of Lord Volkswagen and Lady Bayer.

          1. Lafayette

            The last we need in Europe is more Merkel or more Goldman Sachs cronies like Monti & Draghi. We need statespeople at all levels who are willing to work for the European society and not for a handful of oligarchic vampires.

            Polemical drudgery. The same ole, same ole rhetoric blathered by the Looney Left for decades.

            It’s the system!

            Nonsense! It’s the profligacy of a feckless political class on both the Right and the Left that have kicked the can down the road for the past 25 years – without having had the courage to pay off the debt and also maintain costly Public Services (see here ) within manageable limits. Because such was “politically correct” and necessary to get reelected by pampered EU-populations.

            The result? A non-competitive Europe that cannot kick-start itself into higher growth and lower unemployment. Why?

            Here are numbers (from the OECD) with France as the baseline:
            Unit Labor Costs (PPP, Dollars, 2009, OECD)
            France – 43105 (= 100%)
            UK – 40672 (94%)
            Italy – 40085 (93%)
            Germany – 38440 (89%)
            Spain – 37721 (87%)
            Slovak Republic – 21230 (49%)
            Poland – 19432 (45%)

            China is not listed because it would distort comparisons far too much. The US could be listed but the data is not available – its PPP-costs are nonetheless much higher.

            Yes, the bankers were part of the problem. But they kept lending to countries eager to avoid taking difficult decisions to cut total government outlays that might heighten unemployment and therefore work against their reelection.

            It’s a simple as that. Blaming the bankers is just not good enough. Seeking for the real target for blame?

            Look in the mirror …

        2. Calgacus

          Right, all that France needs is to lurch further Leftwards to fall into the abyss. Gibberish. France & the rest of the world, China & recently Latin America and a few others excepted, has been going full speed rightwards for decades. Melanchon might move back from the cliff the 1% “right” wants the 99% to jump off of.

          Sarkozy would have been the perfect candidate to bring about those difficult reforms that the French pusillanimously refuse to accept. And so, the spineless French will trundle on with high-unemployment … You get everything backwards. “Those difficult reforms” ARE the problem, which the French courageously have sometimes refused to accept, demonstrating their lack of spinelessness. The “reforms” amount to Monsieur 1% saying to Mr. 99% : All that is yours is mine. You are my slave.

          Get real, the problem with French employment is its lack of competitiveness Get real. The problem with French employment is there is not enough of it, because the French insanely converted their country into an adminstrative subdivision of the ECB, demonetizing their debt by making its value entirely obscure & precarious. The Euro is much worse than a gold standard or peg or ordinary currency union.

          That French salaries are high has been keeping money circulating, employment and real wealth up. To be true, at the expense of being a lemming in front of the last lemming, Germany, to jump of the cliff, because of the insane design of the Euro. One has to fuddle ones head with a lot of nonsense to believe that a nation paying high salaries to its workers (rather than far higher sums to its elite parasites) is a bad thing.

          the French unions. Who are adamant at accepting NO CHANGES WHATSOEVER. If only. They’ve accepted a lot of changes, all for the worse. Foremost signing the Euro suicide pact. Had the French had a De Gaulle clone running things for the last 40 years, and unions which said nothing but “non” to changes, they be infinitely better off.

          NO CHANGES WHATSOEVER would have been a great slogan. As it is, France had Mitterand act commonsensically, returning to sane postwar full employment era policies (no changes!) when he became president, only to snatch defeat out of the jaws of victory with his idiotic “tournant de la rigueur” – austerity.

  20. Jeff

    For me, at least, I see the entire discussion over this system or that system to be a red herring. ANY system can and will be corrupted by those inclined to do so. More and more it’s looking like reduced scope is the only way to resolve these things. At least then there are firewalls in place so it’s harder for a robber baron to start robbing at a global scale.

    Accordingly, in the US, I’m wanting to go back to our roots with a substantially smaller federal government which is actually restrained by the constitution. I want to push power downwards to the local and state levels. I want leaders to be closer to those they lead.

    Globally, I want to dismantle as many global institutions as I can… particularly the global banking institution. In light of that, the EU was, in hindsight, a spectacularly bad idea. I just don’t think humans are capable of managing things reasonably when the leaders are so far removed from those they are allegedly serving.

  21. Chris

    The poorest countries are getting bullied, pure and simple. But those being bullied are allowing it to happen.

    ECB should immediately credit the bond holders accounts – all of them, so that the debts of the poorest and the richest countries are eliminated.

    Everyone takes a haircut to the extent that the Euro’s ppp worsens. Of course, this is a thought only. But the economist in me tells me the market would totally mis price the real effect this would have. The banks and other investors would have their money back and a previously large asset class would have dissappeared, bidding up the prices of remaining investments.

    No losers that I can see.

    Let’s face it not going to happen, but permit me. Deficits are still a problem, but a significant portion of budgets which were previously servicing debt can now be used for services. So, future debt issuance, if it is needed at all and it probably isn’t, should be done in the Union’s name.

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