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Is the Euro Crisis Over?

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By Robert Guttmann, Professor of Economics at Hofstra University and a visiting Professor at University of Paris, Nord. Cross posted from Triple Crisis

A strange calm has settled over Europe. Following Mr. Draghi’s July 2012 promise “to do whatever it takes” to save the euro, which the head of the European Central Bank followed shortly thereafter with a new program of potentially unlimited bond buying known as “outright monetary transactions,” the market panic evaporated. Since then super-high bond yields have come down to more reasonable levels, allowing fiscally and financially stressed debtor countries in the euro-zone to (re)finance their public-sector borrowing needs a lot more easily than before. Even Greece has been able to borrow in the single-digits for the first time in three years.

This calming of once-panicky debt markets has led to optimistic assessments that the worst of the crisis has passed. Draghi himself declared at the beginning of the new year that the euro-zone economy would start recovering during the second half of 2013. He talked of a “positive contagion” taking root whereby the mutually reinforcing combination of falling bond yields, rising stock markets and historically low volatility would set the positive market environment for a resumption of economic growth across the euro zone. Christine Lagarde, as the head of the IMF part of the “troika” (i.e. ECB, IMF, and European Commission) managing the euro-zone crisis, declared at the World Economic Forum in Davos a few weeks ago that collapse had been avoided, making 2013 a “make-or-break year.”

All this begs the obvious question whether this major shift in mood is justified and as such durable or just a temporary break before the next storm. The answer to this question is unclear, to say the least. It could go either way – the beginning of sustained recovery around the corner or imminent resumption of market panic provoking further stress in the euro-zone system.

In favor of the now remarkably widespread optimism among European and non-European financial-market players is the prevailing sense that – painful as the process might have been – several of the debtor countries have made significant progress in their adjustment processes. Specifically, we can see that Ireland, Spain, Portugal or even Greece have been able to lower their current-account deficits substantially to the point where at least the first three of these may end up running current-account surpluses in 2013 – a very significant turnaround which may help their economies recover earlier than thought.

More generally, those deficit countries in the periphery of the euro-zone have gone through an austerity-driven and recession-mediated “internal devaluation” process which in the absence of other adjustment options (via lower exchange- and/or interest rates) has improved their relative labor unit costs and so left them more competitive as a result.

Further feeding positive market sentiment is the spreading sense that some key structural reforms needed for proper completion of the single-currency project are finally being moved to the front burner. This is especially true following the launch last September of the €500bn. European Stability Mechanism (ESM), the new permanent lender-of-last-resort mechanism for euro-zone members in crisis. In the meantime a majority of EU countries have ratified the so-called “fiscal pact” which gives the European Commission far more powers than before to monitor national budgets and impose tough deficit limits on member countries, thereby significantly curtailing their hitherto sacrosanct sovereignty over fiscal policy. A third major institutional reform, that of constructing a banking union, has also made recent progress with agreement in December 2012 to create a single banking supervisor under the auspices of the ECB.

But all these tangible improvements may easily come to naught in which case renewed turmoil in the sovereign-bond markets will be just a matter of time. Most troubling in this context is the doom-loop dynamic of persistent fiscal austerity across the continent. To the extent that such deficit-cutting measures push an already shrinking domestic economy deeper into recession and thereby trigger automatic fiscal stabilizers, they may be self-defeating while at the same time depressing economic activity further. Whatever re-balancing adjustments have already taken hold, they may in the end be overpowered by the debt-deflation spiral which a continental multi-year commitment to tax hikes and savage spending cuts will inevitably bring about. Add to this growing political polarization and social unrest in the wake of deepening economic crisis, crystallized around double-digit unemployment and broadly falling living standards. Much of this translates into public rage against European integration, just when exactly that is needed to a greater degree than ever before.

This dialectic centers above all on the euro’s trade-adjusted exchange rate. To the extent that positive market sentiments drive up the euro against its key trading partners (already by over 10% just in the last couple of months), they will undermine the competitiveness of the euro-zone’s economies which only reinforces recessionary pressures already in place and deepens tensions within the EU’s adjustment processes – a dynamic that can be pushed to the breaking point of an acute banking crisis or major sovereign-debtor default.

More generally, the recent improvements in market sentiment have once again proven that Europe’s political leaders only act when under severe pressure to do so. The moment the situation relaxes, as it has in recent months, they go back to their old bickering and meandering ways, bringing reforms to a halt.

But the euro-zone cannot afford this stop-go pattern of policy-making in the face of a systemic crisis. It will have to undertake far-reaching reform on several fronts beyond what Europe’s leading politicians have been willing to entertain. If, for instance, you impose a constitutional balanced-budget requirement on nation-states within the union, then you will have to push harder for a new kind of fiscal federalism which gives the European Commission a bigger budget and deficit-spending capacity. The recent EC budget exercise has gone in the exactly opposite direction, locking in seven more years of fiscal austerity at the federal center of Europe. The banking union will have to be extended to include a continent-wide deposit-insurance scheme and resolution fund, both steps more complex and fraught with intra-EU conflicts than the recently launched EU-wide supervisor. Finally, introduction of mutually guaranteed and jointly issued Euro-bonds is the only way to repair the structurally damaged sovereign-debt market, expand the ESM’s crisis-management capacity when needed, and anchor fiscal federalism – all crucial steps needed to overcome this structural crisis.

Given the scope of reforms yet to be undertaken, continued deep recession, and prevailing asymmetries within the euro-zone between debtor and creditor countries, it may be too early to see the “end of the tunnel.” Only time will tell!

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72 comments

  1. Mark P.

    ‘…In favor of the now remarkably widespread optimism among European and non-European financial-market players is the prevailing sense that – painful as the process might have been – several of the debtor countries have made significant progress in their adjustment processes….’

    Fools.

    ‘Amid scars of past conflict Spanish far right grows’
    http://www.bbc.co.uk/news/world-20773516

    ‘Love or nothing: The real Greek parallel with Weimar’
    http://www.bbc.co.uk/news/world-20105881

    1. from Mexico

      For a completely different take on fascism than that offered by Paul Mason, the author of the two linked articles, I recommend two essays by George Orwell: “Looking Back on the Spanish Civil War” and “England Your England.”

      Mason, in the first article linked, makes it seem as if fascism is a bottom-up, working-class phenomenon. Orwell, on the other hand, portrays it as a top-down movement. “The backbone of the resistance against Franco was the Spanish working class, especially the urban and trade-union members,” Orwell writes. “Too ignorant to see through the trick that is being played on them, they easily swallow the promises of fascism, yet sooner or later they always take up the struggle again.”

      Orwell goes on to explore how Spanish, Italian and German fascism had the wholehearted and almost ubiquitous support of the economic elite in the UK and the US, and how easily, almost effortlessly, the economic elite was able to corrupt the artistic and intellectual elite in those countries. “The intelligenstia are the people who squeal loudest against fascism, and yet a respectable proportion of them collapse into defeatism when the pinch comes,” Orwell observes. In fact, after reading Orwell, I think there’s a legitimate argument to be made that the smarter someone is, the more immoral they are. Thus, as Orwell reports:

      ***beginning of quote***
      After years of aggression and massacres, they had grasped only one fact, that Hitler and Mussolini were hostile to Communism. Therefore, it was aruged, they must be friendly to the British diviedend-drawer. Hence the truly frightening spectacle of Conservative M.P.s wildly cheering the news that British ships, bringing food to the Spanish Republican government, had been bombed by Italian aeroplanes.

      – GEORGE ORWELL, “England Your England”
      ***end of quote***

      With the above in mind, something Mason said in the second article pulled the curtain back on him, revealing what the man is really all about. “Under international pressure,” says Mason, “the Greek state is still capable of upholding the rule of law.” Here Mason is channelling the right-wing American pundit, Max Boot, and the drive to spread the neoliberal faith everywhere. As Boot observed with his usual candor, we should impose “the rule of law, property rights and other guarantees at gunpoint if need be.” How different Mason and Boot are to Albert Einstein and his belief that “where the law is immoral, we have the duty to follow our conscience instead.” How different they are to Martin Luther King, who reminded us that “We must never forget that everything that Hitler did in Germany was ‘legal’ “

      1. Moneta

        How to appeal to the people… make a speech on how there is too much red tape everywhere for small businesses. That there are 350K rules, which number has doubled over the last couple of decades. Then promise that you will cut this number by 10%.

        The people will love it and vote you in. The problem is you never told them that the 10% cut in rules would be those rules that hinder the 1%.

        I just witnessed such a speech last week.

        1. from Mexico

          That in a nutshell is what the neoliberalism (aka fascism) being promoted by people like Paul Mason is all about.

          It’s the jack boot of the state against the neck of working people, and impunity for the rentiers. It’s lavish state spending on the free riders, and austerity for workers. And very much unlike what Mason would have us believe, this monster is not merely a national phenomenon, but transnational in nature, with people like him being its leading apologists in the world’s money centers like London.

          What folks like Mason never acknowledge is that, as an article in The Global Village explains, “the crisis is not for everyone.” There are those who benefit from the debacle, a few inside Spain, but mostly outside Spain. And it is these people who, at any and all costs, will attempt to keep the neoliberal edifice standing. Greece’s president Samaras and Spain’s president Rajoy are mere puppets of this transnational ruling class. And as the article goes on to explain:

          ***beginning of quote***

          The mood ends up being one of social depression. And the worst is the loss of sovereignty. The government is prisoner to the European Central Bank and the dictatorship of the German chancellor, Angela Merkel.

          “The Crises of Spain”

          http://aldeaglobal.jornada.com.mx/2012/octubre/las-crisis-de-espana

          ***end of quote***

          1. Synopticist

            Absolutelly f*cking right.
            Media professionals like Paul Mason live in a small, upper-middle class, privatelly educated, socially liberal, econimically privelaged and secure metroplitan bubble. In the UK the media is almost completelly dominated by former public( private in other words) school pupils. Around about 90%. Naturally, they bring their class assumptions with them.

            They’ve persuaded themselves that they’re “progressive” because they aren’t racist and have lots of gay friends, but for the trully important stuuff they’re right behind the neo-liberal economic agenda. In other words, screw normal people in favour of the global rich and corporations. It’s impossible to raise taxes on the wealthy, therefore we must destroy the welfare state instead.

            It’s trans-national Adam Davidsonism, but the typical British twist from these types is to blame the working class for their supposedly fascistic instincts. It makes them feel better about their own unfair advantages, allows them to ignore the effects of 30 years of neo-liberalism, and to continue the great British tradition of the middle class intelligensia despising the poor.

  2. They didn't leave me a choice

    What a pointless post. There’s an easy, surefire way of seeing if the euro crisis is over. Does the eurozone exist? If yes, there is a crisis.

    But I suppose some people get paid by wordcount, so eh, whatever.

    1. Yves Smith Post author

      If you think people who write on blogs are paid, you are smoking something VERY strong, ex ones like HuffPo that are really Web-based media ventures. I am unusual in that I do pay most of my writers something when I can.

      1. Hayek's Heelbiter

        Bless you, Yves.

        First I scan the NYT headlines to find out where the areas of intereest and conflict are, then I jump to NC to find out what’s REALLY going on.

      2. They didn't leave me a choice

        Oh? Didn’t we have some talk here a couple of days about how some austrian school spooks were trying to hire a goon to pump out propaganda articles for money? Pretty sure the neoliberals are no different on this, isn’t this Guttman scumbag with them? Or is my neolib detector broken? Given the praise towards the economic terrorism undertaken against south europeans that he throws around this seems doubtful. This on top of his call for european integration (more banker led gigantism) marks him as a suspicious character in my books at least.

  3. sidelarge

    That sounds like setting the bar so low that virtually anything looks like a “success”. That sovereign debt crisis was just a symptom that dragged on for unnecessarily far too long due to the utter complacency and incompetence of the bureaucrats and politicians. It WAS avoidable, if not fully.

    The question is whether the ESM and “banking union” will be really able to manage the actual cause of the problems. I highly doubt they will. The ESM seems to me like something akin to a CDO in its essence, sure to malfunction when it’s critically needed. The “banking union” currently on the table, or the one that Germany is ready to approve of, is a joke of a union even if all the uncertainties are cleared.

    That “optimism” has no good basis, I think. I’m reasonably sure that we will have more emergency meetings and so on for the foreseeable future, while the unemployment figures largely remain stuck up there. What is truly unpredictable is the ways in which the problem will manifest itself.

  4. Calgacus

    Guttmann is an economist who ain’t half-bad, but..: Much of this translates into public rage against European integration, just when exactly that is needed to a greater degree than ever before.

    Well, this public rage is the only thing that can possibly lead to integration that in this public’s interest, rather than integrating it into a herd led to a slaughterhouse.

    Whether the public is integrated into cooperating nation-states with their own currencies or into one large Eurozone is secondary to whether the integration recognizes the public’s right to the guaranteed decent standard of living that has very much been within its means for decades. Or whether European elites will continue to force Europeans to live substantially below their means, as they have for decades, this oppression accelerating with the Euro and its endless crises.

    I’m not an optimist about anything good coming out of “the strange calm” – except for this more than justified public rage.

  5. Sanctuary

    “Much of this translates into public rage against European integration, just when exactly that is needed to a greater degree than ever before.”

    This comment is the same sort of wrong-headed, “self-evident” conventional wisdom that has caused and deepened this crisis. Integration of disparate European economies with vastly different competitive advantages and slaved together by the very lousy, neo-gold standard like Euro is what caused this crisis. Well that and the toxic nexus of financial and political corruption and greed which was necessary to pull this heist off. Europe needs LESS Europe and the complete breakup of its big banks along with repudiation of bankster accrued debt. Iceland has quite clearly shown the way. The rest need only to follow.

  6. The Dork of Cork.

    I think the function of the euro 9th circle of hell was to destroy all rational internal economic activity within former nation states post 1980 /86
    It was & is a agent of chaos.

    This constant meme of competitiveness is the Trojan horse.

    With the likes of Spain now forced to put bells & whistles on its exports thus “adding value” so as to afford more imports from distant shores.

    The lack of domestic exchange & commerce is a general characteristic of the Euro cage……

    The Euro market states goal is the destruction of former nation states by any means necessary.

    We can only pray that it implodes , but the momentum is with the euro boys – if they can destroy the last vestiges of nation state systems before their Soviet implodes I guess they have won a special victory.

    1. DRR

      ” to the point where at least the first three of these may end up running current-account surpluses in 2013″

      The surpluses will be used to pay back debt to the EU core. This trick has been played since the dawn of the IMF.

      The bankers are winning……again….

      1. Synopticist

        The big question is not whether they’re “winning”, it’s whether they’ve won. The whole game was about stopping the bondholders taking a hit. It looks like the answer is yes, even if there’s another financial crisis coming.

  7. jake chase

    I read this kind of piffel and wonder if anyone knows what this guy is talking about, including him? He seems to suggest that having a central bank and loading it up with unserviceable debt issued by insolvent governments conduces to continued serviceability of an economic structure divorced from political reality. Why not just say that?

    1. Hypothetical_Taxpayer

      I think something like “a fixed, but slow, fragile recovery” is the code phrase they use.

      But they could say something like this:

      The ECB has identified all Black Swans and is tracking them with a laser designator, blasting them with a steady stream of precision euros using modern technology which eliminates any chance of collateral damage and is completely transparent to the general public. We don’t want to scare anyone.

      1. Synopticist

        “Outrage fatigue” is the thing. The 99% are so bored with getting raped by the banks, we’re letting them carry on doing it.

        The utter indifferencce to the LIBOR thing here in the UK is a sight to behold. No-one gives a shit anymore. Same with the HSBC Mexiacan drug laundering.
        The media prefer to talk about benefit fraud, and normal people just spit on the floor and move on. Meanwhile, former bank chairmen are invited into the House of Lords and the Cabinet.

  8. sidelarge

    If anything, the ESM and that nominal “banking union” are more likely to become sources of trouble, rather than solutions.

  9. The Dork of Cork.

    “Specifically, we can see that Ireland, Spain, Portugal or even Greece have been able to lower their current-account deficits substantially to the point where at least the first three of these may end up running current-account surpluses in 2013 – a very significant turnaround which may help their economies recover earlier than thought”

    He misses the point ……..these jurisdictions no longer have defined economic hinterlands…… (although Ireland was essentially part of the sterling zone via a peg pre 1979)

    I.e. they do not have a closed a semi closed loop economy ……
    They export their surplus to the “core”.

    I.e. they are colonies

    The problem is the core wastes capital at a even higher level now.
    The Euro system is indeed a closed loop now (- energy) , its a entropy loop.

    Besides the massive monetary problems there is uniform dictats from the commission which add hugely to the cost of just living.

    You cannot keep a old rust bucket for occasional trips to the shop and pub anymore.

    http://en.wikipedia.org/wiki/National_Car_Test

    Its a mechanism by corporate forces to force people to buy new cars with pointless safety features which “add value” to products

  10. The Dork of Cork.

    The SEAT 600

    The vehicle of the so called Spanish miricle.

    http://en.wikipedia.org/wiki/SEAT_600

    National economies have less of a need to put bells and whistles on as they are not entrepot economies.

    No need to add useless excessive value to a product so as to pay for external inputs.

  11. AbyNormal

    permanent lending as “positive contagion”…please

    Market Example:

    Via SvD Naringsliv 11/29/2012

    The giant warrant December semester in OMXS30 (the Swedish Dow), a security equivalent to a basket consisting of the Stockholm Stock Exchange’s 30 largest companies, and where trade is very important for the overall pricing of the stock market.

    The order was on buy side of the order book and covered more than 4.2 billion futures, to a unit price of almost 107,000 dollars. It gives a theoretical value of 459 561 500 030 000, ie nearly 460 trillion dollars. Sweden’s gross domestic product, by comparison, amounted in 2011 to more than 3500 billion.

    - This just shows that it can go really bananas with machines, writes a trade to Svenska Dagbladet, referring to the growing element of automated securities trading.

    According to the Exchange spokesman Carl Norell has no order of that size team into the system. Instead, it is about a parsing incurred in exchange system due to a technical error. The order, Norell writes in an email, anullerades, but still remains a problem why the index derivatives market is closed since just before 10 am this morning.

    - Troubleshooting is underway and we communicate constantly updates to our members, writes Carl Norell.

    On Thursday, the Stockholm Stock Exchange’s derivatives trading open as usual.

    (aby-’machines’ are heat seekers and this one located an open position large enough for a whale to splash around in)

  12. The Dork of Cork.

    We need to view official English views of the euro situation with a bit of scepticism….

    The euro region can be seen as a sort of modern day trade surplus India for the UK.
    Most especially when the UK dumped its war time nation state investments after the Big Bang of the early 80s. (which was deeply tied to the euro market state project)

    UK end of year trade data out.

    Balance of trade in oil
    £ millions
    Y2010 : – 4,719
    Y2011 : – 11,509
    Y2012 : – 14,382

    Total goods
    Y2010 : – 98,509
    Y2011 : – 100,228
    Y2012 : – 106,614

    http://www.ons.gov.uk/ons/dcp171778_295724.pdf

    Notice the dramatic graph ( figure 5)

    UK imports from the BRIC countries.

    China is out there man…………but showing recent signs of weakness in 2012.

    So essentially Germany & China are colonies of the UK and indeed France which strangely or not so strangely is in perfect trade balance with the UK.

    Although to be fair to the UK much of the rise in the trade balance of 2012 is a result of a huge spike in its silver (negative) trade balance.

    The UK GDP shows these imports as negative to its wealth but are they ?

    According to a recent BIS paper UK based banks are draining PIG accounts and stuffing them into the German jurisdiction.

    I think the UK has chosen real goods from the Rhine / Rhur industrial system & China over income from the rest of Europe.

    This is the real reason for the Europe implosion.

    The UK can no longer afford to run North Sea oil through the PIigs and get a income return.

  13. The Dork of Cork.

    UK trade in Goods £ million
    EU 27
    Y2010 : -44,055
    Y2011 : -43,292
    Y2012 : -54,797

    So over half of the UK trade deficit comes from the EU

    Also add Oil Surplus Norway in recent years.

    UK trade balance with Germany (by far the biggest import area but negative trade balance almost equal to China as the UK has a more balanced trade relationship with Germany)
    Y2010 : -18,542
    Y2011 : -17,893
    Y2012 : -20,328

    UK trade balance with Norway
    Y2010 : – 17,937
    Y2011 : – 21 ,820
    Y2012 : – 18,722 (major switch from gas to coal in 2012 ?)

    1. Synopticist

      Interesting, Dork, that we export around half as much again to Ireland as we do to China. The UK must surelly be Irelands biggest export market?

      We’re dragging each other down.

      1. The Dork of Cork.

        Everything west is trade surplus including Ireland , almost everything east is trade deficit…….

        Ireland receives North sea oil and gas , therefore the UK trade surplus with Ireland.

        Ireland is essentially part of the British isles despite itself.

  14. The Dork of Cork.

    Nicole Foss talks about the loss of legitimacy of the state and the daisy chain of events this creates in a great interview.

    http://mindweaponsinragnarok.com/2013/02/02/james-howard-kunstler-interview-with-nicole-foss/

    (starts 7.30)

    There is no rational internal economy within Ireland now.
    This is far more important …..life support, real economic interactions etc etc etc.
    Its very different from even the Sterling peg years pre 1979.

    THE IRISH (Spanish ?) PHYSICAL ECONOMY IS NO LONGER A INTEGRATED UNIT.
    It is not integrated with the UK
    It is not integrated with the eurozone.
    It is not integrated with anything now.

    And that is I am afraid the bottom line.

    The trust deficit grows…..
    National monetary assets are becoming stranded assets, divorced from the society they have money claims over

    1. Synopticist

      Whats your view on the recent Anglo-Irish deal?
      Got to be a sliver of good news there somewhere.

  15. Paul W

    Only the EuroZone could turn Sinn Fein and now the Bunga Bunga king into good guys. Is the next phase Golden Dawn liberating Greece?

    1. Bill Clay

      Indeed. As a non-citizen Italian resident, I am thankful that I cannot vote in the upcoming elections, for if I were, the dreadful Silvio Berlusconi is the only major candidate among more than 120 competing slates who has given me a superficially valid economics-based reason for which to vote in his favor.

      If the Italian left cannot lose its trance-like fidelity to the EU and the Euro and admit that they have become (and probably always were) a tool of the international financial cartel, I fear that we’ll soon see “Mussolini II – the Comeback” on ballot near you very soon. And, if no other major Italian party has in the meantime sworn off neoliberal national economic policy — the EU be damned — they deserve to win.

  16. King Kong

    No, it’s not over. Jobless rate is still over 26 % in Spain and Greece and it aint gonna do any good for anyone, when young people aint have anything smart to do. If you think, that when people doesnt have anything left no more and then crisis will be over, then you are almost right. Crisis will be over in a couple of years, but revolution will begin.

    They do this all dumb stuff just, because some guys want to create an empire, none of the people in EU wants it, but why would they listen to us?

    How dumb must professor be, when he thinks, that crise will be over, when people have become slaves without any rights and calls it for competitiveness?

    Now is going the step, where they share crappy debts with all other countrys, who havent yet screwed their economy totally. Soon we will all be in same mess and banksters will make even more money, when rest of EU will also get shitty credit ratings.

    They are creating communist China ffs.

    http://www.telegraph.co.uk/news/worldnews/europe/eu/9845442/EU-to-set-up-euro-election-troll-patrol-to-tackle-Eurosceptic-surge.html

  17. The Dork of Cork.

    @Paul W

    Sinn Fein is as much a creature of the banks as the establishment parties……

    Its the emergency red button that the banking system pulls when the market state fails and it must go back to the nation state system of perhaps a more sustainable extraction.

    Sinn Fein never talks of just printing the money in a national treasury to pay off the banking credit hyperinflation……

    Its all about just shifting the burden to different groups so that interest extraction can be sustained.

    Indeed the entire Irish republican dream should be looked at with great suspicion.

    The Irish 9 /11 moment

    “On 14 April 1922 they were occupied by Republican forces led by Rory O’Connor who opposed the Anglo-Irish Treaty. After several months of a stand-off, the new Provisional Government attacked the building to dislodge the rebels, on the advice of the Commander-in-Chief of the Irish Army, Michael Collins. This provoked a week of fighting in Dublin. In the process of the bombardment the historic building was destroyed. Most dramatically however, when the anti-Treaty contingent were surrendering, the west wing of the building was obliterated in a huge explosion, destroying the Irish Public Record Office which was located at the rear of the building. It has been alleged that the Republicans deliberately booby-trapped its priceless Irish archives, which were stored in the basement of the Four Courts. Nearly one thousand years of irreplaceable archives were destroyed by this act. However, the insurgents, who included future Taoiseach Seán Lemass, denied this accusation and argued that while they had used the archive as a store of their ammunition, they had not deliberately mined it. They suggest that the explosion was caused by the accidental detonation of their ammunition store during the fighting.”

  18. Schofield

    Jez. You don’t have to be very clever these days to make Professor grade it would seem! Staring Professor Guttman right in the face is the obvious conclusion that if the Eurozone Central Bank can create money from nothing to stop the bonds crisis so too can it engage in fiscal policy to create money to get the hell out of the recession many countries in the Eurozone are experiencing. All the “wise professor” wants to talk about is that now the bonds crisis is over Eurozone member countries can balance the books (Credit Card Economics)! He should have lunch with Bill Clinton sometime and discuss how Bill contributed to crashing the economy by balancing the books and how Sectoral Balance Accounting is now the up and coming thing!

    1. Calgacus

      Like I said above, Guttmann ain’t half-bad. But this piece is written with so much academic hedging & detachment that people don’t hear what he is mumbling. He does understand that Most troubling in this context is the doom-loop dynamic of persistent fiscal austerity across the continent. He just has a knack for making it sound like he is saying something wrong, when he isn’t.

      Schofield:Staring Professor Guttman right in the face is the obvious conclusion that if the Eurozone Central Bank can create money from nothing to stop the bonds crisis so too can it engage in fiscal policy to create money to get the hell out of the recession many countries in the Eurozone are experiencing.

      That is what he (weakly) calls for, essentially.

      Schofield:All the “wise professor” wants to talk about is that now the bonds crisis is over Eurozone member countries can balance the books (Credit Card Economics)!

      No – he says:

      If, for instance, you impose a constitutional balanced-budget requirement on nation-states within the union, then you will have to push harder for a new kind of fiscal federalism which gives the European Commission a bigger budget and deficit-spending capacity. The recent EC budget exercise has gone in the exactly opposite direction, locking in seven more years of fiscal austerity at the federal center of Europe.

      Balanced budgets for the Euro countries/provinces can work OK if there is real fiscal federalism, deficit-spending with his “Euro-Bonds” if you want.

      So a charitable reading of Guttman is not inconsistent with Wray’s recent suggestion here: Here’s what I recommended for Greece, Ireland, Portugal, Italy, and Spain. You must band together, making a pact that you will not allow the center to pit one Euro member against the other. Together you demand an end to austerity, or you will leave the EMU—all for one and one for all. Debt relief for all. Substantial fiscal stimulus from the center for all. A job guarantee program for all. Without that, all of you leave.

      That is the kind of integration that is necessary & beneficial to all, save austerian banksters.

      1. Susan Pizzo

        Huzzah! Just so. I have wondered why the GIPSIs have failed to associate when banksters have so clearly combined against them. There would be power in that union…

      2. Ärr, ärr

        Eurobonds would mean that countrys would give up rest of their sovereignty for European comission. That would be huge mistake and loose of democracy. We have seen what happens in United States which is bullying everybody around the world with drones and collecting assets for the rich people. Thats just not very human way to do things. EU would be samekind empire, if you give all the power for the comissioners

        EU budget is a terrible stealing machine and only transfers money from poor to rich by aids and all that have to be borrowed from banks by governments, so i dont see what difference bigger budget would do for 99 % of the people. Countrys could also stimulate with bigger national budgets, so I dont see any reason to give EU any more money than this. None of the bookkeepers have accepted EU bookkeeps in 19 years, because theres so much dissapearred assets.

        What Hugh is saying down there is so true.

        All this whining what professor is doing just isnt worth of saying. Its so narrow minded and doesnt really resolve real problems.

        1. Calgacus

          Eurobonds would mean that countrys would give up rest of their sovereignty for European commission.

          No, the countries have already given up their sovereignty by signing on to the Euro.
          So i dont see what difference bigger budget would do for 99 % of the people. Countrys could also stimulate with bigger national budgets, so I dont see any reason to give EU any more money than this.

          You don’t see the difference with a bigger EU budget deficit-spending to support full employment in the distressed regions? That is what Guttmann suggests in a roundabout way. The idea is not to “give” the EU money by taking it from others, but to do it with newly created money/ bonds.

          However you want to do things, games with Eurobonds, the ECB backing states’ debts, the essential is to spend enough and in the right places for full employment. Inevitably the new bonds will end up in banks – that is what banks are for. But banking is not necessarily bankstering – although I am wary enough of the latter that I support nationalized banking, like Bill Mitchell.

          I’ve read Guttmann before, and have noticed, as others have, that “he just has a knack for making it sound like he is saying something wrong, when he isn’t.” – so some of the criticism here is a bit misguided.

          1. Ärr, ärr

            EUzone people have been fooled into EU and euro with lies. Lobbyist promised many things and none of those hasnt came true. Eurobonds means more integration and makes EU break up much harder. Kleptocracy just aint be the way to do things. There is still some strings in nations hands and I really, really hope that they will get more of those.

            I understand, that MMT is the only smart monetary theory out there, but it needs much from people also and without democracy and possibility for people to choose, what they want community to do – eurobonds will just give more power for few thiefs. Before real democracy Communist European States will just be terrible playground for multinational corporations and let them to take off all rights from the people and introduce neoliberalistic slave program. We didnt vote for EU-president, we didnt vote for commissioners. We the people can not really choose anything related to European Union. Only some rubber stamps to parliament, but we are still very powerless.

            I REALLY feel sorry for GIPSI-countries, but I hope they understand to leave eurozone and later also whole European Union mess. They should do Argentinas and go bankruptcy, even I notice that some capital investors are giving hard times for Argentina at these days still. GIPSIs will never be able to pay their debt in euros, if they leave it, but leave it anyway and rest of it will fall apart. We can evolve EEC treaty and Schengen agreement, theres really no reason for EU and euro from ordinary Joes perspective.

          2. Calgacus

            Yes, I agree that the lack of democracy is horrible. But printing Eurobonds are just another way of printing Euros. If they are spent on the distressed periphery, they can keep the Euro going without the real costs of its dissolution being imposed, and support a return to a decent economies and better in the periphery. The only practical way this could happen is Wray’s scenario of the periphery “integrating” to apply and demand non-insane economic policy. I agree, the outlook for this – real democracy in action, however it is administered – is not bright.

            Absent that, absent the acceptance of the periphery’s entirely rational and universally beneficial, win-win demands by the center – i.e. Germany – the periphery should announce that Germany has forced it to leave the Euro because of its insane, innumerate quackonomical beliefs, default, and set up their own currency/ currencies, as you suggest.

  19. The Dork of Cork.

    A island more Irish then modern Ireland

    http://www.youtube.com/watch?v=YWNRd6Q8i9I

    10 feet of volcanic pumice covering New Kinsale is far better then the market state nightmare that is old Kinsale.
    PS
    It must be noted that in EU treaties Ireland is not referred to as the republic of Ireland unlike other countries such as the Kingdom of Denmark or the Republic of France.

    It is just Ireland.
    RoI is reserved for a section of the domestic population

    As I have said before Ireland must be looked on as merely a very large (badly run) island estate

    It is not a serious place which poses any danger of rebellion.
    The so called Irish Government are only the local estate managers , nothing more.

    They feed the populace various myths depending on the time of day.
    Their role is extraction in the interests of outside agents.

    Irish people will remain quiet so long as they believe they are working for a good landlord.

    But few understand that under the current system of Euro centralization they are worth more dead then alive and if they are worth anything it is as slaves to the current monetary regime.
    A repeat of the Cromwellian conquest is underway

  20. Tom

    “In favor of the now remarkably widespread optimism among European and non-European financial-market players is the prevailing sense that – painful as the process might have been – several of the debtor countries have made significant progress in their adjustment processes.”

    The disturbing part above is AMONG FINANCIAL-MARKET PLAYERS.

    meanwhile, on the ground, grueling conditions for the masses who operate in the real market, jobless, standards of living going down, repression by the Financial Market Players. Where has freedom gone.

  21. diptherio

    …austerity-driven and recession-mediated “internal devaluation” process which in the absence of other adjustment options (via lower exchange- and/or interest rates) has improved their relative labor unit costs and so left them more competitive as a result.~Robert Guttman

    By “improved relative labor unit costs,” I take the man to mean lower wages and benefits. Typical academic economist to spin this as a positive (“more competitive,”).

    A bit later he (inadvertently?) highlights the major problem with “improving relative labor unit costs” :

    Add to this growing political polarization and social unrest in the wake of deepening economic crisis, crystallized around double-digit unemployment and broadly falling living standards. Much of this translates into public rage against European integration…

    I wonder, does Guttman see the connection between “improving” labor unit costs and “broadly falling living standards?” Does he grok the fact that the one necessarily leads to the other, and that rage is an appropriate response to these conditions, especially when the Troika and economists like Guttman keep telling workers that the problem is that they make too much money?

    Blinded by their models and their accustomed ways of speaking and thinking, economists cannot see the obvious before their eyes and so end up talking a lot of nonsense that, to anyone not immersed in the same sea of BS, is obviously nonsense. No non-economist would ever fall for the “efficient market hypothesis” or the canard that workers and employers have equal power in negotiating a labor contract, or shamelessly refer to decreases in wages as “improvements” in labor costs that enhance “competitiveness.”

    It would be funny, if it weren’t so tragic.

    1. JTFaraday

      “I wonder, does Guttman see the connection between “improving” labor unit costs and “broadly falling living standards?””

      People like that don’t see it until they’re the ones being improved upon. But since they don’t think they need improvement, that will probably never happen, right?

    2. from Mexico

      As Christian Parenti observed in Lockdown America: Police and Prisons in the Age of Crisis: “Regardless of the exact etiology of the [corporate] profit slump [of the 1970s], one thing is for sure, the solution to the crisis was, as we shall see, to attack labor.”

      Enter Guttmann, the latest wave of shock troops in The War on Labor that has lasted three and a half decades.

      Despite their spectacular success, I don’t guess they will be happy until labor is subjected to abject penury.

      1. from Mexico

        Or maybe after 35 years of labor being the sole enemy, mainstream economists simply cannot imagine of there being any other enemy.

        1. Skippy

          The un-wealth are always the problem, its a mental disorder to not worship the gawds of mammon… eh.

          Skippy… the longest echo in human history…

    3. Yalt

      This is hardly limited to economists. Every business owner I know thinks decreases in wages are “improvements” in labor costs that enhance “competitiveness.” Just about every middle-manager I know thinks that too, as long as we’re referring to salaries/wages at levels in the hierarchy below their own.

      This is a class issue, not an academic-guild issue. Economics exists to give a veneer of objectivity to a particular class perspective. It isn’t the primary problem.

  22. psychohistorian

    This is some sophisticated can kicking here.

    How can they say stuff like this with unemployment as high as it is and the world economies headed into another or the extended 2008 recession/depression?

    Global posturing is the rule of the day. If someone just says HARUMPH! loud enough then everyone will have faith and everything will be fine……

    The beatings will continue until morale improves…..Austerity forever……

  23. craazyman

    The weirdest thought occurred to me last night sitting by myself in an empty Turkish restaurant on 2nd avenue and 51st street watching snow fall through the yellow light of tenament building’s porch lamp. I’d ordered some unpronouncable main dish that took 20 minutes to cook and I had nothing to read or do, or anybody to talk to. Thinking about the Civil War and what happened in Virginia right were I grew up, right there in the same hills and woods beside the Potomac, was wearing me out, so I decided to do some economics in my head, like I do on the bus, usually, when there aren’t any really hot women to check out. There were two pretty hot waitresses but they were too young and I just don’t go there.

    So I thought “What if two countries increased their trade with each other in such a way that exports and imports were perfectly equal? Let’s say there are 100 people in each country and half are unemployed. Then they increase trade with each other in a way that employs 50 more people in each. Maybe country A plants marijuana bushes and sells bags of reefer to country B and country B makes pizzas and beer and sells them to country A.

    Even though folks would be drunk, stoned and eating pizza, unemployment would decline from 50% to 0%, but GDP wouldn’t change, because net exports wouldn’t change.

    That’s pretty simple, but it made me realize something else that’s been bothering me. I recently finally figured out what money is, but profit has been a source of confusion. There’s something about profit that seems weird to me, sort of unseemly in a strange way. I am not a communist by the way and I’m not making a political statement. There’s just been something about it that’s nagged at my mind. It seems like somebody has to lose, somehow, when there’s profit. And then I realized what it was.

    The two countries — one growing and selling dope, the other beer and pizza, both with full employment achieved with zero GDP growth in each — are in perfect equilibrium because everyone is employed and cooperating with each other. Yes, equilibrium! It can be said to exist. I’m reluctant to admit that, but there is a way in which it can make sense, economically speaking. In theory, anyway. But here’s the shocker that occurred to me waiting for my dinner by myself in the Turkish restaurant with plate glass windows looking out across the street through the blowing snow falling in gusting swirls through the yellow lamp light above the tenament porch, while ignoring the two hot waitresses and the TV up on the wall showing tourist videos of some arid ancient ruin in video loops that went over and over every 5 minutes or so — only if there’s no profit! That’s right. Profit is, itself, a symptom of disequilibrium! Holy Cow, no wonder it’s been bothering me! There’s more to this and it’s not as stupid as it might seem, but right now I’m too lazy to type it out.

    1. anyone

      And thus the handle craazyman. I like the part about getting drunk, stoned, and eating pizza though. You’re not past hope yet. And as a corollary, with so many people seemingly permanently out of work now, you’d think the Feds would be all in for cashing in on marijuana for the masses. But of course you’d be wrong. Shows to go you what you get for thinking these days.

    2. diptherio

      Imho, the problem with profit is its atemporal nature. I buy a share of Coca-Cola today and get dividend payments forever, with no upper limit. Thus, profit seeks to turn a finite input into an infinite output. Labor, of course, isn’t so lucky and receives only finite, temporal recompense for its input into the production process. Profit for the capitalist is like a laborer going to work for only a week and then collecting a paycheck every Friday, forever.

      In my mind, this is a serious flaw in our economic system; if we’re at all concerned with just allocation of income, anyway. I can see no reason why a one-time investment by a capitalist should be allowed to yeild potentially unlimited returns, while us working folk are expected to show up every single day if we want to keep getting paid. The underlying problem is that revenue streams are entirely controlled by only one of the parties involved in the production process, namely the owners. Until we figure out a way to more equitably distribute rights to the disposition of revenue, our economy will continue to suck balls for most of us.

      Worker-owned and mananged co-ops solve this moral conundrum quite elegantly, if you ask me.

      1. Mansoor H. Khan

        Profit is not the problem.

        We can let anyone keep as much profit as they like. All we need to do is print money and give it to people to balance supply and demand. This (printed) money will generate demand and the capitalist and workers will supply via increased production. As long as we don’t create inflation there is no problem with this formula.

        It might only be a problem if the rich or the high income earners spend too much such that inflation is created then we can institute a consumption tax (and rebate the tax to the non-poor and not the rich).

        Income tax is not needed.

        See social credit ideas of Clifford H. Douglas. He figured it all out.

        Mansoor H. Khan

    3. Chauncey Gardiner

      Thanks, Craazy. Reading this, feel like I’m in Eddie Hopper’s “Nighthawks”.

      … For the same basic reason (I think) there was never a sovereign debt swap engineered among the banks even though I think it would have enabled many of them to comply with initial Basel capital adequacy standards.

      As Hugh and others on this board have indicated, optimization of the economic welfare of the People of the EU is not what this is really all about.

    4. tiebie66

      Good insight, myns insiens. But be sure to discriminate between profit, primary profit, secondary profit, accounting profit, and supernormal profit. It is the latter one especially, I suspect, that is troubling you. Supernormal profits and losses, by their nature, must be transient phenomena that occur when a system goes out of balance and readjusts. When fully readjusted, profits and losses should disappear and the happy (and delirious) state of balance, that you perceived, resume. Seen in this context, the persistent pursuit of profit merely stresses the system, something that could be taken advantage of by deliberately stressing it, as long as it can endure the stresses, in ways that will yield profits.

    5. Hypothetical_Taxpayer

      I can add that Keynesians have identified the importance of Aggregate Demand. We are all aware that pot creates demand for pizza and beer, so balanced trade* in such an economy will lead to equilibrium for all of us.

      It may very well be that other sorts of products are contributing to our disequilibrium.

      “Profit” is a complicated subject, and I think may best be viewed similar to the way we think of wave-particle duality – where it can be both a source or measurement of disequilibrium, or even used to promote equilibrium **. It could be represented by something like the Schrödinger Wave
      Function, and I believe that GAAP accounting rules do allow that.

      *but not “free trade” – where only China grows pot and only Germany makes beer and decent frozen pizza.

      ** if spent on “capital investment” or “return on investment”. Spending on private Bunga Bunga parties and not inviting everyone would be an example of misusing profit.

    6. Dan Kervick

      GDP has increased in both countries, not from the exchange, but from the additional production that preceded it and enabled it.

      Think of it just in terms of you and your neighbor, rather than whole countries – which for some reason tends to perplex people. You have a lot of extra time on your hands, and decide to grow weed. Your neighbor has a lot of extra time on his hands, and decides to brew beer and make pizza.

      Do you both make yourself better off? It depends. If the value you derive from having all that weed to smoke is greater than the value you extinguished in the growing of it – the time you used up laboring in the field, the depletion of fertilizers and seeds, the equipment depreciation – then it was worth it to you. The same will be true of your neighbor. You have both increased your product in a valuable way, and both decreased your personal rate of “unemployment”.

      Now why do you and your neighbor decide to exchange weed for pizza and beer? Well, at some point you will reach a point where you have satisfied your desire for weed, and the additional amount you could harvest by increasing your work and expense no longer exceeds the cost for you of those expenses. Your neighbor will be in the same position with respect to his pizza and beer. However, you might wish you had some pizza and bear, and your neighbor might wish he had some weed. If you continue to increase your output of weed beyond that personal satisfaction level, and he does the same with the pizza and beer, you can both exchange those extra amounts of output between you. You both might then find that pushing your production of weed and pizza and beer beyond the level where benefits exceed cost, if you were producing for yourself alone, becomes worth it when exchange is involved. Now you have weed and pizza and beer. You had to work for that pizza and beer, not by producing it directly, but by producing something of relatively low value to you personally that you were able to exchange for something you valued more.

      So you have both further increased your product, and decreased your unemployment. If you had not found the opportunity to exchange with one another, you would have settled in at a lower level of employment, product and satisfaction. There is still a combined level at which the added reward the two of you can obtain from increasing your work (decreasing your degree of unemployment) is not sufficient to justify the extra cost and work, and so you will stop there.

      One problem where whole societies are concerned is that human labor is not expended by a uniform population in undifferentiated lumps, nor are the rewards of that aggregate labor distributed equally under our current social arrangements, and so the the impact of societies settling in at less than full employment is that some individuals are totally unemployed and receive very little of the output, while some are fully employed and receive much more output.

      Also, since some people own the fields and seeds and barley and tomatoes and cheese, and others do not own much of anything, the added increment of production will usually involve the owners contributing some share of the stuff they own, and no work, while the others contribute work. The legal arrangements we have give the ownership of the product to the owner of the inputs, so that owner gets to decide what share of the output he will keep, and what share will go to the labor he hired. All he needs to give to the laborer is just enough to incentivize the laborer to do the work. The poorer the laborer is, the less the owner has to give, since needy persons will do a lot of work for little.

      There is another problem with the weed, pizza and beer situation. Suppose we don’t just have two producers of two products, but a thousand producers of a thousand products, each producing just enough to satisfy themselves. They are faced with a challenging coordination problem. If they all produced more, they could then exchange their surpluses among one another in ways that would justify the added work and production. But until each producer has a reasonable certainty that the added work will pay off because all of those other producers will be increasing their product too, they will not increase their own production.

  24. Hugh

    Do you notice that democracy, wealth inequality, and criminality are not mentioned in this post? There is also the pervasive assumption that the EU and EZ are good in and of themselves, even if they do not produce tangible benefits for the peoples of Europe, even if they promise years of ongoing austerity, misery, and declining living standards.

    As Guttman writes and as diptherio notes above:

    “Add to this growing political polarization and social unrest in the wake of deepening economic crisis, crystallized around double-digit unemployment and broadly falling living standards. Much of this translates into public rage against European integration, just when exactly that is needed to a greater degree than ever before.”

    Guttman is describing the existential failure of the EZ to deliver on what it was created to deliver. Why shouldn’t people be angry? Indeed why shouldn’t more people be angry? And why should Europeans double down on these failures? Guttman’s call for greater integration rings hollow. It reminds me of conservatives calls for tax cuts no matter what. Times are good. We need tax cuts. Times are bad. We need tax cuts. Times get even worse. We need even more tax cuts. Integration did not prevent this crisis from happening. Three years later integration did not cure anything. Now Europeans are looking at declining living standards into the indefinite future, and what does Guttman call for? More anti-democratic integration. The vesting of even more power in those who did not have the wisdom to avoid the current crisis, who have not had three years on the wisdom to resolve it, and who promise years more of hardship, not for themselves but for ordinary Europeans. Guttman’s position underlines how deeply in denial even economists who recognize the worse might not be over remain.

    I have written many times that Europe has 6 problems which must be resovled for the euro to work:

    1. The lack of a democratic fiscal and debt union
    2. A weak, and capricious, central bank
    3. An insolvent and predatory banking sector
    4. Europe internal mercantilist trading patterns
    5. Thoroughly corrupt political classes
    6. A ruling kleptocratic class of the rich

    Guttman’s treatment deals, at best, only tangentially with a few of these, and, of course, he does not even entertain alternatives, such as exit and dismantling.

    1. from Mexico

      Hugh says:

      “Do you notice that democracy, wealth inequality, and criminality are not mentioned in this post?”

      ***beginning of quote***

      The 21st century began with the ownership of the media very concentrated and the diffusion of the news very orchestrated. There is an international cartel whose political vision goes well beyond that defined by the Washington Consensus and NATO. Its basic technique is lying by omission. It amputates essential parts of the truth or the historical and political reality, while inventing or exaggerating that which it wants to reveal. The goal is to demonize persons or countries, beliefs or ideologies, that antagonize its irresponsible ambition.

      “The Magicians of the Lie”
      http://aldeaglobal.jornada.com.mx/2013/febrero/los-magos-de-la-mentira
      ***end of quote***

      1. Skippy

        The Creators always try and save themselves…. as the well of managerial – labor – parishioner souls never runs dry… yet the basic economic inputs just might…

        Skippy… the Universe yawns…

  25. curlydan

    Hardly a mention of the next big boy in trouble: France. It’s internals are not good. The 1% are restless and resentful. I’d keep an eye on that country as much as Spain or Greece. Austerity there will come at a higher price for all.

  26. rotter

    “The intelligenstia are the people who squeal loudest against fascism, and yet a respectable proportion of them collapse into defeatism when the pinch comes,” Orwell observes. In fact, after reading Orwell, I think there’s a legitimate argument to be made that the smarter someone is, the more immoral they are. ”

    Which is exactly why they should not lead any Left movement (although they have always claimed the right to )
    If there ever will be an effective Left, it will be led by the working class.

  27. OMF

    I’ve just come from a tour through the Irish news and blogs and I honestly don’t know what to tell you: After 5 years of staunch conservatism, the Irish central bank just monetarily financed Irish Government debt and everyone in the establishment is has thrown a champagne party over the fact.

    I have lost all intuition and grasp of the situation.

    On Wednesday night, emergency legislation was passed in the Dail, (specially) liquidating the Irish bad bank IBRC/Anglo. Following this the central bank swapped the 8% interest bearing Anglo promissory notes in exchange for newly issued 20+ year government bonds at ~3%. The ECB gave no offical approval for the deal. This was a unilateral move by Ireland to refinance its debt.

    One week ago Ireland was “the best boy in the class”. To act without the approval of the ECB was taboo, heretical, unthinkable. I have had dozen of people say this to my face. Today, after the best boy just flung his inkpot at the blackboard, those same people are clapping themselves on the back and scoffing at anyone trying to point out the fact that the Bundesbank is libel to bellow in tumultuous rage at this development.

    There has been a 180 revolution of policy, but absolutely no change in attitude. The earth has moved, but I’m still facing the same immovable denial, just with different arguments. While I can’t say that I disagree with this radical shift in policy, the swiftness of this Damacene conversion has me completely stunned, all the more so because of the denial that there has been a conversion at all.

    Is this how things happen? How attitudes change? In mental earthquakes? We have always been at war with east-asia, etc?

    I thought I understood the establishment thinking in my own country, but clearly I did not. I don’t think I was even looking at the right level– in the right dimension. Consequently I can’t even begin to tell you what’s likely going to happen with the rest of Europe. But I will only say that you may want to consider whether you understand what’s going on either.

  28. The Dork of Cork.

    @OMF

    Get a grip

    Its just a mechanism to make the overall (credit hyperinflation) debt a bit more sustainable….

    Its not Greenbacks all over the shop . is it ?

    A fundamental change in the western structure of workings is when the system realizes it does not need a central bank to print money.

    1. OMF

      Dork, are you seriously telling me that you didn’t notice this sudden turnabout in attitudes overnight? Leave aside the debt numbers and Anglo for a moment; do you agree that the Irish government just acted unilaterally?

      1. The Dork of Cork.

        @OMF

        I don’t know for sure what went on behind closed doors so I can’t answer that question….
        Do you believe the Sunday Independents musings for example ?

        Colm Mc and the other false Nationalists ?

        But I don’t trust them (the supposed government) period.

        At most I guess it was the local on the ground estate managers telling the owners in forceful terms that the present rate of extraction was unsustainable & dangerous to the long term viability of the business.

        So we got a sort of in between monetary financing thingy on debt we did not owe anyhow.
        The famous Newcastle bailing out Northern Rock Syndrome.

        The question of extraction via monetary means remains a given.

        To be honest I am bored to tits by the Byzantine nature of it all.
        In this sort of situation the CB can’t do much anyhow.

        A independent treasury /state simply prints domestic currency in the same fashion as the free banks created credit ,thus relocalizing trade and commerce.

        However the Irish quasi state will never do this.
        In the long run I expect to see “us” devaluing against Sterling into a new Peg system.

        However before that event “our” function in life is to buy the eurosystem yet more time…………

        Ireland is a sort of Limerick for the eurosystem.

        http://www.youtube.com/watch?v=wNHg5_wYGAQ&list=UUDGN6PKvJsFcfsbz0Des4GQ&index=34

        A shithole you need as a temporary base of operations before the lads and the money move North to Scotland.

        Its amazing how much resources went into sustaining this absurd level of Irish style globalization.
        And for what ?

        Never trust any leadership that can watch over the biggest inflation / deflation experiment in the history of time.

        See above Nicole Foss interview for whats coming down the line.

  29. steve from virginia

    … A strange calm has settled over Europe … following Mr. Draghi’s July 2012 promise “to do whatever it takes” to save the euro …

    He didn’t actually do anything.

    … the market panic evaporated.

    That’s an assumption. More likely is credit strangulation.

    … This calming of once-panicky debt markets has led to optimistic assessments that the worst of the crisis has passed.

    Not by a long shot, the crisis is the cost of energy and the inability of the Europeans to earn anything by wasting it.

    … we can see that Ireland, Spain, Portugal or even Greece have been able to lower their current-account deficits substantially

    Automobile sales in these countries along with France have collapsed, petroleum use has signficantly declined.

    … renewed turmoil in the sovereign-bond markets will be just a matter of time. Most troubling in this context is the doom-loop dynamic of persistent fiscal austerity across the continent.

    Withholding credit is a means to export European fuel consumption to credit issuers such as the US. Any fuel not burned in Italy or Spain is available to be burned in Los Angeles. America’s energy ‘surplus’ is by way of theft, not fracking.

    … This dialectic centers above all on the euro’s trade-adjusted exchange rate.

    Not in the sense that the professor implies: the more deflation-priced euro gives those who hold it the means to buy fuel at a bit of a discount … and an incentive to stick with it.

    … will undermine the competitiveness of the euro-zone’s economies

    The assumption is that countries like Greece or Portugal are industrial countries filled with factory workers like China. Instead, they are senior centers filled with retirees. Peoples’ pensions are being looted in the name of ‘competitiveness’, this is what is showing up on the ‘stats’.

    … But the euro-zone cannot afford this stop-go pattern of policy-making in the face of a systemic crisis. It will have to undertake far-reaching reform on several fronts beyond what Europe’s leading politicians have been willing to entertain.

    What is taking place is Europe is being de-carred by pauperizing the populations. The reform necessary is to take charge of this dynamic and decar the continent on purpose while sparing the citizens. Europe can stand to jettison its useless cars and the fuel waste these things represent. It is the waste that has undermined the European — and world — economies, not trivial real interest rate movements or currency exchange rates. These last are abstractions, fuel waste is permanent: when it’s gone it’s gone, forever.

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