Will Greek Vote Imperil World Economy?

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WEALTH OF NATIONS

Don’t Believe the Hype About Greece

The Eurozone isn’t on the verge of collapse, yet.

By ZACHARY KARABELL

 

July 05, 2015

If Eurozone unravels over the coming weeks, it will be because of stupidity and panic, not because of Greece. There is absolutely no reason for the entire Eurozone to collapse due to Greece, and no reason to assume that it will or even come close.

A considerable majority of Greeks voted on Sunday to reject the onerous bailout conditions demanded by European creditors. More than 60 percent of those who went to the polls followed the call of Prime Minister Alexis Tspiras to stand up against years of punishing austerity. There were celebrations in the streets of Athens and promises by the Greek government that the result would strengthen the Greek position and force concessions from the Germans, the European Central Bank and the rest of the Eurozone.

If only.

If only the referendum marked the end of six agonizing years where Greece has been the symbol for the Eurozone and its future. If only the vote resolved the question of whether Greece is the proverbial first domino or instead a wounded limb that can be removed without killing the main body. If only the action of financial markets on Monday and throughout the upcoming week provided a clear signal about whether the other struggling members of the Eurozone, especially Italy and Spain, have recovered enough from the worst of the financial crisis to withstand the efforts of bond market speculators to send their sovereign yields soaring again to dangerous levels.

The immediate reactions on Sunday were, to put it blandly, mixed. Some members of the European Parliament and the German government said that there was no other path now than a “Grexit” from the euro. The German economy minister and head of the Social Democrats remarked, “Tsipras and his government are leading the Greek people on a path of bitter abandonment and hopelessness,” and concluded that there was little way for Greece to remain in the euro. On the flip side, the normally hawkish and hardline German Finance Minister Wolfgang Schaeublesaid that the member states of the Eurozone would not “leave Greece in the lurch,” though it isn’t clear what that actually means. German Chancellor Angela Merkel and French president Francois Hollande announced they would meet on Monday to discuss how best to respond.

Financial markets will have the first say, however, and that say is likely to be a resounding “OMG” combined with considerable volatility. Some of that will come from traders who have had a blah year looking to make very fast money. Some will come from fund managers who have been betting against the euro and skeptical of the debt of countries such as Spain and Greece. And some will simply be skittish investors whose nerves remain frazzled even six years after the financial crisis and primed to see any tremors not as normal features of the world we live in but as preludes to the Big One that will leave portfolios in tatters, companies in confusion and sovereign government finances in shambles.

Voices warning of the Big One will likely be the same voices that always warn of the Big One. In an infinitesimally small number of situations, those voices are right; the rest of the time they are very wrong. Heeding them is almost always a recipe for making spectacularly wrong decisions, except for once in a generation. This might be that one time, but I doubt it.

Does the situation in Greece really imperil the $17 trillion U.S. economy? Does it impact how 3 billion people in India and China will shape the next five or ten years, as hundreds of millions continue to lurch into the middle class? Does it impact how hundreds of millions of Africans stretching from Nigeria to Kenya manage their own economic moves into the future? No, no and no.

Zachary Karabell is head of global strategy at Envestnet and author of The Leading Indicators: A Short History of the Numbers That Rule Our World. He is a contributing editor at  Politico Magazine.

Read more: http://www.politico.com/magazine/story/2015/07/greece-eurozone-collapse-119752.html#ixzz3f57wKk7A

Playing With Fire, The Eurozone Dilutes The Euro. In Other Words, The Failure Of The Euro.

Euroflop: Europe Dilutes the Euro

by Peter Martino
January 26, 2015 at 3:30 am

http://www.gatestoneinstitute.org/5146/euro-dilution

44

Comment

Every criminal printing money can now argue in court that he should be given a medal for "stimulating the economy."
The refusal of some European countries, such as France, to tackle their high debt level and lack of competitiveness, is now also affecting the non-eurozone.

Europe now wants the rest of the world to foot the bill for its own economic mismanagement.
Suppose a family can no longer pay its debts and dad decides to solve the problem by going down to the cellar and printing extra money. Society would not approve. Printing money is a form a robbery, stealing from everyone else by diluting the value of their financial assets.
Last week, Mario Draghi, the president of the European Central Bank [ECB], announced that in the coming months the ECB is going to pump an additional €1.1 trillion into the economy, at a rate of €60bn a month. When dad does it, it is called "counterfeiting," but when Mr. Draghi does it, it is called "quantitative easing" and one euphemistically speaks of a "stimulus package for the Eurozone." Every criminal printing money can now argue in court that, rather than a jail sentence, he should be given a medal and a reward for stimulating the economy.

The headquarters of the European Central Bank in Frankfurt, Germany. (Image source: Flickr/Solvency II Wire)

The European debt crisis began in late 2009 after Southern European countries, using the euro as a common currency with Germany and other Northern European countries, were no longer able to pay the debts they had foolishly accumulated during the preceding years. To prevent the eurozone from collapsing and its banks from going bankrupt, the ECB began to purchase the government bonds of countries in difficulty, including the junk-rated bonds issued by Greece and Portugal. As a result, the ECB balance sheet swelled to almost €2 trillion. Mr. Draghi has now solved that problem by using his big bazooka and creating €1.1 trillion out of thin air.
The effects were immediate. The euro fell against all other currencies. It hit an 11-year low against the dollar. In July 2008, one dollar was worth €0.62, and one month ago still €0.81; today it is worth €0.89. Analysts expect that the effects of Draghi's "bazooka" will soon push the euro to parity with the dollar, perhaps even lower.
The Swiss central bank SNB anticipated Draghi's decision. Two weeks ago, it stopped pegging the Swiss franc to the euro. In 2011, the SNB had decided to fix the exchange rate between the Swiss franc and the euro at 1.20 or higher. The aim was to keep the franc from getting too strong compared to the euro. On January 15, the SNB surprised the markets with its dramatic decision to reverse its policy. Traders came to refer to the decision as the "Francogeddon": it led to huge losses for those who had not expected it and resulted in an immediate 30% rise of the franc versus the euro. Meanwhile, the Swiss franc, which in October 2007 was worth €0.57 and on January 14 of this year stood at €0.83, is now already worth slightly over €1.
Obviously, this is extremely bad news for Swiss companies and for the Swiss tourism sector. The SNB reckons, however, that keeping the franc artificially low compared to the euro by buying large quantities of euros, which are rapidly going to lose their value as a result of Draghi's strategy, would be an infinitely worse scenario. So they stepped out of the currency war. Other economic competitors of the eurozone, such as the British, the Americans, the Japanese and the Chinese, will either have to do the same or try to keep their own currencies low by buying large quantities of euros or by following the ECB's example and switching on their own money presses.
Within the eurozone, however, Draghi's decision is also leading to tensions. France and the southern countries are supporting Draghi, while the central bankers of northern eurozone countries, such as Germany's Bundesbank president, Jens Weidmann, and his colleagues from the Netherlands, Austria and Estonia, opposed the decision.
They are, however, outnumbered by the southerners. The northerners fear that Draghi's program will reduce the pressure on governments in the south, including France and Mr. Draghi's own Italy, to reform their economies and stop living beyond their means. The Greek elections yesterday resulted in huge gains for the far-left Syriza party, which opposes the current austerity policies. Now that the ECB is buying Greek junk bonds with newly created money, the Greeks may well feel that they no longer need to reform their economy.
Last week, in Davos, Finnish Prime Minister Alexander Stubb warned that there is a bottom line when it comes to Greece. He said that he even preferred a "dirty exit" of Greece from the eurozone, rather than allow it to shirk further economic reforms. "All of us have taken very difficult structural reforms," Stubb said. "I can't take issue with the Greek elections. The Finnish position is: we will deal with any democratically-elected government that Greece has, but it will be very difficult for 
us to forgive any loans or restructure debt at this particular moment."
On Sunday, Bundesbank President Weidmann reiterated his doubts about the effectiveness of the ECB bond-buying plan. He questioned whether quantitative easing in the eurozone would lead to an economic stimulus -- as it did in the US after the financial crisis of 2008 -- because the sluggish growth in Europe is largely due to high levels of debt and, in certain countries, a lack of competitiveness.
It seems that the refusal of some European countries, such as France, to tackle their high debt levels and lack of competitiveness is now also affecting the non-eurozone. As a result of the ECB's decision, non-eurozone countries, such as Switzerland and America, will also be affected. Their companies will have more difficulty exporting to the eurozone because their currencies will become too expensive. In short, they will be paying the price of the ECB's decision to lift the burden from the economies in Southern Europe.

If You Believe What Goldman Sachs Says, Here Are Their Risk Predictions For 2014

Goldman Sachs: Risks Abound for 2014

Friday, 10 Jan 2014 07:22 AM

By Michael Kling

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Goldman Sachs is optimistic about 2014, but economic and financial pitfalls could prove its sanguine forecasts wrong, it warns.

"Our economic and market views for 2014 are quite upbeat," states Goldman's Dominic Wilson in a new report, according to ZeroHedge.

"After significant equity gains in 2013 and with more of a consensus that U.S. growth will improve, it is important to think about the risks to that view."


Wilson cites five top economic risks in the report titled Where we worry: Risks to our outlook."

1. The reduction of fiscal drag could be less than expected. The fiscal drag last year might have been smaller than the firm thought, which would limit the upside for this year, or Goldman's assumptions about current fiscal plans going forward could be to optimistic.

2. Deleveraging obstacles continue to weigh on private demand. Spending may fail to accelerate, and rising mortgage rates could smother the housing recovery.

3. Less effective spare capacity could prompt inflation pressure. Wage inflation has been muted so far. "But the question of where capacity pressures begin to bite is always highly uncertain and is likely to be put to a tougher test as growth picks up," Wilson states.

4. Euro area problems could return. The situation has improved somewhat, but progress has been uneven and remains incomplete. The euro area faces "an uphill battle" due to low nominal GDP and domestic demand, he comments.

5. China poses a risk due to monetary tightening and high levels of debt.

Goldman also sees market risks.

Long-term yields may rise sharply if predictions for the Fed funds rate and inflation prove inaccurate.

In addition, markets could doubt the central bankers' commitment to easy money policies in the face of better growth, low premiums for risk could create valuation challenges corporate margins could come under pressure as wages recover and emerging markets could face challenges.

According to research and consulting firm Eurasia Group, geopolitical concerns pose the major risks for 2014. "There are tensions between China and Japan in the East China Sea, elite-level executions in North Korea, Russia flexing its muscles in neighboring Ukraine and beyond and everyone fighting with everyone else in the Middle East," the firm states in its Top Risks of 2014 report.

"All of which is changing the geopolitical map quite aside from the role of the world’s only superpower."



Related Stories:

• Roubini: Global Economy Looking Better for 2014, But Problems Still Lurk
• FT: Global Economic Outlook Is Rosy, Except for a Few Minefields

© 2014 Moneynews. All rights reserved.

Is Europe Moving Away From Market Economy? Will It End Badly? What Possibility Of It Happening?

Saxo Bank's Jakobsen: Europe Moving Toward Totalitarianism

Friday, 20 Dec 2013 07:36 AM

By Dan Weil

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Europe is shifting away from a market-based economic model and is heading for Soviet-style totalitarianism, says Steen Jakobsen, chief economist of Denmark's Saxo Bank.

In a report obtained by CNBC, Jakobsen provides a series of extreme forecasts, including zero economic growth for the United States and a plunge in oil prices next year.

While Jakobsen acknowledges that the "probability of any one of the predictions coming true is low," he notes they are "based on a feasible — if unlikely — series of market and political events."



As for Europe veering toward communism, Jakobsen says the eurozone will continue to suffer from economic stagnation.

As a result, the European Commission will push for a wealth tax on those with savings of more than $100,000, he predicts.

"We have gone full circle back to a Soviet Union model," Jakobsen writes. "It will be the final move toward a totalitarian European state and the low point for individual and property rights."

Europe is further away from a market economy that at any time since World War II, he says.

So how should investors react to the turmoil? Opt for hard assets and an exchange-traded fund that tracks gold, he says.

Meanwhile, Barry Eichengreen, professor of economics at the University of California, Berkeley, says that Europe's economic crisis appears to be shifting from debt to deflation.

If that's the case, "the European Central Bank has its work cut out for it, and there is nothing to suggest that it is up to the task," he writes in The Guardian.



Related Stories:

• Peter Warburton to Moneynews: European Economic Improvement 'Just a Technical Rebound'
• Eurozone Retail Sales Show Muted Recovery Already 'Losing Momentum'

© 2013 Moneynews. All rights reserved.

Do What We Want You To Say Or...

European Union Spending Millions to Silence Critics

Samuel Westrop - Gatestone Institute,  April 25th, 2013

The European Union (EU) is pouring millions of pounds into organizations that advocate state control of the press. For many, the funding — uncovered recently by Telegraph journalist Andrew Gilligan — is yet further evidence of the EU's increasingly Orwellian, authoritarian nature. The Soviet dissident Vladimir Bukovsky has for years referred to the organization as the EUSSR.

One recipient of European taxpayers' money, Mediadem, for example, has been given 2.3 million pounds. Mediadem describes its mission as working to “reclaim a free and independent media.” Addressing the topical issue of how to restructure the system of redress for those wrongfully accused or defamed by newspapers, Mediadem recommends the “imposition of sanctions beyond an apology or correction” and the “co-ordination of the journalistic profession at the European level.”

Mediadem's representative, Dr Craufurd Smith, has written, “Liberal conceptions of media freedom focus on editorial freedom for government interference…. [however] states may also be required to take positive measures to curtail the influence of powerful economic or political groups…. this entails that neither the media, nor those individuals who own or work for the media, enjoy an absolute right to freedom of expression.”

This is not the first time the EU has sought to control freedom of expression. In 2001, the European Court of Justice ruled that the EU was allowed to suppress political criticism of its institutions and of leading figures. The court ruled that the EU was lawfully allowed to punish individuals who “damaged the institution's image and reputation.”

The European Court of Justice is the EU's highest court. Its advocate general, Damaso Ruiz-Jarabo Colomer, had previously argued that a book criticizing EU financial policy was akin to extreme blasphemy, and thus not protected by free speech laws.

The attack against freedom of expression has extended to economic information. In 2011, an EU official proposed a ban on the issuing of sovereign credit ratings for countries in bailout talks. Michel Barnier, a European internal market commissioner, said, “I think it's legitimate to have a special treatment when a country is in negotiation or is covered by an international solidarity program with the IMF or a European solidarity”.

In the wake of the Leveson Report, a British parliamentary inquiry into the “ethics of the Press,” an EU report called for tighter press regulation and demanded that the EU should be given new powers to enforce fines or the sacking of journalists against errant media outlets.

Much of the EU's keenness to intervene comes from its concern at the negative coverage it receives in the British press. When the EU is not proposing to regulate the press, it is spending vast sums on pro-EU advertising. In 2012, the EU spent £682 million of British taxpayers' money on its enormous public relations department.

Some of this money has been funnelled into the creation of “Captain Euro.” an online children's comic book, in which the integrationist super-hero battles against an “evil organization” that is “hard at work in the shadows.”

Conservative MEP Daniel Hannan has noted there is a whiff of anti-Semitism to the cartoon. The “enemy” of Captain Euro, called Dr Vider, has a prominently hooked nose and uses the free market to make money, “no matter if it might involve the suffering of others.” It is further explained that, “Banned and ostracised from the financial world for unprofessional conduct he managed to escape arrest despite his involvement in financial scandal.”

An internal EU report goes some way in explaining the fondness for comic books, by concluding, “Children can perform a messenger function in conveying the message to the home environment. Young people will often in practice act as go-betweens with the older generations, helping them embrace the euro.”

In 2012, the EU spent £106,000 on a video in which a white woman, dressed in EU colors, overcame threatening, dark-skinned martial arts attackers. The video was withdrawn after complaints of racism. Further, various EU youth groups have produced music videos — in one of which, European youths sing, “I am European, and I love it to be, I am European, it's my destiny.”

While the EU is happy to use the Internet to disseminate pro-EU propaganda, it also advocates the regulation of Internet content. In 2012, the EU proposed the “harmonization” of laws across the 27 member-states to force websites to delete information shortly after consumers request its removal. The EU also funds a number of a projects designed to explore censorship of “terrorist” content on the Internet.

There is a joke in Brussels that if the European Union were a country applying to join itself, it would be rejected on the grounds of being undemocratic. But it is not much of a joke. The EU is run by a body that combines legislative and executive power, with an unelected President at the very top. According to a recent Parliamentary report, widespread fraud has led to more than £4 billion of taxpayer's money “disappearing” from the EU budget each year. Auditors have refused to sign off EU accounts for eighteen years in a row and EU officials have been sacked for exposing corruption and fraud within the vast bureaucracy.

The European Union's flaws are best summed up by Sholto Byrnes, who wrote in the Independent: “All it takes to have a profound suspicion of the EU and its greedy accretion of powers is this: to believe in transparency and accountability; to feel in your bones that sovereignty should not be passed from nation state to international body without the voters being consulted; and to desire that those voters should be as close as possible to the representatives they elect. To be, in other words, a democrat.”

Unable to counteract criticism of its failings through meaningful reform, the European Union is resorting to undisguised propaganda and proposed regulation of its critics.

Cyprus Future Not Assured

Mohammed El-Erian is very bright and has a special handle on foreign

 investments. We trust his experience and expertise when he talks 

about the future for Cypus. The following post exposes the threat

 to not only the country but all of the Eurozone.

Pimco’s El-Erian: Cyprus Capital Controls Are Just 'Circuit Breakers'

Tuesday, 02 Apr 2013 11:09 AM

By Michael Kling

• 
  
  
  

Harsh capital controls are only a stopgap measure for the eurozone's
 Cyprus crisis, cautions Mohamed El-Erian, CEO and co-CIO of Pimco.

Capital controls offer a "short reprieve" at best. If not followed by
 more essential — and probably controversial — decisions, in a matter
 of weeks the controls will become part of an even deeper problem,
El-Erian writes in a guest blog for CNBC.

In an attempt to prevent a bank run, the country's bailout agreement
 limits how much depositors can remove from bank accounts and
take abroad.

"History tells us that this approach only works if controls are followed
 by a re-alignment of economic incentives and by offering the population
 a genuine hope for recovery and return to normalcy," he states.
 "Otherwise, what is viewed initially as a 'circuit breaker' ends up
making the underlying situation worse."

The controls will strangle what little economic growth remains,
 El-Erian explains.

With less access to savings, consumer spending will plummet.
Investment activity will grind to a halt because of substantial
disruption in demand. Capital flowing into Cyprus will stop, and
 capital will only flow out. Even routine corporate activities will
 be limited, as part of companies' working capital is trapped.

And that's just the immediate impact. Over the long term, Cyprus
 must find an economic driver to replace its banking business, he says.
That will not be easy. Although the country's position is not impossible,
 finding a mix of agriculture, tourism and light manufacturing will take
time.

"Cyprus can hope that its tragic situation," El-Erian notes, "will unlock
more generous funding from the 'Troika' of the European Commission,
 the European Central Bank [ECB] and the [International Monetary Fund]."

Leaving the euro "seems equally unpalatable to Europe given contagion
 worries," he adds, warning that a spillover could a systemic threat even
 if limited.

The ECB's options are limited, he maintains. "Wherever they look, Cyprus
 and its European partners are running out of easy options."

Instead of stopgap measures, they must restore growth and jobs

In an effort to create that kind of growth, Cyprus President Nicos
Anastasiades plans to end the ban on casinos, reports the Guardian.

Gambling is legal only on the northern, Turkish side of the island.
 Anastasiades announced plans for tax exemptions on business profits
reinvested in Cyprus, encouraging landlords to reduce rents, encouraging
 banks to lend for longer terms at lower rates and reducing electricity costs.

Read Latest Breaking News from Newsmax.com http://www.moneynews.com/FinanceNews/El-Erian-Cyprus-stopgap-eurozone/2013/04/02/id/497414?s=al&promo_code=13024-1#ixzz2PQNZ7l3G

An Economic Lesson For The Ages

The following post is one of the best ones that we have seen  (other than ours, of course) which really tells the right story about the economy (here and abroad) and what we need to do.


We believe in the band-aid approach to economic troubles.  Better a short quick rough spot than a long, painful episode especially when we will end up in the same place.


The second to last paragraph should be reprinted and sent to every Congressman, Senator, the Fed and the President.  It should be the mantra of this and every following administration.


Let us know what you think.


Conservative Tom

Damn The Torpedoes
By:  Peter Schiff
Friday, June 8, 2012
Last week in an interview on CBS Network News, Economist Mark Zandi, the chief economist for Moody’s, unwittingly revealed a central error of the global economic establishment. Zandi has made a career out of finding the middle ground between republican and democrat economic talking points. As a result of this skill, he has been rewarded with large quantities of airtime from media outlets that want to appear non-partisan, despite the fact that his supposedly neutral analysis often leaves listeners frustrated.

When asked about the recent deterioration in the global economy, Zandi said that “the worst possible scenario” at present would occur if Greece were to leave the Eurozone. He claimed that the economic gyrations and liquidations of bad debt that would result from such an exit would be sufficient to create a vicious cycle that could drag the global economy back into recession. As a result, he urged policy makers to take whatever steps necessary to maintain the current integrity of the 17 nation Eurozone.

Given what most economists now know, few would actively argue that Greece’s entrance into the Eurozone back in 2001 was a good idea. In fact most concede it was a terrible idea based on bad forecasting and outright fraud. There is little disagreement over the fact that Greece grossly misrepresented its financial position in order to gain initial entry into the monetary union. It is also widely agreed upon that in the ensuing decade Greece exploited its monetary advantages to borrow irresponsibly.

Much has been written about how the fundamental misfit between Greece’s economy and currency gave birth to a deeply flawed system that was destined to run off the rails. Most also agree that the countries like Greece and Germany are too economically and culturally disparate to exist under the same monetary umbrella. But despite all this, Zandi wants to maintain the status quo. In his opinion, it is so imperative to prevent the deflationary consequences of an economic restructuring that it is preferable to prop up a failed system, perhaps indefinitely, rather than allow a newer, healthier system to replace it. In the process, the moral hazard created not only assures that Greece will become an even greater burden on Europe, but so too will other nations whose leaders will be emboldened in their profligacy by the anticipation of similar help.

From Zandi’s perspective (and he is certainly in the majority on this point) the goal of economic policy is to keep GDP growing. It follows then that he will oppose large-scale debt liquidations which drag down GDP in the short term. But sometimes debt needs to be liquidated. Bad ideas need to be abandoned. Once economies stop throwing good money after bad, capital is freed up to flow into more economically viable purposes. But economists and politicians never look at the long term. Their job seems to be to manage the economy for the next election.

The same “damn the torpedoes” mentality dominates economic thinking with respect to the U.S. economy as well. Years of artificially low interest rates, and government subsidies that direct capital towards certain sectors and away from others, has created an economy with too little savings and production, and too much borrowing and consumption. The ultra-low interest rates currently supplied by the Fed serve to perpetuate this unsustainable artificial economy. Higher rates would work quickly to redirect capital to the more productive sectors. But high rates could bring deflation and liquidation, which few economists are prepared to risk.

We have too many shopping malls selling stuff, but not enough factories making stuff. We have too many kids in college studying liberal arts, and not enough in the workforce acquiring skills that will actually increase their productivity. Banks are loaning too much money to individuals to buy houses, and not enough money to entrepreneurs to buy equipment. We have too many tax-takers riding in the wagon, and not enough taxpayers pulling it. The list is long, but the solutions are short.

We need to let interest rates rise to market levels, and allow the economy to restructure without government interference. We need to stop beating a dead horse and hitch our wagon to an animal that can really pull. The process will be painful for many, but like ripping off a band-aid, the pain will be over relatively quickly. However, since a painful restructuring means recession, politicians resist the cure with every fiber of their beings. So instead of a genuine recovery, one that will provide productive jobs and rising living standards, we get a phony recovery that produces neither.

Preserving a broken system merely to avoid the pain necessary to fix it only makes the situation worse.  Propping up sectors that should be contracting prevents resources from flowing to other sectors that should be expanding. Keeping workers employed in nonproductive jobs prevents them from gaining productive employment elsewhere. Encouraging activity or behavior the market would otherwise punish discourages alternatives that it would otherwise reward.

Unfortunately, leaders on both sides of the Atlantic put politics above economics, and economists like Mark Zandi provide the cover they need to get away with it.



This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Unported License. Please feel free to repost with proper attribution and all links included.

Germany Up Close

Will the Germans continue to prop up the Euro or will they pull the plug on the whole mess? In the following post Victor Davis Hanson writes an interesting article about the Germans and their attitudes.


We wonder out loud. Are we about to see a resurgent Germany that arms itself and financially takes over Greece, Spain and the balance of the Euro-zone? Could that result in a United States of Europe? Could Germany accomplish in the 21st Century which it failed twice to do in the 20th?


What do you think?


Conservative Tom





The Limits of German Patience
June 3, 2012 - 12:48 pm - by Victor Davis Hanson
   
(Cologne, Germany)

I’m still in Germany, and keep noticing a predictable, but continually interesting, pattern in talking to Germans of all walks of life — tourists, hoteliers, guides, drivers, casual bystanders, or students. When Greece comes up (or rather is brought up by Americans), there is a noticeable tension. Brows tighten. German smiles momentarily vanish. A second later a forced recovery and grimace follow, accompanied by a sort of pained EU propaganda speech, along the lines of “Well, yes, we all have to get along” or “We Europeans of the Union must work something out.” Then after the platitudes, we are back to silence and a look to see whether their constructed optimism worked on you.

The Scratched Veneer


But then if you press with a polite question or two — something like an innocent (or perhaps not quite so innocent) “But is it really true that the Greeks find ways to retire in their fifties while you work to 67?” or “How did those deficits get so big without being detected?” — the façade crumbles. Your German friend takes a quick look to the side, to see whether anyone is listening. And then in a quiet, but soon to be louder and finally animated voice, he starts in on the “EU racket” and “How in the world is Germany supposed to pay for all these freeloaders?”

In minutes you begin to sense that the entire cohesion of the EU is predicated now on two dubious premises. One, of course, is 70-year-old war guilt. I do not mean that in the logical sense as it pertains to the use of victimization by Mediterranean debtors (after all, how can once fascist neutrals like Spain and Portugal, or the successors of Mussolini’s Axis Italy, piggy-back onto Greece’s World War II suffering?). Rather, there is a larger guilt about the Holocaust, Hitler, and starting a war that ended up killing 50 million and, obviously, wrecking Germany (Germans like to point out the extent of the 8th Air Force’s and Bomber Command’s destruction along the Rhine, where 60-80% of some of the larger urban centers were destroyed.) War guilt, then, looms as the lever to pry out German cash, and after three generations the Germans are getting tired of it.

The second premise touches on a vaguer issue — the near admission that with a wink and a nod German companies and banks set up a sort of mercantilism, in which a Mercedes or Siemens found lucrative markets in Mediterranean Europe, got banks to back buying on time, and then sold things on credit to dubious government-sponsored entities and private corporations. After all, the Athenians had no business having one of the highest per capita rates of Mercedes ownership in Europe. Did Germans really think that siestas and 9 p.m. dinners led to prompt repayment of Audi and BMW loans?

No Players Left?

In other words, Germans seem to admit that they were playing poker with amateurs, that they knowingly took the players for a ride, and that they now find themselves with all the chips and no one anymore with the wherewithal to keep on playing. And yet they don’t think they can start over and divvy up the chips, not just because to do so would be to forfeit their winnings, but also because they suspect that the game would repeat itself identically every five or six years. They are right, which explains why the euro in its present manifestation is doomed, and why the Germans are exasperated for doing everything rightly that is now condemned as doing everything wrongly.

Worrywarts?

The EU crackup and the looming costs for Germany — are Germans to work until 70 or are they going to put off another bridge over the Rhine, or pass up building an autobahn? — seem to lead to other — how should I put it? — “exasperations.“ The Muslim population in places like Berlin and Cologne is growing and not being assimilated. Meanwhile, the good-life, statist Germans are shrinking and aging with one of the most depressing fertility rates in Europe. The angst grows because the Germans themselves brought Muslims in, kept them as permanent second-class aliens, and now are quite confused over their proper status — both not wanting them to become full Germans (there is still a word, after all, Volk, in their language, which, like Raza, denotes a solidarity beyond mere shared citizenship), and yet resentful of their chauvinism and often militant Islamism. As one of my conversationalists put it, “Oh yes, the Turks — how can their sons somehow afford our BMWs?”

Indeed, the list of other exasperations is growing. The once beloved United Nations’ UNESCO bunch is likewise picking on poor Germany by “red listing” some of their tourist treasures. Must Germans really tear down their new super-modern aerial tram over the Rhine — an engineering marvel which resembles a designer kitchen as much as a cable lift — at Koblenz, or postpone building high-rise office towers and apartments in Cologne just to ensure UN World Heritage status for their Rhine gorge castles or the cathedral at Cologne (e.g., “So an Iran or Syria is to be judge of our heritage?”)?

Then there is Angela Merkel’s proposed shutdown of Germany’s 17 nuclear power plants in the wake of panic about the Fukushima tsunami disaster. Once minor German concerns about geological fault lines and obsolete designs have now snowballed into a hyped-up nuclear terror (e.g., if the Toyota-building Japanese can have a disaster, then even the BMW-building Germans in theory could, too).

But from where comes the replacement electrical power? (The Ruhr today looks like Detroit and Cleveland should have.) There is still plenty of coal, but the green Germans pride themselves on being model globing warming alarmists. The German countryside is dotted with enormous windmills, but they seem to the casual observer to turn slowly, if at all. I have enjoyed about three or four hours of sunshine every other day, so I don’t think solar is going to save Germans from blackouts. In other words, Germans seem again agitated over their dilemma: the greenest of Europeans cannot survive through wind and solar power; their coal is politically incorrect; they have little natural gas; and now nuclear, which used to be a non-carbon, non-heating approved energy, is discredited. What is a good pan-European to do? Perhaps buy nuclear-produced electricity from a cash-hungry France?

Be Careful About What You Wish For

Another grimace comes from mention of their beloved Barack Obama. He too seems lately to be adding to German angst. Make no mistake about it and let me be perfectly clear, Germans, could they vote in the U.S., would reelect Obama by a wide margin. I’ll spare you the reasons (Bush comes up in the conversation, of course). But they are edgy with him nonetheless: Is it really a good time to be drawing down NATO and redeploying Americans to “Asia”? (As in “who will pay for our defense or ensure NATO solidarity as the EU unravels?”)

Resentments, or so Germans fear, are building against Germany and Germans themselves sometimes sound as if they fear their inner demons as much as do the French in the Alsace. Does Obama — “Polish death camps,” Austrian-speaking Austrians, Berlin Wall anniversary skipped, the old demand for speechifying at the Brandenburg Gate — appreciate the contours of Europe politics and the pretensions of the Atlantic Alliance? Germans assume that we Americans grasp their old postwar two-step that allows them to snicker about Americans (e.g., McDonald’s, Texas, George W. Bush, etc.) publicly and count on us privately. In sum, concerning Obama, there grows a flicker of realization that Germany proverbially should have been careful about what it wished for.

An Edgy Nation

Let me sum up. Germans are, just as the stereotypes go, thrifty, solvent, and an industrial people who played by all the postwar rules. To watch the Rhine is a dizzying experience as barges zoom by, as if on a three-lane highway, while rail cars roar in the background and the parallel autobahns are crammed, all beneath the steam stacks of the Ruhr plants. In comparison, California seems like it is in a slumber.

Germans rebuilt their country, renounced war and did not rearm, unified their bifurcated nation at their own cost, subsidized European development, were good EU and UN head nodders, are at the forefront of the green global warming cult, are rejecting nuclear power — and are terrified that they are unfairly not liked. I am not sure whether they are afraid that the world does not appreciate their efforts or that anytime the world does not appreciate German efforts, petulant Germans can become a bit scary to Germans themselves as well as to their neighbors.

I would be very careful to support Germany as much as we can in accordance with U.S. national interests. I would not, like Obama, encourage French-socialist calls for “growth,” which is a euphemism for inflating and stimulating European economies without commensurate structural reform at the expense of Germany.

I would also be careful about downsizing and redirecting NATO at a time when Germany has an anemic military and a growing list of envious if not angry rivals and former friends. I would cut Germany some slack (and I have been guilty in the past in print of not doing this) about its hypocrisies and strained multicultural internationalism, given its own psychological uneasiness about its past proclivities. And finally, at some point, cannot some American flat out state that it was Germany that worked hard, saved, invested, and prospered, and that is to be admired rather than caricatured and condemned? Texas is not responsible for California any more than Germany is responsible for contemporary Greece. An envious Europe seems to look at Germany the way that Obama has trained us to disdain those above the $200,000 in annual income Mason-Dixon line.

Yes, we might prefer to vacation in Florence or Santorini, but only because we are able to — given that there are for a while longer more wealth-producing Germanys in the world than there are wealth-consuming Italys and Greeces.