Agorocracy vs. Democracy

Four years ago (June 2010), I was pointing out how Agorocracy vs. Democracy were fighting it out in EUrope and the world. How the financial system had gone out of bounds compared to other aspects of our lives. Since then, 44 months have passed. The speaker has slimmed down (see video) and so have the budgets of Greece, Spain and other troubled Euro member states.

Cyprus banks got a haircut last year.

But what is the state of the competition between Agorocracy and Democracy today, February 2014?

Merkelian logics

Merkel's Euro policies qualify for a saying: It's all German to me (compare with the origin of the original saying).

In other words, "Europe" is not "speaking" German, as Volker Kauder of the CDU hoped/argued/boasted at a CDU conference one year ago.

Note: He meant German (CDU) policies not German per se.

Btw, Merkel today said that she does not rule out another CDU-SPD coalition after next year's elections. With FDP doing the way it is, of course not.

Why a single market needs a single currency

Tonight I found out my debit card give me 75 BP for 100 Euros. Not as bad as 70 I got elsewhere but some Oxford St tourist shop give me 80 and a well known department store 82!

That means 750 vs 820 BP per 1000 Euros, or 70 BP per 1000 Euros or 7%. That's 1.333 Euros per BP. Compare with central rate!

That is why a real single market - space also needs a single currency. The rest is hot air. Europe, unite or let yourself decay!

If some in the Eurozone did not suffer from inflation phobia

Maybe one needs to remind Mr. Axel Weber and Mr. Jens Weidmann that if the Trichet led ECB hadn't driven Euro systemics/dynamics out of whack due to inflation phobia ie a 2% inflation target, bond purchases would not be needed today by the Draghi led ECB, would they? What the Eurozone really needs is softer Euro to stop flood of imports & promote exports plus a more realistic EU trade policy (which German mega exporters don't want,do they). Otherwise sooner or later even Germany will have to adopt India/China wages to survive. Good luck with that. Greece and other PIIGS merely Ein Experiment.

When you find 100 Euros worth 70, 75, 76 and 80 BP around London

When you find 100 Euros worth 70, 75, 76 and 80 BP around London on same day, you realise the need for a real single currency, not a CBs one

When will Europe start "thinking" European?

The way for "Europe" to survive is to stop "speaking" German, French or UK and start "speaking" (ie thinking) "European". Til then, pain. Lots of "Tough Love" to EUropeans by German, French and British elites. Until Europe decides to think European, instead of that. Again, the euro was supposed to help Europeans live, work and trade across the EU/EZ not become a power toy for CBs, fins, politicos, elites. So what Europe needs is a euro currency by the people for the people, not by banker/fins for bankers/fins.

The Euro was supposed to ...

The Euro was supposed to help intra-EU trade (EU Single Mkt).

Instead, it became a toy for CBs, MInFins (bonds etc) & fin speculators

What some people don't seem to get re the hard Euro

In the years of the hard Euro, ie when the Euro was (until relatively recently) quite high compared to the USD, the Yuan and other currencies of major trade partners (and tourist origins eg USA),  that  suffocated much of EZ business because it not only had a hard time exporting to non-Euro markets but also faced (when eg Euro was 1.4 or 1.5 USD) more fierce competition inside the Eurozone and even their own "national" markets.

So while interest rates for Eurozome member states were lower than past thus allowing them to borrow more (via sovereign bonds) than the pre-Euro years, they were still high enough (in order to stick to the 2% inflation target of the then ECB directorate) compared to US, UK and other central bank interest rates, for the Euro to be expensive Euro vis-a-vis USA, China, etc.

So while the budgets of Euro member states benefited from cheaper money, and maybe companies too, the price competitiveness of many Eurozone businesses (including tourist ones) took a severe, IMO, beating.

Guess whom (which country) I have in mind today?

The Eurozone's hard Euro policy (explicit or implicit, as a result of inflation "phobia"  thus interest rates higher than UK and US that pushed the Euro up) benefited a lot of non-EZ and lots of non-EU countries' exports! Even "spoiled" some of these countries' exporters and leaders.

If the Euro had remained within a 1.0 and 1.2 USD range in the last 10 years, ...

If the Euro had remained within a 1.0 and 1.2 USD range in the last 10 years, what would the situation in the Eurozone today be?
(food for thought, contact me to discuss)

PS. It was supposed to be a Euro not a EuroDM (see eg inflation policy)

What does Europe really need?

Food for thought:

Many, among them George Soros (see eg "We need to do whatever we can to convince Germany to show leadership and preserve the European Union as the fantastic object that it used to be. The future of Europe depends on it", June 2) and  Charles S. Maier (professor of history at Harvard, "Europe Needs a German Marshall Plan" New York Times, June 9)  have called on Germany and its PM, Anglea Merkel. to "save" the Eurozone and even the EU. The latter even suggests a German Marshall on Europe.

But as Soros points out in his Trento speech/comments )see link above) the Euro crisis started with a flawed EMU design in the Maastricht Treaty (for which he blames the "center" of Europe as opposed to the "periphery")and adds this crucial comment: "The first step was taken by Germany when, after the bankruptcy of Lehman Brothers, Angela Merkel declared that the virtual guarantee extended to other financial institutions should come from each country acting separately, not by Europe acting jointly".

As he points out, "it took financial markets more than a year to realize the implication of that declaration, showing that they are not perfect".  That Merkel pinpointed the flaw and limitation of the Maastricht based Euro and EMU.

I would add that Merkel's behaviour in the last 2-3 yrs has turned European political union from a difficult to an impossible mission.

So which are the key elements of a solution to the European predicament?

a) The austerity road? Fewer and fewer yet still many think so.
b) A German Marshall Plan on Europe?
c) An orderly termination of the Euro project, possibly with the beginning of a political union project that may or may not include Germany (a political union of the willing and able (in terms of national Constitutional constraints) not necessarily the same 17 as the Euro, after all such a political union would not include a common currency at first, not until full union was established and working)?

If we accept the premise that the Euro was working until Merkel burst the bubble of a flawed Euro architecture with her post Lehman comments, then maybe, I say, what is needed the most is neither austerity not money or unrealistically urgent (if not clumsy or even barbaric) "structural reforms" in the labour markets etc (economic cold showers for the ordinary people, while popular with many economists and policy makers, can be viewed as a form of "torture") but a concrete affirmation of unity of Europe, the one that Merkel may have burst with her post Lehman comments Soros refers to or Merkel's "micromanagement" of the Euro crisis that inter alia alienated The Greeks and many other Europeans, thus making a political union a near mission impossible (while I( argue, before that, it was difficult already).

What would constitute such a re-affirmation though?

That is Europe current 10 trillion plus survival question.

The Euro was meant to ....

The Euro was meant to facilitate the Single Market for goods, services, work,

Instead it's been destroying it since almost the start.

Eurozonology: The Eurozone is a system where ......

What was the reason of the creation of the Euro? To facilitate intra-EU trade.

The Eurozone is a system (game?) where 17 European economies try to trade with each other and mostly the Germans. the Americans and the Chinese win!

If the Euro had remained below 1.1 or 1.15 USD in 2002-2009 or even better, 2002-today what would the Eurozone real economy be like today?

Euro myths busted!

In the past 2-3 weeks but especially the past few days, popular (and populist) Euro stereotypes of the last 2+ years have been falling like the deck of cards they really were! Myths busted!

Whatever happens on May 6, they will always have Greece

According to Wikipedia, a "work spouse" is a co-worker, usually of the opposite sex,[1] with whom one shares a special relationship, having bonds similar to those of a marriage (but platonic).

By analogy, the relationship between Angela Merkel and Nicolas Sarkozy could be called "political spouses" or "Euro-spouses".

And if Sarkozy emerges non-victorious on May 6 at the sec9nd round of the French Presidency elections, the two will always have Greece (not sure what Greece thinks of that though).

Yet for those who monitor European, EU and world affairs (what a choice of terminology!!) this Euro  political love affair and "marriage" seemed as plausible as Greek growing by 20% next year, only a few years ago. I can still recall the press reports on how Angela Merkel, always wanted to be prepared at meetings etc, could not tolerate Nicolas' brainstorming style, and neither did her "court".

So many press reports on how much they could not stand each other. And then, political Eros (aka Cupid) striked! Maybe it was Greece that brought them together. Frankly, I cannot recall when the thin line into love was crossed.

They do not call it EU Affairs for nothing. But one of the morals of the story, IMO, is that EU affairs, like romantic affairs, can be unstable.

Nick and Angie will always have Greece. Hope that Greece will not always have austerity though.

People in glass economies should not ....

People in glass economies should not throw stones at Portugal, Spain, Italy and Greece.

Euromyth busting: It's rich for an economy to sit pretty in between 3 mega markets, piggyback on them and then boast how competitive & hardworking it is (when it is pretty high in the OECD list of least hours worked per worker).

How would that economy "perform" if it was in the geo position of Greece or Portugal?

Dynamics: Nothing to fear

A friend sent me a "Merry Crisis and a Happy New Fear!" season's greeting!

The more we believe that a crisis exists the bigger the crisis becomes. That's the nature of social systemics & economics and finance are social sciences!

We do indeed have nothing to fear but fear itself in these crisis dynamics and aura. They are counting on our fear, they are promoting it, they are amplifying it, to benefit their goals.

Euro reminders and solutions

Reminder: The Euro was created to promote intra-EU (intra EU Single Market) commerce & activity in general, not to become a tool for power games.

Reminder (2): The Euro was not created to make Euro members' exports and services like tourism less competitive & Japanese, US, Chinese etc imports more competitive.

Yet the obsessive pursuit by the ECB of the 2% inflation target led to high central interest rates that led a Euro that spent much of the decade at exchange rates that suffocated most if not all of the Eurozone economies.

So some members did benefit from lower rates in their sovereign bonds etc but the effect of the expensive Euro on Eurozone firms, exporters and services such as tourism was a heavy price to pay.

So are "internal devaluations" or even exit the solution?

IMO, No!

The solutions package should include:

a) Immediate: Banning of CDSs (Credit Default Swaps) on sovereigns and of any other speculative tools on sovereign debt (bonds etc). Requires political will by the EU 27 as well as the G20, or the kind of will that is also required for dealing with the issue of tax heavens in Europe and globally.

b) Immediate: An ECB inflation policy that takes into account the effects of the central ECB rate to the Euro exchange rate vis-a-vis the USD, the Yuan, the Yen and other currencies of the EU's main trade competitors.

Inflation curbing in the Eurozone and the EU can be achieved via more dynamic implementation of EU competition law and a much more effective approach towards a real EU Single Market (too many barriers still exist).

c) ASAP: A move to not just fiscal but full political union, that will include inter alia single laws in most if not all areas of policy, to facilitate the micros and SMEs as well as the average citizen.

I am not impressed by alleged 2 speed Euro "theories"

The alleged Merkel-Sarkozy plans for 2-speed Europe or Euro do not impress me.

Why?

They cannot change the EMU part of the existing EU Treaty (via a so called IGC - Inter-Governmental Conference) w/o giving in to Cameron's demands for "repatriation" of certain competencies from EU back to national (or just UK) level!

1) If they offer Cameron what he wants, then other EU members, eg one of the other 9 outside the Euro, but not anti-EU, may raise a veto, ie veto the whole IGC agenda.

2) If they plan a Treaty that works outside the EU Treaties (in a format similar to the original Schengen way/model), then the contents of such Core EU/Euro Treaty can it seems to me can only add, not amend, articles of the existing EU Treaty.

Hence there is a Catch22 of sorts.

So what on Earth are (allegedly) Merkel and Sarkozy talking about?

In an IGC, be it EU or Euro one (see above), all will have to agree, not only Merkozy & "German thinking" others!

Bottom line: Euro membership was/is irreversible, those who do not get that are the ones in denial of legal, technical and other factors!

In speech in Strasbourg, Sarkozy called such plans a mere "intellectual exercise". IMHO they are not a trick. They are just that. Nothing feasible about them.

Zeus, Ulysses, Pericles, Merkel and central bankers

Read below my comments on "Modern Greece’s real problem? Ancient Greece" by George Zarkadakis in The Washington Post.

I disagree with most of the points of the article/opinion by Mr. Zarkadakis.

IMO the paradox is that Zeus and other Greek gods and goddesses, legends such as Ulysses and Achilles, real life ancient Athenians and mostly politicians even of the Pericles era would probably be considered more "unruly" and "less EUropean and EUROpean material/stuff" than modern Greece/Greeks, in the eyes of "purists" (to say the least) such as A. Merkel, central bankers, conservative US and European media, etc etc etc and of course "some" modern Greeks.