ARmy Rumour SErvice

**armchair_jihad** · 20-11-2011, 03:49

Thanks for posting that John he is a firm favorite of mine and I think he is right a number of the non Eurozone Countries will withdraw, Denmark certainly and hopefully the UK.

Here's another article that struck a few chords.

“The prospect of one or more countries leaving, or being forcefully ejected, is now very real, whether you like it or not, so we should face reality, take the decision, prepare for it now, and do what we can to manage the transition, rather than enduring the horrendous consequences of a market-imposed outcome”.

This is the conversation, the tortured debate, now taking place among policymakers, financial analysts and, increasingly, the general public, across Western Europe. Nowhere is this ghastly dilemma - tough-it out, or move to a smaller, more stable eurozone - more keenly felt than in Germany. While Chancellor Angela Merkel instinctively supports the “European project”, she also needs to placate an increasingly restive electorate. Berlin doesn’t know what to do.

The world’s financial markets, the British and American governments, and practically every non-German eurozone politician, are united. They’re watching and waiting, convinced that Merkel will eventually relent. Should Germany sanction the European Central Bank to guarantee the sovereign debts of all and sundry, with “printed money”? Global equity markets would certainly rally if so, at least for a while. And eurozone bond yields would fall. Taking this route would contravene European Union treaties, as Merkel well knows. Far more importantly, once the ECB has bailed-out profligate governments once, the same countries will over-borrow all over again a few years down the line. The markets will eagerly lend to them too, such loans combining a lucrative yield with a de facto ECB guarantee.

The job of any central bank, the ECB included, is to act as “lender of the last resort” to commercial banks in its jurisdiction that are solvent, but in need of temporary liquidity. Central banks aren’t meant to dish-out free money to governments that have spent themselves into insolvency. “Moral hazard” isn’t some kind of intellectual indulgence. It’s a stark fact of life, a reminder that actions have consequences and those consequences can’t be ignored.

What’s probably uppermost in Merkel’s mind, though, is that allowing the ECB to let rip, buying-up eurozone bonds with abandon, while back-stopping the European Financial Stability Facility with credits created ex nihilo, would be electoral suicide.

Germany will give eurozone QE the nod, the argument goes, if proper safeguards are put in place. From now on, Berlin can get in the face of less prudent governments and, suitably revised EU Treaties in hand, prevent profligate “Latin” governments from flouting the eurozone’s spending rules. For many, this is a more likely, and far more desirable outcome than a break-up. The deal will be that Berlin accepts full-on ECB debt monetization and, in return, a German-directed fiscal union will be created, with powers to raise taxes, make large-scale transfers between countries and issue joint eurobonds. I appreciate that we’re all sick and tired of financial turmoil. I also accept, given that I’ve been making the argument for my entire adult life, that “fiscal union” is the only economically coherent system under which the eurozone can possibly survive in its original form. I’m starting to lose patience, though, with those who expect to be taken seriously when they venture that such an arrangement can actually be implemented in Europe.

Greece is a democracy. Spain is a democracy. Italy is a democracy. France, the world’s fifth-largest economy and one of the most powerful countries on earth, is a democracy - and a pretty feisty one at that. Are all these countries, their electorates supplicant, their future politicians content, really going to subscribe to and live under, for decades to come, a system based on Berlin telling them how much they can borrow and spend? Anyone who thinks that such a situation is sustainable needs to examine not only a few history books, but also their conscience.

For the reality is that “fiscal union” is being touted as a solution by those who are desperate to convince themselves, and everyone else, that Germany will ultimately fire-up the ECB’s virtual “printing press”, so sparking the mother of all year-end relief rallies. Let’s say that Merkel does crack, and takes the monetization route, with Germany laying-down terms to the eurozone profligates. Such conditions would need to be non-negotiable and loudly stated, so as to placate an outraged German public. What then? How long before southern European leaders start routinely blaming “the Germans” for domestic woes? How long before new, more extreme politicians come to the fore, pandering to base human prejudice? How long before a system that’s supposed to promote free trade and European co-operation ended up, instead, promoting protectionism, hatred and conflict?

These are the questions that the cheer-leaders of “fiscal union” need to answer. Such a system can theoretically be imposed “by Treaty”, but if it is, then its backers must be prepared to do what it takes to suppress democracy. “Fiscal union” advocates will also need, when the time comes, to send out the eurozone riot-police. Voters get angry, and sometimes violent, when their own politicians let them down. But when they feel controlled and humiliated by foreigners, they become totally enraged. That, I’m afraid, is the undeniable lesson of history.

Maybe Merkel will attempt to “muddle-through” - printing a bit here, a bit there, trying to keep it all under wraps. If so, she will learn that the status quo really isn’t an option. The euro in its current form is incendiary and explosive, a macro-economic weapon of mass destruction. It simply must be defused.

In full

The euro is a macro-economic weapon of mass destruction - it simply must be defused. - Telegraph

**nanotm** · 20-11-2011, 08:46

sarkozy wont fail untill after he has handed full control to Brussels, i think the same can be said of most european governments, either the elections will be rigged and the right people will win or they will declare some sort of emergency and cancel them, the frogs will do what they always do, stand on the orner wrapped in strings of garlic and onions touting cheese with awhite flag in hand.

hell ther political system waves the flag everytime anyone protests for more than a day, they havent learnt since the major capitulations they made in WWII and continue to purpetuate the same misstakes on the grounds that having weighed up the needs of the many and in order to ensure there protection from harm surrender is the best way.... never once have they stuck to there guns and done anything that a few people find objectionable

**alib** · 20-11-2011, 09:33

Originally Posted by nanotm

sarkozy wont fail untill after he has handed full control to Brussels...

Looking at his numbers Sarko is out this spring. Lord knows why (well a comparison Berlusconi does make him look good) but he's actually had a six point bounce over his handling of the crisis but that still leaves him 22 points behind the opposition.

**Boldnotold** · 20-11-2011, 09:41

So time for Britain to take the lead, leave the EU, and start a Trading Bloc?

Maybe we could call it EFTA?

Rustles very old copy of newspaper and says 'Harumph'.

**bokkatankie** · 20-11-2011, 09:43

Originally Posted by Boldnotold

So time for Britain to take the lead, leave the EU, and start a Trading Bloc?

Maybe we could call it EFTA?

Rustles very old copy of newspaper and says 'Harumph'.

Commonwealth will do just fine.

**Balleh** · 20-11-2011, 15:08

Interesting article by Alasdair Palmer in the Telegraph, especially the bolded para

"There has been a fundamental change in the way the European Union is thought about – and the change has happened not just in Britain, but across all member states. A decade ago, the almost universal assumption was that “ever closer union” was inevitable: the tide of history was pulling inexorably in that direction, because the world was coalescing into vast political and economic blocs – of which Europe was one.

To mourn the passing of individual European nations as significant political entities was futile: the equivalent of army officers lamenting the passing of the cavalry charge in the age of the machine gun or the tank. The movement towards a united Europe was simply a fact – so we should stop whining, and get used to it. Nations, such as Britain, that held out against the euro for reasons of pure sentimentality, would sooner or later join in the project that would bind all of Europe’s nations together irrevocably.

The “tide of history” argument wasn’t founded on reason or evidence, but it had a peculiar power. People were genuinely frightened about being left behind. And it is the collapse of that fear that has done more than anything to transform the terms of the debate about Europe – not least because everyone now is a lot more frightened of being stuck inside the euro, despite the German finance minister’s claim last week that every EU country secretly longs to join it.

As the daily demonstrations and riots in Athens show, Greece’s voters – though not yet its political class – have come to the conclusion that their membership of the euro now means their impoverishment, and their subservience to a programme of ever-greater austerity imposed by Eurocrats whom they cannot hold to account. Political parties in Holland, Finland and Austria – all founder members of the euro, and all with strong economies – are openly wondering whether joining wasn’t a colossal mistake.

In Holland, the party that favours a referendum on continued euro membership is crucial to the survival of the coalition government, so it may actually force the issue. In Austria, the Freedom Party, which advocates pulling out of the single currency, is running neck and neck in the polls with the ruling Social Democrats.

The fate of the euro now hangs on whether the German government is prepared to break the laws under which the European Central Bank was set up, and allow it to print money to bail out the bankrupt members, such as Greece. David Cameron last week urged Angela Merkel to take that step: he thinks it is the only way to save the euro, and it will be much worse for Britain if the single currency breaks up. Mrs Merkel thinks that printing money can never solve an economic problem, and will only lead to runaway inflation. She wants to impose Germanic fiscal rectitude on the rest of Europe. Just don’t ask her how.

Cameron and Merkel’s disagreement mirrors the split between Europe’s politicians and economists – and that in itself is a major change from the old situation, where “ever closer union” was taken for granted as the only solution to Europe’s problems. The cracks in the euro have created fissures in the whole project of integration.

Once the euro is seen to be based on the fallacy that all of Europe’s economies are fundamentally the same, it is a very short step to thinking that it is a mistake to try to make them all operate in the same way, according to regulations made by a central bureaucracy that cannot be accountable for its decisions by the nations that are subject to it.

Why not, then, replace the EU with a looser free-trade union, which does not aim to make all its members act in exactly the same way, but simply to trade with each other on a reciprocal basis? That question may end up being fatal to the Eurocrats’ ambition to create a United States of Europe – and the poison may be administered more rapidly than anyone expects."

**Brotherton Lad** · 20-11-2011, 19:00

Originally Posted by bokkatankie

How would he know he does not read the media. He gets all the information he needs from the Technocrats (love that word, wonder what it means).

It's a modern word, 1940s, I think. Greek kratos means power. Teknika originally meant art, but these days means science. A technocrat is someone who rules by science, in this example, by a technical knowledge of economics.

Same with democracy (rule by the people), autocracy (rule by an individual), bureaucracy (rule by officials), theocracy (rule by religion), meritocracy (rule by people's merits) und so weiter ad infinitum.

**bokkatankie** · 20-11-2011, 21:01

Originally Posted by Brotherton Lad

It's a modern word, 1940s, I think. Greek kratos means power. Teknika originally meant art, but these days means science. A technocrat is someone who rules by science, in this example, by a technical knowledge of economics.

Same with democracy (rule by the people), autocracy (rule by an individual), bureaucracy (rule by officials), theocracy (rule by religion), meritocracy (rule by people's merits) und so weiter ad infinitum.

So the Nobel prize winners who formed LTCM were technocrats. One could argue, and I do, that the bail out of LTCM is the root cause of the trouble we are in today. But I am merely a person and have no crat credentials.

**nanotm** · 20-11-2011, 21:32

Originally Posted by Brotherton Lad

It's a modern word, 1940s, I think. Greek kratos means power. Teknika originally meant art, but these days means science. A technocrat is someone who rules by science, in this example, by a technical knowledge of economics.

Same with democracy (rule by the people), autocracy (rule by an individual), bureaucracy (rule by officials), theocracy (rule by religion), meritocracy (rule by people's merits) und so weiter ad infinitum.

isnt it ammusing how economists always seem to be the root cause of any form of finacial crisis, and far from accepting the idea that they got it wrong or there ideas are wrong when theres a hope of fixing the problem they resist any posibility that there knowledge and learing might just be flawed untill its too late to do any thing but mop up the mess caused by them, then they continue on wiht there own wooly mindedness untill such point as another crisis apears and again they completly fail to acknowledge the real fix untill the point of no return has past and there able to look back and write up a really nice lessons learned thesis, and continue on normal jogging without ever aknowledging they got it wrong,

to me an adviser of any sort that by trade description cannot admit fault is worthless and should be ignored at every turn, funny how the common man percieves thease godlike entities who seem to be continuously averting global meltdown caused by them or there collegues in a sister administration.

i gues they all skipped the exit strategies lectures in buisness studies

**Brotherton Lad** · 21-11-2011, 08:14

I reckon the teknika of economics remains an art rather than a science. Ask 3 economists how to fix a problem and you'll get 5 different opinions. That's because politics and human psychology are all thrown into the pot.

We are all a part of the problem. LTCM is simply a symptom, not the cause.