Tuesday, November 15, 2011
Fintan O'Toole -- dontja just love Irish names? -- persuasively explains why neither the fantasies of right nor left will save the European Union. Sadly, his own proposed solution is not as persuasive as his rather grim diagnosis.
Before you mock the European experiment, remember (i) it did foreclose a ruinous fourth war between France and Germany, and (ii) American prosperity depends on European prosperity, at least in the short term and at the margin.
The European experiment is irrelevant to putative Franco-Germanic wars. The peace was kept because the US and Russia put hugh armies into western Europe and American and Russian general actually controlled French, German, Italian, British, etc., militaries.
In fact, the European experiment was the creation of Washington, not Europe.
US (and Soviet) military presence was probably a necessary but not sufficient condition for an enduring peace in Europe. Economic integration was also necessary. Otherwise, once the armies pull out, war becomes inevitable again.
"(i) it did foreclose a ruinous fourth war between France and Germany, and (ii) American prosperity depends on European prosperity, at least in the short term and at the margin."
The first is an articles of faith with little to back it up. The second is probably true, but irrelevant.
For i, Germany was bifurcated until 1989, still a front-line in the winding-down Cold War until 1991, and sick from reunification until about 1999. So the realistic window for a "fourth ruinous German-French war" was about the last 12 years. And you would have us believe that the only thing that saved Europe from a war in this decade and some change was the Euro? How about the complete lack of a cassus belli? Gutted militaries? The pacifistic political leadership?
This is something that the Eurocrats are fond of saying, but that doesn't make it true. For one thing, you can't prove a negative, and trying to do so as your great accomplishment is pathetic. Secondly, the argument in proving the negative is a particularly weak one that relies on emphasizing history from 1870 (even though that war involved Prussia, not Germany) to 1940, but ignoring it from 1940 to 2010.
Concerning ii, I think it's so qualified that it is rendered meaningless. "American prosperity depends on European prosperity, at least in the short term and at the margin" basically says that 'American prosperity will stumble a little, in the short term, if Europe fails.' Which is true, but would also be true of Chinese failure, Canadian failure, Mexican failure, or any other major trading partner. In fact, it would be moreso for these three other examples, being more important to the US economy and all.
Personally, I would be all smiles if the EU fell apart. Most Europeans have been on a holiday from reality for decades, not even to be bothered to provide for their own defense. They've got a rude awakening coming to them.
And yes, that they've been reflexively anti-American for most of the years they've been sucking at our teat (from the Marshall Plan onwards) does play a role in my attitude.
Just saw this line elsewhere: What do you expect when Europe has a German Pope and an Italian Central Bank head?
If Europe was healthy, the dollar would be crashing. Rates would be higher. Big Ben couldn't enable our deficits as he's doing. So we want a sick Europe, but not a dead Europe, I suppose.
I understand how the EU could create a common currency -- you trade in your old currency for the new at a targeted exchange rate. But I don't know how you unwind the Euro. It's likely trying to do a divorce for a couple with very different earnings prospects that have run up more debt than either or both can afford. You need a bankrupty proceeding of some sort as part of it.
Most of the World's Big Banks are Dead Men Walking -- Zombies. We saw this movie before in Japan. Pretend and extend.
But I just read that the amount of global CDSs have gone up -- quite a lot actually. On current trajectory we'll soon hit a quadrillion. I don't believe I actually wrote that last sentence. I know that's "notional" not net, but if banks in the middle of this start doing an "MF Global" then it's not net, and "notional" becomes very real.
Is Fintan O'Toole married to Plenty? ba-dum ching!
Fintan writes: "The weaker members of the euro zone (like [Ireland]) will never vote to create a centralised technocracy whose only aim is to impose more and more austerity on citizens while forcing those same citizens to bail out banks." But that's what's on offer. Even if a deal gets struck now, it won't last. I expect that Ireland will lead on welshing on the deal that current politicians strike, because of its relatively young demographics. Ireland is a small nation, but this example won't be lost on the young elsewhere.