Monday, March 2, 2009

Euro Zone

Listening to Europe's leaders mumble about not going for protectionism makes me wonder just who they think they are fooling. France has a few billion to invest in a car company (the world needs more cars? No, France needs more employment), so France will spend that money supporting employment for Polish workers as opposed to say auto workers in Clermont Ferrand. makes sense to me, and apparently it makes sense to Carla Bruni's husband. Amazing stuff.
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The Germans are telling the world they behaved really well during the recent series of bubbles so why should they, who are blameless have to sort out the messes left by the people all around them who metaphorically locked themselves into concentration camps and economic strait jackets? Well, why should they? Perhaps because their economy is sinking just like ours is, and Japan's and Russia's and even China's is slowing down enough that people there are taking to the streets. Globalization has screwed us all.
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Like all crises this one has it's unintended consequences. You'd have thought that because the US started it with our profligate ways and our ridiculous consumer and credit culture we would be sinking down into the mire of a profound depression all alone. Countries like Ireland, thrifty, hard working little Ireland, and Russia loaded with capitalism and oil and gold, and Switzerland the poster nation for calm economic efficiency would all be buzzing ahead and making the most of our stupidity and failure. Instead everyone else is slipping off the economic cliff and here we are, strong currency and still the world's reserve money. Weird.
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It wasn't so long ago Iran was leading the effort to get the rest of the world to trade oil in euros, a notion that seems as quaint as trading in Austro-Hungarian Thalers, now that the euro zone has been thrown into chaos by the gnomes of unexpected consequences. Poland Hungary and the Czech Republic have sold mortgages at low interest rates in Swiss Francs and those nation's currencies, the zloty, the forint and the koruna have plummeted in value as the world crisis bit them in the butt. The problem is now they are all defaulting on those mortgages which have effectively doubled their house prices. Imagine the default rate in the US if all mortgages suddenly doubled in size! So those countries are leaving Switzerland gasping as those Swiss franc loans are now all but worthless, meanwhile Ukraine and the Baltic states have pulled the same number on the euro and Austria is telling Germany to pull their finger out and help.
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The Germans are reluctant to help, counting no doubt on stronger pleas to cement their position at the head of the Euro zone finally will step in to help, shedding the French and British as struggling co-leaders of the European Union, and leaving them in the dust of their own economic failures. I wonder though how Europe will reinstitute protectionism? As a response perhaps to US tariffs and barriers? Or out of humanitarian concerns for European workers? Who knows...The nub of it all though seems to be dragging us through the same debates and the same fears of the 1930's, this time with electronic chatter to accompany the crisis, but one has to hope, not to the same dreadful conclusion. The second war to end all wars was quite enough.

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