The Other I

November 13, 2011

Is it terminal?

Filed under: The Economy: a Neophyte's View — theotheri @ 3:54 pm

I don’t have the feeling that most of the people who read this blog have a wild interest in the fate of the euro.  I am also aware that more informed minds than mine are writing about it every day.  So my own thoughts are hardly a font of wisdom.

But I’m mesmerized.  And I’m far from indifferent.  Watching the gyrations of the euro’s fortunes is like watching a patient with a long-term and very serious illness.  The doctors keep coming up with one more treatment that everybody thinks might work, or might at least give him a little more time.  He – that is, the euro –  has good days and bad days, but all the time looms the terrifying possibility that it might be terminal.

It’s like reading a Russian novel by Dostoevsky.  Or it reminds me of the accounts I have read of nobility dancing and drinking together in 1914 days before World War I exploded.

People – even here in England, though fewer perhaps than in America – think “what does Greece have to do with us?  let them default and get on with it.”  Italy may bring about just a little more concern, but it’s still pretty remote:  “they’ve always overspent..”   “Those southern European countries are all like that…”

But it does matter.  It matters terribly.  But over here just as in the States, the politicians seem incapable to grasping the nettle.

The issues are the same, too.

There are those who say the solution lies in cutting  government programs we can no longer afford.  On the other hand, there are those who say they are not the ones who caused this mess and that their benefits, their pensions, their salaries should not be cut for the sake of the mythical 1% who caused this problem but escaped with their fortunes in tact.

There are those who say that taxes should be cut to stimulate the economy, and those who say they should be increased, preferably on that wealthy 1%, to pay down the deficit.

The only country that has the economic power save the euro, even short term, is Germany.   But Germany is not eager to bail out spendthrift countries like Greece and Italy and Spain and Portugal.

Yet if Germany will not guarantee their debts, those countries will default, the Germany currency (whether it is still called the euro or returns to the deutschmark) will become so strong that it could ultimately cripple the Germany economy which is dependent on its exports.

Even worse, the defaults of so many sovereign countries in the European Union could make the global banking collapse following the fall of Lehman Brothers in 2008 look like child’s play.  Even American banks are unlikely to be ring-fenced.

It is not fanciful to consider that the global economy might plunge into another Great Depression that we cannot dig ourselves out of.

The terrifying thought is that it was the huge government spending stimulated by World War II that ended the last Great Depression.

So can I do anything about it?  Absolutely not a thing.

I’m beginning to understand why Nero was fiddling like Rome burned, and the nobility were dancing in 1914.


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