I have linked before to the magnificent economic analysis of John Mauldin – freely sent to your Inbox once you sign up.
We mere voter-taxpayer drones have no real idea of what is needed to save the Eurozone or indeed us, given the startling multi-dimensional mess the whole system has created. Suffice to say that those who got us into the mess want to be given even more powers to sort it out. We are at the edge of disaster – let’s take a very big step forward.
Check out by contrast this latest Mauldin piece which has vivid graphs as well as powerful words, arguing powerfully that the contradictions are too large to be manageable, and that the latest moves to ‘help’ Spain’ make it all worse:
Germany has two very bad choices. It can finance the multiple trillions of euros of debt of Spain and Italy (and France), converting it into eurozone debt, while giving up its own fiscal sovereignty and allowing a eurozone-wide fiscal union and taxing authority; or the Germans can spend trillions of euros allowing the eurozone to break up, either by exiting themselves or allowing the southern countries to exit.
If the problem is a structural lack of competitiveness between the Dumplings and the Olives, does striving even harder to keep them under one roof really help? No, it doesn’t.
I also previously have linked to hyperactive Leftist Richard Murphy, someone whose views help shape ours – always do the exact opposite of what he suggests. Here he is calling at vast length for banks to be nationalised:
The third part is a simple one, which is that the government issuing the bond has to take over and manage the bank to ensure that its solvency and liquidity are managed within these constraints.
This means nationalisation; nothing else will do. Banks cannot be allowed to continue under their own management with a pretence that they are still under private ownership when quite clearly they failed and can only survive with state aid. That means that those needing bail out need to be state controlled, and those that aren’t have to be heavily regulated to make sure that they do not abuse this situation, which would be all too easy.
What is baffling about everything he writes is the way he fetishises the State. What does he think the State actually is? Who is in the room when ‘the state’ takes decisions? And who is deliberately left out?
Dominic Lawson reminds us why precisely Spanish banks are in such a mess:
At the heart of the crisis were the financial institutions known as cajas, regional banks whose boards were stuffed with political appointees and which were expected to fund construction projects to bring lustre and kudos (and jobs) to the communities they served.
As Alvaro Anchuelo, an MP for the small Popular and Democratic Union party, remarked, "The use of cajas as the banks of regional governments is part of the origin of the problem. They used them to finance airports with no flights and theme parks that failed." Naturally, the big political parties, both on the left and the right, involved in using the money of unwitting bank depositors to buy votes are desperate to stop the full story from emerging. Attempts to set up a formal investigation into Bankia have been blocked in the national parliament…
It would be easy to dismiss this kind of pork-barrel banking as a phenomenon peculiar to Spain. Yet the whole sub-prime fiasco, from which the credit crunch and recession derived, was to an extraordinary extent the consequence of American banks and financial institutions lending according to the dictates of politicians, who themselves justified this by the claim that they were making the banks act in the general good…
Exactly.
The main risk now is that Europe’s political elite will do whatever it takes to keep the dysfunctional system they created staggering on, long beyond the point where that makes sense. Playing among themselves a deadly game of chicken.