Furthermore, when I finally got to see Europe for the first time in 1970, much of the physical War damage had been rebuilt and so a city like Stuttgart (which was 96% destroyed--39,000+ buildings--by the spring of 1945) was this ultra-modern city with a lot of very new buildings. The lesson I learned was not so much about the horrors of war, but of the resilience of the human spirit.
And then there was this matter of scale. By 1970, I was already quite aware that huge countries like USA have their own set of problems caused simply by their large size. (For example, I grew up in a home where my folks would often complain that sharing the federal government with those backward southerners kept the nation from reaching its full potential--at least by the standards of Minnesota progressives.) So I was prepared to be impressed by small countries--and I was. Their young citizens usually spoke many languages and were very curious and knowledgable about the world outside the borders of their own countries. This stood in marked contrast to the typical USA-educated student who rarely spoke more than one language and rarely knew about anything that had ever happened outside USA.
So my initial conclusion about the European experiment in union was--it sounds like a fine idea but you Europeans should be damn careful that you do not lose the advantages of a smaller / more easily governed country where cultural norms can often substitute for actual laws. So over time, I mostly applauded from afar every success at European integration because I figured the folks who wished to avoid WW III were probably on the right track.
Until Maastricht. The idea of a single currency stank of failure from the first moment it was mentioned. If ever there had been a complete capitulation to a bankster agenda, this was it. And because it was 1992, the Maastricht Treaty was larded with all sorts of monetarist / neoliberal language. Example:
The Maastricht criteria
The Maastricht criteria (also known as the convergence criteria) are the criteria for European Union member states to enter the third stage of European Economic and Monetary Union (EMU) and adopt the euro as their currency. The 4 main criteria are based on Article 121(1) of the European Community Treaty.
1. Inflation rates: No more than 1.5 percentage points higher than the average of the three best performing (lowest inflation) member states of the EU.
2. Government finance:Annual government deficit: The ratio of the annual government deficit to gross domestic product (GDP) must not exceed 3% at the end of the preceding fiscal year. If not, it is at least required to reach a level close to 3%. Only exceptional and temporary excesses would be granted for exceptional cases.Government debt:The ratio of gross government debt to GDP must not exceed 60% at the end of the preceding fiscal year. Even if the target cannot be achieved due to the specific conditions, the ratio must have sufficiently diminished and must be approaching the reference value at a satisfactory pace.
3. Exchange rate: Applicant countries should have joined the exchange-rate mechanism (ERM II) under the European Monetary System (EMS) for two consecutive years and should not have devalued its currency during the period.There it was in black and white--the rule of the moneychangers had been written into a treaty that foreclosed on any economic strategy that had ANY chance of bringing prosperity to anyone but the moneychangers. Flash forward to 2011 and we can see the economic catastrophe that was the inevitable outcome of that fatally flawed document.
4. Long-term interest rates: The nominal long-term interest rate must not be more than 2 percentage points higher than in the three lowest inflation member states.
Fighting (for?) Europe
How European Elites Lost a Generation
The European Union is in bad shape. Not only is the common currency in a shambles and the economies of many member states moribund, but young Europeans no longer see how the EU helps them. Millions of them are taking to the streets to demand a future. By SPIEGEL Staff 06/23/2011
When Kostas Dekoumes, a 24-year-old Greek, is asked about Europe, he launches into a rant about German Chancellor Angela Merkel. When Oleguer Sagarra, a 25-year-old Spaniard, is asked the same question, he says that Europe represents the only chance to find work. Karl Gill, a 21-year-old Irishman, responds to the question by railing against the banks.
And when Jacques Delors, 85, is asked about Europe, he says things like: "Europe needs a pioneering spirit," and he asks: "Do the men and women of this era truly want this Europe?"
Delors, together with former French President François Mitterrand and former German Chancellor Helmut Kohl, was one of the driving forces behind the European Union, and under his leadership as president of the European Commission, treaties were signed that would be impossible to forge agreement on today.
Delors represents a time when Europe inspired the imagination of statesmen. The goal was to secure peace in Europe and prosperity for the continent's poorer countries including jobs, education and justice. Europe was a promise. When Kostas Dekoumes, Oleguer Sagarra, Karl Gill and hundreds of thousands of other citizens protest in the squares of European cities, it is to demand that governments and politicians make good on this promise. In their opinion, Europe is in the process of making them poor . In response, they are speaking out and exerting pressure on their governments, just as the financial markets are doing.
A Look at the Zeitgeist
When Delors, an elegant man with a soft face, worries about the common European currency -- a monetary union which in recent months increasingly resembles a teetering house of cards -- he talks about the debt crises of individual countries, and he says that the markets are testing the EU "because they are convinced that it is not capable of taking action." All of this is very disconcerting, says Delors, but it isn't the real reason for the scope of the crisis.
"We are talking about the Zeitgeist, aren't we, about the 'mood'?" says Delors. By that he means that two crises are unfolding at the same time in Europe today. On the one hand, there is the debt crisis faced by individual nations. The second crisis, and the more dangerous one, is a crisis of meaning. Do Europeans -- the citizens and their political elites -- even want the historic project of a European Union anymore? moreWhat is so bad about this is that lives of serious young people who only want a job and the possibility of a life are being crushed to maintain an insane lie.
Bankers and Fools
Robert Bonomo, Contributing Writer
After a tense week with world markets teetering on the edge of collapse Angela Merkel finally met with her French counterpart Nicholas Sarkozy and they ended the seven-month chill in their once cozy relationship. According to The Independent, they faced a serious impasse regarding bank haircuts in the "déjà vu all over again" Greek financial crisis. Sarkozy fought tooth and nail to guarantee that the largest holders of Greek debt, the French banks, wouldn’t get a clipping. Merkel made a valiant effort to demandaccountability from the banks but she finally caved in, giving great comfort to the second largest holders of Greek debt: the German banks.
According to the Financial Times, French banks are holding $53 billion in Greek debt, Credit Agricole alone is $30 billion invested, while German banks are holding $34 billion. Colloquially speaking, Frau Merkel and Monsieur Sarkozy know who their daddy is.
Follow the Money
One key question is missing from the discussion of the Greek sovereign debt crisis. Imagine a close friend is moaning non-stop about a debt owed to them that looks like it won’t be paid. Worst of all they borrowed the money from someone else in order to lend it! Most attentive and caring friends would make that most indelicate but necessary of inquiries. Who did you borrow the money from?
We are blessed to have a corporate media so polite that they don’t burden us with these embarrassing questions. Where did the French and German banks get the $87 billion to lend the Greeks? They would have you think that these are the deposits of hard working Europeans, small businesses, corporations and maybe even tax revenue from governments. This is not the case. Banks use their assets as reserves against which they either “create” money to lend or borrow "created" money from central banks, in this case, the European Central Bank. When buying government bonds, which supposedly have no risk, they use maximum leverage and actually have no reserve requirements.
As John Maudlin put it:
“Why is Greece important? Because so much of their debt is on the books of European banks. Hundreds of billions of dollars worth. And just a few years ago this seemed like a good thing. The rating agencies made Greek debt AAA, and banks could use massive leverage (almost 40 times in some European banks) and buy these bonds and make good money in the process.”
This means that $1 million in assets for a French bank could have been used as colleteral to borrow up to $40 million from the European Central Bank to buy Greek bonds. And where does the European Centeral Bank get the money? They use a designer mouse from Apple and make a few clicks on a very hip computer. The bank does not lend any of its own money or that of its depositors, though they would certainly have you believe they did.
And What if?
So what happens in the case of default? In the case of default, banking regulations demand that the bank place in reserve the amount of money it loaned out. This maintains the integrity of the money and deters the moral hazard of “printing money”.
Greece has a GDP of around $300 billion and its federal budget deficit is close to $425 billion. How will they ever pay this back if this year alone they will add another $30 billion in debt? This money will never be paid back, but, then again, no one ever worked to earn it. Since it was made out of thin air why not just write it off?
This is the key question that Europe will ask as the austerity measures begin to fail. The problem isn’t that the banks would collapse. It could be arranged so the banks don’t take such a big hit to their reserve requirements. As the Financial Times notes, the examiners can look the other way, as if the loans were not defaulting. The real hit to the banks are the huge profits they will forgo for their shareholders. No one’s money is lost, but the integrity of the banking system would be questioned and the curtain would be pulled on the great banking/political/corporate ponzi scheme. The alternative is a generation of austerity to continue to maintain the extravagant lifestyle of the richest 1% who own most of the equity in the banks. No one will be dying of hunger or begging in the streets if the banks have a few bad years. moreThere are many folks who thought the Euro was a terrible idea for a wide assortment of reasons. Here are some holding a mock funeral.