25 Nov 2011, 1:03pm
economy:
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  • Angela, the Euro and Forbidden Planet

    Even the doughty Economist is adopting the brace position for the demise of the Euro. The markets have been falling for ten days in a row. And yes, I have poked my snout in there and made some purchases – the tragedy of a market fall is you can’t call the bottom so you have to take a few hits between the eyes. I’d say it’s early days yet.

    It’s possibly within Angela Merkel’s capability to save the Euro, and yet she chooses not to, at this stage. I can see her point – she could doom the German nation to become the milch cow for the rest of the Eurozone. There is much harrumphing about modifying the European treaties to stop profligate countries overspending, but you have to ask yourself, how the heck does that work? There is no answer to the Josef Stalin question, where are their divisions? How exactly would you pressurise Greece to stop the early retirement and tax dodging? If you fine them, then the problem gets worse. You have to park tanks on the lawn. After all, in a working transferunion like the United States, they still haven’t found a way to stop California voting to stop taxing but carry on spending. In a democracy there are usually more votes for spending than for saving 🙂

    I believe the reason that the federal government can’t park tanks on Arnold Schwarzenegger’s lawn is because the US military isn’t allowed to act on behalf of the Federal government against US citizens on US soil, but it’s probably the only way to stop the economic transfer. In the end the only way to stop one group of people hell-bent on behaving in a way you don’t like is to apply the threat of overwhelming force. Understandably, there is trepidation in Germany about sleepwalking into that kind of situation in Europe.

    So it seems that Angela Merkel is drawn into the scenario painted in the movie Forbidden Planet, where in trying to avoid a deep-rooted fear, the energy lends power to unconscious forces that start to destroy something else she holds dear, which is the Euro.

    The Euro was set up with the idea that governments would not overspend and create inflation over a certain percentage, but, as I recall, even Germany broke the rules in increasing government spending. There were rules, but every country is different, as you point out, and every country went into the currency union with its own cultural-political baggage. Part of Germany’s baggage was its somnambulist past with the self-described king of somnambulism, A. Hitler. A German once remarked to me that “Germans create efficiency to destroy efficiency.” Those Conservative Bavarians who were the architects of unification and to a lesser extent the Euro wanted to create breathing space for Germany’s pent-up capital, hoping a free Eastern Europe would provide that space. It was a success. Now that they have this Greater Reich they are paralyzed with indecision. Will they create new efficiencies or destroy the efficiencies they created. Baggage ?

     

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