I warned you. Do not underestimate the power of German culture to stear events in the EU. I told you this over 20 months ago. It is very clear that closer union integration in the EU is not a possibility.
Mother Merkel said just today that no debt sharing would occur while she’s alive.
Well then what are we doing here? Spain can’t afford to pay its bills today. It’s not going to be able to pay them tomorrow. It needs to restructure its debt load. The market’s not extending risk to Spain. So that’s not happening without default unless debts are going to be shared.
Issuing joint debt was the inevitable hope for any cessation of sovereignty to Brussels. Without the prospect of joint area debt, there’s no carrot here; just a stick. How is it that the rest of the nations are supposed to navigate the field, when the only outcome is getting whipped?
But then, this has been a false choice from the get go. The fallout has been the only guarantee; I can’t say I blame Germany for calling the game and taking their chips off the table. They have the choice of contraction by a stronger, newly issued Deutschmark, and contraction by extending liability to their idiot neighbors.
Might as well pick the course that keeps you master of your own life, even if it’s a rough life to live. The only other option has them losing sovereignty, any way you look at it.
So the EU is going to break up. Merkel is channeling the spirit of Hjalmar Schact. The euro and the dollar are going to par. We’ll probably need quantitative easing in the next two months to stave off the selling.
The Europeans have chosen their path. They hate each other too much to function under a coalition that’s only adhesive is trust for one another. 1,000 years of culture trumps 10 years of colorful papers.
Game. Over.
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Default. Game over.
Good piece Cain.
Eithjer way Germany will win out. I am stil in the camp that the periphery will come kneeling before the Fatherland, signing over their sovereignty.
Germany just checked to the Fed, who will print, kick the can and buy Germany some monre time to complete the deal with their neighbours.
I don’t think they will, Jim. I think if the bailout isn’t free, then freelance will be preferred.
No one in Europe will cede authority to the Germans. I hate to say it, but Cain is right, too much bad blood between them, lingering distrust and massive cultural differences that reflect in how the individual economies function (or don’t for the most part) makes integration very unlikely.
We in the United States take fiscal and monetary union for granted. E Pluribus Paeloris (Out of many, we are Bernanke) and all that sort of thing.
For all our cultural, ideological, and political differences, when push comes to shove, the hippiest Berkelian hippie freak and the reddest-necked redneck from Redneckistan will put aside their differences – however temporarily – because deep down inside, they’re both willing to admit that their countercultural counterpart is still a fellow American. It doesn’t work that way in Europe. They don’t even speak the same language, let alone share the same culture.
Chancellor Merkel has learned well the lessons of the Weimar Republic: hyperinflation is bad, mmmmkay?
She has failed to learn the lesson of the Treaty of Versailles: debtor nations with debts that can’t be paid are even worse, and doubly so when those debts become unpayable (in significant part) due to the obstinacy of their creditors.
Excellent post. If Europe was meant to be a Union, it would have happened long long time ago!
However, collapse can take many years! Fed, IMF, Worldbank and friends (you and me) will prolong the agony.
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