George Soros (who, of course, is Jewish, which of course is irrelevant happenstance until it isn't anymore) posted a remarkable load of crap yesterday. Let's go through it.
Hans-Werner Sinn has deliberately distorted and obfuscated my argument.
Perhaps the argument was distorted, perhaps it was obfuscated. To my liking neither point is proven in the foregoing, nor mostly even loosely alluded to, but then again my liking is not the measure of the world. That aside then, how does one know such was done deliberately ? A question for another, calmer time.
I was arguing that the current state of integration within the eurozone is inadequate: the euro will work only if the bulk of the national debts are financed by Eurobonds and the banking system is regulated by institutions that create a level playing field within the eurozone.
The first part of this proposition may be even true. It entirely hinges on the meaning given the word "work" in this particular context (much like Clinton's honesty hinged one day on the meaning of the word "it").
The second part of the proposition is however unadulterated nonsense. If it were possible for these or any other regulators to do any such thing, they would have long regulated Greek laziness, Italian profilgacy or French airesi out of this world. These aren't new concerns in any estimation. The old Habsburg court was struggling to contain the same exact problems in its southwestern provinces with dismal results. If Mary & Joszef failed to so regulate, allow me to have little regard for the prospects of some postmodern bureaucrats.
There will never be a level playing field, for the simple reason that some people are lazy and some people are industrious. The latter must be the masters of the former or the entire lot must perish in famine and abjection. I hope I'm neither obfuscating nor distorting Soros' argument when I point out that socialistoid "idealism" (commonly known as wilful ignorance) coupled with abstruse torturing of morphemes (commonly known as wordplay) might make for excellent politics, but will never yield good policy.
Allowing the bulk of outstanding national debts to be converted into Eurobonds would work wonders.
The chief wonder it would work, of course, would be for the holders of such debt.
It would greatly facilitate the creation of an effective banking union, and it would allow member states to undertake their own structural reforms in a more benign environment. Countries that fail to implement the necessary reforms would become permanent pockets of poverty and dependency, much like Italy’s Mezzogiorno region today.
Except said countries have clearly shown that they will not implement any sort of reforms if there's any way to weasel out of so doing. Creating a "more benign" environment seems flatly contrary to everyone's best interest (including those who work on African productivity levels but expect North American levels of consumption).
The reference to Mezzogiorno seems particularly ill thought out. At issue is the unification of Italy, in which process the industrious North was tricked into entering exactly the sort of harmful compact that is now being pressed upon Germany. The poor southerners have failed to become anything other and anything else, in spite of benefiting for over half a century from participation in the Italian state bonds. If this plan of uniting Basilicata bonds and Milan bonds failed to work for Italy, how is the plan of uniting German bonds with Greek bonds supposed to work for Europe ?
The correct answer, of course, is that it's not supposed to work. That's quite what Mr Soros has in mind. He intends to continue making money after all.
If Germany and other creditor countries are unwilling to accept the contingent liabilities that Eurobonds entail, as they are today, they should step aside, leave the euro by amicable agreement, and allow the rest of the eurozone to issue Eurobonds.
This will probably happen, especially considering the current shifts in German politics.
The bonds would compare favorably with the government bonds of countries like the United States, the United Kingdom, and Japan, because the euro would depreciate, the shrunken eurozone would become competitive even with Germany, and its debt burden would fall as its economy grew.
This is nonsense on the level of the famous 1920s "permanently elevated plateau". The rusted car with no wheels and no engine will outpace everything in the car race, the man says ? Give him a cookie, he's earned it.
But Germany would be ill-advised to leave the euro. The liabilities that it would incur by agreeing to Eurobonds are contingent on a default – the probability of which would be eliminated by the introduction of Eurobonds.
The probability of a default is never eliminated by an administrative measure. Defaults follow the faults of reality, and an inability to grasp this fundamental point disqualifies one from making policy suggestions, or indeed participating in discussions with adults. On the other hand it does make one eminently qualified for politics.
Germany would actually benefit from the so-called periphery countries’ recovery. By contrast, were Germany to leave the eurozone, it would suffer from an overvalued currency and from losses on its euro-denominated assets.
No country suffers from an overvalued currency against its will. This is the equivalent of proposing Soros is suffering from being rich, and if he were poorer he'd be happier. This may be true, but it's something entirely within his capacity to fix. Conversely, were he poor, the problem would present itself a lot more indomitably.
This aside, the periphery is never recovering. The entire Mediteranean basin is slowly integrating itself into Africa these days. The aggitations of war temporarily pulled a languid troop into some semblance of activity, but that generation is gone and the Southern peoples are ready to continue their slumber so rudely interrupted by these overactive Protestants. Consider the situation of Italy's industrial output cca 1930, cca 1880, consider where Greece and Spain, opposites on the continent, neighbours in the gallery of history's dead cultures found themselves before the great wars. That's exactly where they're headed again.
Whether Germany agrees to Eurobonds or leaves the euro, either choice would be infinitely preferable to the current state of affairs. The current arrangements allow Germany to pursue its narrowly conceived national interests but are pushing the eurozone as a whole into a long-lasting depression that will affect Germany as well.
The problem with this (muchly repeated) "narrowly conceived" national interest is that the states have a mandate to follow it, steming from the actual nation they represent. There is a source for what exactly to follow, there is a way to know when you're not following it. Who's the reservoir of "widely conceived" global interest ? Soros himself ?
Thank you very much Mr. Soros, the day I'll be interested in elevating you to deity status I think I'll say something myself. No need to try and insinuate yourself. (But yes, the notion did yield a chuckle. Soros fancies himself wiser than nations, little unrecognised King Solomon that he is and we didn't know earlier tut tut tut.)
Germany is advocating a reduction in budget deficits while pursuing an orthodox monetary policy whose sole objective is to control inflation. This causes GDPs to fall and debt ratios to rise, hurting the heavily indebted countries, which pay high risk premiums, more than countries with better credit ratings, because it renders the former countries’ debt unsustainable.
Which credit ratings of course fell from the sky. One day when it was raining credit ratings Germany was lazy and stayed home so it got the best ones whereas various pigs were busy working and by the time they returned home - tired! - there were no good ratings left for them. Poor pigs, how unfair this rating business is.
Here's a thought : complaining that homework hurts lazy kids more than their more accomplished peers is never going to promote education. All it promotes is laziness, helplessness and extreme inequality.
From time to time, they need to be rescued, and Germany always does what it must – but only that and no more – to save the euro; as soon as the crisis abates, German leaders start to whittle down the promises they have made. So the austerity policy championed by Germany perpetuates the crisis that puts Germany in charge of policy.
"Giving people unwilling to find work or hold down a job only enough to not starve is bad. Were they to get exactly as much as those people who actually work there's be no more unemployment to speak of. Therefore this policy of keeping benefits under actual salaries only serves to perpetuate poverty."
What sort of nonsense is this ? Why's it so hard to grasp that absent incentive the entire structure of economy collapses, and the next step is Soviet-style famine and shortage ? We have already seen the socialist ideas at work, how come they're still being argued (under the guise of being something else, of course, that's always the case).
Japan has adhered to the monetary doctrine advocated by Germany, and it has experienced 25 years of stagnation, despite engaging in occasional fiscal stimulus. It has now changed sides and embraced quantitative easing on an unprecedented scale.
My bet is that at no point during the next 25 years will the situation of Japan ever again approach the average of the past 25.
Europe is entering on a course from which Japan is desperate to escape. And, while Japan is a country with a long, unified history, and thus could survive a quarter-century of stagnation, the European Union is an incomplete association of sovereign states that is unlikely to withstand a similar experience.
This is certainly a misstatement. Europe was here for a much longer continuous interval than any Jewish state or attempt at a state ever existed. As far as endurance goes, you'd be very hard pressed to find something to compare to Japan outside of China itself and good old Europe.
There is no escaping the conclusion that current policies are ill-conceived. They do not even serve Germany’s narrow national self-interest, because the results are politically and humanly intolerable; eventually they will not be tolerated.
The old "if you don't give us your money we will take it by force". How about earning your own, dear socialists ? It's "humanely intollerable" to be poor ? How about getting a job ? It's politically intollerable to live with your parents ? How about getting a job ?
Nobody's asking anybody to tolerate anything. The poor South is more than welcome to wake up an hour earlier, go to bed an hour later and spend an hour less at lunchbreak (which'd leave about two hours and change, which should be enough for anyone anyway).
Work. It makes one free.
There is a real danger that the euro will destroy the EU and leave Europe seething with resentments and unsettled claims. The danger may not be imminent, but the later it happens the worse the consequences. That is not in Germany’s interest.
Millions for police but not a farthing for social entitlements.
Sinn sidesteps this argument by claiming that there is no legal basis for compelling Germany to choose between agreeing to Eurobonds or leaving the euro. He suggests that, if anybody ought to leave the euro, it is the Mediterranean countries, which should devalue their currencies. That is a recipe for disaster. They would have to default on their debts, precipitating global financial turmoil that may be beyond the capacity of authorities to contain.
Again, the argument of turmoil. If these syndicates, mobs or whatever they are are so very ebullient, how about using a shred of that energy doing something useful, that may perhaps put a penny in their pocket in the process ? Isn't it a little suspect by now just how quick to their feet these putative crowds are ? Too tired and exhausted to dig a ditch, very athletic when it comes to some good old rioting.
I would imagine it won't work.
The heavily indebted countries must channel the rising their citizens’ discontent into a more constructive channel by coming together and calling on Germany to make the choice. The newly formed Italian government is well placed to lead such an effort. As I have shown, Italy would be infinitely better off whatever Germany decides. And, if Germany fails to respond, it would have to bear the responsibility for the consequences.
I am sure that Germany does not want to be responsible for the collapse of the European Union. It did not seek to dominate Europe and is unwilling to accept the responsibilities and contingent liabilities that go with such a position. That is one of the reasons for the current crisis. But willy-nilly Germany has been thrust into a position of leadership. All of Europe would benefit if Germany assumed the role of a benevolent leader that takes into account not only its narrow self-interest, but also the interests of the rest of Europe – a role similar to that played by the US in the global financial system after World War II, and by Germany itself prior to its reunification.
This final nonsense vaguely reminds me of the American Jewish Comittee organising boycotts of German goods some eighty years ago. If memory serves that didn't end well. If memory doesn't serve... well. That's what we have titles for.
Thread lightly, my dear circumcised friends. That turmoil that the authorities fail to control often enough ends up more inclined to burn socialist revolutionaries than the actual burgeoisie.———
- Mit Pomade bezahlt die Franzosen ihr König;
Wir kriegen's alle Wochen bei Heller und Pfennig. [↩]