Category Archives: Greece

17Islamization of Europe

Western civilization as represented by the European cultures is under threat from militant Islam.


A combination of falling birthrates among the native-born and the influx of hundreds of thousands of Moslem refugees from the Mideast are threatening to swamp the indigenous European culture.


Because the French census forbids asking religious questions, estimates of the number of Moslems there varies but may be as much as 10% of the total   population of 70 million, a third of whom described themselves as observing believers. Germany in 2015 was calculated to have 4.4 to 4.7 million Muslims [5.4–5.7% of the population]. But that was before Chancellor Angela Merkel permitted a million Syrian and other refugees to enter in 2016.


Optimists have suggested that the growing numbers of Muslims will assimilate to the powerful post-Christian, largely secular culture of the West. They also point to the many aspects of Islam which share the Judaic and Christian religious experience.


But that may well be wishful thinking, given the Moslem numbers and their tendency to form self-contained slums around the great European urban centers, incubators of Islamic extremism. Police fear to enter many of these and radical imams [Islamic clerics] in their mosques aggressively recruit young men to wage jihad against the West. The November 2016 bloody attack in Paris hailed from Molenbeek, a Brussels slum that has long been a hotbed for radical Islam, drugs and lawlessness.


It also ignores the fundamentals of Islam. Moslems debated the authoritarian aspects of their dogma – which advocated forced conversion and led to the conquest of much of the Mediterranean world.— during the so-called golden age of al-Anduls in present day Spain. But Ibn Rushd [1126 – 1198], often Latinized as Averroes, a medieval Andalusian polymath and cleric, lost the argument with more rigid Moslem theologians The argument came down to whether any individual act of a natural phenomenon occurred only because God willed it, or Ibn Rushd’s insistence that phenomena followed natural laws that God created, The latter, of course, was an important fundamental concept of the European Renaissances and the rediscovery of much of earlier Greek and Roman learning.

Since 2014 Europe has seen an upsurge of Islamic terrorist activity, a spillover of the Syrian Civil War linked to the European migrant crisis. Moslem radicals have used social media to encourage terrorism across Europe; including a number of “lone wolf” attacks..

The number of so-called “honor” crimes has escalated in Germany. Honor violence ranges from emotional abuse to physical and sexual violence to murder, usually carried out by male family members against female family members who are perceived to have brought shame upon a family or clan. Offenses include refusing to agree to an arranged marriage, entering into a relationship with a non-Muslim or someone not approved by the family, refusing to stay in an abusive marriage or living an excessively Western lifestyle. In practice, however, the lines between honor crimes and crimes of passion are blurred being any challenge to male authority. Elicit retribution is sometimes staggeringly brutal – as with a German husband who dragged his wife behind his car with their two-year-old child sitting in the backseat after plunging a knife into her several times.

The growing American debate over the qualifications and numbers of refugees to be admitted takes on some of these questions. Proponents of a more generous policy toward the refugees point to the U.S.’ strong tradition of assimilation. Others argue that conditions in the world and in America have changed radically; for example, rapid and cheap communications and transportation have reinforced ties between immigrants and their origins which did not exist in the past..













Obama, you are there, nicht wahr?

Angela Merkel, Germany’s long-lifed chancellor, is noted for her Teutonic precision in public statements. So one cannot ignore her remarks after meeting Pres. Barack Obama on his present loop around the Europe. Over and over, she repeated the importance of the U.S. participation in Alliance strategies. The meaning might have been charged off to the ordinary polemics, except that the tone had a new quality. Merkel seemed to be ending each such assertion with an unspoken “that’s right, isn’t it?”
The German chancellor perhaps was hoping against hope that Obama assertion of American withdrawal from old leadership commitments to postwar Europe wasn’t true. If so, she was not only disappointed. For in an unusual public display of disagreement over policy, the two outlined their basic disagreement over Syria with its inundation of migrants and refugees for Europe.
Merkel, increasingly exposed to bitter opposition after continuing difficulties getting the rest of Europe to bear its share of the burden, is facing a crisis over the inflow. More than a million migrants invaded Germany last year, not only Syrians but other Mideasterners and Africans anxious to taste the fruits of the European welfare state.
Merkel has been trying to close the door she so righteously opened to all and sundry – a policy seen as a reflection in part of the guilt for the Nazis’ race policies. The business community at first welcomed the new labor recruits with a general German consensus. But as the numbers have increased, with the prospect of a continued flow, and the difficulties and cost of settling the newcomers, more and more Germans are questioning the policy.
But Merkel’s implied question was for a much larger question. In effect, she was asking how far Obama’s withdrawal of American leadership will go, and inferentially, whether another president in 2017 will continue that strategy. That Obama contradicted his own policy was probably irrelevant. He had, for example, taken a heavy hand in Britain arguing against Brexit, the U.K. pulling out of the European Union. But he offered nothing to amend his own erosion of Britain’s historic “special relationship” with the Americans. [British politicians, too, were quietly shaking their heads over the former university lecturer’s confusing the creation of the North Atlantic Treaty Organization with that of the European Union.]
Through smiles and reaffirmation of agreement, the division of Germany and the U.S. over Syria was laid out unusually forthrightly. Merkel has repeatedly called, and she did so again in this meeting, for the establishment of “safe zones” in Syria. The theory is that Syrian “moderates” would herd refugees into areas protected through military intervention, if necessary, by the Western powers. Obama has continually and emphatically rejected this strategy, even when it was proposed by American critics of his Mideast policy. That’s despite he was simultaneously announcing another increment in the renewed U.S. military presence in Iraq.
Instead, Obama put the emphasis on Sec. of State John Kerry’s conference for a negotiated political settlement. That, of course, runs up against the hard reality that the civil war in Syria centers on the continuance in office of Basher al-Assad and his bloody regime. One of Obama’s “red lines” once called for Assad’s immediate departure, but like his other “red lines, it has now been eroded into a compromise for Assad to remain through a transition period. Most observers give Kerry’s conference little hope of success. And Merkel and her supporters argue that until the moderates can claim a bit of territory, they have no real voice. And, of course, there is the problem of the continuing flow to an overwhelmed Germany and Europe. Turkey’s Recep Tayyip Erdoğan is blackmailing Berlin with the threat that he will renege on his pact to curb illegal migration to Europe if Brussels blocks his request for visa-free EU entry for his 78 million Turks.
All of this to say that Obama’s planned retreat from what he saw as overextended American commitments to leadership abroad is leaving no end of doubts and chaos in its wake.

No Brexit please!


There’s not much good news from Europe these days.

It’s clear that German Chancellor Angela Merkel has bitten off more than she can chew with her big, big welcome mat for any and all migrants. The Hungarians and the Poles have different ideas, don’t want to take their “share” as Berlin sees it. That could be the death of “Shengen”, movement within the EU as free as it was in the golden years before World War I when a flicking a passport got you anywhere from the Irish Sea to Carpathians.

Merkel & Co. have bared their teeth and not for the first time, talked of solving an EU problem by creating a “mini-Shengen”, in effect two levels of EU membership to maintain free-passage. Then there is the whole mess of the Euro, that common currency which was supposed to eliminate balance of payments. Instead it has been an artifice for pushing German exports down the throats of willing consumers – like Greece – who really didn’t have the wherewithal for all those Mercedes.

European, not to say Obama Administration resolve, to meet Ras’ continued aggression in Crimea, Ukraine, and threats in Belarus and the Baltic States, as well as his blind man’s bluff in Syria, has faded.

But the biggest cloud on the horizon was the possibility that the Brits would pick up their marbles and go home. That old hundred miles of often treacherous water which has given the not-so-longer United Kingdom its distance from Continental troubles is getting wider and stormier again. The growing encampment t of migrants [including legitimate refugees] on the Calais side epitomizes the issue. Britain, earlier than her neighbors was getting indigestion from absorbing unlimited numbers from her former empire to share the bounties of the original welfare state. And there is universal sentiment now in Britain that a Continental surge would tip the boat.

Prime Minister David Cameron, who unexpectedly won a majority in May’s elections, as part of his electioneering, promised what used to be called before Hitler discredited it, a plebiscite, on British EU membership. That is, Brits would go to the polls to decide whether they wanted to continue what has been their limited membership – no participation in the Euro, for example – in the Community. Armed with that, and the possibility that without concessions, the British might really exit, he has gone back to dicker with the autocrats at Brussels.

Now comes word that despite earlier statements on how the Brits would not pass, the EUrocrats are willing to make concessions. European Council president Donald Tusk December 17 opined: “Leaders voiced their concerns but also demonstrated willingness to look for compromise,” Tusk told a press conference, he was “much more optimistic” than before the talks began.

In all the welter of political shoving back and forth at the moment, this negotiation could in the long run be the most important. It goes without saying, Pres. Obama’s problems ousting Winston Churhill’s bust from the Oval Office as an opening gambit in his Administration notwithstanding, that the Special Relationship between Washington and London remains a cornerstone of our foreign policy.

Many, here and there, have seen Britain’s participation in the EU as an obstacle. We never have. That Britain has taken up the cudgels, in fact more forcefully than the Obama Administration, in the fight against Daesh, the Mideast terrorists, as an American ally is just one more example of the relationship’s importance despite Britain’s economic and therefore military travails. Blood, Roberts’ Rules of Order, and Shakespeare do count, you know!

But perhaps even more important, Britain’s presence inside the EU, with whatever limitations, is the best assurance that the tyranny of the clerks in Brussels will be held in check. More than its Continental neighbors,  perhaps for the younger folk out there, British representative democracy is so solid and so well grounded that it cannot but have an effect in Brussels. That is of the utmost importance, not only for the Brits and their EU partners, but also the whole of the democratic West including the U.S.

So please, let’s do have an old-fashioned Anglo-Saxon compromise and keep Britain in the EU with no Brexit on the horizon!



Greece: the real question

When the Euro was being proposed and in its early days, some of us had a question: could a common currency be possible within a group of countries all of whom maintained their own individual economic, monetary and fiscal policies?
When we got an answer back, which wasn’t too often, it came in myriad voices.
On one end were those who “promised” us that in some mysterious way this fundamental problem would be solved. At the other end of the spectrum were a few brave if somewhat idealistic souls who advocated the abolition of individual nation states for at least a federal if not a unitary political union for which the common currency would be a handmaiden.
In between, were all the spoken and unspoken solutions, verging from a seemingly commonsense vow that progress toward a commanding central bank and one policy would emerge out of the various European institutions – the bureaucratic European Commission, the nominal multilateral executive, the Council of Ministers and the relatively powerless European Parliament. In addition, this Christmas Tree was decorated with an additional four high-sounding named institutions such as the European Court.
Britain, of course, in the usual pragmatic way of the Anglo-Saxon constitutional process, opted out. It would not and could not abandon sterling, if no longer a challenge to the dollar as a world reserve currency, still served as a handmaiden to The City and the continuing profitable dominance and profitability of London as a leading world currency exchange.
Of course, in what could have easily been predicted would be the new order, each country went its own way. There was even continual conflict between Paris and Berlin, the two central pillars of the new money, with France always flirting with “dirigisme” – central planning – and Germany pretending, at least, to be a full-fledged market economy.
But while the big boys discussed the major issues interminably, the cat was away and the mice, they did play. It was far too easy for Athens [and to an extent Lisbon, Madrid and even Rome, a major EC player] to use their unlimited draw on the common currency to finance lifestyles to which they would like to become accustomed but for which they were either incapable of producing or for which they were unwilling to work hard enough to attain.
True, much of the Greek mess is historical. It has always been easy – with some tjustification — to blame it on the hated Turks’ Ottoman Empire heritage, but now a hundred years away.
Yet no one now speaks above the intense and infinitely complicated negotiations to trim Greece’s exceseses without killing its economy altogether, a game in which Athen’s shrewd if amoral leftwing government pulls the cat’s tail and dares it to take a fatal snap that would destroy the figment of a voluntary association of free nations.

Greece: Tragedy or farce?

The drama of Greece’s bankruptcy is beginning to take on the aspects of a soapopera.
Again on Friday we are facing another of what has been an interminable list of deadlines; this time Athens is supposed to meet an obligation for repayment of International Monetary Fund loans. In theory, Athens should be able to sell some bonds and come up with the cash. But the European Central Bank, acting as the sheriff for members of the Euro monetary union, won’t take the bonds until Prime Minister Alexis Tsipras agrees to a new round of austerity measures. And even at astronomical rates of interest, the private sector isn’t interested..
Of course, that is exactly why Tsipras’ bitter opposition to just such a program elected him in January with his grumpy leftwing coalition partners. Tsipras argues that even were he to accept what his Euro creditors demand they are about to spring on him, he would have to call new elections or a referendum on any new set of demands on Greek consumers.
The list of Greek economic ailments – from notorious dodging by the ordinary citizen as well as the high and mighty of taxes to an unbelievably bloated government bureaucracy to labor laws it can’t afford to a current capital run for the exits – is long and certainly needs drastic reform. But there is also the argument that if the new demands for cleaning up the mess are too stringent, they would impede growth and make it impossible for the Greeks to ever pay their debts. And Ysipras has had the out until now that there were differences among Greece’s creditors about just what they wanted him to do.
It’s been no secret that the IMF has been calling for Greece’s creditors to take a haircut, especially the Germans with their place at the head of the line of the lenders. But if the gossip – and it changes every 24 hours or less – is now valid, everyone including Germany and the IMF have compromised their differences and are ready to give the Greeks a package of measured reform and aid but with an ultimatum although no one wants to call it that.
Ysipras has an ace not far up his sleeve, of course.
That would be to fulfill his repeated threats and take the Greeks out of the Euro and return to their own national currency. Nobody really knows what that means, even if he had the courage to go through with it. The fantasists who put together a monetary union, now 19 of the 28 states in the European Union, made rules for entry, often bent badly as in Greece’s case. But there is no door marked exit, and Greece’s departure would threaten the Brussels’ bureaucrats who contrary to common sense created a common currency for a group of nation states but with no instrument of common fiscal or monetary policy. The weak European Central Bank has until recently spent most of its time with its chairman wringing his hands at the continuing crisis.
If the Greeks were really to go, it would set a precedent for there are other members of the Euro not in much better shape. [Unemployment in southern Italy, the EU’s fourth largest economy, outdoes the Greeks!] At a time when all the EU economies are largely pawing the ground, the EU really doesn’t need a Greek chorus in the background. And so it looks like the bluffing on both sides has just about reached its end.

Islam is the problem

The worship of Mohammed’s followers throughout their history has rarely constituted a religion of peace, contrary to repeated statements by leaders in the West – above all Pres. Barack Hussein Obama. These have been made in their pursuit of trying to defuse the current crisis, but nevertheless are now a part of the problem..

One might stretch to argue that Mosses, founder of Judaism, had a “battlefield commission”. But neither Jesus, Gautama nor Confucius, leaders or founders of the several other great world religions, advocated violence. Nor were they soldiers as was Mohammed, the messenger who carried the word of Allah to his flock.

Furthermore, virtually all Muslims accept that in his last decade of what may be a largely legendary life, he pursued that career with ferocity in the destruction of his Arabia peninsular enemies, most notably the contemporary Jewish tribes who refused to accept his new religion. The history of Islam is inseparable from its attempt to conquer alien societies and turn them forcibly to its belief. That code demands – unlike the other great religions today – unquestioned obedience to a legal as well as a moral code of contradictory but supposed God-given dictums from the Koran and the accumulation of practices in the hadith, pronouncements and activities surrounding Mohammed the man.

Again today, as repeatedly in the past 1500 years, the West is fighting off a campaign of Muslim fanatics to overtake and replace its Judeo-Hellenist-Christian- civilization. Rather than massive armies at the Tours battlefield in the 8th century or at the gates of Vienna in the 16th and again 100 years later, this time the attacks are continual thrusts at the ineludible vulnerable “soft targets” of modern open societies.

As incomprehensible as it is to Westerners and non-Muslim societies of the East, these fanatics are willing to die so long as they can bring pain and disaster on their targets. It is, as some Muslim fanatics have proclaimed proudly, that the rest of the world loves life and these psychotics worship death.

When the leaders of the whole world – not excluding both Israel’s Prime Minister Benjamin Netanyahu and the Palestinian Liberation Organization Mahmoud Abbas – came together in Paris for a demonstration of unity of purpose against this new threat to humanity, there was a missing figure. It was no accident, as the Communists would say, that Obama was not there among the leaders of most of the civilized world.

In a tortured and benighted view of the world’s issues, Obama apparently believes that outreach to the Muslim fanatics through Islamic state leaders – including the mother hen of all the contemporary terrorists, the insidious Muslim Brotherhood – will appease the tiger. His closest advisers make desperate attempts to convince the rest of the world that the great mass of Muslims are innocents. True enough, but that they will [the “good”Germans with the Nazis or a dozen other historical instances] bring down the militants is highly questionable. .

Obama rides this tiger not only in great peril to the country he leads and to the world in general, but at the risk of his own role in history. Calling a blatant attack at Ft. Hood by a twisted mind – a psychiatrist indeed! – “workplace violence” not only distorts the real meaning of the incident making it impossible to deal with it, but this refusal to name the crime makes it difficult to meet out the modest reparations to the survivors.

In the same vein, by not identifying the current worldwide campaign of terrorism – now into its second decade – as an outgrowth of Islam itself, he and his advisers make it impossible to understand it and mobilize to defeat it.

At the United Nations, instead of a straightforward attack on the origins of this violence to all civilized society, Obama was busy warning against any attack on the sanctity of Mohammed’s name. [A documentary producer who had the audacity if however clumsily to challenge the relationship of Islam to the wave of terrorism still is serving a prison sentence, part of the design to obscure the martyrdom of four Americans at the hands of terrorists at Benghazi.] Nothing plays more into the lying of Muslim fanatics in dealing with their fellow citizens; they can carefully site elements of their dogma which sanction deceit in their professions of innocence with nonbelievers.

Any attempt to take on the long awaited need to bring the religion of Mohammed to a test of modernity and contemporary morality is denounced. Earlier attempts were abandoned after a bitter debate in Andalusia, Spain, in the late 12th century when Ibn Rushid [Averroes], ironically sometimes called “the father of modern Western secularism”, was defeated in his efforts to find a synthesis of Hellenic, Judeo-Christian and Islamic values. Ironically Averroes contributed mightily to Western religious and philosophical thought. But his Islam retreated into the thousand-year bowels of a totalitarian conformity that imprisons it to this day. Those who call for a constructive new debate are quickly denounced as “Islamophobia” – even when they come from acknowledged scholars such as the eminent modern philosopher, Joseph Aloisius Ratzinger.

It remains to be seen if Muslim leaders will rise to join Egyptian President Abdel Fattah al-Sisi who recently pleaded with Islamic clerics to examine their game. He argued Moslem “thinking” had stymied, that concepts “we have sacralized over the years” are “antagonizing the entire world”. In practical terms of a hard-bitten military leader of the largest and most important Arab nation, he argued that it is not “possible that 1.6 billion people [a reference to the world’s Muslims] should want to kill the rest of the world’s inhabitants—that is 7 billion—so that they themselves may live”. He warned that Egypt [or the Islamic world in its entirety] “is being torn, it is being destroyed, it is being lost—and it is being lost by our own hands.”

Again, it is no accident that the Obama Administration’s relations with the al-Sisi regime hang by a thread while it has continued to court the likes of Turkey’s increasingly Islamicist Pres. Recep Tayyip Erdoğan [and with a lesser and lesser degree of success]. It also continues to bemoan the fall of al Sisi’s predecessors, the discredited Muslim Brotherhood. [Alas! That is also true of Hillary Clinton with her own close connections to the Brotherhood leadership through her principal aid, Huma Mahmood Abedin.].

Recognizing Islam’s relationship to the Muslim terrorists is critical if the U.S. and the world is to defeat this aberration before it destroys Western civilization through its steady depredations, always forcing restraints on our liberties in order to defend ourselves.







The Cool War Cometh

No, Russian Pres. Vladimir Putin has not ushered in the return to The Cold War with his assault on the integrity of Ukraine. But he has confirmed that the United States and his Russian regime – very likely as long as he lasts – is engaged in a bitter new geopolitical contest. The Obama Administration – and its predecessor Bush II – had refused to acknowledge the onset of this conflict. Washington now finds itself wrongfooted in Ukraine, a crowning blow to an already growing perception of U.S. foreign policy failure and general retreat across a worldwide screen. That’s leading to a replay of old rivalries, if on a more temperate scale.

But the situations of both countries – especially Russia – has changed dramatically in the almost three decades since the Soviet Union imploded. Its hold on Germany, the rest of Central and Eastern Europe, under Communist domination is gone if not forgotten. . Moscow retains a huge nuclear arsenal and missile delivery systems that make it one of the world’s greatest potential purveyors of weapons of mass destruction. . But there are multiple signs the overinvestment in the Soviet military-industrial complex on which post-Soviet Russia has been coasting is about played out. Putin’s repeated effort to rebuild Russia’s limping conventional military has largely failed. And his economy, while rewarding a new urban class, still cannot cope with a collapsed agriculture and an almost total dependence on fossil fuel exports, eroding rapidly under the impact of the American shale gas revolution

Still, Putin certainly has won the first battle in the war for the future of Ukraine, an important east European country with its population of 45 million and considerable undeveloped resources – for example, once the breadbasket of the Soviet Union with its famous black soil belt. But more than any other region in the USSR, Ukraine took a beating from the Communist regime for most of the 20th century – oppression and mismanagement to the point of repeated famine. It also suffered disproportionately from the Nazi onslaught in World War II and the Holocaust where after Poland lived a great part of Europe’s six million Jews and a significant part of its entrepreneurial class.

The post-Soviet regime has visited all the ills of a newly independent, only partially industrialized state including outrageous corruption among its leadership. [The guess is that Putin’s proffered $13 billion loan to the Viktor F. Yanukovych just about covered what the afrocked president had swindled away to foreign banks and investments, short of the gold plated plumbing fixtures in his palatial Kiev home.]

The whole question of Ukrainian identity, itself, often disputed before and after the fall of the Russian Empire and the Communist era, is probably moving toward a crescendo. The academic arguments over whether a separate Ukrainian nationality existed during its centuries-long close relationship with the Great Russians is irrelevant. {Just as in the case of Algeria or Palestine, once invented and politicized, the identities took on life. As late as World War II, for example, “Palestine” referred to Jews and Jewish institutions in the British Holy Land League of Nations Mandate.] Ukrainian nationalism is now the most powerful weapon in any struggle by the West to maintain any vestige of its independence and promote economic progress, even if there is danger of excesses from some of its advocates on the right.

That nationalism reaches full bloom in the western region of the country, where Ukraine’s small [8%] but potent Roman Catholic community lives [with its ties to Poland and Ukrainian Americans]. It is significant that while Ukraine has suffered the same catastrophic demographic decline as other former Soviet Slav areas, the western reaches, mostly rural, has among the highest birthrates in Europe. And if current trends continue, they – and not the dilapidated industrial areas in Eastern Ukraine along the Don River where Russian ethnics and pro-Russian sentiment predominates — are likely to dominate any future Ukrainian state.

That’s of course if its integrity can be preserved. One of Putin’s options, presumably, would be to try to detach the ethnic Russian areas in the east into a Moscow satellite — or even annex them as the Russian parliament hinted last week.. [Moscow has successfully used old salami tactics with the sliver of Trans-Dniestr to blackmail Romanian-speaking Moldava, keeping it from rejoining Romania where it was pre-World War II ]. One suspects that Putin, having bamboozled Pres. Barack Obama on Syria, Iran, and now Ukraine, will play his options by ear. Listening to the Soviet – oops! Russian UN Security Council delegate, one has proof that whatever else the Russians have lost of their Soviet glory, the old Communist agit-prop techniques are still held in high esteem and practiced with skill.

Staring bankruptcy in the face, the current pro-Western Kiev interim government is putting up a fight to fend off Putin’s domination – even if he does not move beyond his military action in the Crimean peninsular where Moscow had base rights among a Russian ethnic population. [Interestingly enough there is some evidence from on-the-spot interviewers that sympathy for affiliations with the EU and the West is strong even there, simply because of the economic pull compared with affiliation to a stagnant Russian economy.]  If worse come to worse, and Putin does go on the warpath, it is not clear his still largely conventional forces would do better in Ukraine than they did when they stumbled into Georgia in 2008 snatching off two provinces while a befuddled West watched after promising Tiflis NATO membership.

Among the many ironies of the situation, few recall that a newly independent Ukraine in June 1996 shipped its last 9,000 nuclear warheads to Russia for dismantling under joint Moscow-Washington auspices. Furthermore, it was dictated by the 1994 Budapest Memorandum on Security Assurances signed by the United States of America, Russia, and the United Kingdom, pledging Ukraine territorial integrity. That’s why if the Obama Administration fails to rescue some face-saving remnant from this present debacle for the West’s strategy, it will impact the whole structure of American treaty arrangements all around the world.

Sorting all this out will not be easy, even under the best of circumstances. The announced 90-minute conversation between Obama and Putin this past weekend is not comforting, nor was the U.S. President’s absence from an announced conclave of his security officials to discuss Ukraine about the same time. Remembering that live mike reference by Obama to how he would have “more flexibility” after the elections when in March 2012 in Seoul he met former Russian president [now prime minister] Dmitry Medvedev , one can only assume a compromise was being hatched despite the tough U.S. rhetoric at the UN. But with the history of Obama’s international deal-making, neither the Ukrainians nor the free world can take encouragement for the cause of longer-term world peace and stability.

The Ukrainians do have cards to play. Despite the corrupt deal by former German Chancellor Gerhard Schröder to help Russian Gazprom in its effort to take over European gas markets by skirting the Baltic states and running a pipeline down the Baltic Sea from St. Petersburg to Germany, more than 40% of Russia’s natural gas sales to Western Europe go through Ukraine. Unfortunately, until Shell or Chevron, both looking for shale gas in western Ukraine, strike, Ukraine is dependent on Moscow for its own energy at whatever price they can make which in the past has included filling officialdom’s pockets. But Gazprom’s recent 10% discount to the Europeans suggest the impending pressure high-cost producer Russia will feel not only from U.S. shale developments and coming LNG exports but also new  sources of Central Asian gas reaching Western markets through Turkey, and even the new exports from Israel already arriving in its neighbor Jordan..

What the Ukrainians need right now, of course, is economic aid – some estimates put it at about $53 billion immediately, possibly to come from the EU, the U.S. and the IMF. [A million here, a million there, and pretty soon, you are talking about real money, as a Texas politician in Washington once said: the Greek rescue so far has been something like $150 billion and still counting.] It was in fact, what Kiev viewed as less than a generous EU offers for an associate membership that touched off this current crisis, giving Yanukovych an excuse to turn to Putin. That in turn brought on peaceful street demonstrations, which the former president answered with repression and secret police tactics, and some of the dissidents then responded with Molotov cocktails. The rest is history.

Putin now holds virtually a royal flush. He may settle for a relatively small deal with Obama now – why not, since as in other venues, he has welshed? Or he may be tempted to go for broke, what with his growing economic – and perhaps  political –difficulties as American future fossil fuel exports to Europe and East Asia dim his own export prospects.

At stake for Putin is his campaign to return Russia to former Soviet glory on the world stage. The first necessity for that is a return of Russian hegemony in the “near abroad”, the former Soviet “republics”, not least the oil and resources of central Asia, Siberia and Far East regions where the Chinese increasingly are competing for influence. But if Obama again “leads from behind”, Putin may well get all he needs for the moment in Ukraine without firing a shot,

But in any outcome of the current Ukraine crisis, there is little doubt the new Cool War will continue..


Solutions in a time of crisis

Follow the money No. 96

“Moderation in all things”, said a pre-Christian North African Roman dramatist, Terence [Publius Terentius Afer]. But like so many artists, he latched on to a beautiful artifact but got the logic wrong. He’s echoed these days in the oft repeated mantra from talking heads calling for compromise. It usually follows a description – inaccurate, of course – of how we are passing through the greatest crisis ever. But just a little recall of past troubled times demonstrates how equally or more difficult earlier threats were – whether bloody days of World War II or the U.S. Civil War.

Logically, we cannot have it both ways: to describe our present situation as a full blown crisis demands we recognize solutions will have to be drastic, not measly compromises. Whether we are looking at current U.S. political contests or the European economic scene, this need for incisive answers must match the depth of the crisis. And for the most part the price to be paid for that has not yet received general acceptance.

On the one hand, a dilemma is posed for American voters going toward the November 2012 elections faced with Republican primary choices: are they to believe Gov. Mitt Romney, graduate of both government and business but whose whole career has been compromises in the face of problems, is the man to help rescue the U.S. from its worst business cycle since the Great Depression? Or are they to go for an adventurous, perhaps untested, advocate of a major overhaul of an impasse — for the moment, at least, incapable of the kind of correction which followed one recession after another since World War II?

Somewhere, too, in all this theater is the question of “confidence”. In a digital age of unlimited data, it is easy to forget the economy runs on a psychological track often more important than so-called hard statistics no matter how many we now can quickly churn out. And the kind of inspiration needed to restore “confidence” often may have little to do with successful economic remedies. For those who did not live through it, it’s important to recall Franklin Delano Roosevelt’s New Deal was the quintessential embodiment of this phenomenon. In the end, FDR had no economic solutions for the Great Depression. Pres. Barack Obama’s pronouncements and other amateur historians notwithstanding, the U.S. economy did not recover its former prosperity until mobilization for World War II revolutionized the whole economic landscape. But Roosevelt’s Fireside Chat leadership did inspire hope when morale of the American people was at its lowest ebb.

The parallel crisis now dogging Europe is, too, as much psychopolitical as economic. The Europeans, to block a possible third round after two wars almost costing Western civilization, began political and economic unification. But the European Project has been built top-down, guided by extremely clever bureaucrats creating a supranational framework. In the process, basic and conflicting interests of Europe’s different vibrant cultures – the glory of the continent – were not adequately considered, much less integrated in a bottom-up process. The Euro, a common currency theoretically fitting all, was an attempt at this kind of forced amalgamation – and its demise was predictable for that very reason.

Now the patchwork to salvage it – for it has become a totem of the whole effort at European unification – continues but with little likelihood any solution can be more than temporarily successful. It was emblematic British Prime Minister David Cameron should play the villain in the latest act by refusing a new treaty pledging renewed conformity to guiding safeguards. The proposed new pact is not all that different from earlier formal statements which even France and Germany, now presenting themselves as paragons of economic virtue, violated.

Having lost so much of its former glory, London’s role as the world’s second financial center was at stake. For any British leader not to have protected that would have been the last straw in reducing further Britain’s diminished world as well as its European role. How to accommodate London’s primary interest in the European Union’s economic community should have been a problem negotiated long ago. But, now, for the moment, Frankfurt and Paris have their revenge for their long apprenticeship to The City. In the long run, however, it can only be seen as another failure of a semiauthoritarian European movement.


BOOK REVIEW: ‘The End of the Euro’

BOOK REVIEW: ‘The End of the Euro’,
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By Sol Sanders
Tuesday, December 13, 2011, The Washington Times
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Story Topics
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 Johan Van Overtveldt
 European Union
 David Cameron
 Germany
Follow Us On
By Johan van Overtveldt
Agate B2, $24.95, 208 pages
The principle problem with this concise book is, of course, that the whole drama
continues. I write as British Prime Minister David Cameron has just dropped a bomb into
the laps of his 26 European Union partners by refusing to go along with a new treaty
aimed at reinforcing economic integration and solving the crisis of the 17 members’
common currency, the euro. Johan van Overtveldt completed his manuscript, he tells us,
on Aug. 30, but the past is prologue, and he has certainly prepared the present scene.
Bravely, he set out to lay out possible scenarios for further developments. In an attempt
by a very systematic mind (no wonder he hints at prevalent Flemish contempt for the
lofty generalizations of his fellow Belgians and other francophones), he lays out three
possible directions. Following his calling, he journalistically labels them “More of the
same [MOS],” “Throwing out the System [TOS],” and “Rebuilding of the System
MOS means, he says, continuing to throw more credit at the problem, whether emanating
from governments reinforcing failing banks, the International Monetary Fund or the
European Central Bank. A second part of this crisis response was imposing “reforms” on
delinquent creditors such as Greece. But in the end, he argues, MOS is a Ponzi scheme
because deflation enforced on the debt ors means they cannot hope to grow to pay their
debts or even pay the interest on their more -and-more pricey borrowings. The game
would be up, he says, either when the banks fail or austerity brings on political crisis.
TOS suggests individual euro users d ecide their only course is individually to exit the
common currency. Short term, he says, the enforced devaluation of their currencies might
improve their competitive opportunities. But in the end, Mr. van Overtveldt argues, this is
the Argentina route, which several of the southern European debt -ridden countries
resemble economically – one that has not improved the once -prosperous South American
candidate for first world rank. He does argue that Iceland has been as successful as it has
because it was done quickly and with unusual backing of its small and remote population.
ROS, accepting defeat – even the exit of some members – and then rebuilding the
monetary union from scratch is “a Herculean task.” He argues an effective monetary
union requires four conditions: political union, fiscal integration, labor mobility, and
price and wage flexibility. Could the Europea n Monetary Union achieve those conditions
and survive? “Likely no,” Mr. van Overtveldt says.
“Despite the deep crisis,” he concludes, “the European authorities have done hardly
anything really substantial about the fundamentally important issues: rebuilding the
banking sector, restoring the long-term sustainability of public finances, improving the
structure of growth performance of their economies and, most important of all, rebuilding
the institutional framework of the monetary union to make it more durable and efficient.
They are quickly running out of time. As a matter of fact, it is probably already too late.”
Although the author isn’t ready to say it bluntly, he comes to a rath er startling conclusion
– especially at this moment when across the political spectrum in Germany there appears
universal support for attempting to strengthen the EU institutions through new
agreements. He concludes his narrative with a bevy of quotes – he has relied on others’
words for most of his arguments – suggesting that it will be Germany that finally pulls the
plug on the common currency.
He argues that the time is past when Germany’s neighbors – and others further afield –
can rely on German recognition of its culpability in two wars that almost destroyed
European civilization.
“I do not mean to imply that the present generation of German politicians is in any way
unaware of the country’s past,” he writes. “My point is that they seem much less inclined
to let that past dominate Germany’s policies.”
Berlin’s critics point to German business’ profitable courtship of Iran, despite increasing
Western sanctions meant to inhibit its development of weapons of mass destruction. Also
cause for criticism is Berlin’s love affair with Russia’s energy giant Gazprom – even to
the point of cheating its eastern neighbors of transit fees – and its continued refusal to
acknowledge that its export -led incentives are basic to the euro problem. Perhaps, Mr.
van Overtveldt sugarcoats those issues. Although he never quite says it, the author
predicts that it will be German action, with all the power of Europe’s paramount
economy, which will, in the end, spell the death knell for the euro.
Sol Sanders writes the weekly column “Follow the Money” for The Washington Times .

Living with ambiguity

An old Chinese curse, “May you live in interesting times”, has become a bromide. I suspect those old Chinese savants were smarter: Confucius [and his St. Paul, Mencius] codified rules and ceremonies for all princes for all eternity, undoubtedly suspecting, rightfully, all eras would have many if not most of the same difficulties. [What would the old boy have thought of Beijing leaders using his dogma, once trashed when they were Marxists, now in the service of Chinese “soft power” and espionage “institutes” around the world?]

These are, indeed, “interesting times”. Although our media and intellectuals increasingly try to entice us into believing the digital revolution has made all things knowable [after all we have google, Wikipedia and algorithms!], the world political economy is fraught with unpredictability. Wherefore, we resort to an even more ancient Indian piece of wisdom: “Arise, awake, and learn by approaching the exalted ones, for that path is sharp as a razor’s edge, impassable, and hard to go by, say the wise.” [Katha Upanishad – 1.3.14.]

Nowhere are ambiguities so manifest as in the current European geopolitical scramble. Furthermore, unlike earlier post-World War II European crises, the current debacle completely stymies Washington. While the U.S. is still the major world power looked to for leadership — if no more than for new fads – it has no remedies. It was all very well for Pres. Barack Obama to reassure the Europeans [and ourselves] they have the wherewithal if only they had the political will, but it was more than a little bit of hypocrisy. Not only is Washington not able to present a model of its own efficacy in solving debt problems, but quietly, the Fed joined other central banks a few weeks ago to extend short-term dollar loans to European banks virtually cut off from dollar credit — and not by those Occupy Wall Streeters.

The Fed moved because it is hard to exaggerate implications of any breakdown in the U.S.-EU economic relationship. In effect, North Atlantic trade represents virtual integration. Even with the economic downturn, more than a trillion dollars worth of goods traversed the Ocean in 2010; another $250 billion in services. Last year Europe invested another $100 billion in the U.S.; Americans put another $70 billion in Europe. A staggering $2.7 trillion was swapped in our markets.

Furthermore, Mr. Obama’s prescription is easier said than effected in societies increasingly dependent on nanny governments to sort their problems. European private initiative, never of the American intensity, has atrophied. [The European Union Commission at the moment is in hot pursuit of highly debated standards for bottled water!]

Nor will a pampered electorate go quietly to new temporary consumption restraints. Even now opposition to ending the French 35-hour work week could well become a major issue in next year’s presidential campaign. Firing some of every third Greek who works for government [and who notoriously does not pay his taxes] reawakened old postwar Communist-rightist confrontation. Even the recent boost given German exports, Berlin’s economic deus ex machina, was, ironically, the cheaper Euro. But a depreciating Euro hardly seems adequate for Europe’s legendary powerhouse as Germany’s population declines and ages rapidly, its labor force narrows, and there is more and more questioning of integration of four million Turkish Muslim “guest workers” who came in the 1960s — and stayed.

From day-to-day, it becomes increasingly clear the reserves of Euro governments and the banking system cannot cover the growing sovereign and commercial deficits of 17 members of the common currency. Credit has evaporated as lenders perceive their exposure more endangered by the moment, not only to whopping “haircuts” – “voluntary” discounts of outstanding debt — but by a growing possibility the debtors may not be able to amortize even those discounted tabs as their economies spiral downward under the eight of severe austerity and social disintegration. Nor is it certain “technocratic” governments in Greece and Italy can manage essentially political decisions.

For Americans, the question of the hour – carefully not asked by our talking heads — is whether this European financial “malaise”, with a continuing failure of the Europeans to address it more than sequentially, will spread to the U.S.? Do our bankers with all their handheld devices really know what their actual exposure is – or will we be treated to new surprises as we were in 2007-08?

That Atlantic bridge could be in for even heavier if snarled traffic.


The Euro is dead, long live the euro!

In the spring of 1947, I was on deck as one of that dying breed of transatlantic liners was tugged into Le Havre. Despite decades of experience there was incredible confusion as French stevedores hassled over tying up ropes. A rail companion, a French Jewish refugee returning from American wartime refuge, declaimed, “Eh voila! L’élan francaise”. My 90 hours Berlitz preparation for being a “sois-dissant” Paris student, unabashedly imitating my 20s predecessors, had done me well. But I hadn’t a clue what “élan” meant, so he went into a “cartésien” dissertation on how Frenchmen were individuals as none other, cooperation comes hard if at all, and the genius of the civilization resides in that peculiarity. [Gen. Charles DeGaulle: How can anyone govern a nation that has two hundred and forty-six different kinds of cheese?]

As “Europe” falls apart, it’s natural each of its 27 members would be doing their thing. For the moment – while a search goes on for a missing one trillion Euros [$1, 400 billion] – the Euro has been rescued as a common currency for 17 members, and, hopefully, the whole Europe Project to unite a continent for peace and progress survives.

But continuing crisis, whatever its final outcome, is already rearranging geopolitical pieces on the European chessboard:

London smugly congratulates itself for refusing to enter what is now a failing common currency, preserving The City’s worldwide financial role. But Prime Minister David Cameron backbenchers’ called for a referendum on British EC membership. While put down, they will haunt his promised negotiations to rearrange the UK’s relationship with Brussels.

German Chancellor Angela Merkel will fiercely resist efforts to rearrange London’s other “special relationship”, perhaps forcing a showdown on whether you can be half in and half out. She has rammed through a call for more EC economic and political integration, swapping it for her recalcitrant Bundestag’s veto over more bailout. But at her back are obstinate voters reluctant to pick up the chips for southern bankrupt members of a common market Germany’s export drive exploited so shamelessly.

Chancellor Merkel bested French President Nikolas Sarkozy, facing a tough election next year after failing to produce his promised marketizing of the French economy. He wanted a super-Q-easing by the European Central Bank to save the Euro and inflate. In that grandiose French play, he proposed “comprehensive” settlement while the methodical Teutons wanted step by step – even at the risk of more minicrises and general economic doldrums as austerity brakes growth.

Italy’s tragicomedy starring Prime Minister Silvio Berlesconi featured parliamentary fisticuffs. Worse, his painful promised belt-tightening for the Italian welfare state built since it beat off a near successful attempted Communist coup d’etat in 1948 could get its ultimate test. Does the family, the cornerstone of Italian culture since the Romans, remain strong enough to buoy a society with the lowest birthrate in Europe, the mother of modern international immigration now facing invading hordes on the North African coastal periphery?

Initial market falderal was heartening. News that America, the heart of the world economy still for all the talk of shifting patterns, had grown in the last quarter instead of drooping into doubledip recession, heartened the optimists.

But there is bound to be a second look. And when the spectacles come out, analysts will find less detail to the Euro settlement than headlines. Germany is still keeping a staying hand on the throttle of the European Central Bank. The European Economic Stability Fund still looks more like an impoverished debt set-aside than a mini-IMF. And the controversial Eurobonds proposal hangs over the dusty debris left by two officials’ talkathons

President Sarkozy’s call to China’s Prime Minister Wen Jiapao for help in bailouts and recapitalizing European banks is fantasy. Beijing plays a completely mercantilist hand. With its exports threatened and repeated promises to its own increasingly restless to shift to a more consumer-oriented economy, China’s more than $3 trillion in monetary reserves [20% in vacillating Euros] is mortgaged by a deflating dollar and its own incipient inflation. Ditto, Brazil – in a welter of official corruption scandals – and India with seemingly uncontrolled inflation. President Barack Obama’s op-ed proposing a firewall against a European debacle added insult to injury. U.S. banks sometime back stopped Eurolending — with their exposure still unknown.

Help, if it comes, will look to those glorious European traditions – all of them, as varied and contradictory as they are.


Daddy’s sugar bowl empties

            It’s our tradition to control,
like Erich Honecker and Helmut Kohl,
remember him
from the Ukraine to the Rhone.
Sweet home uber alles,
Lord, I’m coming home.yah
Come on, Sugar Daddy, bring me home.

Hedwig and the Angry Inch

George Soros isn’t the only sugar daddy whom former beneficiaries accuse of turning tightwad faced with rollercoaster stock markets and interminable debt debates.

German taxpayers all along were wary of becoming the only teat on the EC’s udder for what Winston Churchill once called Europe’s soft underbelly. There is nostalgia, too, for the once high-flying DMark which few wanted exchanged in 2002 for Euros. Now those feelings are exploding with Germany’s vaunted economy going south – but not just for bailouts for Greece, Portugal, Ireland, and possibly Spain, and even Italy.

German growth collapsed to near zero over the early summer which

could take Germany, Europe [and the world] into recession by winter. That would mean abandoning hope Europe’s biggest industrial engine would salvage the EU common currency.

Many usual suspect talking heads called all this totally unexpected. Hello! Sixty percent of the German template for an export-led economy went to other EU countries. True, profligate Greeks, Portuguese, Spaniards and Irishmen should not have bought those Mercedes they couldn’t afford. But if they hadn’t, how would German auto plants have pumped out cars, keeping German unemployment relatively low!

The Germans, like everybody else with dreams going back to Marco Polo, turned to China [and Russia] for new markets. Trouble is the jerry-built Chinese “world factory” is in deep doo-doo too, cutting back on what its “Communism with Chinese characteristics” leaders thought was a foolproof, permanent formula for stability: unlimited infrastructure expansion, subsidized exports for super growth rates with corruption for the elite .

But more than one little piggie didn’t go to market. Chinese inflation [or should we use new Obama Administration’s gobbledygook, “core inflation”] is rising, particularly food where 80% of Chinese subsist. [Incidentally Chinese shortages mean huge US corn purchases lifting American prices.] And there are still Chinese who remember in 1949 the Communists installed that ogre Mao Tse-tung mostly because of rip-roaring inflation on Shanghai’s counting house tables, not battlefield valor.

Russia? There, increased German dependence on Soviet gas, even encouraging Moscow government monopolies to buy into Western distribution, was all well and good during the halcyon days of unlimited credit and rising consumption. But now Moscow bleeds; an incredible $30 billion capital outflow in the first six months of 2011. [No oligarch dares leave money lying around in Petersburg or Moscow lest the new Rasputin grab it]. Some 1.2 million professionals immigrating in the last three years carried part of it out. And with diving fossil fuel prices, the Russian economy is hanging by one energy thread. That’s why a half million small and medium sized German firms in Russia, ”highly leveraged” with government export credits, are sweating.

As the Euro stumbles from crisis to crisis, “solutions” boil down to two proposals: full-steam ahead toward economic integration permitting a unified fiscal and monetary strategy, or refinancing bankrupt southern members using a Eurobond guaranteed by the 17 members of the common currency and anybody else Brussels could seduce into signing on.

German Chancellor Angela Merkel and French Pres. Nicolas Sarkozy stumbled back from sacrosanct European summer holidays in mid-August to find a “solution”. But while their vague statement more or less endorsed the first approach, it offered not a clue how problematical negotiations could go forward as quickly as needs be – especially amidst crumbling economies gaining downward momentum.

They didn’t rule out the second solution. That’s because the last straw has been the rising cost of refinancing national bonds – more threatening even than bailouts’ size and conditions. But the Germans are more than aware any such new “credit instrument” has to be backed proportionately by Europe’s largest economy. Nor is it clear from its most enthusiastic sponsors, how rates would be set if they ignored/avoided the current race to the top for interest in a rocky market.

Of course, the 500-pound gorilla in the room is the option letting debtors drop back into their old national currencies to balance their books. But dismantling the oversold Euro [pun intended] might be the death of the European Union itself.

Keep tuned: the tragicomedy is still unfolding.


Poor Richard’s Debt Almanac

The debt crisis is likely to be with us for quite a while. And since TV talking heads speak in gobbledygook, what better than a layman’s glossary? Herewith:

Banks  Safehouses where hardworking individuals and corporations put their savings supposedly to discreetly finance other people’s worthy projects.

Bonds  Paper representing company or country debt bought and sold with interest paid to owners whose value peaks when repayment looks more and more unlikely.

Central Bank Each government’s own bank to protect the national prosperity by printing money at a proper level and manipulating it against other currencies.

Correction When the bottom falls out of the stock market, and small investors get caught with their pants down, not knowing whether to ride it on down and hope or sell at a loss.

Derivatives Bets on bets on bets hidden in computers until someone punches the wrong algorithm and all hell breaks loose.

Dollar The USA currency, devaluing in a deteriorating economy, but still the standard for international transactions and guarantee for other even weaker currencies.

ECB European Central Bank, the Euro mother bank unable to salvage bankrupt Greece, Portugal, Ireland, Spain and, perhaps, Italy, who can’t pay their bills because they borrowed too much elsewhere.

Euro The European Community’s common currency but uncommonly in trouble because 17 different finance ministries drive their countries’ earning and spending in different directions.

Financiers Technocrats who believe they have mastered markets in order to feather their own nests but in times of crisis panic endangering the system by calling for government handouts.

GDP Gross domestic product is an estimate of all national economic activity, often divided to give a widely used per person figure not revealing much about you and me.

Geithner The U.S. chief financial officer who is looking for a way to get off the Obama ship of state after his government bureaucratic instincts called all the shots wrong.

Gold It’s a precious [as in valuable not cute] metal which shines when polished whose value is considered immutable and therefore a refuge when currencies cheapen wherefore now at all time highs.

IMF The international money pot, the cavalry supposed to come to the rescue when individual donor members got into trouble before the whole caboodle got too big and complicated.

Inflation When too much money chases too little goods, the prices begin to spin upward and shortly get out of control if the government simply continues printing money to chase it.

Intervention When Central banks buy up or sell their own currency in order to halt, slow or accelerate its value against other currencies which often doesn’t work and results in further panic.

Merkel Germany’s chief executive whose training as a physicist in Communist East Germany hasn’t equipped her to keep pumping out exports to countries who can’t pay in order to maintain Europe’s largest economy’s prosperity.

Obama The American chief executive, the first in the 200-year history of The Republic who believes government directed redistribution of the fruits of citizens’ labor will insure future stability, prosperity, peace and justice.

RenMinBao Beijing’s currency, for which no one knows the value, only used in China except when held outside in the hope it can eventually be reinvested in China, but which is usually called the yuan.

Revenue The money coming into the government’s coffers – particularly in the US –enhanced only in periods of prosperity created by a government which promotes business and suckles taxpayers.

Stocks  Paper representing bets on the ability of corporations to profit under changing circumstances, swapped with fellow gamblers who think they know more than their trading partners.

Taxes   Money squeezed out of citizens to fund the commonwealth which when reaching exaggerated heights encourages government profligacy and citizens’ evasion blocking entrepreneurial talent.

“Terrorists” That’s what spendthrift liberal politicians call Congressmen who think they ought to stick by 2010 campaign promises to rein in Washington’s 75-year-old spending spree to pay off debts before drowning.

US Treasuries American government debt traded and still considered, despite all the US trials and tribulations, the better place to keep money as its current relatively low interest paid buyers indicates.

World Bank A collection of highly paid, income tax free Washington theoreticians which helped reconstruct Europe after WWII but mistakenly preached government to government lending could modernize backward economies and societies.


Plus ça change, plus c’est la même chose – maybe

An old French adage posits the more things change, the more they are the same. But that’s not always true, historiographers, those who invent how to write history, must figure out when transformational changes do occur. It’s [at least my version of] the string theory: yes, things do go along on a consistent pattern [genes, for example] until suddenly, something from the outside changes one knot, and then they pick up routinely again but along the now changed form.

That’s where we are at the moment with “the Europe project”, an attempt to create a peaceful, united, prosperous, democratic Europe. [Napoleon and Hitler tried other unfortunate solutions.]

In the late 40s, after all the horrors of World War II, European unification was generally considered necessary and unavoidable. Every “right-thinking person” understood two European “civil wars” had almost destroyed Western civilization. How to prevent another such conflict was at the center of thinking by enlightened European politicians, especially France’s Gen. Charles De Gaulle and Germany’s Chancellor Konrad Adenauer, and such technocrats as Frenchmen Jean Monet and René Mayer.

Common sense as well as idealism demanded embracing what would inevitably be a reemerging strong Germany in a bear hug by a weakened France and Britain. It should start with what in those economies was basic, the iron and steel industries, incidentally, located in contested border regions. The exquisitely detailed Treaty of Paris established the European Coal and Steel Community, signed April 18, 1951, by “the inner six“, France, West Germany, Italy, Belgium, Luxembourg and the Netherlands It laid the cornerstone of today’s European Community. The basic metals agreement turned into a customs union, a common labor market, capped by a common currency – at least for major Continental members.

Now that common currency is in deep trouble. The lack of central fiscal and monetary control has taken its toll. More prosperous northern European countries [especially Germany] used the Euro to boost Union exports and southern Europeans used its creditworthiness to buy goodies but alas! more than their productivity could afford. The Greek collapse and its attempted rescue has been seen widely as the ultimate test not only of the Euro but inflated to cover the whole idea of “Europe”. And as the crisis deepened — for the rest of the European Union is deeply burdened by welfare economies they find increasingly difficult to support — the Euro is said by some to be a test of the whole idea of “Europe”.

That’s a pity, especially since there is no consensus on where to go now. Some advocate dramatically moving to a centralized economic state. That would be put together — as the EU has been until now — by Brussels bureaucrats rather than any compromising legislative assembly. [That the difficult American constitutional convention came so close to failure is omitted in the self-congratulatory versions of US history nominated as a template.] Others see creating a two-tier Euro system. And some braver souls are ready to abandon the monetary project, with Greece, and other highly indebted partners, retreating into their own currencies to force readjustments difficult for populist governments

Again, this last option is seen by many as the end of the whole unification effort. Such an analysis is skewed. It relies on a mindset of at least a generation ago. The old bugaboos are gone, perhaps replaced by new ones, but they are gone. For the first time in 2,000 years, the German tribes are depopulating. True, Germany remains the strongest European economy but its overdependence on mostly older products exports, with subsidized credits is a longterm threat. For Europe, other problems – not the least the difficulty of integrating an immigrant labor force in a declining native population, primarily recruited among Muslims – takes precedent. War between the major European powers in a time of cultural amalgamation and Europe’s relatively declining world role, is unthinkable

Remodeling, at least, of the Euro is now inevitable. But it need not be seen as a failure of “Europe”. European unification now might take a leaf from the American book and go back to building more representative institutions. The growing regional nationalisms – from Scottish to Catalonian – which European federalization has encouraged might even be a basis for a new attempt at political integration. But what is certain is a new era demands new thinking and new solutions. The old rationales for a federal Europe are dead.


Charlie Chaplin’s suit?

The geopolitical question of the hour: is there a tripwire that will tie together a series of regional crises bringing on another 2007-08 worldwide economic disaster?

Lehman Brothers’ collapse dramatized how enhanced interconnections can tumble through the new world economy with domino effect. But if the world finance mavim know a seminal interrelation of our several bubbling crises, they are not telling us. Meanwhile, the minitheaters percolate:

Europe –There’s growing consensus Greece’s economic collapse is leading to a restructuring of the European Union’s finances with more than 20% of the world’s gross product. Shooting the messenger – the growing attacks on rating agencies which, indeed, are feeding debilitating increases in the cost of debt – doesn’t solve the problem nor do complicated if band-aid solutions. Nor, does it seem likely to this observer, creation of a Eurobond market to absorb growing debt would automatically bring about inspired, problem-solving central European fiscal and monetary direction. [It didn’t with creation of the Euro “common currency”.]

The U.S. – However much the Obama Administration’s stimulus program staved off an even worse crisis – to be argued until the end of the economists’ time, not soon contrary to John Maynard Keynes hopeful prediction the profession would die out – it has run out its string. Public opinion demands curbing deficit spending. But how against pressures of “special interests” [yours’ always are, mine are heaven blessed] is a conundrum taxing the American political system. It‘s a time when parliamentary government – with its ability to bring down a cabinet’s failed strategy instantaneously – is envied. Instead, more than a year’s political mudslinging appears inevitably producing near paralysis. Meanwhile despite widespread denials – including fudging with inventions like “core inflation” – higher prices could couple with stubborn underdemployment/unemployment and an unresolved housing bubble for increasing misery.

China – The cracks, long seen by the few who questioned sustainability of the miracle of “the world’s factory”, are widening. Beijing central planners – despite their rationale only rapid growth could legitimate “Communism with Chinese characteristics” by providing jobs and stability — have curbed unlimited infrastructure expansion which with now slowing exports was the engine of growth. “Creative accounting” takes on new meaning for government banks hiding “non-performing loans” in new set-aside organs now making their own bad loans. Beijing’s inability to “feed” local Party hacks leads them to “squeeze” workers and farmers in turn leading to growing violence. Inflation, especially food where most Chinese live, grows despite monetary devices borrowed from Western systems largely ineffective on what still is a Soviet skeleton.

Japan – The world’s third largest economic power drifts, mysteriously bereft of political leadership, caricatured in its inability to address the destruction of the earthquake-tsunami with characteristic “Yamato Damishi” [fortitude]. In Japan’s hot, muggy summer, only 19 of 54 reactors are operating in the face of anti-nuclear sentiment. With more to shut down, cutbacks of 15% already haunt large electricity customers and boosts expensive fossil fuel imports. Consumer confidence falls to record lows, ominous for Japan’s rapidly ageing population. Government debt, already the world’s highest ratio at 200% of GDP, will rise as Tokyo borrows $100 billion to rebuild and GDP shrinks. Luckily, Tokyo borrows at home at floor-scraping 1.5%. But, Japan, too, has its echo of the American argument: Economy Minister Kaoru Yosano opposes Tokyo selling itself bonds as the Fed and Treasury have done, warning resulting higher finance charges would hit Japanese banks.

But how does it all connect? We saw how Japan’s disaster put a crimp in the manufacturing supply chain from Shanghai to Detroit. But, for example, what call have German and other European banks on their U.S. colleagues if Greece defaults? Japan, which has been lending the world $175 billion annually in investment capital, is out of that business. Nobody wants to talk about the impact on Spain [20% of the EU GDP] if Greece [3% of the EU GDP], followed by Portugal and perhaps Ireland, “goes”. What will that do to Latin America where Spanish banks have invested heavily as the Brazilian boom simultaneously now threatens to go “bust”? Australia’s roaring dollar is already feeling Chinese cutbacks as will all commodities producers, perhaps even the Mideast petrosheikhs.

In one of his serio-comic sequences, Charlie Chaplin’s little tramp starts pulling a thread from his crumpled suit. Before long, his whole miserable costume dissolves. Is there that kind of loose thread here?