Tag Archives: Euro

A euro for your thoughts


by Sol Sanders

The European Union has entered a multifaceted and what promises to be an extended crisis.

It will reshape European politics and its outcome will have far-reaching effects on the world economy and international politics. Resolution of the crisis will come with even more difficulty since the Europeans for the first time since the end of World War II cannot count on a strong role of Washington as mediator and mentor.

First off, it is important to remember that despite all the propaganda to the contrary about newly arriving power centers – and the weaknesses exposed by its current troubles – Europe remains the force in world affairs unmatched except by the U.S. Its more than half a billion population with almost a quarter of the world’s total economic activity, enormous cultural diversity and heritage, with infinitely fecund research and technological innovation, and with a diminished but technologically powerful military, still dominates the world scene.

When we speak of “Europe”, of course, we are lumping in a set of complicated relationships as well as groupings. The geographic Europe is everything west of the Urals in mid-Russia, but for the moment Russia has excluded itself from the European family. That’s in part because the European Union now includes all the countries of Western Europe except Norway and Switzerland, and more recently central, northern and parts of eastern Europe for a total of 28 countries [with four more former Yugoslav states soon to join].

The EU institutions include the European Commission, the Brussels-based appointed executive, the Council of the European Union, its upper house of parliament composed of executives of member states, the directly elected European Parliament, the lower legislative house, the Court of Justice, the European Central Bank and the Court of Auditors. At least theoretically, these countries now have a common market and are moving toward a standardized legal system. A separate treaty removes passport controls among all the countries [including Norway] with the exception of the U.K.

Eighteen of these countries – with the exclusion of the U.K., Denmark, Sweden and Poland – are part of the Erozone, using the Euro as their currency. [Seven additional states are obliged under their treaty obligations to join the common currency at a later date.] Since the international crisis of 2007-08, the European Central Bank has become a mini-International Monetary Fund. It has taken on a role of handing out emergency Euro loans to some of its members in deep trouble and is helping to work out individual national economic reform agendas. Through it purchase of national government bonds – Germany has blocked Eurobonds – it also indirectly helps direct the finances of the individual members.

Rather suddenly, a series of problems have grown acute, testing to their limits these and older European institutions in a way not seen since the onset of The Great Depression and the resultant collapse of much of Europe into authoritarianism. These developments put into question whether national interests can be subsumed in a superstate which has become the aim of many of the proponents of further European economic and political integration. Or whether, as an alternative, national and regional sentiments within some older nation-states will scotch this movement, or, indeed, reverse the whole effort.

The problems are, of course, interrelated and will require new efforts at international collaboration as well as mobilization of resources to move on to another stage whatever that may be. It’s no wonder then that any attempt to describe the ideological and more practical conflicts of the various constituents looks like a cat’s cradle of connections which alas! are not likely to fall apart as quickly as success at that old string game.

Putin’s challenge After more than a half century with sometimes bitter but relatively minor wars, Europe is faced with the continuing threat of naked aggression by a major power, Russia. An unstable Moscow regime glories in its inability to assimilate politically to the European consensus. But unlike its autarchic Soviet predecessor for which many of its leaders [and unhappily its citizens] have deep nostalgia, Putin’s Russia is not only directly intertwined with the world economy but virtually totally dependent on its sale of fossil fuels to the rest of Europe. [Recent feints to the East to China are just that with so-called trumpeted agreements falling far short of their ballyhoo.]

Using methods that could have been copied from the aggressive pre-World War II Fascist and Communist dictatorships, Moscow bluffs at least temporarily have overwhelmed European [and American] leadership. Neither Brussels, the national capitals, nor Washington have found an adequate response thereby inviting further aggression from Putin’s ad hoc agenda to restore what he claims is Moscow’s hegemony in Eastern and Central Europe if not a superpower. The fact that Ukraine has become the focal point for the conflict is symptomatic, for it is the irresistible attraction of participation in the European movement toward integration which draws Kviv away from its traditional domination by Moscow.

Democracy quotient The EU’s original deadly fault – top-down imposition of a new regulatory regime on self-governing societies – has finally climaxed in the candidacy of a new president of the Brussels bureaucracy. Tiny Luxembourg’s former prime minister, the lackluster politician Jean-Claude Juncker, has by happenstance become the nominee of the European parliament for the presidency of the EU on the claim that his party now has a majority in that assembly. That claim, reinforced by the lack of other major alternate contenders, in effect would establish parliamentary supremacy against what has been a tradition of hand-picked appointed Brussels bureaucracts..

But Juncker’s advocacy of more “federalism” – further political as well as economic integration – challenges London’s opposition to a stronger federal union at the same time its most ardent advocate is Germany. Furthermore, a clutch of anti-EU parties – some of them proto-fascist – now hold a fourth of the seats in the European parliament.

Britexit The sweep of anti-EU skeptics of the British delegation in a just completed Europe-wide election for the European parliament threatens to increase the growing minority in the U.K. who want to leave the EU. Conservative Prime Minister James Cameron, increasingly threatened by an anti-EU, anti-immigration, nationalist swell on the right, has promised a 2017 referendum on leaving EU membership. At the moment, British public opinion remains divided with apparently a small majority for remaining in the EU, but continuing as a limited partner. However beleaguered is its sterling currenmcy, most Brits count themselves lucky they stayed out of the Euro and thereby reinforcing the role of The City as perhaps the foremost international financial center.

Germany, a proponent of further integration, nevertheless makes preventing the departure of the British, its main ally in opposition to French and other EU partners’ statism, its highest if contradictory priority. Britain’s exit would, of course, have enormous repercussions inside the EU beyond its role as the main opponent of further bureaucratization, feeding skepticism which exists in Scandinavia, for example, and may even be growing in Germany where it has been a dogma of the post-World War II regime.

Economic malaise The European Central Bank president, Mario Draghi’s imposition of a negative interest rate – that is, the national central banks’ deposits into the Euro would be charged interest – is a groundbreaking effort to stimulate growth Theoretically, it would force the central banks to loose their lending policies. It is an attempt to counter the austerity policies throughout most of bankrupt southern Europe’s economies and the resultant high unemployment of low growth rates and increasing political instability.

Draghi’s policies are bitterly opposed by Germany with its paranoia about inflation from the deadly post-World War I expeience. Meanwhile, as by far the largest EU economy it continues to maintain a budget surplus through its “beggar your neighbor” trade policies. [Germany rolled up the highest trade surplus in the world at $270 billion in 2013 despite the fact that 60% of its exports went to other EU partners. [If Germans sanctimoniously blame their souther partners’ priofligacy for their situation, it was German-financed exports that in large part brought on the disaster.]

Germany’ situation is almost unique in the region. Its per capita income is 23% above the EU average with more than a fifth of the federation’s gross development product. That it is inimitable to Draghi’s grand strategy sets up an enormous conflict inside the EU at a moment of economic crisis.

Nor is it at all clear that Draghi’s effort will help given that the bulk of the Euro’s transactions still remain in national budgets, most of them already in deficit. That, of course, is the long term argument for further integration, welding differing financial strategies into a whole behind the Euro. But Berlin’s notorious historical incapacity to lead a democratic alliance contradicts Germany’s hegemonic economic role inside the EU, another reason why its effort to keep Britain inside the union is consered by many,m even in Germany, so critical.

This welter of crosscurrents takes place at a time of a growing perception – probably realistic — among European leaders that the U.S. is retreating from world politics and when the world engine of growth, the American economy, is sputtering.

Any of these various issues and contradictions could at any moment flare up into the kind of crisis that would feed popular sentiment and the 24-hour media, overshadowing the general confusion of these more complex economic and political issues. That question of unexpected events now dominates the European and ultimately, the world scene.

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The ABCs of the Euro crisis


The kaleidoscope of events and mock-events is moving so rapidly in the European crisis, even a dedicated netizen following happenings finds himself bemused.

It might be good to look at a little history:

The European effort to unify – after two bloody civil wars of near annihilation and the post-World War II threat of Soviet Communism – began with economic integration. Political unity, given the long history of European national, racial and ethnic conflicts, its mainly original French and German sponsors thought, would eventually fall into place were economic coordination achieved. Somewhere down the line, again it was assumed by the idealistic if elitist thinkers, a united Europe would achieve something like North American unity.

A step-by-step customs union followed the 1951 relatively primitive six-nation European Iron and Steel Community, the initial European Union amalgamation seed. That body reorganized the then most important industry in the face of diminishing domestic raw materials and need for revised marketing. But when the visionaries – often slowed down by parochial interests – in 1995 finally got to monetary union, they jumped a cog. For the relatively easy creation of a common currency and a central bank did not insure – nor was it more than theoretically acknowledged – amalgamating national economic policies, and perhaps more important, their bureaucracies. In fact, of course, some of the strongest economies such as Britain and Scandinavia’s opted out with reliance on the vaunted deutschemark’s incorporation as its bedrock. To do otherwise would have required commonality that did not exist even among the most advanced economies, much less their less developed members at almost “third world” economic levels.

It was inevitable when [not if], a major new economic crisis hit the world economy, the Euro would be imperiled. For it was being used by participating governments for their own individual economic strategies rather than any common development. German Chancellor Angela Merkel may now well say the Euro’s preservation is the issue, not Greece’s more parochial interests, But that, too, is 20-20 hindsight. It derives from the major EU members [again excluding Britain and Scandinavia] making another mistake: their inability to solve the Euro crisis quickly has made it a talisman for the continued successful pursuit of European unity.

In fact, the southern Europeans pretended their Euro was a truthful representation of their productivity. They could, therefore, use its perceived unlimited resources to fund a standard of living which their productive capacity did not, in fact, support. Outrageous “benefits” – retirement age in Greece at 50 – were accorded a population only a generation away from the horrors and privations of World War II and the worldwide “Great Depression” which helped produce it. Increasingly, cities like Barcelona and Athens took on la dulce vida they could not really afford with their artificial Euro.

Crunch-time revealed a stark dilemma: northern European taxpayers with their higher productivity must rescue their southern European spendthrift compatriots, or southern Europeans face slashing their living standards to levels not seen for a generation. The German taxpayers, their French fellowtravelers, as well as minor players, Dutch, Austrians, Finns, Estonians, Czechs, are yelling foul. Furthermore, there is danger such cutbacks may reach the bone, destroying these poorer economies’ ability to restart the longer process of achieving higher productivity and the just rewards of higher living standards. [This is a fundamental problem of continental economies with backward areas, not unknown even in the U.S. with its vast homogenization. One element in the present American economic debate: how far does federal taxpayers’ largesse extend to Mississippi and Arkansas?]

What’s at risk, of course, is the whole concept of post-World War II universal European representative government after the fall of Communism. There was applause in obscure corners for Greek Prime Minister George Papandreou’s threat to take the issue of Greek “suffering” to the people for a referendum rather than impose it even from an elected government. Good try! But perhaps to the long term detriment of true European democracy, North European leaders’ threats and Greek politicos’ own maneuvering will again permit a papering over. The risk is grave, of course, mandated “solutions” – the curse of Brussels for a generation now – may run into bedrock popular resistance, even civil unrest.

Can the center hold in perpetuity as it could not in the 1930s? may be the question of the hour.

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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.

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A vicious circle tightens



The globalized economy’s undertow is ripping all around the world.

Even the economic optimists’ two darlings, China and India, are now troubled. Seen as the world’s growth machine [along with a now overheated Brazil] in a period of advanced economies’ stagnation, their downturn produces a universally grim world outlook.

India, now the world’s largest population, had promise to overtake

China – perhaps more stable with its veteran private sector and representative government. But inflation threatens with food almost half its consumer index rising to more than 9 percent last month. Prime Minister Manmoham Singh, after all a graduate of Soviet-style Indian planning, has his foot on the brake and gas pedal at the same time. Reserve Bank of India rates force lending for preferred firms to 13 percent and notorious paper-shuffling babus [clerks] hobble initiative, sending Indian coal companies, for example, despite some of the world’s largest reserves, chasing projects from Australia to North America. A spate of influence peddling scandals, including $16-billion in telecommunications, further clouds the scene.

New Delhi’s geopolitical rival, China, has turned its back on its 25-year strategy to prevent destabilization of one-party dictatorship with maximum growth. With incipient inflation, Communist leadership enters a generational succession next year trimming its investment-led behemoth’s sails. Widespread civil violence – despite enormous expenditures for the most elaborate hi-tech suppression machine in the history of authoritarianism – jeopardizes any new tactics. In fact, all the Chinese boom’s contradictory chickens simultaneously are coming home to roost: vast overexpansion of infrastructure feeding the boom [along with subsidized exports] has produced marvels for photographers but a real estate bubble including, literally, empty new cities. There’s growing resentment over second class citizenship and lack of services among more than 200 million migrant labor from rural areas stampeded to coastal cities employment. Declining foreign markets, roaring imported commodity prices [ironically brought on in part by speculation on “unlimited” Chinese demand], wage pressure, competition from export-led cheap-wage producers, monumental corruption, all now threaten “the Chinese model”. Consumption continues to decline as a percentage of domestic product mocking talk of redirecting a growth strategy. A combination of nonconvertibility and hot money chasing an undervalued yuan demonstrates how empty talk of it as an international reserve currency is. Beijing’s capacity for foot in mouth disease is epitomized in its increasing hoard of dollars and Treasury debt [again on the upswing] while officials continuously publicly denigrate the dollar.

So much for “the emerging markets”.

Turning to the developed world, there, too, crises are escalating.

A bureaucratic hassle over the Euro with divergent views in Berlin, Paris, Brussels and Frankfurt is turning into a dragged out effort to save the 17 European Union members’ common currency. Meanwhile other integration efforts — a free labor market and common defense and foreign policy — are faltering. A Greek default could produce a European banking crisis [even contagion for North America]. In other words, a fiscal and monetary crisis is turning into a major political upheaval threatening accepted European patterns. Half-baked intervention in Libya, dragging in NATO and the U.S., was announced in idealistic terms by Europe’s leaders. But it encapsulates European concerns – unlike the increasingly hot American debate over Obama Administration’s opting for “a war of choice”. For Europe “Libya” is linked directly to falling birthrates and need for imported labor and unemployed North African, Middle Eastern and Black African youth almost literally swimming the Mediterranean at a time Muslim immigrant assimilation is increasingly questioned.

Europe faces, too, the fact the world’s window to the U.S. consumer maw which supplied the post-World War II economy not only with unlimited markets but revolutionary technology has a “closed for repairs” sign with no reopening time indicated. Whatever happens after decades of drunken sailor’s spending, there will be no substantial U.S. economic strategy in place until after November 2012. Current Washington debate, if it can be dignified with that title, over raising the debt limit and reducing government spending, is simply a foretaste of the pain necessary to get the U.S. economy – perhaps now sliding into a double-dip recession — back to its historic miraculous production of jobs and expanding markets.

It’s going to be a long hot summer and a grim fall — despite the American sideshow of political shenanigans with the curtain only temporarily coming down on the first [Weiner] scene.

To deconstruct or not to deconstruct is no longer the question


                 Increasingly, however reluctantly, Europeans are bellying up to the Eurozone’s ultimate crisis. Talking heads present a dilemma: either the European Community will pick apart its common currency or take radical steps toward a highly centralized economic command.

That’s because a triangle is strangling the Euro: markets faced with the threat bankrupt members of the monetary alliance will default raise the cost of refinancing; northern European taxpayers warn their elected governments they will not continue bailing out southern neighbors; and a plethora of national and international monetary organs desperately maneuver to protect their bloated bureaucracies’ turf by improvising temporary rescues.

Placing even more power into hands of unelected bureaucrats for economic amalgamation would be a giant step. That’s not going to happen because inauspicious as it is for the monetary crisis, widespread political opposition [most of it constitutional and peaceful] to the growing calls for austerity is evidence of grassroots sovereignties as old as the end of the Roman Empire. How difficult they are to assuage has been demonstrated by a half century of tortured progress of The European Project. More apparent daily is the inadequacy of building “Europe” from the top down – even given the vision of Gen. Charles de Gaulle and Chancellor Konrad Adenauer and their technocratic collaborators. Absence of a process such as the American Continental Congress with grassroots representation painstakingly compromising conflicts has led into a blind alley on the economic front, however much limited success has been achieved politically.

Meanwhile, as so often happens, the helter-skelter of daily events obscures the coming inevitable decision. Those include critical happenings on the dollar side of the Atlantic, too. Evidence of the refusal to face up is a proposal by idiosyncratic economics Nobel Prize winner Robert Mundell to fix the dollar to the Euro to anchor the ever more threatening parallel international currency instability. Mr. Mundell might just be defending his original sponsorship of the Euro, a common currency designed to bounce around a dozen different national economic strategies without an overall guiding hand. But pinning fixed prices for rapidly devaluing dollars to disintegrating Euros would be, indeed, rearranging deckchairs on the Titanic.

Early on as it is, it’s rash and, of course, daunting, at this juncture to speculate in a few hundred words implications of the Euro’s demise. But where angels fear to tred, here are some guesses:

  • Whether or not hard-nosed advocates will win out in fostering surgical cutbacks of American government spending in order to save the dollar from being overwhelmed by domestic and international deficits – a question as large as the Euro’s future – the role of the dollar as the international reserve currency is willy-nilly being strengthened. Any talk of massive huge East Asian dollar holdings shifting into Euros – never a real possibility – is now out the window. Talk of a non-convertible Chinese international reserve currency is too idiotic to discuss. We have already been through a failed “supracurrency” experiment of creating the International Monetary Fund’s “drawing rights”. And there may not be enough gold to cover ever-expanding liquidity demands.
  • The attenuation of the Euro crisis unfortunately has elevated its role in the total project for a stable, prosperous, unified Europe. It was, originally, if always highly important, only one of many unification efforts – a common trading market, a common labor/migratory zone, financial, environmental and health regulatory unification, a common foreign policy, a common defense. These have been, at best, only partially achieved just as only 17 – notably excluding Britain with its world finance hub in The City — of 27 EU members adopted the Euro. Always important, the Euro has been exalted to the touchstone for success of unification and its demise therefore now made increasingly catastrophic.
  • The coming Euro breakup coincidentally will partially rehabilitate the U.S. superpower role despite Washington’s obvious economic and geopolitical-military overextension, persistently exaggerated by Pres. Barack Obama’s determined campaign to deflate the American image. That will be coupled not only with hedonistic Europe’s continuing lack of determination to tend its own military defenses but its continuing reliance on the U.S., for example, an American intercontinental anti-missile shield which Washington has no option but to build in pursuit of  its own security.

So, accept: the Euro construct is dead! long live European diversity — the wellspring of Western civilization!

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Meanwhile back at the ranch …


Mesmerized by the Osama Ben Ladin drama, world attention has swung away from world economic issues. That may not be for long. A three-ring circus of instability matching P.T. Barnum’s extravaganzas is in full swing. But unlike Ringling where only the viewer’s attention connects acts, so intertwined are these convulsions even the most arcane market punter is having difficulty telling us what is going on – much less how to invest.

  • · Ring No. 1 is the soap opera – to change my metaphor — playing out with Europe’s common currency. It is becoming increasingly clear, as some of us predicted at the beginning of the crisis, the Euro cannot survive in its present form. With Greece near civil war, the markets tell anyone listening there is no confidence in bail-outs even as a new one is underway in Greece and one just put together for Portugal. Because default could come at any moment, borrowing rates are too high for recovery even where recalcitrant politicians have the courage to inflict the pain of austerity. Joining Ireland, and soon probably Spain, clinging to the Euro vitiates unavoidable belt-tightening their separate currencies once forced on earlier regimes. Threat of a German taxpayers’ revolt grows for German Chancellor Angela Merkel’s increasingly shaky federal coalition — wounded recently by loss of the largest state after 34 years of conservative rule but still soon facing four state elections. Public opinion sees Berlin doing the heavy lifting for spendthrifts but ignores it was those miscreants who gobbled up German exports. Unfortunately, the Brussels EUrocrats’ rescue stratagems invite a future dramatic Euro crash. By procrastinating, they increasingly are making the common currency’s fate synonymous with the whole “European project” of creating a united continent to avoid wars and preserve prosperity.
  • · Chinese delegates have decamped Washington after another annual talkathon with a befuddled Obama Administration trying to spin what is in reality a dismal impasse. Just as everyone was being lulled into myths of Beijing’s boosting consumption, April marked record trade surpluses. The combination of higher imported commodities, slackening appetite for its subsidized exports and growing concern about its real estate bubble did not stem the tide. Beijing’s escalating humongous dollar holdings show where big chunks of the Fed’s “quantitative easing” [printing dollars] have gone. Meanwhile, Beijing further screws down political repression. Announced internal security costs are larger than its understated publicized defense budget. On the eve of a generational transfer of power, there is paranoia about “Arab spring” contagion and much shin-kicking among leaders. The Communist politburo is in no mood for “experiments” but “keeps on digging its [financial] hole”. That is now leading to inflation [if paused for the moment], especially in food, the overwhelming concern for most Chinese. Thus, recruits to the tiny China-will-implode prognosticators, among them yours truly, is growing.
  • Our third ringmaster [or perhaps snakeoil salesman to mix out metaphor again] proclaims greedy oil companies are the cause of high gasoline prices. Mr. Obama’s own clamp on Gulf offshore drilling as well as Alaskan oil are the real culprits. Of course, as markets showed in mid-May, probably temporarily, a sudden stronger dollar and lower commodities prices could sink notoriously unpredictable crude oil prices – but probably only as a sign of a descent into double-dip recession. For the moment, relief seems unlikely for Memorial Day weekend driving with Louisiana’s 15% of refining capacity threatened by the Mississippi River flood  And continued high prices at the pump could just be the 2011 election eve deciding lollapalooza rather than the current concern for fiscal discipline by an American electorate burdened with  joblessness and foreclosures now running three months in arrears.

Interconnections among all these phenomena are infinite and mostly unpredictable. But the 1997-8 crash apparently did not teach us – there are signs among our bankers – clever derivatives and exotic algorithms are not going to give us a road map to recovery. Just as the self-emulation of a single unemployed Tunisian – the least likely trip-wire in the whole Muslim world — set off a wave of unpredictable revolutionary unrest among 300 million Arabs, the world economy, too, is at the mercy of unforeseen events and their unanticipated consequences.

Tighten your seat belts!

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Crises – but which is the one?


Clichés come in at least two varieties: those sayings artfully worded, however empty of logic. Others trotted out because they do represent universal truths, vetted over centuries. One of the latter: “history does not travel in a straight line”. Afterward, reinforced with additional retrieved facts and by fads, we concoct a simple, “logical” timeline.

For those of us who lived through long decades of The Cold War, we look back to mistaken views of a world scene played out on many stages. Then as now, drama tended to overshadow more important currents.

Relevant, perhaps, was the 1956 Hungarian Revolution. A Soviet satellite state, incidentally Bloc leader under benighted central planning, attempted escape from Moscow’s grip. It, too, began with youngsters in a square. In part, alas! they were emboldened then too by Washington’s support for “liberation”. But when the brave stood against Communist tanks, the U.S. blinked, fearing nuclear war.

Almost simultaneously, Egypt’s military dictator Abdul Gamal Nasser used the pretext of the Eisenhower Administration’s refusal to build the Aswan Dam megaproject  to “nationalize” the Suez Canal, for a century an immensely profitable Anglo-French commercial entity. To regain control, London and Paris used another pretext, warding off but actually colluding in an Israeli Sinai occupation to insure its own passage through the essential waterway.

U.S. Sec. of State John Foster Dulles adamantly forced America’s allies to relent. NATO Sec.-Gen. Belgian statesman Jean-Paul Spaak, an unsung hero of the epoch, literally in tears, beseeched Dulles: we have sinned but grab this opportunity to secure Europe’s lifeline to Mideast oil. Dulles, forever the moralist, refused “to reward aggression”. Nasser got the Canal, reinforced pan-Arabism sweeping the region, allied with Moscow to bedevil the West until his death. But his legacy was a mess of pottage, dismally failing to produce that long-awaited Arab renaissance, leaving a further discredited secularism for the benefit of his Moslem Brotherhood enemies.

Contradicting another cliché, history does not repeat itself, no more than the same water runs under the same bridge as the stream flows on. Nevertheless, while our attention is focused on increasingly bloody events in Araby, perhaps again more important happenings may germinate the kernel of world history elsewhere:

·        The German parliament has just laid down the law to a more than willing Chancellor Angela Merkel: it will not accept a “Europeanization” of the Euro’s financial debacle. With Greece near civil war trying to impose austerity, its southern tier debtor neighbors – facing rapidly increasing borrowing costs – move inexorably toward new “bail-outs”. No all-Europe institutions or mechanisms can meet those costs. Now the Bundestag has closed the door at least temporarily on Eurobonds [with Germany as prime guarantor] which might repeat might have been an “out”. The Euro as we knew it is doomed. Can “the European project” – the effort to create a stable continent shorn of its age-old capacity for intra-European violence — survive it?

·        A huge, new wave of Muslim refugees from Tunisia, Egypt, now Libya [accompanied by “transiting” Black Africans] is flooding Italy and Europe. They come as Chancellor Merkel, French Pres. Nicolas Sarkozy, and even U.K. Prime Minister David William Donald Cameron [the youngest British leader in 200 years], publicly declare “multiculturalism” dead. Failed Western assimilation of new workers in otherwise declining populations has led to indigestible, economically deprived enclaves abetting bankruptcy for “welfare states” created in the postwar prosperity.

·        The Europeans, as the U.S., finds itself in the grip of a growing threat to physical security from totalitarian Islam but bemused by intellectual confusion reminiscent of the1930s seduction of intellectuals by the Leninist road to utopia. When the Catholic Church’s scholarly leader, Joseph Aloisius Ratzinger, attempted to renew the dialogue between Christianity [and Judaism] with Islam – a 1500-year-old debate – at Regensburg in Sept. 2006, he was howled down by the politically correct. Yet native Europeans, their government – and their economies –are assaulted daily by immigrants who want to continue non-European lifestyles including some of the world’s most barbarous customs, exploiting modern Europe’s tolerance and freedom.

·        China, which within a generation has turned itself into “the world factory”, is being drawn into shaky collaborative international financial arrangements but at only a snailspace. Beijing uses its export of “capital” – slave labor and increasingly stolen technology – to blackmail its trading partners. It expands exponentially a military machine against fictitious enemies. Using largely American and EU debt, Beijing is spurring threatening worldwide inflation, uneconomically pursuing raw materials– and increasing worldwide food shortages which it has helped to create by neglect of its agriculture. Its unlimited infrastructure expansion and claptrap financial structure including unprecedented payments surpluses – now pressured by Washington’s “quantitative easing” in its effort to reflate the world’s engine, the American economy – promises a bubble bursting at any moment.

Therefore, as dramatic and seemingly all encompassing as current Arab world happenings would appear, when this period is looked back upon, it could be other contemporary world crises were more important. We, of course, will never know – which, should, inspire a little humility [admittedly not seen in this unavoidably brief review].

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