Cutting to that other but unfortunately linked chase, we find the Euro crisis is about fundamental European politics not just economics. The European Union, and therefore, the Euro, was concocted top-down by visionary politicians and consummate bureaucrats. They did not arise from studied compromises among Europe’s incredibly diverse societies as did the American union in the 1787 Philadelphia Convention. Now those differences have reasserted themselves because nanny governments chose burdens even their remarkable economies could not afford.
European opinion is divided mainly among those who want further economic integration and that majority who want to continue band-aid approaches. The latest flavor is moving national indebtedness into Eurobonds, which in effect, is a sugar-coated way of creating a “commonwealth” in which the reluctant northern Europeans, personified by the Germans with their disproportionately large economy, would pick up the tab for their lesser endowed neighbors.
A third position, abandoning the Euro, at least for bankrupt southern members of the common currency, is still largely seen as “unthinkable”. But it grows closer — if for no other reason than fierce austerity now forced on the Greeks from Brussels is not sustainable by any Athens government for the time needed to solve the basic problem of a 15-20 percent gap between consumption including public services and Greek workers’ productivity. So coming down the road could well be a choice between abandoning the Euro — with growing implications for the grander European Union structure as the crisis perpetuates — or watching social tension in the Mediterranean countries, as in the 1930s, lead to authoritarianism.
The latest fairy tale, of course, is that the Chinese with their over $3 trillion in foreign reserves are going to bankroll Europe. [It’s good to remember that this, too, is a pot of accumulated American debt.] Yes, it is true Beijing looks for an alternative world reserve currency. Yes, the Chinese would like to get away from a dollar losing purchasing power in no small part because of “quantitative easing” by Federal Reserve Chairman Ben S. Bernanke and an Obama Adminsitration restrained in “stimulus” spending only by a Republican House of Representatives.
However, the just announced joint central banks emergency three-month dollar loans to rescue European banks, hoping to calm the markets faced with a possible Greek default, confirms Beijing doesn’t really have a choice. If you were running the Chinese dollar hoard, would you now see the Euro as an alternative, even were its coffers large enough to hand such a “dump”? Picking up equity bargains among old if threatened European luxury brands [Club Med appeals to the new Chinese kleptocrats] is great fun if sometimes risky. But U.S. Treasuries bringing their lowest return in 70 years tells you what the Chinese and the rest of the world know: even with the circus in Washington: the U.S. and its dollar still remain the last, faint hope of the international investor.
So, as old Rudyard said:
If you can keep your head when all about you
Are losing theirs and blaming it on you,
If you can trust yourself when all men doubt you,
But make allowance for their doubting too…
Sol W. Sanders, (email@example.com), writes the 'Follow the Money' column for The Washington Times . He is also a contributing editor for WorldTribune.com and EAST-ASIA-INTEL.com. An Asian specialist, Mr. Sanders is a former correspondent for Business Week, U.S. News & World Report and United Press International. >