Archive for March, 2013

How Long Can Europe Hold On?

March 24, 2013

I’ll admit my predictions were wrong.

When I first started reading Monty’s Doom posts at Ace’s a couple of years ago I was convinced that Europe would split within a year or two.  Greece led the debt-ridden PIIGS (Portugal, Ireland, Italy, Greece, and Spain) and looked to be on the way out.  

When we visited Athens my family decided to go without an organized tour group.  Things appeared quiet, but my family could detect an undercurrent of desperation.  I was pickpocketed on the train, but they only got a few euros for their trouble.  Waiting for buses back to the cruise ship, the tension in the air was palpable.  These were not happy people. 

The next year Athens saw the violent protests against austerity.  So, I supposed the end was approaching.

I was wrong. 

Crisis after crisis was averted by Angela Merkel’s handouts, with a full expectation that the southern countries would reciprocate with grateful reductions in spending. 

But as the great Victor Davis Hanson wrote, the way of life in Greece was one of graft, first through a socialist government largesse to welfare recipients, then to those employed by the government.  He would tell of repairmen who would tell the good doctor that his washer could not be fixed for several weeks but if the repairman came back, off the clock, the job would be done that same day if he paid him under the table.  That repairman would reap his government salary for the day despite going home at 2 pm.  Then, he’d make his real money after hours in seedy wink-wink transactions.  Such is Greece.

Austerity?  No way.

Merkel’s consternation at Greece’s intransigence could not trump her desire to see the European Union survive.  Too many bureaucrats had staked their reputations and fortunes on the grand EU experiment to let it fail.  So bailout after bailout ensued, with the ECB (European Central Bank) finally announcing it would perpetually bailout any distressed countrie’s struggling banks.

Crisis averted.  EU solidly together again, despite a few raised hackles in Germany who is funding most of these bailouts.

Nothing to see here, move along.

And then along came Cyprus.  How could a small (tiny, really) island make any difference even if its banks were in arrears?  Who cared with such a tiny fraction of the trillions of GDP that represents the EU? 

Ahhh, but there’s that human thing.  People don’t like it when their government takes money right out of their accounts.  They’re much more docile when taxed and when interest rates are kept artificially at zero.  But take their money directly, and it’s panic time,

The lies told to us by the EU governments are laughably transparent.  Bank holidays?  What a joke. 

Will this be the domino that starts it all?  Well, if so, it’s several years too late, and of course the reckoning will be that much worse. 

Now the real question is, with the slow-motion trainwreck of EU dissolution taking so gosh-darn long, what will be our tradjectory in the U.S. when our own collapse occurs?

I can imagine it will topple quickly, once it starts to go.  It all comes down to the faith of the common person in the fiat currency.  Once it’s gone…splashdown.