Even a publication like the Business Insider touts
the Economists viewpoint in The Future Of The Euro Could See Trouble This Week.
“Indeed,
the political risks to the euro may be greater now than they were at the height of the euro crisis in 2011-12. What was striking
then was that large majorities of ordinary voters preferred to stick with the single currency despite the austerity imposed
by the conditions of their bail-outs, because they feared that any alternative would be even more painful.”
The EURO currency has a permanent flaw that no amount
of tweeting can correct. Europe has always been a hot bed of national differences. Utopian dreams of uniting dissimilar cultures
and very divergent economies under the fig leaf of a political union have always been a formula for failure.
The German economy has emerged as the bankroll of last
resort. Applying the same political pressure used throughout the post war era to bully the Federal Republic of Germany into
paying a disguised version of reparations to sustain the EU is coming to an end.
Spiegel Online, the German publication provides an interesting article on Monetary Fallacy?
- Deep Divisions Emerge over ECB Quantitative Easing Plans.
“If
the ECB does launch a buying program for government bonds, another problem arises. To avoid coming under the suspicion of
trying to provide funding primarily to crisis-ridden nations, it will probably have to acquire the bonds of all euro-zone
countries. For the ECB itself, the most likely approach is to simply base its bond-buying program on each country's initial
contribution to the ECB, known as the capital key.
It's no surprise that the ranks of skeptics are also growing within the ECB. Bundesbank President
Weidmann has long warned that the central bank cannot be allowed to become a "sweeper" for policymakers. Now German
ECB Supervisory Board member Sabine Lautenschläger is coming to his defense, saying that the purchase of government bonds
could only be a "last resort" in the event of a deflationary spiral, essentially the final ammunition of monetary
policy. The critics of further quantitative easing measures also include the Executive Board members from Luxembourg, Austria,
the Netherlands and Estonia.”
The
tool box of the EU’s monetary gears is clashing with the speed of the declining health of commerce. Even cheap oil will
not get the economic machine back on track. The psychology of deflationary expectations builds fear at a much higher pace
than transactions in the cash register.
Tourism
has long deposited favorable sums in the EU economies. As long as the feeble international recovery crawls along, this may
delay panic from internal downturn in domestic activity. The vulnerability of any reduction in foreign visits is an added
component that does not affect most of the rest of the world in the same way.
So what signs to watch as the New Year unfolds? Peter Spence in the Telegraph
provides a list of Six triggers that could renew a eurozone crisis in 2015.
- Germany loses faith in euro project
- Spanish uncertainty reaches breaking
point
- France calls it a day
- Pain of Italian reforms drives country away
- Greece turns to left-wing extremes
-
European Central
Bank runs into Berlin Wall
Each of these national concerns that could spark a new run on the EU currency can only accelerate the deficits in
governmental budgets and depress economic activity.
The risks of a political implosion in the EU union among conflicting economic and social concerns are mounting. However,
the entrenched elites who dominate global commerce control the political decisions. Unruly protests have a long tradition
in Europe. As the velocity of money slows, the prospects of earning a livable existence sink. The socialist model has only
been sustained by massive sovereign debt financing.
When the European financial press reports on the warning signals of a significant crisis brewing, everyone should
take notice. The relative foreign exchange conversion rate for the EURO may not concern most Americans. However, the long
history of European political intrigue has always influenced global economic realities. The next chapter of financial crisis
may well be written in Brussels.
James
Hall – December 17, 2014
