AkhandBharat
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Europe's predictable collapse
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The Soviet bloc collapsed 20 years ago, not under military attack from capitalist imperialists, but under the weight of its own economic contradictions, as Karl Marx himself might have said.
This implosion, inevitable after two or three generations, had not been predicted by anyone save by a handful of economists with an unshakable faith in the laws of free market. Today, the same laws enable us to foresee the collapse of Europe, with the crisis of the euro as its harbinger.
Markets are often criticized for their lack of vision—for their "short-term approach," to use the preferred stock-market jargon. But that reading requires a serious misunderstanding of what a market price is, even a speculative one—particularly, in fact, a speculative one. A price on a free market condenses all the information available, not only about the present but also the past and the future.
In other, less sophisticated, words, let's say that those who have money—"the rich," whether good or bad—care about a much more distant future than the politicians, who are concerned about their re-election. The famous "money wall" is a wall where the future is written, not unlike Balthasar's (Daniel 5:25).
Today, the markets anticipate not only the disastrous everyday consequences of the alleged "remedies" meant to hasten the end of the financial crisis started in the U.S. two years ago, but also and above all Europe's inability to face the global market, as it is hampered by the burden of a public debt that has made a huge leap upwards due to the aforementioned remedies.
The "ugly speculators" have also put into their computer programs the debts generated by the pay-as-you-go pension systems, commitments which are ever larger while their funding shrinks as reform is delayed or botched. The self-destruction of the welfare state, as it results in fewer children and more unemployed, less savings and more taxes, is no less predictable after two or three generations than the failure of the Soviet system was, and whether politicians are in denial or not about it, the markets know it very well now and take it into account.
Actually, politicians are aware that this day of reckoning is coming.
French President Nicolas Sarkozy is rushing to the help of Greece, pushing for the establishment of an improbable European economic governance, while hastening to complete the latest pension reform, no matter the political cost in advance of the election, in order to try and prevent a humiliating deterioration of France's rating on the financial markets, which would result in an additional increase of the debt burden and a huge political slap in the face, both political and personal.
A rearguard fight, with the back against the wall, would be an apposite description.
Barring a miracle on the "social front" (the pensions, the labor market, health insurance), which nothing justifies expecting, and unless the "thermometer" of the rating agencies is broken, the degrading of the French state is inevitable. The current public debt is simply not sustainable.
What applies here to France may be said for most European countries, as they are mired in the same rut.
Major historical events usually combine chance and necessity: a spark ignites a powder keg.
The spark was brought by the U.S. subprime crisis (another fruit of the welfare state).
The powder kegs are the deficits accumulated over 30 years. We are living through the explosion right now, and it will bar old Europe from global competition for a long time.
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The Soviet bloc collapsed 20 years ago, not under military attack from capitalist imperialists, but under the weight of its own economic contradictions, as Karl Marx himself might have said.
This implosion, inevitable after two or three generations, had not been predicted by anyone save by a handful of economists with an unshakable faith in the laws of free market. Today, the same laws enable us to foresee the collapse of Europe, with the crisis of the euro as its harbinger.
Markets are often criticized for their lack of vision—for their "short-term approach," to use the preferred stock-market jargon. But that reading requires a serious misunderstanding of what a market price is, even a speculative one—particularly, in fact, a speculative one. A price on a free market condenses all the information available, not only about the present but also the past and the future.
In other, less sophisticated, words, let's say that those who have money—"the rich," whether good or bad—care about a much more distant future than the politicians, who are concerned about their re-election. The famous "money wall" is a wall where the future is written, not unlike Balthasar's (Daniel 5:25).
Today, the markets anticipate not only the disastrous everyday consequences of the alleged "remedies" meant to hasten the end of the financial crisis started in the U.S. two years ago, but also and above all Europe's inability to face the global market, as it is hampered by the burden of a public debt that has made a huge leap upwards due to the aforementioned remedies.
The "ugly speculators" have also put into their computer programs the debts generated by the pay-as-you-go pension systems, commitments which are ever larger while their funding shrinks as reform is delayed or botched. The self-destruction of the welfare state, as it results in fewer children and more unemployed, less savings and more taxes, is no less predictable after two or three generations than the failure of the Soviet system was, and whether politicians are in denial or not about it, the markets know it very well now and take it into account.
Actually, politicians are aware that this day of reckoning is coming.
French President Nicolas Sarkozy is rushing to the help of Greece, pushing for the establishment of an improbable European economic governance, while hastening to complete the latest pension reform, no matter the political cost in advance of the election, in order to try and prevent a humiliating deterioration of France's rating on the financial markets, which would result in an additional increase of the debt burden and a huge political slap in the face, both political and personal.
A rearguard fight, with the back against the wall, would be an apposite description.
Barring a miracle on the "social front" (the pensions, the labor market, health insurance), which nothing justifies expecting, and unless the "thermometer" of the rating agencies is broken, the degrading of the French state is inevitable. The current public debt is simply not sustainable.
What applies here to France may be said for most European countries, as they are mired in the same rut.
Major historical events usually combine chance and necessity: a spark ignites a powder keg.
The spark was brought by the U.S. subprime crisis (another fruit of the welfare state).
The powder kegs are the deficits accumulated over 30 years. We are living through the explosion right now, and it will bar old Europe from global competition for a long time.
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