Europe's Mistake

Opinion was quite divided when the euro was first introduced in 1999. The most common criticism at the time was the lack of control member states of the European Union would have over the currency. One currency, many countries. And each country with different economic parameters, employment, debt levels, and social systems. Interest rates set by the European Central Bank in Germany might be suitable for Berlin, but too onerous for Madrid. Liquidity levels might have been alright for the Benelux countries, but too high for others. Deficit levels, initially set at a maximum of 3% of GDP, proved to be unsuitable for practically all the member countries, and ridiculously low for some (read Italy, Spain, and yes, Greece). As such, it was routinely ignored by all.

After what has been happening in the last few months over in Euroland, the critics would not be happy for having been proven correct. It is that severe.

By far the most intractable problem involving the euro is sovereignty. Greece is in trouble, for reasons that bear no examination here (read high gov't spending, high gov't borrowing, black markets, low revenues - so what else is new?). It simply owes too much money. If Greece still had the drachma (love the sound of that word) it could be doing all kinds of wonderful things. Like what? Like devaluing the hell out of it ( lowering the value of the drachma relative to the U.S. dollar, or by injecting liquidity into the money supply by buying up old debt issue), thus making its billions ( in euros, dollars, does it really matter?) of debt cheaper to pay off. Of course, that would mean a significant haircut for anyone unlucky enough to have invested in Greek bonds to begin with, but at least, it's better than defaulting. A weaker drachma would also serve to stimulate economic growth, enlarging GDP and lowering debt ratios. As well, having your own currency allows you to have a central bank, with which you can control interest rates and money supply, all useful tools in guiding your own economy.

With the adoption of the euro, Greece traded sovereignty for what it thought was security. Greece cannot alter the value of the euro currency it uses, since it does not own the currency or a central bank, so an indispensable tool for dealing with long term debt is not available to it. As for security, ask the Germans. It's taken four months for Berlin to come to terms with this problem, and because of the delay it is now a crisis. Four months is a long time for the European Community dedicated to political and economic union to come to the aid of one of its members. Simply put, Germans don't like how the Greeks have spent their way into trouble, and are only coming to their aid now because speculators are shorting the euro (about time) and because European banks hold too much of that blasted Greek paper (still worth slightly more than the parchment it's printed on). And if Greece can't get its calls returned, what will happen when Spain and Italy go to speed dial? Hmmm... the plot will only get thicker.

The euro is now being exposed for the political decision it was, as it never made much sense monetarily, being just one more of the many top-down upheavals perpetrated on a helpless European public by the EU. Only now people of the have countries like Germany and France are balking at paying a bill they feel is not theirs, and governments in the have-nots are realizing the straightjacket they find themselves in.

The solution? Reverse the mistake. It may take years to unravel, and the embarrassment will be huge, but one by one, those toxic Club Med countries have to go back home. To their currencies, that is. They carry far too much debt relative to their GDP's , and if they're forced to roll it over, issue new bonds and ultimately pay any loan packages in euros at much higher interest rates than at present, well, you can kiss any kind of meaningful economic growth in those countries good-by for years to come - never mind the social cost of whatever economic austerity measures these countries would have to adhere to in order to qualify for the loans in the first place.

So, here's their choice. Riots, tear gas, molotov cocktails from malcontent gov't workers, pensioners, and the unemployed with the euro? Or a slow unravelling of all the googoo with massive devaluation involving all the old currencies you've known and loved. No one would lend to them again but what the hell, the Mediterranean would be so cheap to visit, they'll get it all back in spades.

by Rick Morris

Everybody Pays For Banks and Governments Blunders

Watching the riots from Greece I was thinking that maybe they have a point. Why should we have to pay for  their mistakes and miscarriages of finance. Why should we pay more taxes and have less services when it was the banks and governments that made the wrong bets. The banks are making billions again yet we have to pay more and get much less, and people wonder why they are angry. What better way to have the populous under control if not massively in debt. We can just have the IMF rule the world( if they don't already), forget about your  government. What can they do when the banks say give us your money, get your debt down for the sake of future generations (So says Harper at G8 and G20). What a scam! I'm wondering why we're not rioting. Maybe when the Habs are out of the playoffs.

Whole Lotta Changes Going On

Like Wayne and Garth we fear change over here at New Media and Politics but none the less we are jumping headlong into the great unknown. Aside from the new look we are delving further into each story with more links and lots of video.  We've made it easier to leave comments so drop a line and tell us what you think.

I was on the subway and the passenger next to me was reading a story about the oil problem in the Gulf of Mexico. He got to the end of the story and let out a big sigh, that pretty much sums it up for me. Of course our enviro man on the scene, Karl will have a much more in-depth analysis of the situation.

Recently I've found out I'm being sued,  so if any lawyers are reading this, e-mail me at newmediandpolitics@gmail.com. I need help, in fact we all need help, Canadians anyways. Omar Khadr is suing the Canadian government so thats you and me.  I think I'm guilty but the government is stopping the facts from coming to light, hiding my guilt from myself. As litigants in the suit I'm thinking we are deserving of the trial transcripts, should there ever be one. I for one would like to offer my apology to Mr. Khadr for the way Canada has behaved and feel quite embarrassed for what our once naive country has become. I wonder if anybody puts a Canadian flag on their backpack when travelling through Europe?  Oh what happened to that cute little country with the curly red hair that would pull on the trouser legs of the big countries when they did something wrong?  But I'm confident Mr. Harper will do the right thing, I know he always has our best interest in mind. ( even in jest I can't believe I just typed the last sentence) Time to renounce our citizenship and jump on the next boat to Nutopia.

Don't Panic-It's Only Our Lives

Pakistan Fooling The World While President Obahma Tells Jokes

Is Pakistan actually rooting out the Taliban or putting over one of the greatest cabals of all time? Some sources say they are putting on a show to garnish moremoney from the US. Is it a co-incedence that the Pakistan president is in the United States and the they attack Swat. They are causing havoc but to what end? The displacement of thousands not only causes a humanitarian nightmare but also provides a captive audience for the Taliban and their summer recruitment drive. The only way for the current situation to have any lasting effect is if the Pakistan army stays in Swat in large numbers for years.
Meanwhile back in Washington I see President Obahma had them laughing in the aisles at the press junket the other night. So much for the pretense an unbiased media, seems unlikely when they party with the subject.