Streetwise Professor

August 20, 2011

I Don’t Believe in Tinker Bell

Filed under: Economics,Politics — The Professor @ 2:39 pm

More European jitters–focused on European banks–sent stock markets around the world swooning last week.  So of course Merkel and Sarkozy met and rumors circulated about this plan or that.

This is becoming a tiresome pattern.  Well-justified angst about the fiscal straits of the PIIGS, and the consequences that defaults would have for European banks and the Eurozone leads to crisis meetings.  Some plan is extemporized, and announced with great fanfare.  For a while, investors say I believe!  I believe! and the market comes to life, like Tinker Bell, in Europe’s version of the confidence fairy.  But then reality reasserts itself.  People realize that short of socialization or monetization of debts the risk of default is not going away.  And even under those two alternatives the problems are just transformed, not banished.

So each successive Tinker Bell rally becomes weaker than the one before, and each successive reversal become more bone jarring. I don’t believe, and I won’t believe.  Indeed, the yawning gap between the nature and scope of the problem, and the proposed palliatives (short sale bans, securities transaction taxes) should reinforce one’s understanding of how childlike I believe! really is.

The choice is ultimately Germany’s, and it is being pressed feverishly by France.  Saving the Eurodream will require Germans to go against their deeply ingrained instincts.   But historical scars of more recent origin than Weimar makes them petrified that by saying nein! they will be condemned for destroying Europe for a third time in a century.

In the end, I agree with R that the latter fear will overcome the former: but regardless, theirs is a choice between fears–neuroses, perhaps.   But agreeing to shoulder a disproportionate share of the debt burden to save Europe will expose Germany to financial gangrene.

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  1. “But historical scars of more recent origin than Weimar makes them petrified that by saying nein! they will be condemned for destroying Europe for a third time in a century.” And that’s the irony. The German elites want to condemn as right wing or bad the German volk’s understandable desire to go back to the Deutsche Mark and be left alone. Instead they’re going to be guilt-tripped by their elites into subsidizing the German neo-junker class’ plans for a real 4th Reich by bailing out the European customers of said industrialists. Or more accurately, since BMW, Mercedes et al could all survive without bailouts, the banksters within Deutsche Bank, BNP Paribas and Societe Generale’s counterparties.

    Comment by Mr. X — August 20, 2011 @ 9:21 pm

  2. Actually this was all predicted by the hardcore British euroskeptics, including Rodney brother of Mr. Bean Rowan Atkinson, back in the mid to late 1990s after the Kosovo War. They said a common currency would inevitably lead to a common fiscal policy — diktated from Berlin, with Paris as the window dressing:
    Fascist Europe Rising and Europe’s Full Circle

    At times I wonder if our intel agencies spy as obssessively on Berlin as they do Moscow, though SIGINT and their sponsorship of Google and ‘social media’ probably makes them terribly lazy when it comes to developing real (as opposed to simply electronically ‘tagged’) human sources, even within ‘friendly’ countries. But if not, perhaps they should.

    Unfortunately, I would imagine said intel would only end up being leaked to the ‘private’ sector and used for private gain (i.e. Soros massively shorting DB on the back of sigint of their execs admitting how screwed they are). After all, Soros already rode the agency like a wet mule while pretending to perform such a nice public service of massively fronting for them behind the Eastern Bloc from the 1980s all the way to the Rose/Orange Revolutions (Soros funded the first Internet telephony between the Soviet Union and the outside world, all the way back in 1984). And that’s the real scandal that what were supposed to be agencies set up to serve the national interest have been serving globalist corporatist interests since at least the Kennedy Assassination of the 1960s.

    Comment by Mr. X — August 20, 2011 @ 9:26 pm

  3. I have zero sympathy for the Germans, including the ordinary Germans who are about to get f*cked over. It was they who were the principal beneficiaries of the single currency, allowing their Mittelstand, which make up most of their economy, export across Europe without exposure to currency variations. What’s more, the interest rate which caused so much of the situation now seen in the PIIGS, was set at a level perfect for Germany, and it was set for that reason only. People were saying for years that the interest rate needs to rise to deflate the bubbles in Spain, Portugal, and Ireland, but rhe ECB would refuse to do anything which might affect German exports. Now the chickens are coming home to roost, the Germans are complaining. Well, tough shit.

    Comment by Tim Newman — August 21, 2011 @ 2:16 am

  4. […] Take it away professor: People realize that short of socialization or monetization of debts the risk of default is not going away. […]

    Pingback by Solving the eurocrisis — August 21, 2011 @ 2:30 am

  5. Don’t forget – the West Germans got hit with a ‘solidarity’ tax to pay for reunification. It’s been 20 years and East Germany still isn’t as strong as the West. in 1991 East Germany had a population of 11 million, same as Greece today – what level of taxation increases would the ‘strong’ economies have to introduce to ‘fix’ the economies of Greece, Portugal, Spain and Southern Italy? 20%?

    Comment by Jean — August 21, 2011 @ 11:50 am

  6. I see the host of this site doesn’t want to touch the Soros as an asset gone rogue story with a ten foot pole. But hell, if I were the Brazilians and he just sank a billion into Petrobras, I’d put a sweet young tail on him too (see NY Post this week). 🙂

    Comment by Mr. X — August 21, 2011 @ 6:56 pm

  7. But hell, if I were the Brazilians and he just sank a billion into Petrobras…

    Funny how the likes of the NYT never mentioned this when he was campaigning against drilling offshore USA, wasn’t it?

    Comment by Tim Newman — August 21, 2011 @ 11:25 pm

  8. The idea that countries should pursue some ideal of international fairness surely must be discredited by now. That ain’t the way the world works. The words of Churchill have never rang truer-

    A nation has no permanent enemies and no permanent friends, only permanent interests.” Winston Churchill

    The tipping point has not been reached and will never be reached to falsify this statement. Policies based on some ideal of international fairness neglect the fact that this is in no way a universally shared ideal.

    Comment by pahoben — August 22, 2011 @ 8:33 pm

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