Europe crosses the Rubicon

Ireland has started to issue its own Euros, or rather counterfeit its own Euros, since it has no legal authority to issue Euros – not that anyone worries about legal authority these days.

If any one country of Europe can get away with issuing Euros, then the political benefit is captured by the one country issuing Euros, while the inflationary effect is experience by all of Europe.  This guarantees over issue of Euros.

The proposed cure for this problem is more central authority, a United States of Europe – but there was already central authority to stop people from issuing their own Euros.  Irish issue of Euros is illegal, but the European Central Bank lacks the balls to say so, and forming a United States Of Europe would not give the European central bank a testosterone infusion.

The two most powerful democratically elected people in Europe, Ms. Merkel and Mr. Sarkozy, have, under pressure from their voters, prescribed a solution:  The Deauville pact.

The Deauville pact if implemented would mean that Greece and Ireland would  go broke.  Irishmen would go the ATM, attempt to withdraw cash from their bank accounts, and no cash would come out.  Pensions and doles issued by the Irish and Greek governments would bounce – that is to say, solvent banks would turn them down, and while insolvent banks would cheerfully accept them, the insolvent banks would be unable to give cash for them.

The European Central Bank is, however, reluctant to go along with this plan.  But if they are reluctant to stop people spending Euros they do not have, or unable to stop people spending Euros they do not have, Euros will, in the end, be worthless.

The more solvent countries of Europe could save themselves from this shipwreck by issuing their own currencies – franks and marks.  Of course, that would be easier if they actually were solvent.  That Europe is drifting into a system that makes financial collapse unavoidable is more of a symptom than a cause.  Genuinely solvent nations would unhesitatingly cut the wastrels off without a penny, to teach them thrift, which is what the the Deauville pact proposed.  The problem is that every bureaucrat fears that if one government goes broke, people will doubt the next.  Big spending governments fear to let bigger spending governments go broke, lest their own solvency be doubted.

The Deauville pact was more the politicians of France and Germany assuring each other and the voters that they were indeed solvent and could act in the macho manner that solvent enterprises can act, than it was any real intent to act.

8 Responses to “Europe crosses the Rubicon”

  1. Bill says:

    This is the most interesting sentence in the piece:

    The agreement had the unforeseen effect of forcing Europe to take steps toward increased economic and political cooperation.

    The eurozone is weird, very weird. A single currency used by a bunch of countries of differing levels of wealth, differing prospects, and differing styles of government. Everyone has always known it is weird. Everyone has always know that its weirdness would someday lead to some kind of crisis, and that the crisis would most likely take the form of a weak government teetering on the edge of default. “Unforeseen” is a lie, flat out.

    The elites of Europe have wanted a United State of Europe since WWII. The elite of the US has wanted a United States of Europe since WWII. The people of Europe don’t want it. The elites want crises—crises just big enough to justify the USE without actually wrecking things. The mortgage mess was a bigger trigger than they thought they would get. We’ll see whether they can turn it to their advantage or not.

  2. jim says:

    As you say, the crisis was foreseen from the first day, and was intended from the first day to be used like any other crisis, as grounds for centralization of authority.

    But further centralization of authority is irrelevant to fixing the crisis, short of the complete abolition of the states of Europe and a full takeover of all their taxing and spending by Brussels. The problem is that the most central institution of them all, the European Central Bank, lacks the will or the ability to defend the currency against irresponsible banks and governments. The problem is social decay and civilizational loss of will.

  3. Alrenous says:

    I dunno, I thought it was hilarious when they briefly forbade member countries from inflating.

    “Since today’s economists (except of course the Austrian School) have abandoned the the apparently unfashionable concept of causality in favor of the reassuringly autistic positivism of pure statistical correlation, it has escaped their attention that when you stop shooting heroin, you feel awful.”

    And then governments started to go down! Fancy that.

    ‘Course now Germany’s running its time-honoured “Take over the world” script. Bets it will end as badly as it usually does?
    France is even rolling over and showing its belly right on cue…

  4. jim says:

    My interpretation of these tough words is that they resemble the Deauville pact – empty talk by the broke trying to sound solvent.

    • Alrenous says:

      But it’s still Germany trying to take over the world. If you’re right, it just means the project is going about as well as it historically has.

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