While we are waiting for yet another "summit" - the one on December 9 - in the endless line of EU crisis meetings, I thought it might be interesting to highlight these two interesting comments:
D.K. Matai writing in the Market Oracle:
Germany's Next Move
Dr Merkel also wants to rewrite the euro rulebook by reopening the Lisbon Treaty, meaning a negotiation amongst all 27 EU states that would also involve the European parliament and the European commission. Given the enormous complexity of this proposed reformation, coupled with the existential crisis of the Eurozone at present, this would suggest that the entire process may not be achieved in time to save the euro and is therefore utterly implausible. Given the German reputation for "gründlichkeit" or thoroughness, is Germany really preparing for something else? Is all of this just a big red herring? Reliable media sources have already published reports that Germany has contingency plans in place to exit the Eurozone quickly and resurrect the Deutschemark including the issuance of paper currency.
Designed to Fail
Many distinguished members of the ATCA 5000 have expressed grave reservations in private in regard to the solidity, viability and sincerity of the German proposals because they appear at one level to be designed to fail. The failure of adoption of the German plans across the Eurozone member nations could feasibly be construed by Germany as a justification for their exit. As a result, Germany could attempt to abandon the euro and resurrect the Deutschemark without incurring blame. They could even turn around and claim that they have clean hands and it was a fault of the weaker members of the Eurozone that various nations refused to participate in full financial integration that would have paved the way to save the Eurozone. Thus, all blame could be cast on the weaker members of the Eurozone.
We will have to wait and see, but I think the above scenario has something to it. What you see is in politics often not what you will get.
Russ Roberts on Cafe Hajek also has a good point:
On my exercise bike at the gym the other day, I caught a snippet of the Stuart Varney Show. Three guests were discussing the European crisis. John Stossel argued for letting market forces work–if I remember correctly, he wanted those banks that had lent money to Greece and Italy and Spain to bear costs, possibly severe costs like losing their money. One of the guests (I don’t know who it was) strongly disagreed. His argument was that Stossel’s solution would lead to the apocalypse. That was his argument. We risked the end of civilization–banks could go broke leading to a depression and then we’d all be worse off. Varney agreed. Stossel’s idea of market discipline was simply too dangerous.
Stossel gave a good answer. He said but what if we get the apocalypse anyway? Maybe all we’re doing is kicking the can down the road and making the reckoning even worse than it otherwise would be. His answer is made more powerful by recent history. In 2008, we rescued the creditors relentlessly that helped pave the way for this crisis. What will the next one look like?
I have a different problem with the apocalypse argument. How do you know if it’s true? Where’s the evidence that letting banks lose some, or most or even all of the money they unwisely lent or invested in bonds is going to lead to a disaster? Where are the data that make this claim credible other than a bald assertion?
But I have an even bigger problem with the apocalypse argument. If the threat of banks taking a haircut risks the apocalypse then we may as well admit the game is over. Just give the banks our wallets and checkbooks and go home. It’s the end of capitalism and the end of democracy. I’d prefer an apocalypse.