YOUR DEMOCRACY IN EUROPE
THE ORIGINAL CONCEPT OF SUPRANATIONAL DEMOCRACY FOR EUROPE BROUGHT LONG-LASTING PEACE TO THE CONTINENT. EU'S FOUNDER ROBERT SCHUMAN DESCRIBED DEMOCRACY AS BEING IN THE SERVICE OF THE PEOPLE AND ACTING IN AGREEMENT WITH THE PEOPLE. WHAT'S GOING ON TODAY? SEE ALSO WWW.SCHUMAN.INFO AND HTTP://DEMOCRACY.BLOGACTIV.EU .
http://eurdemocracy.blogspot.com/
29 JULY, 2010
Iceland and the EU: Fish, Finance and acquiring the real Acquis of Europe
'A moment of joy' said Belgian Foreign Minister Vanackere for the European Council of Ministers. 'A day of celebration,' said Icelandic Foreign Minister Össur Skarphéðinsson, With the meeting of the Accession Conference on 27 July 2010, Iceland has now embarked on the route to full membership of the European Union. This followed the decision of heads of government in the European Council on 17 June to open accessions.
High on the list of crucial topics for negotiations are Fish and Finance. For generations Icelanders have had a policy of high inflation, rivalling the South Americans, and then off-loading the problem with devaluations. Then they came up against the euro and a big crunch. It is clear both the Icelanders and other Europeans are being hurt by such irresponsibility. The euro is held together by a Stability and Growth Pact, which in theory at least, outlaws such abuse. The Icelanders were free of this self-imposed constraint. They inflated their financial sector to such an extent the debt of three banks amounted to more than six times the country's GDP.
In 1958 Robert Schuman wrote: 'It is an incontestable truth that a politically free Europe cannot prosper or even survive unless it succeeds in enlarging its base of activities, imposing a discipline that is acceptable to all and having a consciousness of the coherence and interplay of European interests.' (Notre Europe, p118.) Some of those threats may have changed or have disappeared but more and more Europe is faced with even graver global problems today.
Fish is another matter. The EU politicians are keen on fishing with little restraint. The politicians always overrule the scientific reports on the estimated fish stocks. On which side do they overrule the scientists, by being conservative or exploitative? Don't ask. Remember fish do not have votes. The Icelanders do not want the EU to wipe out fish stocks in their waters. Their future depends on it.
What is the answer? Should the EU make the rules, with its present agreements, known significantly by the French word as the Acquis? Or should the Icelanders expand their conservation system to the EU? The Icelanders admit that their system is not perfect but believe it is far superior to vacuuming the oceans of the last fish.
Who should rule? EU or Iceland? The answer as everyone knows in their heart is that the fish should rule. Europeans must be wise guardians of their fish. If we wipe out the fish no one will gain. We will all be left without a source of food. The first rule must be sustainability. What about the EU Acquis?
Why do politicians use a special term like Acquis? Why not translate it? And yes, it does sound like a selfish concept. It should be remembered that the Acquis is a Gaullist principle. It has nothing to do with a Community of democratic nations. The Common Fisheries Policy (CFP) was implemented by Gaullists, such as Maurice Couve de Murville, (earlier de Gaulle's foreign minister and prime minister) just before three maritime nations joined: Denmark, United Kingdom and Ireland. Its basic feature was to stitch up the policy before enlargement. Negotiations were then dominated by Couve who tried to squeeze the most concessions out of the three candidates -- or stop them joining at all.
My pocket dictionary says Acquis means attainment. That English word is avoided. Why? The question would come up as to what is to be attained. What did the Gaullists and selfish nationalists want to attain or rather retain? They did not want to attain a higher form of democracy. They wanted to attain their special advantages that de Gaulle had attained by blackmail. Examples of this are many but we could point to the Wine Lakes, the Meat Mountains and the Common Fisheries Policy. For de Gaulle, the Acquis of having other Europeans subsidize his voters through the CAP was a good deal. This Acquis is a childish attitude to a Community policy: 'I want to keep my toys. And I want some of yours too!' It is the opposite of what a real Community is about -- a means to help all members flourish and attain their potential to contribute to the whole.
It was ‘a negotiation like other negotiations’, Couve said. Schuman said the Community should be based on revolutionary principles unlike any of the negotiations in history. He said this at the opening of the first intergovernmental conference.
Should the original Community of the Six, and France especially, have had the final say? Is it a matter of other States, like Denmark, Ireland and Britain, joining a club? That is a misunderstanding -- a deliberate misunderstanding by the Gaullists -- of what a Community is about. The Gaullist CAP is being revised — at last. There is no reason that the same should not be done for the CFP. A Community is not a selfish, inward-looking club but a free asociation trying to achieve the highest moral values of European civilisation. The aim is to serve each other as best they can, and in the world others who are not so privileged.
If Community principles are to be applied the Fisheries Council should be open to the public and the press. How can Europeans have a consciousness of each other's problems if Ministers debate behind closed doors and cut deals. Are they ashamed of what they say in private? The original treaties give the ministers no more privileges for such secrecy than they do to the European Parliament or the other institutions. They hold their debates in public.
The Economic and Social Committee and the Committee of the Regions should have their full part in the decisions. They represent organized Civil Society. Legislative consultation is required from those who are consumers of fish, those who work in the fish industry and those who are ecologists and conservationists. In other words those who worry about their children and our common future. Everyone who has an interest needs to have their say in asupranational democracy.
According to Robert Schuman, when a new Member State joined the whole policy should be reconsidered. He used the word 'reconstituted'. Why? Because all the aspects of the common assets and the common problems associated with them have changed. It was up to all the new Member States to create a policy that fitted the new situation. Anything else treats the new Member State as a second class entity. The whole idea of the Community was not to create an exclusive club where others had to beg to join. The idea of the Community was to create the means where all nations could unite under jointly agreed rules that had the highest moral content. That is why the founding principle of the Community Charter is that people and States should be 'free to choose'.
The idea of Gaullists and nationalists was that everybody should agree that Charles de Gaulle or some other nationalist knew best. Wisdom comes from the counsel of many.
Should the Icelanders insist on the real application of the Acquis? Yes. It is about attaining a purer, better form of democracy. They should insist on dropping the present CFP and CAP. The Icelanders with a long democratic tradition should insist on attaining the democracy that the Gaullists and many other nationalists refused to implement. For example, the Icelanders should insist that the elections to the European Parliament are, as the treaties insist, conducted under a single electoral statute and are held at one time across the whole of the Community. Otherwise they will have some Europeans in Iceland who have possiblyTWELVE votes to the Icelanders' one.
The oligarchy of the main political party machines has had a crushing effect on European democracy with ever-declining voter support and lack of public trust. There are many other matters of democracy and fairness that the governments and politicians have refused to apply.
Iceland could take the EU further on the road to democracy. Will the EU now be extended geographically further to the West than ever before? The answer is No. I am not talking about the Portuguese Azores where the island of Florus is far to the west of Iceland. The EU already extends much further West.
The legal profile of the EU also extends to French Guyane to the north of Brazil. It lies within the boundaries of the EU because it is an internal Département of France. The EU as a supranational union has global boundaries. It also has a global vocation, worthy of the globalist Vikings
High on the list of crucial topics for negotiations are Fish and Finance. For generations Icelanders have had a policy of high inflation, rivalling the South Americans, and then off-loading the problem with devaluations. Then they came up against the euro and a big crunch. It is clear both the Icelanders and other Europeans are being hurt by such irresponsibility. The euro is held together by a Stability and Growth Pact, which in theory at least, outlaws such abuse. The Icelanders were free of this self-imposed constraint. They inflated their financial sector to such an extent the debt of three banks amounted to more than six times the country's GDP.
In 1958 Robert Schuman wrote: 'It is an incontestable truth that a politically free Europe cannot prosper or even survive unless it succeeds in enlarging its base of activities, imposing a discipline that is acceptable to all and having a consciousness of the coherence and interplay of European interests.' (Notre Europe, p118.) Some of those threats may have changed or have disappeared but more and more Europe is faced with even graver global problems today.
Fish is another matter. The EU politicians are keen on fishing with little restraint. The politicians always overrule the scientific reports on the estimated fish stocks. On which side do they overrule the scientists, by being conservative or exploitative? Don't ask. Remember fish do not have votes. The Icelanders do not want the EU to wipe out fish stocks in their waters. Their future depends on it.
What is the answer? Should the EU make the rules, with its present agreements, known significantly by the French word as the Acquis? Or should the Icelanders expand their conservation system to the EU? The Icelanders admit that their system is not perfect but believe it is far superior to vacuuming the oceans of the last fish.
Who should rule? EU or Iceland? The answer as everyone knows in their heart is that the fish should rule. Europeans must be wise guardians of their fish. If we wipe out the fish no one will gain. We will all be left without a source of food. The first rule must be sustainability. What about the EU Acquis?
Why do politicians use a special term like Acquis? Why not translate it? And yes, it does sound like a selfish concept. It should be remembered that the Acquis is a Gaullist principle. It has nothing to do with a Community of democratic nations. The Common Fisheries Policy (CFP) was implemented by Gaullists, such as Maurice Couve de Murville, (earlier de Gaulle's foreign minister and prime minister) just before three maritime nations joined: Denmark, United Kingdom and Ireland. Its basic feature was to stitch up the policy before enlargement. Negotiations were then dominated by Couve who tried to squeeze the most concessions out of the three candidates -- or stop them joining at all.
My pocket dictionary says Acquis means attainment. That English word is avoided. Why? The question would come up as to what is to be attained. What did the Gaullists and selfish nationalists want to attain or rather retain? They did not want to attain a higher form of democracy. They wanted to attain their special advantages that de Gaulle had attained by blackmail. Examples of this are many but we could point to the Wine Lakes, the Meat Mountains and the Common Fisheries Policy. For de Gaulle, the Acquis of having other Europeans subsidize his voters through the CAP was a good deal. This Acquis is a childish attitude to a Community policy: 'I want to keep my toys. And I want some of yours too!' It is the opposite of what a real Community is about -- a means to help all members flourish and attain their potential to contribute to the whole.
It was ‘a negotiation like other negotiations’, Couve said. Schuman said the Community should be based on revolutionary principles unlike any of the negotiations in history. He said this at the opening of the first intergovernmental conference.
Should the original Community of the Six, and France especially, have had the final say? Is it a matter of other States, like Denmark, Ireland and Britain, joining a club? That is a misunderstanding -- a deliberate misunderstanding by the Gaullists -- of what a Community is about. The Gaullist CAP is being revised — at last. There is no reason that the same should not be done for the CFP. A Community is not a selfish, inward-looking club but a free asociation trying to achieve the highest moral values of European civilisation. The aim is to serve each other as best they can, and in the world others who are not so privileged.
If Community principles are to be applied the Fisheries Council should be open to the public and the press. How can Europeans have a consciousness of each other's problems if Ministers debate behind closed doors and cut deals. Are they ashamed of what they say in private? The original treaties give the ministers no more privileges for such secrecy than they do to the European Parliament or the other institutions. They hold their debates in public.
The Economic and Social Committee and the Committee of the Regions should have their full part in the decisions. They represent organized Civil Society. Legislative consultation is required from those who are consumers of fish, those who work in the fish industry and those who are ecologists and conservationists. In other words those who worry about their children and our common future. Everyone who has an interest needs to have their say in asupranational democracy.
According to Robert Schuman, when a new Member State joined the whole policy should be reconsidered. He used the word 'reconstituted'. Why? Because all the aspects of the common assets and the common problems associated with them have changed. It was up to all the new Member States to create a policy that fitted the new situation. Anything else treats the new Member State as a second class entity. The whole idea of the Community was not to create an exclusive club where others had to beg to join. The idea of the Community was to create the means where all nations could unite under jointly agreed rules that had the highest moral content. That is why the founding principle of the Community Charter is that people and States should be 'free to choose'.
The idea of Gaullists and nationalists was that everybody should agree that Charles de Gaulle or some other nationalist knew best. Wisdom comes from the counsel of many.
Should the Icelanders insist on the real application of the Acquis? Yes. It is about attaining a purer, better form of democracy. They should insist on dropping the present CFP and CAP. The Icelanders with a long democratic tradition should insist on attaining the democracy that the Gaullists and many other nationalists refused to implement. For example, the Icelanders should insist that the elections to the European Parliament are, as the treaties insist, conducted under a single electoral statute and are held at one time across the whole of the Community. Otherwise they will have some Europeans in Iceland who have possiblyTWELVE votes to the Icelanders' one.
The oligarchy of the main political party machines has had a crushing effect on European democracy with ever-declining voter support and lack of public trust. There are many other matters of democracy and fairness that the governments and politicians have refused to apply.
Iceland could take the EU further on the road to democracy. Will the EU now be extended geographically further to the West than ever before? The answer is No. I am not talking about the Portuguese Azores where the island of Florus is far to the west of Iceland. The EU already extends much further West.
The legal profile of the EU also extends to French Guyane to the north of Brazil. It lies within the boundaries of the EU because it is an internal Département of France. The EU as a supranational union has global boundaries. It also has a global vocation, worthy of the globalist Vikings
13 JULY, 2010
Avalanche3 Is the assault on the Euro one 'unintended consequence' of the US toxicity bailout?
Over a year ago, a commentary on this page warned about
Since then, some Europe governments and the euro have been under intense pressure. Some speak of the break-up of the euro, though this seems too often to come from over-hopeful speculators. It is rather like a purchaser of apples in the market who asks for as price reduction on the basis that he imagines one apple looks a little over-ripe. One should always distinguish between impartial analysts and greedy speculators whose wish-fulfillment brings massive rewards.
How has the trans-Atlantic mechanism been working? When in the 1970s under President Richard Nixon, the US government unleashed the Federal Reserve printing press, a largely divided, weak Europe got the back-wash. The Community of Six each with their own currency could only complain separately at the dollar inflation. Nixon’s Treasury Secretary John Connally responded famously: ‘It is our currency, but your problem.’ Europe createdthe Euro to deal with their problem.
The US dollar was long considered the world currency and the USA the world banker. That is why Europeans should keep a close watch on what is happening and how the debt drama will affect them.
Recently the US administrations tried to replace 'toxic' assets of derivatives and sub-prime loans with newly-minted dollars from the Fed. As a consequence, the federal deficit has now risen more quickly than expected, touching 9.9 per cent of GDP already, according to the US Government Accountability Office. That is the largest since 1945. The Public debt-to-GDP ratio could reach and exceed the highest historical levels of 109 per cent by 2020. That is two years earlier than previous GAO estimates.
The federal government is staring at 'an unsustainable growth in debt.' The GAO hadalready warned in 2007 that this could 'spiral out of control.' Previous projections by the GAO indicated that debt-to-GDP ratio would rise from 60 percent to 'only' 90 percent by 2020. The debt-to-GDP ratios would double by 2040 and double them again by 2060, reaching 600 percent by 2080. This crisis may be underestimated. Without effective remedial action, the USA could reach a debt-to-GDP level of 200 per cent by 2030.
Toxic is merely a polite way of saying that a dishonest or fraudulent practice has been exposed. However, the new flood of dollars to help wash out fraudulent assets in the US economy is already having a major effect abroad. As the commentary here recalled such action has known deleterious effects on the European economy. More than two thirds of US dollars are held outside the US. When the Federal Reserve boosted its money supply it surged onto the external markets. It was looking for solid, non-toxic assets to avoid the same trap again. This wash of dollars has a major tsunami effect on what previously appeared as stable markets.
That's when the PIGs, the suspect Mediterranean economies, came under extra scrutiny. Previously, Portugal, Italy, Greece and Spain had proudly boasted of their safe monetary credentials as euro-members. Why did they then become less secure? Statistical blemishes had previously been forgiven by some indulgent politicians in other euro-states. Now the search is on for what is real, honest, quality money.
Consider a market trader selling apples. He has 27 apples to sell each week. The customers have 27 dollars with which to buy their fruit. The trader sets up a notice: 'A dollar an apple'. They are available on a first come first served basis.
All of a sudden the buying group now have 80 dollars credit for apples. What happens? The trader immediately sets up several notices 'Top quality apples now only 5 dollars an apple'. Another says: 'Excellent quality apples only 4 dollars an apple'. 'Good quality apples for 3 dollars.' And so on.
The Fed's money surge has an effect of differentiating the quality by expanding the price fork. This price fork accentuation was blunted before the money surge. It also sharpens the analytical skills of the potential purchaser (looking for profits). The surge no longer respects governmental quality labels on the apples but the buyer makes his own judgement. Why shouldn't he? The US administrations, specifically the party machines, were complicit fraudsters. Honest efforts in Congress to correct the looming disaster failed. Political oligarchies who should not be meddling refused to change their crony capitalism. The crisis deepened. Politics are discredited on both sides of the Atlantic. It is equally of no use for the apple trader to say that 'All my apples come from the top quality eurozone. Each is worth ten dollars.' Some of the European governments do run a clean shop. Others supported by party cartels are known to be playing tricks.
The discriminating buyer sees through that con. Why spend extra money on an apparently rotten apple (where politicians have a finger on the scales) just because it has a eurozone label? He will avoid it or expect the seller to change the category and price. Despite the eurozone label, the purchaser can discern perfectly well for himself what is a quality product and what is corrupt practice. Quality is not necessarily synonymous with something that has a government label or has the apparent approval of government. Why? because the label sometimes means that politicians and others are meddling where they should not be present. Nor are statistics necessarily reliable when they have the stamp of an international accountancy firm. Some do not smell too fresh. Reputations have to be earned.
We can compare the concept of quality apples to supranational values. These are theCharter principles on which the European Community was founded. They are based on your neighbour's evaluation of your actions. Honest money is one example.
Governments are not ignorant of honest money and honest accounting. Supranational values indicate that accepting bribes from the rich so they do not pay taxes is bad economics. Forcing the poor to take on the extra burden is also recognized as an abuse according to such supranational values. Accountants should know when the books are in order. They should be firm to resist any bribery or twisting of arms to make them give approval to accounts that are falsified.
In the early post-war period most western European countries had huge debts, high inflation and not too many scruples. They needed to reconstruct and also to outdo their neighbours. They engaged in a game of competitive devaluations and beggar my neighbourpolicies.
That started to change in 1950 with the creation of the European Community, (9 May 1950) and the European Payments Union, created on 16 September 1950. Robert Schuman, who had been one of the most active Finance Ministers, commended Switzerland for having a solid currency and sound values.
'The participation of a country with a solid currency, like Switzerland, encouraged the expansion of the volumes of trade and commerce by providing sound money in the circuits of multilateral purchases. Everyone gained from this, without risks or sacrifices.' (Pour l'Europe, p130).
For Schuman Switzerland was a model for Europe. It was not only a community of peoples and cantons based on geography but a community based on shared values and traditions. It had the inspiration, self-discipline and leadership (that is many people of good character) who acted in the long-term interest. Such achievements do not come from egotistical autocrats -- something that the Swiss opposed over the centuries. To create a European Community with sound money requires that all governments, people and associations have self-discipline or if not at least have the will to submit themselves freely to community supranational values. Good money is based on mutual trust.
In community economics supranational values also clarify that the concept of 'Beggar my neighbour' is no longer acceptable. We are all each other's neighbour. In a globalised world we are all connected more and more. The unforeseen consequences of bad practice in one country reverberate worldwide.
Successive US governments set themselves on the same toxic road as Enron. This energy firm tried to hide its bad debts in off-shore companies. The US did the same thing when it decreed that the poor should have access to mortgages they could not conceivably repay. The crucial question was where to hide the debts. This was a political decision, not an economic one. The politicians calculated that those who benefited from these crooked property loans would surely vote for them. They could also cream off some of the takings for party funds. Successive US administrations appointed pliable politicians to the bodies to enforce this unrealistic policy in the large mortgage firms.
Politicians had the misconceived idea that that were on a higher plane or smarter than supranational values. Practically the whole American population went along with the scam. Why? Because they all thought they would gain something. The bubble felt fine while it was expanding. The property sector boomed. Businesses also expanded. Yet it defied logic. It was all patently false, starting with the giveaway term 'subprime loans'. Just about everybody was on the take. If the US public gave it some honest reflection to it, they knew that all this was a scam. The honest few said so. The politicians gained most of all. Their party coffers were filled from the 'crony capitalism.'
Those mortgage-policy sellers who visited people and sold them deals knew there was little chance of recuperating the house-loan. It was a fairy tale. The house-buyers if they took any advice realised they really could not pay to the mortgage fairy. Others, whether businesses or individuals, profited indirectly from the property bubble. They had no reason, they said, to object. And above all the executives at the top and the politicians who knew all the figures were well aware that it was fraudulent. Who was kidding whom?
When the Fannie Mae and Freddie Mac mortgage firms crashed out, as was inevitable, the politicians in Washington provided a means to bail them out. How? Out of public money. Who would pay the final bill if nearly the whole population was stealing from each other?They stole again via the Fed from the innocent, the voteless and speechless, the future generations, some yet unborn. And the foreigner.
This nasty little bit of political corruption is not and cannot remain local. The neighbours across the Atlantic are also affected. Using public money to save political cronies in the USA now affects the whole world, and Europe in particular. This avalanche washed over into Europe.
Europe's problems are correctable. Some Europeans had already learned their lessons: others are still learning. Competitive devaluations by accessing the monetary printing press bring no lasting solution.
Europeans can act wisely. They have the freedom to choose how to correct their problems. So have the Americans.
The secondary effect of the Obama avalanche is to test and prove whether the European governments are up to their job as honest guardians of the public good. Compare this to how some Mediterranean countries who for several decades have lacked the courage to set their house in order and who persistently apply bent practice have been differentiated recently.
Europe is left with a clear choice. The Obama avalanche has contributed to the clarity. Europe can clean up its house or it can continue the old corrupt economics.
This sad tale is not the only or even the main cause of Europe's monetary woes. It is hoped that we will return to this in the future.
'the result of President Barack Hussein Obama’s policy of pouring some 4.5 Trillion dollars into the US system. The aim is to buy out toxic assets created by toxic financiers and decades of toxic government policy.
The problem is that it is likely to have major unintended consequences for Europe. It is not clear whether the US administration has fully considered the non-US consequences … or even cares.
That may sound harsh. But much of the origin of the crisis dates from this persistent Beggar my neighbour attitude. In fact the origin of the euro derives from wishing to avoid being taken for a ride by careless and self-serving US administrations'
Since then, some Europe governments and the euro have been under intense pressure. Some speak of the break-up of the euro, though this seems too often to come from over-hopeful speculators. It is rather like a purchaser of apples in the market who asks for as price reduction on the basis that he imagines one apple looks a little over-ripe. One should always distinguish between impartial analysts and greedy speculators whose wish-fulfillment brings massive rewards.
How has the trans-Atlantic mechanism been working? When in the 1970s under President Richard Nixon, the US government unleashed the Federal Reserve printing press, a largely divided, weak Europe got the back-wash. The Community of Six each with their own currency could only complain separately at the dollar inflation. Nixon’s Treasury Secretary John Connally responded famously: ‘It is our currency, but your problem.’ Europe createdthe Euro to deal with their problem.
The US dollar was long considered the world currency and the USA the world banker. That is why Europeans should keep a close watch on what is happening and how the debt drama will affect them.
Recently the US administrations tried to replace 'toxic' assets of derivatives and sub-prime loans with newly-minted dollars from the Fed. As a consequence, the federal deficit has now risen more quickly than expected, touching 9.9 per cent of GDP already, according to the US Government Accountability Office. That is the largest since 1945. The Public debt-to-GDP ratio could reach and exceed the highest historical levels of 109 per cent by 2020. That is two years earlier than previous GAO estimates.
The federal government is staring at 'an unsustainable growth in debt.' The GAO hadalready warned in 2007 that this could 'spiral out of control.' Previous projections by the GAO indicated that debt-to-GDP ratio would rise from 60 percent to 'only' 90 percent by 2020. The debt-to-GDP ratios would double by 2040 and double them again by 2060, reaching 600 percent by 2080. This crisis may be underestimated. Without effective remedial action, the USA could reach a debt-to-GDP level of 200 per cent by 2030.
Toxic is merely a polite way of saying that a dishonest or fraudulent practice has been exposed. However, the new flood of dollars to help wash out fraudulent assets in the US economy is already having a major effect abroad. As the commentary here recalled such action has known deleterious effects on the European economy. More than two thirds of US dollars are held outside the US. When the Federal Reserve boosted its money supply it surged onto the external markets. It was looking for solid, non-toxic assets to avoid the same trap again. This wash of dollars has a major tsunami effect on what previously appeared as stable markets.
That's when the PIGs, the suspect Mediterranean economies, came under extra scrutiny. Previously, Portugal, Italy, Greece and Spain had proudly boasted of their safe monetary credentials as euro-members. Why did they then become less secure? Statistical blemishes had previously been forgiven by some indulgent politicians in other euro-states. Now the search is on for what is real, honest, quality money.
Consider a market trader selling apples. He has 27 apples to sell each week. The customers have 27 dollars with which to buy their fruit. The trader sets up a notice: 'A dollar an apple'. They are available on a first come first served basis.
All of a sudden the buying group now have 80 dollars credit for apples. What happens? The trader immediately sets up several notices 'Top quality apples now only 5 dollars an apple'. Another says: 'Excellent quality apples only 4 dollars an apple'. 'Good quality apples for 3 dollars.' And so on.
The Fed's money surge has an effect of differentiating the quality by expanding the price fork. This price fork accentuation was blunted before the money surge. It also sharpens the analytical skills of the potential purchaser (looking for profits). The surge no longer respects governmental quality labels on the apples but the buyer makes his own judgement. Why shouldn't he? The US administrations, specifically the party machines, were complicit fraudsters. Honest efforts in Congress to correct the looming disaster failed. Political oligarchies who should not be meddling refused to change their crony capitalism. The crisis deepened. Politics are discredited on both sides of the Atlantic. It is equally of no use for the apple trader to say that 'All my apples come from the top quality eurozone. Each is worth ten dollars.' Some of the European governments do run a clean shop. Others supported by party cartels are known to be playing tricks.
The discriminating buyer sees through that con. Why spend extra money on an apparently rotten apple (where politicians have a finger on the scales) just because it has a eurozone label? He will avoid it or expect the seller to change the category and price. Despite the eurozone label, the purchaser can discern perfectly well for himself what is a quality product and what is corrupt practice. Quality is not necessarily synonymous with something that has a government label or has the apparent approval of government. Why? because the label sometimes means that politicians and others are meddling where they should not be present. Nor are statistics necessarily reliable when they have the stamp of an international accountancy firm. Some do not smell too fresh. Reputations have to be earned.
We can compare the concept of quality apples to supranational values. These are theCharter principles on which the European Community was founded. They are based on your neighbour's evaluation of your actions. Honest money is one example.
Governments are not ignorant of honest money and honest accounting. Supranational values indicate that accepting bribes from the rich so they do not pay taxes is bad economics. Forcing the poor to take on the extra burden is also recognized as an abuse according to such supranational values. Accountants should know when the books are in order. They should be firm to resist any bribery or twisting of arms to make them give approval to accounts that are falsified.
In the early post-war period most western European countries had huge debts, high inflation and not too many scruples. They needed to reconstruct and also to outdo their neighbours. They engaged in a game of competitive devaluations and beggar my neighbourpolicies.
That started to change in 1950 with the creation of the European Community, (9 May 1950) and the European Payments Union, created on 16 September 1950. Robert Schuman, who had been one of the most active Finance Ministers, commended Switzerland for having a solid currency and sound values.
'The participation of a country with a solid currency, like Switzerland, encouraged the expansion of the volumes of trade and commerce by providing sound money in the circuits of multilateral purchases. Everyone gained from this, without risks or sacrifices.' (Pour l'Europe, p130).
For Schuman Switzerland was a model for Europe. It was not only a community of peoples and cantons based on geography but a community based on shared values and traditions. It had the inspiration, self-discipline and leadership (that is many people of good character) who acted in the long-term interest. Such achievements do not come from egotistical autocrats -- something that the Swiss opposed over the centuries. To create a European Community with sound money requires that all governments, people and associations have self-discipline or if not at least have the will to submit themselves freely to community supranational values. Good money is based on mutual trust.
In community economics supranational values also clarify that the concept of 'Beggar my neighbour' is no longer acceptable. We are all each other's neighbour. In a globalised world we are all connected more and more. The unforeseen consequences of bad practice in one country reverberate worldwide.
Successive US governments set themselves on the same toxic road as Enron. This energy firm tried to hide its bad debts in off-shore companies. The US did the same thing when it decreed that the poor should have access to mortgages they could not conceivably repay. The crucial question was where to hide the debts. This was a political decision, not an economic one. The politicians calculated that those who benefited from these crooked property loans would surely vote for them. They could also cream off some of the takings for party funds. Successive US administrations appointed pliable politicians to the bodies to enforce this unrealistic policy in the large mortgage firms.
Politicians had the misconceived idea that that were on a higher plane or smarter than supranational values. Practically the whole American population went along with the scam. Why? Because they all thought they would gain something. The bubble felt fine while it was expanding. The property sector boomed. Businesses also expanded. Yet it defied logic. It was all patently false, starting with the giveaway term 'subprime loans'. Just about everybody was on the take. If the US public gave it some honest reflection to it, they knew that all this was a scam. The honest few said so. The politicians gained most of all. Their party coffers were filled from the 'crony capitalism.'
Those mortgage-policy sellers who visited people and sold them deals knew there was little chance of recuperating the house-loan. It was a fairy tale. The house-buyers if they took any advice realised they really could not pay to the mortgage fairy. Others, whether businesses or individuals, profited indirectly from the property bubble. They had no reason, they said, to object. And above all the executives at the top and the politicians who knew all the figures were well aware that it was fraudulent. Who was kidding whom?
When the Fannie Mae and Freddie Mac mortgage firms crashed out, as was inevitable, the politicians in Washington provided a means to bail them out. How? Out of public money. Who would pay the final bill if nearly the whole population was stealing from each other?They stole again via the Fed from the innocent, the voteless and speechless, the future generations, some yet unborn. And the foreigner.
This nasty little bit of political corruption is not and cannot remain local. The neighbours across the Atlantic are also affected. Using public money to save political cronies in the USA now affects the whole world, and Europe in particular. This avalanche washed over into Europe.
Europe's problems are correctable. Some Europeans had already learned their lessons: others are still learning. Competitive devaluations by accessing the monetary printing press bring no lasting solution.
Europeans can act wisely. They have the freedom to choose how to correct their problems. So have the Americans.
The secondary effect of the Obama avalanche is to test and prove whether the European governments are up to their job as honest guardians of the public good. Compare this to how some Mediterranean countries who for several decades have lacked the courage to set their house in order and who persistently apply bent practice have been differentiated recently.
Europe is left with a clear choice. The Obama avalanche has contributed to the clarity. Europe can clean up its house or it can continue the old corrupt economics.
This sad tale is not the only or even the main cause of Europe's monetary woes. It is hoped that we will return to this in the future.
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