This is beginning to feel like 2008, complete with all the rumor and chaos and volatility we saw back then. MF Global is a bit like those Bear Stearns hedge funds which went bust — an isolated datapoint in one respect, but ominous in many others. And right now the best case scenario is that Greece ends up being Bear Stearns, rescued by an international community petrified of what might happen in the event of a chaotic collapse. But Greece being Greece, of course, a chaotic collapse has to be pretty much an inevitability at some point. Of the many ways in which the euro project was fundamentally misguided, this might be the proximate cause of its demise: it was never robust to the messy world of political reality. And in the real world, people — including heads of state — make stupid decisions all the time. So it’s a bit silly, frankly, second-guessing George Papandreou’s fateful decision to call a referendum on the latest Greece bailout. It might not have been the most statesmanlike thing to do, but the fact is that, judged by the standard of most Greek prime ministers, Papandreou’s pretty much the best that Europe could reasonably hope for. (Just think: Greece could be run right now by someone more like Silvio Berlusconi. Or, for that matter, Jon Corzine.) In Greek tragedy, humans don’t rise above events to triumph; rather, they are crushed by forces greater than themselves. (It’s one reason whyThe Wire was such an innovative piece of television: it reached back past that great humanist, Shakespeare, to his Greek antecedents.) The architects of the eurozone displayed classic hubris: they saw the increasing economic ties between the various countries and locked themselves in to a momentum trade where such ties could only ever strengthen and never weaken. And in the event it took much less time than even the skeptics had anticipated before that hubris resulted in the inexorable nemesis. There is a decent chance that the G20 summit will somehow muddle through in Cannes. There’s even a possibility that Greece will manage to extract itself from its current political mess, implement the reforms that Merkel and Sarkozy are insisting on, and live to collapse some other day. But at this point I see no sign of the pan-European unity at the head-of-state level which is needed to preserve the eurozone project over the medium term. Commeth the hour, commeth the backbiting and finger-pointing and recriminating. Greece is going to default and leave the euro; the only question is when. And when it does, the EU will find that its protections against contagion are about as effective as that $1.6 billion tsunami breakwater in Kamaishi. Greece can fall and the eurozone can still survive. But Italy — which is just as politically dysfunctional as Greece — can’t. Which is why those Olympian forces will ultimately spell the end not only of Greece’s membership in the euro, but also of European monetary union.Europe’s doomed fate
Dear Daily Crux reader,
Here is your Crux PM update:
This could be the industry that "reignites" the U.S. economy
"It's a new industrial renaissance..."
Eight ways to save money while shopping online
"If you know what to look for, you can save a significant amount of money..."
Not so fast... Today's reports of a Greek resolution could be premature
"Despite expectations that any talk of a referendum is over and done with, this is hardly the case..."
Credit Suisse: The three biggest risks to the economy now
Europe isn't the only worry...
A rare bullish sign from Chinese stocks
This hasn't happened in months...
Reuters: "Europe is doomed"
"Right now, the best case scenario is that Greece ends up being Bear Stearns..."
Regards,
Justin Brill
Managing Editor, The Daily Crux
www.thedailycrux.com
Thursday, 3 November 2011
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