http://www.zerohedge.com/news/wikileaks-exposes-german-preparations-eurozone-chapter-11
Monday, 7 November 2011
The underlying issue is globalization: the
interconnection of trade affects everyone to a greater
or lesser extent.
Monetary theory, that control of interest/exchange rates enables
stability (an argument I used against the Euro a decade or more ago) IS
correct, but there is a caveat: the country(ies) involved need to have a
broad economic base, i.e. a range of industries, so that there is
flexibility in their economies.
Specifically, there needs to be less dependency on foreign trade, both
imports and exports. Countries _dependent_ on either, such as the UK,
and the Eurozone as a whole are highly vulnerable to exchange rate
fluctuations.
The countries that will come out of this best are probably China, the
Sub-continent, Brazil, the USA, Australia and Canada. The latter four
have pretty healthy and diversified economies and natural resources; the
former have big internal markets - it will hurt them, but not as much as
it will hurt the rest of us.
In the UK and the rest of Europe we have become dependent on cheap
imported food and manufactured goods. This imbalance has stripped value
from farmland and mass production operations here, such that they aren't
viable any more.
The fact that this is part of the credit bubble (one of the two real
underlying issues) has escaped most MSM commentators.
The panic is that the chairs have been removed and now the music has
stopped. Whilst the jolly tune was playing the absence of seating didn't
really concern anyone, but now it does.
And, for the UK, the other underlying issue: every pound taken in tax
probably loses between 20 and 40% of its value in the machine. Our state
sector is rising to Wilsonian levels (>60%), but, unlike the Wilson era,
it doesn't include heavy industry or much infrastructure. It is mostly
bureaucracy, welfare and pensions. The economically valuable stuff, such
as defence spending and infrastructure, is being dramatically cut back.
Currently between 13% and 25% of the tax take goes on servicing public
debt. We owe between £7,000,000,000,000 (7tn) and £8tn, and that's only
public-sector debt.
That debt is rising at a staggering rate. Politicians, especially
socialists, love to elide "deficit" with "debt," a practice which IMHO
is downright evil.
Our deficit is simply the rate that government capital debt is
INCREASING. It's in the billions-per-month league, and increasing
(meaning, "we are now borrowing more, more quickly than before").
So, any politician who actually understands this, and few of them bother
to find out the real numbers, is probably scared shoeless. Or something.
S.
George Papandreou will no longer be running the Greek government, after a deal was struck with the major opposition party leader Lucas Samaras. A new coalition government will be formed now, aimed at implementing the latest 'bailout' deal, a requirement before the next tranche of aid is approved. February 19 has been agrred by Greece's main political parties as election date, the finance ministry said.
As reported by Athens News, Lucas Papademos is the candidate most widely tipped to succeed George Papandreou as the prime minister. According to the Greek news-wire, Papandreou first suggested Lucas Papademos, former ECB vice-president and former governor of the Bank of Greece. As an alternative, "the Pasok leader proposed Nikiforos Diamandouros, a professor of political science who was appointed European Ombudsman in 2003. Samaras’ proposal was Stavros Dimas, one of his party’s two vice-presidents. Dimas served as European commissioner for the environment from 2004 to 2009" Athens News adds.
Papademos Said to be Greece’s Interim Leader Choice
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