Ah, now comes the moments of truth. I say moments because there will be many, both now and to come. I remember one write who thinks the EU and ECB will muddle through, a little fudge here and little deception here but all will be well. I wish I had such confidence in the stupid but successful solutions that come in spite of our best efforts to screw things up. I am so sorry but history is replete with idiots, morons, and unsuccessful plans of mice and men. I see that Italy is now taxing shadows. to wit, those arwings that cast shadows on public property will now be subject to taxation. As if that were not enough we see that a few economic writers have cast aspersion on the central banks of each country within the EMU. It seems that their accounting systems lack uniformity and one can always question the entries of assets and liabilities. You know, this sounds like China where the official figures issues by local authorities do not always mirror the conditions of the local economy. Of course that means that the regional figures are wrong but but that s to be expected. After all, when good news is expected and the messenger brings us bad news, well, the messenger must be shot, not the news.
Now we see Puttin wanting to establish a Russo-Chinese monetary union. As if the EMU didn’t provide sufficient proof against such stupidity, the Chinese, the Russians, and whoever else who has the IQ of a moron will want to duplicate the EMU results. I am losing my faith in my fellow man’s ability to learn from mistakes. Most of the EMU central banks fudge their books so that their government spending doesn’t look bad while the ECB wants to throw money into the economy to increase inflation. Somehow, inflation is the savior of all economies. Well, not really. The latest evidence is that deflation is not the evil Draghi suspects. It seems that while there is some increase in the inflation in consumer goods, that is largely offset by a decrease in energy prices. One hand washes the other, so to speak, and often, as shown by Greece, italy, and Spain, deflation is a good thing and even results in an increase in GDP. The case for Greece would be better but the problem is that export income comes from shipping and the Baltic Dry Index shows that there has been a 30% decrease or greater. So that lack of shipping, Greece has a large fleet of ships that do just that, accounts for the lower expectations of GDP growth. The Greeks are hardly lazy fellows, after all.
So it should be evident that all those countries who have joined the EMU and had weak currencies as well and current account deficits are at a great disadvantage and ought to withdraw from the EMU. The best that they can hope for is a temporary advantage in foreign exchange, after which they become disadvantaged. I marvel at how many commentators can issue proclamation after proclamation about the great benefits of the EMU. Like the rest of the world, if one can cheat in the manner that Germany does, then one can benefit. Sort of like China pegging its yuan to the Dollar. It is an artificial devaluation that enables one country to lower its cost of doing business at the disadvantage of the other countries. So, to recap, free trade is not free, some other country pays. If one can keep the cost of production artificially lower so as to gain advantage over another country. NAFTA has been a bust, a disaster for American interests unless you count off shoring of jobs a plus for the average American. You see, the problem is that when you reduce employment and push low wages jobs over the higher wage jobs you end up with lower consumption. Initially costs are reduced until you discover that sales are reduced in a similar fashion.
So what does this have to do with Greece? Very simply, Greece can leave the EMU and survive. The defaulted debt that will come as a consequence of the EU, EMU, and ECB interference in the Greek economy and the insistence on debt repayment come hell or high water works against the interests of the EU, the EMU, and the ECB. Common sense would inform most people that the grandiose schemes of socialists simply do not work. What we are witness to is just how dysfunctional the EU, the EMU and the ECB has become. The national central banks are a case in point. Let them rig their accounts and any true measure of stability, of growth, or of solvency is grossly distorted. How then can one write about how the EU and ECB will do the right thing and save Europe from disaster? Socialism believes that there is a pot of gold coins, unfortunately that pot only holds a finite amount, and after spending what is in the pot that is the end of the coins. But that is not just a socialist ideal. There are a great many capitalists that believe in the same fairy tale. Understand that so many business men believe that growth comes from cost cutting, from restriction of trade, or all those contortions in the market that they wish to put it though.
The average business man looks for short cuts to productivity, to profit, to market domination, and these beliefs in such magic fuel the socialist agendas. Growth comes from an increase in demand. that increase will depend on a decrease in price, but there is a finite decrease in price. That is, one cannot sell below cost without becoming bankrupt. There is a limitation to cost cutting and cost cutting has its price in ways one may not expect. The other method of decreasing cost is through an increase in productivity. But such increases are incremental. Thus demand is a limit. Regardless of price and cost, individuals can only consume so much before they become satiated. So we see that Greece is becoming, to a small degree, self sufficient. Yes, not all areas of the economic spectrum will exhibit a similar degree of growth. Greece will be gone form the EU come July, August at the latest. The ECB has already drawn up the plans for their expulsion. What more do you want?