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[...] France's treasury director at the time, a certain Jean-Claude Trichet, expressed the French authorities' hubris admirably. In a bid to refute the plain truth that the Deutsche Mark was the anchor keeping the EMS-ERM system grounded, he denied the dominance of the German currency with the extraordinary statement that 'the anchor of the [EMS] system is the system itself'.
Incapable of grasping the finer aspects of French postmodern sophistry, Bundesbank officials were aghast. [...]
this is actually so funny
John Major, Britain's prime minister [...] committed his government to shunning 'the soft option, the devaluer's option that would be a betrayal of our future and our children's future'. It was the signal speculators needed, with George Soros famously ahead of the pack, to take the British government to the cleaner's: a once-in-a-century opportunity to profit from a commitment to an exchange rate with the Deutsche Mark that the Bundesbank had signalled it would not defend. [...]
I vaguely remember reading a long-form journalistic piece about it several years back, but at the time I didn't know much about the history of the European Union or anything so it's cool to revisit it with that context in mind
The result was that German workers, as their share of their employers' profits fell, could not afford the goods they produced. Deprived of domestic demand, surplus German products thus flowed to places like Ireland, Greece and Spain, where demand for them was supported by the loans Franz and his Frankfurt banker colleagues, dipping into the German corporate profit glut, had shifted to Europe's periphery. The export of German goods and German profits to the rest of the eurozone created debt-fuelled annual growth of 5 per cent in Greece and Ireland [...]
result of the Hartz reforms. German banks were loaning money to consumers in the periphery (interest rate arbitrage basically)
But this was not a bailout. Greece was never bailed out. [...] Greece's bailout, then Ireland's, then Portugal's, then Spain's primarily rescue packages for French and German banks.
The idea is simple: the central bank buys from commercial banks other people's debts. Who are these 'other people'? They can be families that owe mortgages to the bank, corporations, or even a government that has sold bonds to the bank. In exchange for these debts and the stream of income they produce, the central bank deposits dollars or euros in an account the commercial bank keeps at the central bank. Where does the central bank find the money? From thin air, is the answer: they are just numbers that the central bank conjures up and adds to the commercial bank's account. Why do this? In the hopes that the commercial bank will use this money by lending it to businesses wishing to invest and to families wanting to buy houses, cars, gadgets and so on. If this happens, economic activity will rise again as liquidity sets in. [...]
[...]
To cut a long story short, a great deal of believing must occur before QE delivers on its promise to boost the real economy. [...] banks tend to lend the money conjured up by the central bank not to other banks or to Jack and Jill but to companies. Except that these companies do not invest the borrowed money in machinery and workers, fearful that the demand will not be there for extra output produced. What they do is to buy back their own shares in the stock market in order to increase their price and collect a nice bonus for having 'added value to the company'. While this process does boost, to some extent, upmarket house prices and demand for luxuries, the only genuine beneficiary is gross inequality.
[...] a federation replaces sovereignty forfeited at the national or state level with sovereignty at the unitary, federal level, centralizing power within an alliance of states is, by definition, illegitimate, for there is no body politic that can legitimize it.
[...] The essence of that sorry treaty was not so much that it crushed Germany economically and caused Germans untold collective pain, but that, in the end, it was an own goal: a terrible deal even for the victors--a self-defeating punitive act that John Maynard Keynes understood early on and the rest of the world came to recognize as such in the 1930s, when it was too late.
[...] Bewildered Europeans caught in a permanent downward spiral and devoid of democratic control over those whose decisions determine their lives are turning inward and blaming themselves. Back in the Middle Ages, when the Black Death hit Europe, most Europeans genuinely believed that the plague was caused by sinful living and could be exorcized through self-flagellation. They were of course wrong, but something similar is happening today.
Instead of asking 'How should we deal with this crisis?' the powers that be asked an almost religious question: 'How should we bail out Greece, Ireland and the others without seeming to violate the no-bailout dogma?' It only takes a second's thought to realize that by posing the second question rather than the first Europe was bound to go astray.
DRIFT
Leonard Schapiro, writing on Stalinism, warned us that 'the true object of propaganda is neither to convince nor even to persuade. But to produce a uniform pattern of public utterances in which the first trace of unorthodox thought reveals itself as a jarring dissonance.' [...]