… into a wood chipper. Politically and economically of course, not physically.
The title of the linked article is:
The world must insist that Europe act
This is sort of like the world insisted that Germany act, or that Japan act, right?
We know how those episodes ended, which is why my answer to those that argue such things is that they should be fed feet-first into a wood chipper with their pontifications on a political and economic basis.
There can be no return to the pre-crisis status quo. It is now clear that market discipline within monetary union is insufficiently potent and credible to assure sound finance. It is equally clear that the risk of self-fulfilling confidence crises becomes substantial when banks and sovereigns have no access to lender of last resort financing. The responsibilities of the ECB, national financial and regulatory authorities and EU officials can be defined in different ways. But there must now be simultaneously an increase in the central financial commitment to the financial stability of member states, and a reduction in their financial autonomy, if the common currency is to survive.
The real problem that Larry doesn’t want to admit to is that at its core this crisis was a function of his economic policies. This entire mess (and it’s a big mess) is fundamentally about lying.
Lying to ourselves, lying about solvency, lying about balance sheets, lying about being able to stop drinking from the “cheap credit” well any time we want.
It’s all been a lie, and we’re all suffering from it.
The ridiculous “fear” of the boogeyman deflation is a chimera. Once one puts together 30 years of massive inflation of credit reversion to the mean is not deflation, it is removing the influence of a massive and pernicious bubble.
Oh sure, those who “profited” from that bubble will get creamed if and when that is done. But their “wealth” was never real in the first place. It was not earned, manufactured or innovated – it was stolen through artifice and fraud and in fact never really existed.
Can we avoid recognition of the truth, here or in Europe? For a while, perhaps.
The premise of our so-called “booming economy” was a lie. Larry was a chief promoter of that lie. Now that it’s coming apart, in fulfillment of the we’re screwed, they’re screwed worse basic statement of beliefs that I have put forward for the last few years, Larry and many others are cowering under the desk screaming for more booze to calm their shakes.
It won’t work because it can’t work.
Can the EU bail out the banks over there? Maybe, although doing so will simply goad the markets to press into the next nation in the (correct) belief that the EU’s firepower is finite and the damage to be absorbed exceeds that firepower’s capacity. But the EU shouldn’t bail out anyone. Instead they should tell them all to twist and default the bad debt. Remove the excess liquidity and credit, returning the economy to stability.
Will this require new banks as many of the current ones turn into smoking holes? Sure. We have to have a clearing mechanism for commerce. That is, we need banks but not these specific banks that have manipulated people and nations both with the claim of “easy money” that in fact is nothing but a gigantic pyramid scheme that they knew must eventually fail.
That, in fact, is the key: These institutions knew this scheme could not continue forever. They understand the math. They just believe they can force you, the taxpayer, both here and abroad, to pick up the cost of their foolishness.
It is time to stand and say “no” while we still have the ability to determine the path that this cleansing takes, lest it become disorderly and not subject to our desires, whims and control.
The lies are no longer working. We must choose truth.