I posted a rather tongue-in-cheek item on the Irish situation yesterday. Anyway, a good friend, Peter M, sent the in following to illustrate both the complexity and, in the end, the delightful simplicity of the Irish bailout. Read on.
It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit.
On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night.
The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer.
The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him “services” on credit.
The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveler will not suspect anything.
At that moment the traveler comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town!
No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
And that, Ladies and Gentlemen, is how the bailout package works.
A guest post from Chris Snuggs, a long-term supporter and author on Learning from Dogs.
Chris Snuggs
EU QUESTIONNAIRE – C Snuggs, 26 November, 2010
This questionnaire is designed to test your knowledge and opinions of the EU. Your answers will be collated and go towards the production of a report to present to your MEP (Member of the European Parliament)– if you can find him or her. Please give your opinion by ticking either T (true) or F (false) for each proposition.
a
THE EURO
1 Greece falsified its statistics in order to “qualify” for entry to the euro.
2 EU leaders KNEW this (like almost everyone else), but ignored it.
3 The EU’s OWN economists had told them that Greece and others could not live in the Eurozone alongside Germany.
4 Ergo, the EU elite connived in a LIE about the finances of Greece and the future of the euro..
5 Once Greece was in the Eurozone it spent money wildly and wastefully with many people retiring at 50, a bloated and overpaid civil service, civil servants who often didn’t bother to turn up, pensions bequeathed to relatives and so on.
6 The EU elite knew all this but DID NOTHING EFFECTIVE about it.
7 Now European taxpayers are having to pay BILLIONS to bail out feckless countries that vastly overspent.
8 The EU elite that lied and ignored these deep problems have been utterly incompetent guardians’ of EU taxpayers’ money. More than incompetent, they have been party to DEFRAUDING many millions of taxpayers for their own ambitions and political ends.
9 The VAST payouts of taxpayers’ money to bail out Greece, Ireland and soon Belgium, Portugal, Spain and Italy DO NOTHING TO FIX THE UNDERLYING PROBLEMS as highlighted in 3 above. This policy therefore represents an appalling further waste of money and merely postpones difficult decisions that EU leaders must make, and should in fact have made YEARS ago.
10 According to the EU’s OWN RULES it is ILLEGAL to “bail out” a bankrupt country. Despite this, the EU countries have bailed out Greece and now Ireland. Mr Van Rompuy was charged with finding a way that this could be done legally. Frau Merkel has suggested that the Lisbon Treaty be amended to allow bailouts to be done legally. How she proposes to amend this Treaty without the consent of member countries is a mystery.
11 The EU elite, knowingly having illegally bailed out Greece and now Ireland should be arrested en masse for illegal use of public money. The EU is very strong on law, except apparently for itself when it suits it.
EU FINANCE, SPENDING & REMUNERATION
12 The EU has failed to get its accounts signed off for the nth year in succession; NO PRIVATE CONCERN COULD GET AWAY WITH THIS.
13 At this time of economic crisis the EU wants to spend SIX BILLION EUROS on a new diplomatic service, including the placing of FORTY-SIX “diplomats” on Barbados and over FIFTY on Madagascar.
14 The number of EU citizens demanding this vast expenditure must be microscopic; though nobody knows for sure since the EU would never dream of asking its paymasters their opinion.
15 Europe is going through the worst period of financial chaos since WWII. Jobs are being lost almost everywhere; many EU countries are technically bankrupt; people’s living standards and public services are being drastically cut, except it seems in the EU in Brussels.
16 The EU has just won a court case against the people that finance it, the national governments. As a consequence, EU workers will receive a payrise backdated to last year with interest of 3.7% at a time of desperate economic hardship for many millions of EU citizens.
17 The head of the vast new “diplomatic” organisation is a Brit who has NEVER BEEN ELECTED to any post of significance and earns more than TWICE as much as ANY European leader, plus very considerable expenses. She is far from unique in the EU circle of the elite.
18 EU workers receive extraordinary perks (benefits) and also pay around 8% income tax. Very few of their electors (who pay their wages) benefit from anything like this sort of remuneration.
19 Peter Mandelson RESIGNED from his post as Commissioner to become an English Lord. Since his ludicrous remuneration for this was LOWER than his EU income the EU is paying him around £62,000 of taxpayers’ money for FOUR years to make up the difference, EVEN THOUGH HE RESIGNED.
20 The above-mentioned practice amounts to institutionalised THEFT of taxpayers’ money.
21 The EU has just created an English-language website to inform us of how wonderful they are. In other words, WE are paying to have EU PROPAGANDA shoved down our throats.
22 The EU paying some 300,000€ for a dogs’ home in Poland at a time when millions of people in Europe are suffering real economic hardship is just one example of frivelous use of taxpayers’ money.
THE RATIONALE OF THE EU
23 Mr van Rompuy, unelected “President” from a failing and disintegrating state (is this the reason for his obsession?), has said that “The nation states are dead.”He and the EU elite seek the creation of a European “superstate” controlled from Brussels.
24 Mr Van Rompuy has presumably informed President Sarkozy, Chancellor Merkel and other EU leaders personally that their states “are dead”. Their reactions have not been published so far.
25 This agenda was denied by the EU elite for many decades, which of course represents yet another LIE.
26 This unelected “President” earns more than any national leader in the EU. This is to give the impression that he is more important, since clearly the more money you are paid the more important you must be.
MEPs & DEMOCRACY
27 MEPs have just demanded a near 6% increase in the EU budget.
28 In this they are certainly not reflecting the wishes of the majority of their electors.
29 Many turn up in Brussels, sign on to qualify for their attendance allowance and then go away.
30 I do not know of any other profession where you get paid a vast salary and expenses and then EXTRA MONEY just for attending a meeting.
31 Most people haven’t got the foggiest idea who is supposed to be “representing” them in Brussels.
32 The EU as it stands is a top-down decision-making organisation whose leaders have a degree of self-righteousness (“Only we know what is good for you.”) that has to be suffered to be believed.
33 MEPs do not take their electors wishes into account.
34 The EU hates referendums since they give an opportunity to the people to express their opinion and actually make a decision. Naturally they can’t be trusted with decisions.
35 When a referendum goes against the EU the usual reaction is to oblige the country involved to do it again and again till the “right” answer is produced. In this the EU is a laughing stock, but the elite do not care as long as they get their way
36 MEPs periodically flog up and down from Brussels to Strasbourg. Sitting in Strasbourg is supposed to be some sort of symbol, but I don’t know of any voters who were asked if they wanted to pay through the nose for a symbol at vast expense, not least in carbon emissions.
CONCLUSIONS
37 The modern world is characterized by greed, arrogance and incompetence. These are qualities that the EU elite has demonstrated in abundance.
38 The EU elite has totally and utterly FAILED the people of Europe and is not fit for purpose.
39 Most people believe in cooperation within Europe, but not in a European superstate ruled from Brussels, a country both disintegrating and vastly endebted.
40 The EU elite has completely destroyed the faith that many ordinary people had in the EU as primarily a “common market”.
My overall reaction to the EU elite and its management of the EU is as follows. (Please tick ONE box.)
A) In general I am very pleased with the EU leadership.
B) I am quite pleased, even if some things could be improved.
C) I don’t care much either way. They can get on with it as far as I’m concerned.
D) I am not very pleased with the way the EU is run.
E) I am very dissatisfied indeed about the way that my money is being spent.
F) It is such a corrupt, wasteful and undemocratic shambles that we have to abolish it up and start again. My country is certainly better off outside the EU AS IT IS CURRENTLY RUN. I am profoundly disappointed.
F) I am disgusted at the EU elite’s arrogance, incompetence, dishonesty and venality.
[NB. If after reading the above, you really would like to submit your answers to the above questions to your local MP or MEP, then Chris has a form you may use that may be downloaded from here. Ed]
François Fillon, the French prime minister, said on Friday (June 4th) that the weakening currency was “good news” because it could boost European exports. His comments accelerated the currency’s slide and prompted selling of French government bonds.
This of course is the cunning ploy formerly used by weak, failing, uncompetitive countries such as Greece, Italy, Portugal and so on before they hitched their waggons on to the euro gravy-train led by the massive German engine. (Anyone remember the story of the over-burdened camel, by the way?)
For France’s Prime Minister, the falling euro is “good”. Well done, François. Thanks for the increased price of oil and everything else we import. How the Swiss must be quietly smirking as they watch this shambles of overspending and reckless financial profligacy.
And the news of Hungary’s tottering economy is helping to push the euro further down towards parity with the dollar. Wonderful. Perhaps we should hope that it falls to half the dollar! Think of how much that would boost exports! This policy is of course about as fatuous as France’s idea that cutting the working week to 35 hours would increase employment.
Of course, the Yanks could copy our example and help to push the dollar down, so that the USA and Europe end up in a deadly game of spiral descendency (“Ha, Ha – our currency is weaker than yours!”) while the Russians, Chinese and Arabs quietly prepare to buy up all our increasingly-worthless assets.
We deserve better leaders.
P.S. Ireland? The Forgotten Basket Case? Don’t worry – it won’t be forgotten for much longer:
Fears for Ireland’s financial stability also re-emerged after the minister of finance said that the country’s banks had to refinance more than €74 billion of debt by October 1. The sum is equivalent to more than half Ireland’s annual economic output.
P.P.S. The USA will save the world as usual? Maybe not!
European Council President Mr Herman Van Rompuy (aren’t we so lucky to have yet another tier of vastly-expensive management – a President of a country that doesn’t even exist?) said: “Everyone shares the will to go forward together”.
Indeed. It would be rather strange if one or more didn’t share “the will” and preferred to go backwards. But going forwards together infers at the same speed and in the same direction.
The Meeting drew up this plan of action.
greater budgetary discipline (will you tell France and almost every other country that never stuck to the 3% budget deficit or shall I?)
find ways to reduce the divergences in competitiveness between member states (so German IS going to take over Greece then? What fails in war can be achieved in the economy.)
establish an effective economic crisis management mechanism(you mean, prepare to borrow billions more to bail out those who fail in the above two areas?)
strengthen economic governance to be able to act quicker and in a more coordinated and efficient manner to deal with any future economic crises(yes, you could get a bit more efficient than ignoring the rules for 10 years – certainly scope for improvement there.)
Is there any way not to be simultaneously cynical and depressed about Europe at the moment?
Well, every day the eurofarce gets more surreal. Yesterday, Frau Merkel said this:
“The current crisis facing the euro is the biggest test Europe has faced in decades. If the euro fails, then Europe fails.”
What on earth does she mean by “Europe fails”? Why this recourse to sensationalism?
If the euro is sinking it is because people don’t think it is serious. If that is the
Two happy leaders!!
case, the only thing to do is MAKE it serious. This is not to be done by borrowing EVEN MORE money.
In the worst-case scenario (which Merkel’s antics are rapidly talking us into) the euro collapses and we go back to our old currencies. This would be a failure of the EURO, not of EUROPE.
Germany would return to being the economic powerhouse of Europe under the strong Deutschmark. Italy, Greece and other usual suspects would return to their quaint old ways with frequent devaluations.
So what? Better to be honest than go on suffering from a vast ego-bubble that will inevitably collapse in an explosion of hubris. (Thank you for the vocabulary, dear Greeks)
You eventually pay for LIES and STUPIDITY, even if it takes time. Sadly, the euro was born in a lie and now Merkel has compounded the problems by giving in to French pressure and being stupid. But the German people (in contrast to their leaders) have no desire to be the bankers of all Europe.
What Merkel has done is utter folly and, worse, won’t even fix the problem. The ONLY way to fix a problem is to DO THE RIGHT THING, which is not rescue people from their idiocy but allow them to take the consequences of it. This is not wishing to be cruel but just the way people learn difficult lessons. As J J Rousseau observed, “The fastest way to teach a child about the danger of fire is to let him burn himself once”… or words to that effect!
J J Rousseau, philosopher
Besides, the euro WITHOUT Greece would be a damned sight more convincing than WITH it. The Germans gave up the Deutschmark on the PROMISE that the euro would be as strong by following strict rules. The EU even MADE A RULE that no country could have a budget deficit of more than 3%. This was insisted on by Germany PRECISELY in order to avoid this sort of surreal situation where the Greeks, Portuguese, Irish, etc. (and Britain, but we are not in the euro …) would NOT wildly overspend.
These “strict rules” were breached before they had hardly started, first by letting in Greece and then France a year or so later, justifying the decision by saying that the rules didn’t apply to big countries — in other words, the rules didn’t apply to themselves. Brussels, and the French and German elites, LIED to the people.
The criminal bit is that these countries just IGNORED the rules. And even more criminal, they (Germany included) just IGNORED what was going on in Greece and elsewhere until, surprise, surprise, it all reared up out of the sand and hit them in the face. Now the Germans have to accept even MORE tax increases, despite being already very highly taxed, just like the French and – increasingly – the British. The British finally got fed up with being lied to and dumped their government. Germany may be going the same way. (France swings wildly from left to right anyway, and each time it seems worse than before.)
Besides, Germany can’t AFFORD to bankroll the whole of Europe. France, too, is ludicrously over-spent and top-heavy with her state. The consequence of all this will no doubt be vast political gains for the left in both countries, but the left have even LESS idea about how to run an economy – see Gordon Brown of “I do know how to run an economy” fame(perhaps he meant “ruin an economy?!”).
Europe is in deep trouble and I really don’t think the politicians even now understand it. Some say that a gradual decline of Europe is already inevitable as Asia rises; the current mentality of lying, overspending, over-borrowing, bailing out undeserving basket cases and over-centralisation will only accelerate this decline.
But for some, of course – such as Jose Manuel “Boring”oso – this crisis is manna from Heaven; a big step towards a United States of Europe and vastly increased power for Brussels. For God’s sake call his bluff. We don’t WANT an “economic union” run from Brussels. It will be a bureaucratic, tax-heavy nightmare, as in France.
Jose Manuel Barroso, EU President
“Let’s be clear,” said the European Commission president, Jose Manuel Barroso, last week. “You can’t have a monetary union without having an economic union. Member states should have the courage to say whether they want an economic union or not. And if they don’t, it’s better to forget monetary union altogether.”EuroActiv May 12, 2010.
These people are really unbelievable. If Barroso is so sure about not being able to have monetary union without economic union (and, of course, ipso facto political union as well) then why didn’t he say this at the beginning? The pro-USE lobby really kept that quiet, didn’t they. It is all a big LIE.
So, to cure indebtedness, you incur FURTHER vast debts? It is surreal. Niall Ferguson, an economic historian at Harvard University, put it this way: “This bailout wasn’t done to help the Greeks; it was done to help the French and German banks. They’ve poured some water on the fire, but the fire has not gone out.” NYT May 17, 2010
The European rescue plan, which totals 750 billion euros thus far and was intended to head off the risk of default, will instead greatly increase borrowing. That could be the end of Europe’s nascent recovery.
A very far-sighted view of European collaboration from 12 years ago!
Once again, Learning from Dogs welcomes a guest post from Per Kurowski.
Per Kurowski
——————-
I was intrigued by a recent Post on Learning from Dogs entitled Poor Old Europe. It included two commentaries from elsewhere about the state of Europe and how the feeling of trying to force, politically, very disparate countries together was still ever so dominant. It reminded me of an article that I wrote for my own Blog nearly 12 years ago just before the Euro came into effect. Reading it today is interesting, to say the least.
In just a few weeks, on the 1st of January 1999, eleven European countries will forsake the right to issue their own currency and accept the circulation within their boundaries of a common currency, the Euro. Monetary policy related to the Euro will be set by a European Central Bank. One fact that struck me as curious is that in all the abundant legislation that regulates this process, there is no mention whatsoever of how to manage the withdrawal or future regret of any of the union’s members.
The absence of alternatives in this case evidently represents a burning of the bridges, but this may be necessary to achieve credibility. There is no turning back and there is no doubt that this is a truly historical moment. As participants in a globalized world in which Europe has an important role, we must naturally wish all members luck, no matter what worries we might secretly harbor.
Until 1971, all money used throughout the history of humanity was backed in one way or another by something physical to which a real value was attributed. Sometimes the backing was direct, pearls for example, while in other cases it was indirect such as the right to exchange bills for a certain quantity of gold.
This physical backing in itself did not necessarily mean it consisted of something of fixed value. The value of a pearl, for example, is in itself subjective. The promise to exchange bills for gold did not guarantee anything either, since this promise could easily be voided by fraud. Whatever the backing was, however, it did at least offer the holder of the money the illusion that it was supported by something concrete.
In 1971, the United States formally abandoned the gold standard and the direct backing, however imaginary, disappeared. Since the Dollar is a legal currency, it could always be used to repay Dollar denominated debt. Today, however, in spite of the fact that the Dollars may have lost some of their purchasing power, a holder of excess Dollars can only hope that the Government of the United States will exchange his old bills for new ones of the same tenor.
This apparently precarious situation must be the raison d’etre of the motto printed clearly on the bills which states “In God We Trust”.
Since 1971, the real value of the Dollar as an element of exchange, has lost some of its value due to inflation. Today, we would need many more Dollars to buy the same houses, cars, movie tickets and gold than we would have needed in 1971. In spite of the above, with few exceptions such as the end of the ‘70s during which inflation increased dramatically, few would dare qualify the United States’ elimination of the gold standard as a failure.
The world’s economies have managed to increase international commerce drastically and with it, sustain a healthy growth rate. Many analysts would explain this phenomenon by saying that the discipline exacted by the gold standard represented a brake on international commerce. The growth rate registered in commerce after 1971 was the result of the release of this brake. Other more critical analysts sustain the thesis that, due to the fact that we have abandoned the discipline required by the gold standard, the world has accumulated gigantic accounts payable, which we may be coming due very soon.
I personally swing back and forth between amazement of the fact that the world has accepted such a fragile system and satisfaction that it actually has done so.
The Euro has one characteristic that differentiates it from the Dollar. This characteristic makes me feel less optimistic as to its chances of success. The Dollar is backed by a solidly unified political entity, i.e. the United States of America. The Euro, on the other hand, seems to be aimed at creating unity and cohesion. It is not the result of these.
The possibility that the European countries will subordinate their political desires to the whims of a common Central Bank that may be theirs but really isn’t, is not a certainty. Exchange rates, while not perfect, are escape valves. By eliminating this valve, European countries must make their economic adjustments in real terms. This makes these adjustments much more explosive. High unemployment will not be confronted with a devaluation of the currency which reduces the real value of salaries in an indirect manner, but rather with a direct and open reduction of salaries or with an increase of emigration to areas offering better possibilities.
What worries me most is the timing. The world is facing the possibility of a global recession. This will require very flexible economic and monetary policies. The fact that the search for initial credibility for the Euro is based on trying to assure markets around the world that the new currency will be guided by a philosophy closer to that of Bonn than that of Rome, probably goes against the best interests of the world.
Published in Daily Journal, Caracas, November 19, 1998
Europe puts on a grand farce for the rest of the world to watch and wonder at.
The “Greece scuppers the euro” soap opera is steaming along at top speed and the iceberg ahead is more than big enough to sink the Euro, the flagship of those seeking a United States of Europe.
The Euro coin
Several very interesting things are becoming clearer about all this:
A) Greece (and for that matter some other countries) was NOT “ready” for the straitjacket of a single currency in the same bed as Germany, Holland and other serious (well, sort of ) countries, particularly in the North ….
B) The EU hierarchy set some stiff rules for entry to the Euro, which Greece LIED about to gain entry.
C) I firmly believe the EU leaders KNEW that Greece’s figures were the delusional fruits of fraudulent pretention, but they PRESSED ON regardless.
The question is, WHY did they let Greece in? And the reason was – I maintain – their GREED. Not directly for money (though that is ever in the background) but for POWER. The more countries in the Euro the bigger the organism and all organisms seek to grow to their maximum.
The bigger the Eurozone the more unstoppable the momentum would appear (and “appear” is certainly the right word) and the more power would accrue to Brussels and Frankfurt. POLITICAL GREED overcame economic and financial logic.
But the chickens always come home to roost and the result could now be the OPPOSITE of what they wanted to achieve.
Coming back to the roost
Instead of a tight core of financially-stable and righteous Eurocountries that could have thrived as a model for others to emulate and join, Euroland has become a haphazard bodge of totally-disparate economies that has every chance of unravelling in chaos.
I have no desire to see the Greeks or anyone else in economic trouble, but we cannot build a new Europe – let alone world – on lies and a lack of realism. A touch of hubris is direly needed. More practically, we need more long-term planning and less short-term political greed and cowardice.
If this Greek crisis had happened when the EU was flush with funds then it could perhaps – temporarily – have been bodged over as usual. Now we are still on a financial knife edge, and it could go either way. There is some talk that this crisis could accelerate political and monetary union, but I can’t see individual countries giving up their financial independence to Frankfurt and Brussels …. what is true is that we are in dangerous waters out of control and maybe heading towards the rapids … (or the iceberg …) Most EU countries are already in serious trouble; the last thing they need is a further drain on scarce resources. The Greek patient could well bring down the German doctor …….
One of the funniest things (if you like black humour) was soon after the EU bigwigs fixed a ceiling of 3% above GDP for countries’ budget deficits. In other words, countries joining the Euro had to guarantee to take steps to ensure this ceiling would not be breached, and this in the interests of Euroland as a whole; a sort of collective responsibility.
Yet as soon as FRANCE found it could not apply the self-discipline to keep to this promise (do promises matter at all in politics?) then some French government spokesperson said when challenged on this that “the rule could not be applied to big countries.”
François Fillon, the French prime minister, said on Friday (June 4th) that the weakening currency was “good news” because it could boost European exports. His comments accelerated the currency’s slide and prompted selling of French government bonds. 
Learning from Dogs 