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Notes From the Fieldby Martin Weil

Posts Tagged ‘Euro crisis’

July 6, 2015

Ben Hunt Channels 1914

In 1914, Europe had arrived at a point in which every country except Germany was afraid of the present, and Germany was afraid of the future.

Sir Edward Grey

That from a Ben Hunt piece drawing parallels between today’s Greek debt crisis and the lead-up to WWI.

Since the 2008 financial crisis, I have held that the US parallel to that event was not 1929-32 but the financial panic of 1907. Subsequent events seem to at least loosely confirm this thesis. My biggest fear was, and remains, that in the inevitable game of global musical chairs (who ends up holding the bad debts), the risk was that one party or more was going to be a sore loser. And that war, not financial collapse, was the bigger concern.

Ben is not predicting a war in Europe over who should pay whom what. But his is a cautionary perspective and reminds us that we take the status quo for granted at our own peril.

In spite of all the apparent turmoil in the world and the terror events in our country and abroad, the seven decades since WWII have been among the most pacific in modern history. A great part of this is due to the establishment of international trade and the maintenance of a global order by the US. The Euro experiment was created in part as an add-on attempt to further preclude another catastrophe such as befell Europe twice in the 20th century. But the antecedent attempt to bridge European borders with a common currency (Austria Hungary in the 1880s) did nothing to prevent WWI. And I suspect when push comes to shove, neither the Euro, nor all the trade agreements in the world, can prevent a desperate country from doing what desperate countries do.

We shall see whether, hopefully, calmer heads prevail, or whether the US will be called upon (and is still willing) to play the global order enforcer should events take a more hostile turn.

July 5, 2015

1953 London Debt Accords

Der deutsche Vertreter bei den Verhandlungen όber die Regelung

 

Wherein major creditor nations – that included Greece – forgave 50% of German debt. It makes an interesting contrast to the situation today where debtor and creditor nation have switched places.

(pointer @VisualEcon)

 

June 16, 2012

Cyprus too?

Admit it, when was the last time you thought about Cyprus? If you are old enough, probably 30-plus years ago, when the Turks and the Greeks slugged it out over control of the tiny island, causing an international crisis. I suspect we are about to be hearing a lot more about the divided island after reading this piece by Wolf Richter. Seems that natural gas, lots of it, has been discovered. And the Russians, as well as Italian, French, Malaysian and of course US energy companies are hot on it. Add the failure of Cyprus’ banks and an financial bailout to the long standoff between a now-weakened Greek and a rising Turkish government over sovereignty, and I believe you potentially have a volatile situation.

 

June 6, 2012

Panic has become all too rational

That is the title of a recent OpEd by the always astute Martin Wolf in the Financial times. Wolf argues passionately that in this time of crisis, decisive action and ample credit are both needed to forestall the rising lack of faith in the economic system that is threatening to turn the Eurozone into another 1930s type event.

Before now, I had never really understood how the 1930s could happen. Now I do. All one needs are fragile economies, a rigid monetary regime, intense debate over what must be done, widespread belief that suffering is good, myopic politicians, an inability to co-operate and failure to stay ahead of events.

h/t Marginal Revolution

 

November 2, 2011

The always on-target Martin Wolf

“Creditors can huff…” is Wolf’s latest Op Ed in the FT (registration required) on the hypocrisy of lenders (Germany and China) decrying the borrowing practices of debtors (Greece, Italy, the US).

Do creditors rule the world? Not really. In the short run, they can threaten to turn off the credit. But their surpluses depend on the willingness and ability of others to run deficits. It would be more sensible to admit that there has been too much borrowing by the profligate because there was too much lending by the supposedly prudent.

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