Tuesday, 25 May 2010

"The EU Should Issue Debt Jointly"

The international economic system is full of stabilizing feedback loops.

If your economy is weak, you will export less, your foreign reserves will fall, your currency will weaken, making your exports more attractive, meaning you export more, pouring money into reserves, strengthening your currency and so on... If your economy is strong, your inflation rises causing higher interest rates, which makes your currency more attractive to foreign reserve holders so it strengthens. This makes your exports less attractive causing exports to fall and so on...

Look at what both these examples rely on: Yes! A freely floating currency and domestic control of interest rates. And look at what is happening to Greece (and is about to happen to Spain). They cannot control their currency, and therefore suffer disproportionately when they have the wrong interest rate and currency level. Of course, in both these countries, and in Greece especially, they've had Socialist Governments for most of the last 40 years, the centre right only managing to win consistently in the 90s. This means a bloated state bureaucracy and rampant government spending. And of course, since Greece joined the Euro in 2002, both the centre Right and Pan Hellenic Socialist movement have had the ability to borrow at a rate subsidised by the mighty German economy.


For those of us who ALWAYS regarded the Euro as a stupid thing to recommend for anyone outside the Franco-German-Benelux core, the problems of Greece should stand as a warning to anyone recommending it in the future.

And if you add to the idiocy of removing the automatic stabilizers of currency fluctuation to the idiocy of Socialist government to whom you give the temptation of nearly free money, OF COURSE YOU'RE GOING TO GO BANKRUPT.

Schadenfreude is not pleasant to see, but if the misery the Greeks are feeling now can serve as a warning to Europhiles to prevent them advocating UK ever going into the Euro, I shall indulge in it a bit. And if the queues of Jobless in Greece and Spain lead to unrest, then perhaps that should serve as a warning to the UK electorate. And maybe the British Government will get on with firing the parasites in the public sector (no, not the sainted Nurses 'n Teachers - I'm talking about the worthless box-tickers, the prod-noses, the diversity outreach co-ordinators, the 5-a-day workers, the Quangocrats, the Fake-Charity wallahs) to prevent the same happening here.

Britain is NOT Greece. Our National Debt, measured as a balance outstanding as a percentage of GDP is one of the smallest in the developed world. Though our deficit is large, we are still able to borrow Long-term, and we also have the longest-dated national debt in the OECD. Furthermore, Sterling is a major currency which floats freely. We have time to sort out the catastrophic mess left by our last Lunatic government.

Today a low-grade Bank Clerk called Herbert Van Rumpy-Pumpy or something like that suggested that "EU countries should issue debt jointly". Basically that allows socialist lunatics in Greece to spend even more of German tax-payers money (ie that earned by Germans not yet born) than they do already.

We are NOT in Greece's position in part because of the economic policies of the Thatcher Major years to pay down the National debt (which stood at just 45% of GDP in 1997 and fell to 30% by 2000, as Brown stuck to Tory spending plans), in part because a well-developed financial sector provides a market for all that Government borrowing and in part because we're not in the Euro. A Liberal Conservative Government is fixing it, and the federast Lib-Dems have realised that 'Europe' is a tough sell right now. Remember this; and don't let socialist europhiles ruin it. Again.


The Quizzical Observer said...

An excellent analysis, cogently put. I just wish I shared your confidence that the new administration will get to grips with it. I'm sure they have the facts at their fingertips, but will they be prepared to face the political price of really sorting out our public sector?

Mitch said...

The left just never learn. Their silly ideas which sound so good in university after beer and drugs just don't square with reality.

Excellent piece.

Roue le Jour said...

The situation is much simpler than you describe. The Eurozone was guaranteeing Greek debt. It is now pissed off that that guarantee has been called in. Tough shit. It's not rocket science.

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