Saturday, 19 November 2011

The Bond Markets are the Masters. Ah... Democracy at last.

Here's the bad news. The bond markets are the masters now.

Here's the good news. We are the bond markets, and the bond-markets are us. Or at least anyone with a pension. Who needs democracy when we, the paymasters, have those who would rule us, by the short 'n curlies. When politicians decide that they know best, we, the people who pay their bills, and ultimately lend them the money for them to squander, eventually call time on their nonsense. They can pretend the bond markets are shouty shirty men with many phones shouting about stuff they don't understand. But it's people managing your pension fund for you thinking "you know what, I think I might dump those Italian bonds now" because they don't trust the Italian Government to repay you any more.

If you don't let the people decide, you end up with politicians in charge (until they run out of your money that is), and as far as the Eurozone is concerned, the Italians have shown that given democracy, they elect, repeatedly a magnificent, corrupt nincompoop and can't be trusted. It's too late to whine about sovereignty. The Italians gave that up, willingly when they joined the Euro. So did you, Ireland. You think British sovereignty was bad, now wait and see what happens when you're forced to bend over to bail out German bankers.. They won't even have the decency to spit first. And Greece, who are even more culpable as they lied flagrantly to get into the Euro. Germany rigged the system to it's benefit. And you didn't see it coming. So, democracy in Europe is dead. Germany has her Empire, and it will break their bank because they didn't set to it as the British did, with trade in mind. Indeed the whole project is designed to shield France from globalisation (that's what they ACTUALLY want!!!)

There is a solution to the current crisis, a simple one, and the markets know it. It's very, very simple. We're beyond moral hazard. Germany needs to bail out Southern Europe, and the ECB needs to indicate that it will print sufficient money to ensure that Spain, Italy, Portugal, Ireland, and yes, it will come to this, France too, do not default on their debts. The Euro will fall, but so will bond-yields and the Euro. The Germans must accept a stagnation of living standards for a generation.

The Euro was a political project. Politicians, had they asked their people would have been told "no". And the people are, once again, right with the politicians in the stupid corner. And the Icing on the cake is that the UK isn't part of this unfolding disaster, so while we will suffer a bit more than is reasonable as our trading partners' economies roll over, we can enjoy the Schaenfreude of knowing WE TOLD YOU SO. Britain, of course maintained her trading links with the rest of the world, rather than looking in to an aging, dirigiste, stagnating, over-regulated Europe and will remain the worlds second most popular destination for foreign direct investment, after the USA.

Just Imagine what it's like to be John Redwood now. Having endured a decade of ridicule and abuse to be proved so comprehensively, prophetically, totally right. The UK can try to help. We can, and probably will lend the IMF, and the Eurozone some more money. Bear in mind that we're borrowing at a little over 2% and probably lending it to those Euroweenies at 5,6 or 7%. And the German tax-payer's going to get the bill. It's like winning a war, but no-one's died. Who cares about an EU referendum when in a decade there may not be anything left but a ruin in Strasbourg and Brussels a ghost-town?

And when the Euro-project collapses into a singularity of political vanity, the UK can sail off into the mid-Atlantic, still a major global trading nation, still a permanent member of the UN security council, still (just) in possession of military forces with global reach and still with close relationships with rich, prosperous, free-market countries with which we share a language. All things the European Union sought to take from us. Oh. And the human relationship with the Next major superpower is pretty good too. (no, not China, they've demographically screwed themselves before they're rich), India, with whom we (or at least the English) share an obsession.

The UK, once again has flirted with disaster, yet will once more come out the other end the victor, still on top, and all because some politicians with humility decided in the late 90's that they ought to consult the people before surrendering economic sovereignty.

Don't write blighty off just yet.



6 comments:

Antisthenes said...

Every cloud has a silver lining I hope you have called it right on this one. You are right of course about France a more xenophobic bunch it would be hard to meet and they suffer from delusions of grandeur. The EU having taken on the trappings of the old soviet union I suspect is largely down to their influence.

Ben said...

"the Italians have shown that given democracy, they elect, repeatedly a magnificent, corrupt nincompoop and can't be trusted"

Erm, or did they show how very very very much they do not want a socialist government?

Imagine faced with a choice of Socialism or Berlusconi? Not a good choice but who could say they chose wrong.

cuffleyburgers said...

You fail to mention Brown's role in all this and his supremely accurate analysis that it would really really piss off tony blair if we stayed out until it was on his (Brown's) watch, and so it would be the great statesman (sic.) Brown who took us in...

For the rest of it I admire your optimism

Starship Fighter said...

Putting far more eloquently into words that which I have been thinking since this crisis broke. An excellent synopsis of what I too believe will happen in the next few years.

Single acts of tyranny said...

Redwood ~ Correct, masterly and excluded by a small man called Dave.

Peter Whale said...

Nice post but do not discount the Germans French and Dutch yet. I can see the PIIGS back to their old currencies Belgium divided between the French and Dutch and the new Euro coming to be a major player which the governing parties in UK will join and referendum till they get the result they want.

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