Sunday, 18 September 2011

09:23 – Some people apparently have poor reading comprehension. I got email the other day from someone who asked why I was cheering for the euro to crash.

In the unlikely event that any of my other readers believe I’m cheering for the euro to crash, let me be clear: I believe the collapse of the euro is inevitable, but what I believe will happen and what I would like to see happen are not necessarily the same thing, and in this case are definitely not. The collapse of the euro will be catastrophic, and not just for Europe. The consequences of that collapse will be felt worldwide. Those consequences will include a great deal of human suffering, and a reduction in standard of living across the board. Most of southern and eastern Europe will become what amounts to third-world countries, but the rest of us will not escape entirely. The US, Canada, Australia, and the rest of the first world will also suffer, the UK more so, and northern Europe even more so. And the effect of this economic collapse will be catastrophic in many of the world’s poorer countries, which depend on subsidies from the formerly wealthy nations even to feed their populations.

All of this has happened because governments have been living beyond their means and encouraging their citizens to do the same, consuming now with a promise to pay later. Well, it’s now later, and we’re all going to pay the price in the form of lower standards of living, much higher unemployment, cuts in salaries and benefits in real terms, later retirement age, drastic cuts in government social programs, and so on. Well, at least those of us who are not members of privileged classes, such as government employees. And even they will suffer cutbacks, as taxpayers revolt.

Our financial mess a couple years ago lit the fuse, which is now rapidly approaching the European powder keg. The result is not going to be pretty.