Category: politics

09:50 – The latest IMF report on the eurozone is out, and it makes truly scary reading for anyone who’s invested in the euro, financially or emotionally. Basically, the report concludes that the euro is doomed unless the eurozone takes certain specific actions. That’s a superfluous qualifier, because those actions–debt pooling, eurobonds, and so on–are steps that Germany and the rest of the northern tier are never going to take.

Germany is as aware as anyone that there is no solution to this crisis, short of Germany agreeing to pay everyone else’s debts. Not just current debts, either. Germany would be expected to continue funding deficit spending in the southern tier permanently. The probability of Germany, along with Finland and Holland, agreeing to such a “transfer union” are somewhere between zero and less than zero. So, the euro is going to crash. Or, more precisely, the southern tier is going to crash, whether they’re on the euro or revert to using local currencies.

One of two things is going to happen: either Germany will revert to the D-mark, or possibly to a new currency. Call it the Northern euro. In the latter case, Finland and Holland may join Germany in a currency union, and perhaps a political union. (Everyone is now painfully aware what happens when a currency union exists without a political union to support it. But the cultures and economies of those three countries are similar enough that a currency union might be workable for at least a couple of decades before stresses started to tear it apart.) The second option is that the debtor nations will depart the euro and return to sovereign currencies, leaving Germany, Finland, and Holland with perhaps Luxembourg and one or two other nations using the euro.

German politics is bi-polar about this. On the one hand, if Germany keeps the euro and other, profligate nations leave it, the debts they owe Germany will continue to be denominated in euros, which will remain a “hard” currency. Germany would hope to get at least some of those debts repaid, in hard euros. On the other hand, Germany has in effect co-signed for hundreds of billions of euros in loans to southern tier nations that have no prospect of ever being repaid by those nations. Germany will be on the hook to repay those loans, which of course are euro-denominated. That means that if Germany departs the euro, which would immediately crash to something like 5% to 10% of its former relative value, Germany would be able to buy cheap euros to pay off those debts.

Forget all that stuff about “war guilt” and “European solidarity”. The simple truth is that for Germany, as for everyone else, it ultimately comes down to money. Who will get stuck paying all these bills? Until now, it seems that Germany’s policies have been intended to force weak nations into leaving the euro. But it seems to me that things are shifting now, with the ever-increasing commitments that Germany finds itself tied to. At some point soon, one of two things is going to happen. A weak nation will abandon the euro, which will start the dominoes toppling. Or Germany will finally give up, and abandon the euro itself.

In fact, given that for all intents and purposes the euro is already a zombie currency, it’s possible that both things will happen. Germany will go back to its sovereign currency, and so will everyone else, leaving the euro as a currency without a country.

08:54 – I see that Sandusky has been convicted of raping children and is awaiting sentencing. He may spend the rest of his life in prison, which isn’t enough.

Meanwhile, I saw an article on CNN the other day that argued that pedophiles can’t help being pedophiles. They’re born that way. And I agree, just as heterosexuals can’t help being heterosexual and homosexuals can’t help being homosexual. Pedophiles are hard-wired from birth to be sexually attracted to pre-pubescent children. There’s no way to change that. But we as a society can demand that pedophiles not act on their attractions, and penalize them if they do so. Hanging, drawing, and quartering seems about right to me. Having sex with children–and by “children” I mean people who have not yet reached puberty–is beyond the pale. Children cannot consent, and having sex with someone who does not consent is by definition rape.

One thing we could do to help prevent pedophiles from having sex with children is relax the ridiculous restrictions on “child porn”. Ban actual child porn, that which involves actual children having actual sex, fine. But right now, fake child porn is penalized just as heavily as real child porn. Drawings of children engaging in sex acts or CGI simulations are just as illegal as actual images or video. Legalize “child porn” that doesn’t involve actual children and you give pedophiles an opportunity for a fantasy sex life that in most cases would substitute for the real thing.

09:13 – We should have preliminary results of the Greek elections by about mid-afternoon EDT. My guess is that they’ll be inconclusive, pretty much a re-run of the last election, six weeks ago. ND will probably lead the results, with Syriza not far behind. Given the 10050-seat bonus awarded to the leading vote-getter, it’s possible that ND will be able to form a coalition government with PASOK. If that happens, it’s likely that Greece will continue to pretend to attempt to comply with the Troika’s requirements and the Troika will continue to provide funding, allowing Greece to remain in the eurozone for the time being. But it’s also very possible that no coalition government can be formed, in which case Greece will continue its rapid descent into chaos.

I hope that the elections bring an end to this farce, and that Greece crashes out of the euro and returns to the drachma. That means a decade of unimaginable suffering for the Greek people. That’s bad, but the alternative if Greek remains in the euro is unimaginable suffering for the Greek people for two or three decades. In any event, Spain and Italy will follow Greece into default, with France not far behind. Even Germany will suffer, although not to the degree that the southern tier will. That’s what inevitably happens to anyone or any country that spends lots of money that it doesn’t have.

07:52 – And now we have former UK PM Gordon Brown warning that the euro crisis may lead to Italy and France requiring bailouts. There’s not a whole lot of “may” about it. Italy and eventually France will require bailouts; only the timing is in question.

Much depends on the outcome of the Greek election tomorrow. If New Democracy and PASOK win enough votes to form a coalition government, that may delay the collapse for a few more weeks or even months. If the anti-austerity parties, led by Syriza, gain enough votes to form a coalition (which is unlikely, even if Syriza is the top vote-getter), things will go downhill faster. Regardless of the outcome, Monday morning is likely to be exciting on the markets.

If the anti-austerity parties win, that will be perceived by the markets and by the EU as a vote in favor of Greece abrogating the bailout terms and leaving the eurozone. If that happens, the markets will turn their focus to Italy, which could be forced to seek a bailout as early as next week. Of course, there’s no money available for such a bailout, which will simply increase the pressure on the ECB to inflate its way out of the problem, a fix that’s worse than the underlying disease. The EUrocrats have painted themselves into a corner from which there is no escape.

Everyone, including Obama and other world leaders, is demanding that Germany Do Something. Merkel, the only one in this group of “leaders” who has any clue, correctly points out that there’s nothing Germany can do, and that even if Germany did what is being demanded of it, it would have no beneficial effect and merely doom Germany along with the rest. At this point, there’s no doubt that Merkel is perfectly aware that the euro is going down. Her only concern is, as it should be, to minimize the effects of that collapse on Germany and German taxpayers.