Europe Can't Beat The Bubble, Past Sins And Future Debts

By: Andrew_McKillop

BUBBLE TROUBLE
Don't fear the bubble, says Paul Krugman and his talkalikes, but Europe is dealing with another kind of bubble. Call it Bubble Politics. An unworkable Federal Europe with a single money, that nobody wants.

Bubblists say that the flood of money being poured into the global economy by the world's central banks is good, proven by asset prices of several kinds, especially stocks and shares being pumped up far beyond fundamental valuations. When (not if) these valuations revert to sanity and unwind the bubble burst could be disastrous in all manner of unpredictable ways. So what is more logical than to keep pumping and keep the party going?

Official media in Europe (as in the USA or Japan) today says that QE is working and austerity is working, shown by financial markets at all-time highs. Only "transitional problems" are left, like the 55% unemployment rate for young persons in several sacrificed "Club Med" countries.

Opinion polls say other things. Europe scares people when it doesn't bore them. Everybody wants to get out of Europe, but nobody knows how. People in the Eurozone want to keep the euro - but solely because they are terrified of what might happen if they abandon it. The extreme left and extreme right parties, and anarchists say they know how to end the farce. By street protest - or civil war.

THE STRANGE LOGIC OF BUBBLE POLITICS
This is a prediction which is all too easy to make, not least because the "fait accompli" No Alternative nature of the Federalizing Project in Europe has no time stamp associated with it. At the moment.

Due to this, the presently distorted economic, social, political and human conditions prevailing in Europe will remain in place until they are dumped. Probably with violence. Wildly distorted logic of the type used by Paul Krugman cuts no ice with average persons in Europe - justifiably scared their savings will be stolen by a surprise "bail in", when their national politicians own up and announce things were a lot worse than they said, and hand the national banking system over to The Troika. The dreaded Troika. Krugman says, with po-faced innocence that: "long-term rates are so low because people, rightly, expect short-term rates to stay low for a long time." Savings accounts can be taxed at any time, not paid even a symbolic rate of interest, the ECB has officially warned.

For regime-friendly economists like Krugman and his talkalikes, low interest rates "across the curve" are causing asset prices to rise around the world. Then we get the logic chop. Official economists say that the job of financial markets is to convert future cashflows into a present-day lump sum, and that lump sum is naturally going to be higher when interest rates are low. And there is No Alternative.

In the European case, these weird and bent "logical derivatives" of Keynesianism married with Crony capitalism have a direct and related political program - the Greater Union - but the European Union's ceaseless attempts to Federalize the continent, while the pace of European disintegration continues to quicken, is at least paradoxical if not pathetic. This extreme context results in violent and total switchbacks of policy such as the 22 May Council of Europe meeting. This decided that shale gas fracking is now OK. Previously it was pest and hellfire. It also decided that tax dodgers and tax havens are going to be steamrolled. Previously, Europe's dozen or more domestic tax haven "financial platforms" were vital and basic to the free flow of finance, that was the mantra.

Eurozone and euro money logic was similar - warped. Totally different European countries with different economies were bundled together. Anybody could borrow anything, especially if they were a bank. In countries like Spain and Ireland, the housing bubble which floated on the back of that was awesome. People bought 3 house on paper and traded 2 of them while they lived in a relative's spare house or apartment. They could buy a tract home with no money down, hold on to it for a few months, and then flip it on the market for a substantial payout — with no remote intention of ever living in it.

Today we have a new cottage industry of bubble-worriers in Europe, worrying about the Union as well as the economy. European free market morality, worse even than the US version, held that the pace of generating vast income inequality and unemployment in Europe was not going fast enough, so the ECB would have to play its own version of Helicopter Ben dropping free money and free lunches on the already rich. When it came to the cosmic karma of wherever there's a party, there is bound to be a hangover, the "implacable rigor" of austerity was needed, for the non-rich.

PAST SINS AND FUTURE DEBTS
The view that "we have to pay for past sins" is homely and Christian, even "liberal", but the simple fact is that recession is deepening in the 17-member Eurozone, whatever the frothy talk about "recovery" and stock markets cranked to lurid summits might seem to say.  The endless "recovery" propaganda is of course just that, interminable, mindless and lying because in reality Europe is wallowing in its longest downturn since the "single currency" was launched in 1999. Not a few persons, able to completely ignore Krugman & Co, identify the single currency and the Federalizing Urge of the Eurocrats as a main cause of this - not the solution.

Young persons in Europe - including most German youth - reject the idea they have to pay, the rest of their lives, for the debts run up by their Baby Boomer parents and the politicians they voted for. In the case of Germany's youth, opinion polls show they also do not intend or want to pay for bail-outs in Club Med Europe, either, whatever the "surprise bail-ins" can steal in the way of local persons' savings.

This generational divide goes a lot further than Europe's mounting rich-poor and North-South divides and their mounting political spillover.

The solution for Europe means less of Europe, and we can hope better Europe. Europeans know all about their national politicians, increasingly they distrust them, but they know them. They know their national political parties and politicians. They know their tricks and their virtues, and all their defects. But the power shift to Brussels and Strasbourg has been a flop. This is not a cherished new thing. The European Parliament exists, for sure, but for any normal European it is as far away as Washington or Pyongyang. The Commission and its mushrooming agencies - many of them totally unknown to average persons, like the CEER or ENTSO or ACER (and dozens of others) - are totally remote, unable to make any meaningful decisions on how to run the economy, organize society and spend the tax money that citizens pay.

The European paradox is simple to state. The endless talk aimed at creating a more integrated Europe has a long pedigree - but it has no future. Treaties are bundled and cobbled together, but they mean less and less to ordinary persons. In January 2013, a Reuters report said this: "When the 2012 Nobel Peace Prize was awarded to the European Union, jaws dropped from Belfast to Belgrade. The citation said the EU had helped transform Europe from a continent of war to a continent of peace.... Many think that is a strange way of interpreting the last 100 years". Creating a ruined economy and massive unemployment may seem to merit a Peace Prize, for the Norwegians who gave this prize - and themselves have no intention of joining the EU - but for average Europeans the prize is a bad joke.

A recent survey by the European Council on Foreign Relations (ECFR), an unheard of but Eurocrat-friendly think tank shows that since the eurozone and European crisis started in 2008, "trust in the European Union" has fallen from more than 10% of polled persons being "actively trusting", to an average of 22% being "actively distrusting" in the Eurozone countries, with 29% in Germany distrusting the Union, 52% in Spain, 23% in Italy and 49% in the UK. For the ECFR this is "a test of wills" translating in cash terms to the northern countries not wanting to pay down Club Med sovereign debts without tight controls, and the southern countries resenting fast-growing moves to centralized control of budgets, taxes, pensions, internal migration and the labor market.

The spendidly paradoxical conclusion, made by the ECFR is that "nobody in Europe can count on others to resolve their local problems". Union for what?

CHANGING PURSES TO PIGS EARS
Europe reverse logic simply jumps out of any comparison with facts on the ground, in the real world, and the fantasy fare coming out of Brussels and Strasbourg, and the capitals where the mushrooming number of New Agencies are located. More and more Europeans are waking up to a simple fact. The single currency monetary union, the ultimate Elite Eurocrat Project, sold to gullible Europeans as a major benefit, has morphed from the Union's largest innovation into it's largest burden. Even a cursory scan of European Central Bank plans and policies is a nightmare of debt scenarios, couched in impenetrable technocrat-prose but threatening more and further Cyprus-style "bail-ins".

Nobody's money is safe! Opinion polls show that even after more than 10 years of the euro, majority opinion in all eurozone countries treats the euro as "not our national money". Nobody's money.

Even the elites are gradually realizing that despite all their efforts they have miscalculated in a very big way. The breakneck pace of European Treaty-writing from the 1990s is a simple proof. These strange documents, today, already seem as eccentric as they are unworkable - for those who can wade through their thousands of pages. From improvised poetry on a sunny day, we can say, Eurocrat talk has morphed to a yelp in the dark.

Basic elite psychology is all that is needed to explain the fantastic pace of would-be "integration", especially since the 1990s. The Great Fear of the Elites was they had "missed the train leaving the station". They had to move faster, then faster again. Blinded by hubris, the Eurocrats and their running dogs of the media (or yelping poodles) simply could not slow down. The elite theme then flipped to "implacable rigor", when the lights went off and Europe plunged into endless economic crisis.

Now there are inklings of regret for such rash and arrogant action. The only choice is to take a step back, but this is not going to be admitted as the only solution, or applied until a lot more red ink is spilled across the economy, with a real risk of that transmuting to red blood in the streets. Humbly admitting mistake and error is, if you think about it, not the normal way elites deflate their egos.

Unsuspected for a long time, but no law prevents it, Anti-European sentiment will soon morph into street rage - British Deputy PM Nick Clegg, of course pro-EU, has warned that "If the euro zone doesn't come up with a comprehensive vision of its own future, you'll have a whole range of nationalist, xenophobic and extreme movements increasing across the European Union."

Extreme hubris has its natural counterpart - extreme street rage. Already, in the Club Med countries and outside them, plenty of persons and Anti-Europe parties compare 2013 with what happened to Germany after 1919 and the Treaty of Versailles. Hyperinflation and the Spartakist movement - and tens of thousands of dead in street war - were the sombre result in Germany. Dumping ordinary people in the trashcan of History because they "do not fit the great project" finally does have limits, and European Union-friendly politicians are having to wake up to where the so-called Great Project is leading them - like a farmyard animal with a ring in its nose.

By Andrew McKillop

Contact: xtran9@gmail.com

Former chief policy analyst, Division A Policy, DG XVII Energy, European Commission. Andrew McKillop Biographic Highlights

Co-author 'The Doomsday Machine', Palgrave Macmillan USA, 2012

Andrew McKillop has more than 30 years experience in the energy, economic and finance domains. Trained at London UK’s University College, he has had specially long experience of energy policy, project administration and the development and financing of alternate energy. This included his role of in-house Expert on Policy and Programming at the DG XVII-Energy of the European Commission, Director of Information of the OAPEC technology transfer subsidiary, AREC and researcher for UN agencies including the ILO.

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