Eurozone Crisis

Now It’s Time for States to Secede from Washington DC

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There are two economic dangers from leaving a political union. The first is trade dislocation. Political unions are not necessary for free trade. In fact that hinder it. The EU is basically one big bribery ring where member countries pay off politicians and bureaucrats in Brussels not to harass member countries. It’s like a labor union where the fatcats get all the fees in exchange for forcing out competitors by labor legislation.

The first economic danger is that EU bureaucrats will be ‘butthurt’ as they say and exact trade punishment on the UK by erecting tariffs and embargoes and bans and quotas and whatever else. This is not necessary, but it could happen.

The second economic danger, and this is the major one, is a dissolution of currencies. If a Euro country were to leave the EU, the Euro would fall apart, robbing everyone’s savings in the Eurozone as would happen eventually anyway but a dissolution would hasten it.

The Euro, the Dollar, they will all fall by sheer weight of printing exhaustion. The sooner the better because the sooner the less catastrophic. It’s not the dissolution of the Euro that is is the problem, but a fiat currency controlled by bureaucrats itself that is the problem. The minute it was introduced it was destined for collapse because it is not free market money, but political force money.

Now that Texas wants to secede from the Union, which would be great, the danger to Texas is again trade barriers and the death of the dollar. If dollars are no longer the currency in seceded states, the dollar falls, which again would happen anyway eventually but this would hasten it. I’m all for hastening the inevitable so we can get on with our lives.

Of course, no president would ever allow any state to secede from the Union. They would sooner annihilate every Texan than allow secession. If Texas votes to secede, Trump or Clinton or whoever is head of the army would invade and kill, just like Lincoln did.

But it would indeed be sweet if states just started seceding. How about we make the European Union voluntary, and the American Union voluntary. Those who want to pay taxes to Brussels in Europe are free to do so. Those who don’t want to don’t have to. Those who want to send a federal tax return to Washington can certainly do so. Those of us who don’t, shouldn’t have to. That would be fine.

But of course, political unions depend on forcing those unwilling to contribute.

Brexit is a beautiful thing. I would rather have trade barriers than bribe bureaucrats to lower them with ever bigger unions and bribery fees.

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GREECE CAVES: Will Yanis Varoufakis Come to the Rescue?

rafifarber Eurozone Crisis, The Jewish Libertarian Blog

He may have resigned as Finance Minister but the guy is pissed. Greece not only completely caved. They agreed to sell off 50 billion Euros of assets to the banks. Governments selling assets is good. But selling them to German banks is definitely not good.

Varoufakis has a Q&A up at Zerohedge that shows both sides of him pretty well. That gross white-wine-socialist side that seems to shrug off all the grotesqueness of the situation, and the human side of him. These are the most interesting lines: (The full interview can be found here.)

 “It’s not that it didn’t go down well – there was point blank refusal to engage in economic arguments. Point blank. You put forward an argument that you’ve really worked on, to make sure it’s logically coherent, and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply.”

This weekend divisions surfaced within the Eurogroup, with countries split between those who seemed to want a “Grexit” and those demanding a deal. But Varoufakis said they were always been united in one respect: their refusal to renegotiate.

“There were people who were sympathetic at a personal level, behind closed doors, especially from the IMF.” He confirmed that he was referring to Christine Lagarde, the IMF director. “But then inside the Eurogroup [there were] a few kind words and that was it: back behind the parapet of the official version. … Very powerful figures look at you in the eye and say ‘You’re right in what you’re saying, but we’re going to crunch you anyway’.”

Varoufakis was reluctant to name individuals, but added that the governments that might have been expected to be the most sympathetic towards Greece were actually their “most energetic enemies”. He said that the “greatest nightmare” of those with large debts – the governments of countries like Portugal, Spain, Italy and Ireland – “was our success”.“Were we to succeed in negotiating a better deal, that would obliterate them politically: they would have to answer to their own people why they didn’t negotiate like we were doing.”

The deal now has to go through a bunch of parliaments. Who knows if it will. But here’s a scenario that no one sees coming. It’s a long shot, but possible. The plan is implemented at the expense of the Greek government collapsing and new elections being called. Varoufakis is pleaded to run at the head of a new party. He wins.

And he scraps the deal.

Yanis Varoufakis is not a good economist. He’s a very bad one. But he does not covet power either. He’s half human, unlike the others who aren’t human at all. If he is forced into the Prime Minister’s seat, anything could happen.

My Advice to Italy and France: Don’t Poke Germany, They Might Leave

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Varoufakis has said this in the past, that if maintaining the illusion of an artificial fiat monetary union becomes too expensive for those who have to support it (Germany), then Germany will simply exist. There is no problem with Germany going back to the Deutschemark. Or Mark. Or whatever it is. (Or GOLD or God’s sake.) It would cause a minor disruption but nothing catastrophic.

Then again, even Germany is sporting 80% debt to GDP. Back in the 19th century governments never ran more than 10%. Germany may well just leave because they cannot afford to finance the debts of even more indebted countries. France is at 93%. Italy, well, you know, they’re the second highest debt in the Eurozone.

France and Italy are now ganging up on Germany. This hasn’t gone well in the past. Those two should shut up, or they might push Germany out, simply because it doesn’t want to fund all this nonsense anymore.

Sunday Still Looks Like Grexit, After All the Craziness

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Nuts. I don’t know how the bureaucratic nonsense in the Eurozone works, or if they need unanimity to agree to fork over another few billion Euros to the Greek vacuum cleaner, but if they need unanimity, they’re not gonna get it.

Wolfgang Schauble, the German Finance Minister, actually proposed a 5-year Grexit, where the country would be quarantined to see if it could survive without other people’s money flowing into it. Sort of like kicking your 18 year old (or 40 year old) out of the house to get his own job, and trying not to think about the possibility that he’ll starve to death on the streets.

The Germans are the main financiers of this crap, and it looks like they’re saying Nein.

Two things we can learn from what’s happened in the last week.

  1. Economics trumps democracy, every time. You cannot simply vote for more money if the people who own it do not want to give it to you.
  2. Economics trumps politics, every time. You cannot create wealth by restricting how people trade. Lefty ideologues are in an exercise of how much they believe their own bullshit. If more paper Euros will save them, why won’t paper Drachmas? Because paper Drachmas will only be able to claim economic goods and services within Greece. And there aren’t much of those. Whatever there is has been bought with Euros, which can claim goods throughout Europe, that were given to them in bailouts, and therefore represent the work of other Non Greeks. Drachmas would be fine if the citizens simply stopped living off welfare. After voting to pass fake austerity measures even bigger than the ones they rejected, they have failed to believe their own bullshit.

Real austerity would produce real wealth. Real austerity would be cutting government spending by 50%, and abolishing 90% of all regulations, and lowering taxes by 80%. This fake austerity is giving a 25 year old kid who lives at his parents’ teat $500 a month instead of $520. It doesn’t make him the least bit independent. It only pisses him off. Cut it down to $10 a month for a falafel or whatever, and he’ll either grow up and get a job, or die.

Do some real austerity, and you won’t need a Grexit. That’s not happening until the whole system collapses in a flaming debt heap.

Shavua Tov!

Looks like Sunday is Grexit Day

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This is it. It’s either happening on Sunday, or it isn’t happening. Greece will either leave the Eurozone on Sunday, or they will get bailed out again.

One thing I simply do not understand about this crisis is Germany. They refuse to devalue Greek debt, yet they know it cannot be paid. So instead of getting a fraction of it after a restructuring, they are insisting on getting zero. I don’t understand why. Germany started World War II over unsustainable debt. They have defaulted more times than any other European country in modern times. Hypocrites.

From the outside, and from a frum perspective, it certainly seems like a case of God hardening Merkel’s heart. The only thing I can think of causitively is that if Germany accepts a debt restructuring, then every Eurozone country with unsustainable debt (there are 6 of them by my count, France among them) will demand the same, and then bonds everywhere in the Eurozone could crash. So they are forcing Greece out as an example to anyone who might ask for a debt restructuring. But that itself will crash the bond market as well.

There’s really no way out of this, barring every Eurozone politician suddenly transforming into a libertarian and freeing every economy simultaneously.

China is crashing. Japan seems to be following today. Japan is the most indebted country in the world in terms of debt to GDP. Over 200%. I’m short DXJ as well right now, have been since March. US money supply growth is grinding to a halt. There are about 4 weeks left until growth goes negative if we don’t push through $12.1T by then, meaning quarterly shrinkage of money supply. The last time that happened was September 2008.

The 2008 crash occurred on the last day of 5768, the final day of the last shmitah year, September 29, 2008. The S&P swung 103 points that day. I’m getting an itchy feeling that Tisha B’Av this year is going to be nuts. But since it falls on Shabbos, it’ll be either 8 Av or 11 Av when fireworks erupt.

Just a feeling.

UNBELIEVABLE New Greek FM Euclid Something Forgets his Homework at Home

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You know, when people flippantly say “Greeks are lazy and that’s why they’re bankrupt,” I have dismissed it. Japan is much more bankrupt than Greece by debt to GDP and I would’t call Japanese people lazy. Japan can print its own money though, so they can keep financing it through inflation.

America is also much more in debt than Greece in terms of unfunded liabilities into the future, but America can print dollars until the currency collapses. Greece can’t.

But now, I think I’ve seen it all. The new Greek Debt Minister Euclid Tzakalotos came to the emergency post referendum meeting with nothing. Un-be-friggin-leavable. He wrote cursory notes on hotel stationary.

Maybe they are just lazy.

 

We’ll Miss You, Yanis Varoufakis

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I’ve always had mixed feelings about the guy. On the one hand he’s a commie. On the other hand, he promised not take any bailout money and he never did.

He has resigned, saying:

Soon after the announcement of the referendum results, I was made aware of a certain preference by some Eurogroup participants, and assorted ‘partners’, for my… ‘absence’ from its meetings; an idea that the Prime Minister judged to be potentially helpful to him in reaching an agreement. For this reason I am leaving the Ministry of Finance today.

I consider it my duty to help Alexis Tsipras exploit, as he sees fit, the capital that the Greek people granted us through yesterday’s referendum.

And I shall wear the creditors’ loathing with pride.

I believe it was entirely Varoufakis who prevented any more bankster bailouts, and for that he should be commended. I fear that Greece may yet break if he’s not there.

I can proudly say that though at times I can’t stand the guy, I found him and thought he was cool before it was cool to think he was cool.

Greeks Stick it to the Banksters, Vote No, OXI, No Deal

rafifarber Eurozone Crisis, The Jewish Libertarian Blog

Oh boy. All eyes on Italy and Spain now. Watch the yields.

The three weeks are off to a crazy start this year.

The OXI camp really beat the crap out of the Yes camp. So far 60-40. Total landslide! Grexit at this point doesn’t really matter. If the Greeks print money, it’s Grexit. If they don’t print money, then no Grexit. What matters is the bond yields. Interest rates. Do they stay under control or do they bankrupt the whole continent?

OXI.