If only the international financial crisis could be sorted out by sending in a few thousand truncheon-waggling riot squads.
Whilst city police launch coordinated raids to clear anticapitalist protest camps from U.S. cities, the real threat to freedom and democracy remains defiantly out of control.
In fact, this creature of our own making is, right now, lurching drunkenly along the corridors of power, merrily spraying everyone who tries to to apprehend it with urine and vomit. No one coming into contact with this particular disaster ends up looking pretty.
When The Grit last wrote about the West’s sovereign debt crisis, things were already looking spectacularly bad. But if anyone suggested, two short months ago, that the European currency, the Euro, was on the brink of imploding, even the most fevered financial doom-mongerer would dismiss the notion as an impossibility. Not anymore.
“What will it take to save the Euro?” gasps the BBC. “Eurozone Collapse 2011: The Endgame Has Begun” blares the International Business Times.
Although the political unity within the United States is such that it could never happen (irony alert), imagine the chaos if the dollar was on the brink of disintegration.
Each state would be faced with the prospect of issuing its own, competing currency. Trade across state borders would be subject to variable exchange rates, nationwide corporate assets would have to be revalued, and the simple act of moving people and products around the country would become ever more expensive and tedious.
This is the prospect facing the Eurozone countries. Some economists believe, if the Euro implosion happens, the European Union will grind to a chaotic halt.
The Euro is a grand project, on which the financial health of an entire continent has been staked. It is now in serious danger of unravelling. As ever, the reason is debt. Too many countries in the Eurozone are in the red. They don’t have enough money to pay public sector wages and keep their economies functioning, and the money markets aren’t interested in lending cash to countries that look very much like they won’t be able to pay it back.
In September’s blog post The Grit suggested we should all blame Greece. Certainly Greece’s behavior (a country with miniscule tax receipts but one of the highest concentration of Porsche SUVs in the world) has been a major reason for the crisis. But this has gone way bigger than Greece, and now affects all the majorly indebted countries within the Eurozone.
Propping up the Greek economy with multibillion Euro loans is something Germany can just about afford to do. But having broken the bank doing that, it can’t save Italy, Spain and Portugal as well.
Things are happening fast. In the last week, Greece’s Prime Minister has gone, as has Italy’s. Both have been replaced by technocrat economists, who are charged with imposing reduced living standards on a restive populace.
There’s no guarantee so-called austerity measures will work. Unless the economies in the Eurozone become more productive, they won’t be able to pay down their debts, and recession is inevitable. The alternative—having countries default on their existing bailouts and exit the Euro—is worse. It will, according to European leaders, result in a depression, and drag the world economy down with it.
Unless the economies in the Eurozone become more productive, they won’t be able to pay down their debts, and recession is inevitable.
The United States exports 22 per cent of its goods to the Eurozone. More than 50 per cent of U.S. overseas assets are held in Europe. America needs healthy, functioning trading partners to keep its own economy from crashing.
A Europe that uncouples from the Euro and slides into depression is bad news. Unemployment, inflation and high interest rates ain’t fun for anyone.
If the Euro does fall over, don’t be under any illusions. The effects will be felt very keenly in America.
And unlike most things The Grit has brought to your attention over the past few months, there’s not the slightest thing you can do about it.