Mr. Varoufakis makes lots of good points about the Euro, but this might be one of the best:
“ Max (in particular) suggested that, by shifting debt around (between the EFSF, the ECB, insolvent states such as Greece and Spain etc.), some ECB bankers or functionaries were profiting. I do not believe they were. Take for instance what happened last month: Greece borrowed 4.2 billion euros from the EFSF so as immediately to pass it on to the ECB so as to redeem Greek government bonds that the ECB had previously purchased in a failed attempt to shore up their price. This new loan boosted Greece’s debt substantially but netted the ECB a profit of around 840 million (courtesy of the 20% discount at which the ECB had purchased these bonds). That’s all true and accurate. But it is incorrect that ECB bankers pocketed that 840 million. Who did? No one! It was lost inside the ECB’s balance sheet! Without a trace. So, the situation is worse than Max assumes. For if some unscrupulous characters in the ECB were to profit from Greece’s pain (or Spain’s), at least there would be a logic (however sinister) to what they are doing. But there is none! All that we witness is organised madness, guided by an ideological commitment to an unworkable status quo!” [Bold mine]
The crazy part about this mess is that there are very few winners from the status quo. Even the Germans are getting hurt by their policies. There are no bankers making a mint from pushing out this crisis.
The Germans would be better served by embracing the solutions and loading all of the debt on a common euro structure. This would push the euro much lower – think EURUSD .9000 – and turbocharge the German export machine.
“The Germans would be better served by embracing the solutions and loading all of the debt on a common euro structure. This would push the euro much lower – think EURUSD .9000 – and turbocharge the German export machine.”
One wonder how much Germany would really benefit from that sort of solution. A majority of German exports occur within the EZ, and a weaker Euro wouldn’t help there. It would help for exports to non-Euro countries, but right now those mostly go to the US and UK. The UK economy is going nowhere fast, and the US CAD has already been highlighted as unsustainable in the long-run at such high levels. I don’t know if I would want to bank on that as the prmary source of future prosperity if I were Germany. Not to mention much of the export gains will be shipped of to the periphery in the form of fiscal transfers.
I think the only way to save the Euro (as was suggested by Greg at Another Amateur Economist) is to retrofit an import certificate markets on top of it, which would allow for a sort of synthetic currency devaluation.
http://anamecon.blogspot.com/2011/10/trade-certificates-solution-to-european.html
Well, another way to save the euro is to make the EZ a German Empire by giving Germany the authority to intervene in the sovereign affairs of other countries. I am concerned that this is the goal and the course of events seems to be on track for accomplishing it.
Yeah, it seems that way. They say NATO was created to keep the Russians out, the Americans in and the Germans down. There’s not much the German army can do independent of NATO (in fact, I believe their Basic Law forbids unilateral foreign deployments, it must be part of a multilateral effort) and naturally every Supreme Allied Commander, Europe (ever since the first one, Dwight D. Eisenhower) has been an American.
1. If we are “on track” to anything is towards a so-called “banking unification across the Eurozone”, in tandem with the establishment of a central fiscal authority for the region. This means that, effectively, the fate of the economies and the societies themselves of the Eurozone member-states will be decided in Brussels – or Berlin.
2. His first name is spelled “Yanis”.