Welfare State, Greece, Gold, Nazis, History, Options

[Laura]

With or without hyperinflation, today's welfare-state obligations – just like 1919's war reparations – are simply too big to be paid...

The EUROZONE'S PROBLEM? In short, it's history...precisely what the single currency was supposed to neuter, of course.

Greece's still-pending €110bn bail-out has already cost three lives in Athens' riots today. More bloodshed inside Western Europe would make a horrific end for this grandest of grand post-war projects...the crowning achievement of Europe's longest-ever period of peacetime.

But thanks to history – and the very same history that built the Euro, as well – Germany cannot inflate. The rest of Europe, however, cannot do anything else. Sharing one printing press was always unwise. Now it makes UK prime minister Gordon Brown look smart for staying outside. Which really is saying something.

No "single currency" could ever reconcile history, however, because Europe's monetary politics over the last 100 years is cleft right in two. Germany suffered first hyper-inflation...and then madness...before banishing the shame of cattle-trucks packed full of people by promising "Never again!" to wheelbarrows overflowing with bank-notes.

The rest of Europe, in contrast, and especially the PIGS of the south (but also Great Britain, you'll note), got things the other way round. Deflation came first, thanks to the interwar Gold Standard. Victory in Europe was then followed by the victory of soft money. Time and again, devaluation worked magic to rescue over-spent nations from ever settling their debts.

So, where Germans look back and see catastrophic inflation...followed by the sins of the Führer...and finally a five-decade boom built on sound money (not to mention cream-laden lunches)...Greek, Spanish and Italian civil servants fondly recall an insane scramble for cash, only redeemed – repeatedly, and for the next 50 years – by default through debasement.

The hyper-inflation of 1919-1923 is scorched onto Germany's collective conscience and Germany's alone. To the west of the Rhine and everywhere south of the Alps, a very different 20th century applies. Their only memory of tight money was the disaster of the Great Depression. Sparred hyper-inflation in the 1920s, Europe outside of Deutschland slipped instead into chronic deflation the following decade. Come 1931, the world's monetary anchor – the international gold-exchange standard – was cut loose from the Pound, forcing everyone else to do the same sooner or later.

Sooner was better, as well. Inflation worked. So did the war. Just ask Paul Krugman or Ben Bernanke.

"You owe us €70 billion for the ruins you left behind," spits the mayor of Athens, Nikitas Kaklamanis.

Deputy prime minister Theodoros Pangalos cuts nearer the heart of the matter by adding how "The Nazis took away the Greek gold that was in the Bank of Greece. They took away the Greek money and they never gave it back."

Germany should cough up, in short, for the sins of the Führer. Which is kind of correct, since Hitler's greatest achievement today is a welfare state that neither the Allies or Axis could ever afford.

Compare and contrast with the crushing demands made after WWI. Denied a knock-out blow on the battlefield, the French and British sought victory at Versailles instead...squeezing the Hun for more money than yet existed in the form of gold bullion. Whereas today, "Greek civil servants are suffering because of a crisis they didn't cause," reports the BBC. Only they did cause it, of course – or rather, their parents did...like everyone else who survived or was born after WWII...by voting themselves a cradle-to-gravy-train welfare state that hasn't stopped paying ever since.

The irony of Greek civil servants demanding 16 months' wages each year from German taxpayers this runs deeper than it seems at first glance. The inevitable response by central banks takes us straight back to Weimar, as well.

"What might therefore take place in the long term?" asks French economist Patrick Artus at Natixis of the single Eurozone project. The options he sets out are nigh-on impossible:

* the launch of a federal system (taxes, spending and central control), "which is highly unlikely given Germany's stance";

* a continued gap between permanently depressed member states and high-growth prosperity elsewhere – "difficult to accept both politically and socially";

* withdrawal from the Euro, ignoring the costs, by "irrationally populist governments in the countries experiencing the greatest difficulty..."

Option 1 would force that political union which Helmut Kohl first sought, but the rest of Europe refused to accept. A pan-Eurozone council would hardly help German politicians cool tabloid demands to reinstate the Deutsche Mark, either.

Option 2 is also too ugly to bear, since ignoring the growth-gap only prolongs and worsens the anger, delaying the catastrophe that is Option 3. Watching the Eurozone project – the end of history, no less, for the people who built it – collapse into social unrest inside Western Europe would be just too ironic at best. It might end six decades of peace at worst.

So what about Option 4 – which Artus ignores – by re-opening Germany's print-shop in Frankfurt?

To date, the plan for bailing out Greece, and thus preserving the Euro, means giving Athens enough money to save it asking the markets for funding until 2014. That sum, so far, is put somewhere near €120bn. But to date, Greece's Eurozone partners have offered up diddly squat. Italy and Spain, in particular, have gone very quiet.

Wheeling out the printing press in Frankfurt, however...and getting the European Central Bank to do precisely what Havenstein did in 1920...means Europe can pay its pensioners the same way the Weimar Republic tried to pay Britain and France after Versailles, and with the same inevitable outcome, as well.

Just like British and French pride in 1919, today's heroic welfare promises are just too expensive. Whether sooner or later...and with or without a hyperinflation to try and pay off the victorious pensioners and civil servants...these costs from the past cannot be paid from tomorrow's money. They're simply too big.

By Adrian Ash

[Injin]

Printy printy.

It's sooo easy to print. press a button, todays problems all go away.

They come back hard and harsher tomorrow, but that's okay....the printer will still be there.

Addiction.

['Bart']

Deputy prime minister Theodoros Pangalos cuts nearer the heart of the matter by adding how "The Nazis took away the Greek gold that was in the Bank of Greece. They took away the Greek money and they never gave it back."

Isn't that gold in a Swiss vault somewhere. At the very least, in private hands?

Germany was rebuilt after World War II through the industriousness and hard work of it's people, something Nikitas Kaklamanis might do well to remember.

[Laura]

Printy printy.

It's that or ......... wait

"It's a long shot but it just might work"

"Be careful Chuck"

..............................

Why has no-one mentioned 'Chewits'?

Edited May 6, 2010 by Laura

[Injin]

Why do we always have to refer to the baddies as 'Nazis' as though it had nothing to do with anyone else? My young daughter never realised when taught at school that they were actually Germans.

Yes - face facts, the Germans took away the Greek gold.

Sure.

But the greek people can hardly say they aren't responsible for things their government did and then blame the people of another nation for their governments actions, can they?

[yellerkat]

Yes - face facts, the Germans took away the Greek gold.

A lot of DEAD Germans.

Unless you believe in the concept of racial guilt, which would be more than mildly ironic.

[AteMoose]

Why do we always have to refer to the baddies as 'Nazis' as though it had nothing to do with anyone else? My young daughter never realised when taught at school that they were actually Germans.

Yes - face facts, the Germans took away the Greek gold.

and Britain, USA and Russia took away Germanys gold after the war? And gordon then gave away Britains portion of greeks gold to the chinese at historically low prices.. IMHO you need to get it back from the chinese...

Edited May 6, 2010 by AteMoose

[aa3]

The EU monetary authority has to change the rules so that printing can be allowed. They need to print huge and start buying up these national debts with the printed money. While behind the scenes forcing the governments to dial back if they want to get this nice printed money flowing their way.

The only way out is printing, and you can see the pressure starting across Europe on the widening spreads as liquidity is going away.

[CokeSnortingTory]

and Britain, USA adn Russia took away Germanys gold after the war?

No we took away billions of freshly printed Marks.

[leicestersq]

Why do we always have to refer to the baddies as 'Nazis' as though it had nothing to do with anyone else? My young daughter never realised when taught at school that they were actually Germans.

Yes - face facts, the Germans took away the Greek gold.

More relevant to us, is that our gold was taken away, by a SCOTSMAN.

[Gone baby gone]

Germany was rebuilt after World War II through the industriousness and hard work of it's people, something Nikitas Kaklamanis might do well to remember.

Indeed. Something else the Greeks could dwell on is a comparison between the levels of corruption in Greece and Germany.

Of course, I'm sure the fact that everyone is bribing everyone else and filing false returns is completely unrelated to the mess they find themselves in now.

[CokeSnortingTory]

More relevant to us, is that our gold was taken away, by a SCOTSMAN.

Ah yes, who needs Panzer divisions?

[AteMoose]

Indeed.  Something else the Greeks could dwell on is a comparison between the levels of corruption in Greece and Germany.

Of course, I'm sure the fact that everyone is bribing everyone else and filing false returns is completely unrelated to the mess they find themselves in now.  

Ireland is LESS corrupt than then the UK?

[R K]

Isn't that gold in a Swiss vault somewhere. At the very least, in private hands?

Germany was rebuilt after World War II through the industriousness and hard work of it's people, something Nikitas Kaklamanis might do well to remember.

And US capital.

The first payments under the Marshall plan were to whom?

Greece.

It's got little to do with hard work and industriousness and much to do with Geopolitics.

[right_freds_dead]

Why has no-one mentioned 'Chewits'?

no. it was pacers that was mentioned.

[huw]

The EU monetary authority has to change the rules so that printing can be allowed. They need to print huge and start buying up these national debts with the printed money. While behind the scenes forcing the governments to dial back if they want to get this nice printed money flowing their way.

The only way out is printing, and you can see the pressure starting across Europe on the widening spreads as liquidity is going away.

The Germans won't accept that -- they will leave. So will the Dutch IMO, and possibly others.

Unless option 1 (political/fiscal union) can be pushed through it has to be option 3 (break-up), sooner or later. How that French guy could call it "irrational" when it's the only option that actually relieves stresses instead of making them ever-worse, I do not know -- oh wait, he's involved in something called the Single Eurozone Project

[huw]

Ireland is LESS corrupt than then the UK?

The miracle of regular absolution?

[interestrateripoff]

Printy printy.

It's sooo easy to print. press a button, todays problems all go away.

They come back hard and harsher tomorrow, but that's okay....the printer will still be there.

Addiction.

Yep the printing press is too hard to resist.

[ken_ichikawa]

Printy printy.

It's sooo easy to print. press a button, todays problems all go away.

They come back hard and harsher tomorrow, but that's okay....the printer will still be there.

Addiction.

Time to buy shares in companies that do the printng?

[Guest sillybear2]

Why do we always have to refer to the baddies as 'Nazis' as though it had nothing to do with anyone else? My young daughter never realised when taught at school that they were actually Germans.

Yes - face facts, the Germans took away the Greek gold.

Because after the war was over there were no nazi's to be found in Germany, aside from the really well known one's who were tried at Nuremberg of course, but the general populace treated them like an alien species that had now left. In ideological terms it was true invasion of the body snatchers stuff.

The problem for Germany is the fact they haven't thought out the logical conclusion of outcompeting everyone else, if you run surpluses you will end up owning everyone else, like our utilities for example, and if their financial institutions can bankrupt entire sovereign countries via usury then it's going to cause trouble.

The untermenschen are an eternal problem, they just don't work as hard.

[Guest sillybear2]

Ireland is LESS corrupt than then the UK?

Not really, it's just that the people who compile the corruption statistics in Ireland are more corrupt than in Britain.

[lowrentyieldmakessense(honest!)]

Time to buy shares in companies that do the printng?

oil and timber

[Guest sillybear2]

Time to buy shares in companies that do the printng?

De La Rue's share price dropped off a cliff in the aftermath of the Lehman's collapse, ironic huh. I guess electronically generated central bank money is now the BitTorrent of the printy, printy world.

Edited May 6, 2010 by sillybear2

[matroskin]

Unless option 1 (political/fiscal union) can be pushed through it has to be option 3 (break-up), sooner or later. How that French guy could call it "irrational" when it's the only option that actually relieves stresses instead of making them ever-worse, I do not know -- oh wait, he's involved in something called the Single Eurozone Project

I think they missed Option 5:

--there are "international development/aid" budgets, both at EC and every EU country level. I think EC international aid budget is about EUR8Bn last time I checked, and that's only at EC level.

--Greece can be persuaded to temporarily "leave" EU

--then these budgets can be used to help Greece at much more favourable terms, maybe even in a form of interest-free loans.

I feel this is the plan which could actually work :-)

[Guest_FaFa!_*]

And US capital.

The first payments under the Marshall plan were to whom?

Greece.

It's got little to do with hard work and industriousness and much to do with Geopolitics.

That's true because of course Africa is now an industrial powerhouse due to the vast amounts of money chucked at it in a frenzy of white guilt since WW2.

South Korea was one of the poorest countries on the planet after the Korean War. Certainly the amount of money chucked at them helped, but without a govt that encourages private growth and can keep corruption in check far enough that it does not damage growth a country is buggered. Geopolitics is one thing, but the US is not necessarily interested in having countires stand on their own two feet. If they do that, the rationale for the presence of US troops diminishes. Hard work, industriousness and a govt which incentivises such behaviour is key, IMHO