Wednesday, June 29, 2011

Two Articles of Interest

As you can see from the first article below, China is anxious to do what the US can no longer afford to do -- prop up the Euro and the EU. In addition, the Chinese need to invest their cash reserves somewhere after largely pulling out of the US sovereign debt market. That said China is actually interested in buying technology from Europe’s high-tech firms (particularly, Germany, UK, Switzerland and Sweden) in an effort to obtain what they cannot steal or buy from the US.

However, China’s intervention will change nothing. Greece is just the tip of the proverbial iceberg. Portugal and other southern and Eastern EUrozone members are also on the brink of financial failure -- their economies have been developed on the basis of unlimited credit subsidized by northern and Western Europe, vastly bloated government ministries, heavily subsidized agriculture and "white elephant" industries producing uncompetitive products, along with cradle-to-grave social security and medical care regardless of citizenship or employment. Europe has all of the problems the US has without the unfortunate American habit of overspending on hegemonic military adventures in places that don’t count. Still, European Social democracy is not fiscally sustainable. I suspect it must decline into socialist authoritarianism with democratic trappings or straightforward fascism where this evolution has already carried Russia, Ukraine and Belorussia.

It is also entertaining to see signs in English carried by the Greeks that declare their Prime Minister, “Goldman Sachs Employee of the Year.” As others in this discussion have pointed out, a Greek default, if properly structured and managed by the French and German Banks may turn out to be the best solution for Greece, but it’s very much open to question whether such an event can actually be managed in the political, as well as, financial sense. Throughout history as seen in France in the decades leading up to the revolution and Europe after WW II, these events tend to gather strength, then, run out of control.

The now seems likely that Europe is on the verge of making a sharp political and economic turn to the right. It is too soon to tell what this turn will mean, but it’s obvious that “more of the same” in economic terms is nearing its end. Bernanke’s “deer in the headlights” performance at the last press conference may work here, but it is not something the German-speaking peoples or their neighbors in the Netherlands and Scandinavia will tolerate. And hardship in any form is something Europe’s Latins and Greeks utterly reject.

In this connection, see the article that describes what may or may not be the case – the German Bundesbank is printing Marks as a contingency plan. I am unable to confirm the efficacy of this article’s claim, but my contacts in Germany and Austria confirm the widespread public sentiment for a restoration of German and Austrian sovereignty along with control of their own borders and migrant labor. Germany and Austria’s contemporary political leaders are viewed as transitional figures at best.

China: We'll spend billions to prop up the stricken euro

China has vowed to increase its support of the eurozone after pledging to spend billions of pounds propping up the single currency.

Premier Wen Jiabao said it will keep buying government bonds – the debts of stricken European nations.

In a boost for Greece ahead of a pivotal vote on greater austerity cuts tomorrow, Mr Wen said Europe could count on his ‘unremitting’ support.

However, according to billionaire speculator George Soros, the debt crisis has pushed the eurozone to the ‘verge of an economic collapse’.

It was all but ‘inevitable’ that at least one stricken member will have to exit the euro because of massive debts, the hedge fund tycoon warned.

Mr Soros said the EU had to come up with a ‘plan B’ to avert a catastrophe.

‘Fundamental flaws’ in the design of the currency union would leave crippled nations with no choice but to withdraw, he added.

Mr Soros warned: ‘The euro had no provision for correction. There was no arrangement for any country leaving the euro.’

In a devastating critique of the European response to the Greek crisis, Mr Soros accused political leaders of being in denial about the need for far-reaching reforms to avert the disintegration of the euro.

He said: ‘We are on the verge of an economic collapse which starts, let’s say, in Greece but could easily spread.’

His warning came just days after Bank of England’s Governor, Mervyn King, branded European attempts to shore up Greece as a ‘mess’.

Huge demonstrations are once again expected in Athens as the government there makes a final attempt to approve almost £25billion of cuts which are a condition of the latest bailout.

If the Greek parliament does not pass the austerity budget tomorrow, the nation will receive no more support and is likely to run out of money by the middle of next month.

But the turmoil engulfing the region has not diminished China’s desire to buy up more European debt. China has foreign reserves of around £2trillion and is the largest creditor to the United States.

At the start of a three-day visit to Britain yesterday, Mr Wen said: ‘China is a long-term investor in Europe’s sovereign debt market. In recent years, we have increased by quite a big margin our holdings of government bonds. We will consistently continue to support Europe and the euro.’ Mr Wen, who will meet Prime Minister David Cameron today, flew into Birmingham Airport for a trip intended to boost China’s commercial, economic and political links with Britain. Business deals worth up to £1billion are expected to be announced during his visit.

As a lover of Shakespeare’s plays, the Chinese leader started with a tour of the house where the playwright was born in Stratford-upon-Avon.

He was escorted by Culture Secretary Jeremy Hunt, who said: ‘We want to have a broad-based relationship with China which encompasses political, economic and social dialogue.

‘But this visit is saying it’s not just about jobs, it’s about a broader cultural relationship which is the best possible way to make sure we understand each other and avoid the kind of misunderstanding that so can bedevil relationships, as has happened in the past.’

As human rights protestors demonstrated outside, Mr Wen also visited the MG car plant at Longbridge, which is owned by China’s Shanghai Automotive Industry Corporation.

The visit coincided with the launch of a new car, the British-designed MG6 Magnette, which will be assembled in the UK using parts from China.


By Martyn Brown

ALMOST three-quarters of Germans doubt that the euro has a future, a poll reveals.
They also believe rescue attempts are futile as billions more euros will be paid to bail out Greece.
A poll by German newspaper, the Frankfurter Allgemeine, found 71 per cent had “doubt,” “no trust” or thought there is “no future” for the euro. Only 19 per cent expressed “confidence” in it. Sixty eight per cent said they did not think the emergency bail-out of Greece would work.

A separate poll last week showed more than half of Germans thought that Greece should be thrown out of the euro. Rumors are also rife in Germany that Deutsche Mark bank notes are being printed again in preparation for ditching the euro.

It is said Germany’s central bank, the Bundesbank, has been ordered to print marks as part of contingency plans to leave Europe’s single currency.

The Bundesbank has been ordered to print marks

This would be an extraordinary step for Germany and would deepen the growing divide between Europe’s leading states.

Since its introduction in 1999, the euro has had a tough time trying to win over a skeptical German public, who saw the mark – one of the world’s most stable currencies – as a symbol of post-war prosperity, second only to the US dollar as the reserve option for investors.

Chancellor Angela Merkel now faces her biggest crisis. The opposition is speculating her government may fall as Germans become more vocal in their opposition to bailing out Greece.

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