GM:
I have Jonah Goldberg's "Liberal Fascism" book and found it insightful. (BTW Glenn Beck cites it as an influence).
In a very different way, I find the following piece from Stratfor to have a genuine insight. In that economics is usually and area in which Stratfor depends on glib Keynesianism, this is a surprise to me
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STRATFOR
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December 2, 2011
VIDEO: AGENDA: WITH GEORGE FRIEDMAN ON THE EUROPEAN DEBT CRISIS
As European leaders prepare for a crisis summit next week, STRATFOR CEO George
Friedman argues that German determination to dominate trade may be a principal cause
and that some of the smaller European countries may not be able to survive without
protection.
Editor’s Note: Transcripts are generated using speech-recognition technology.
Therefore, STRATFOR cannot guarantee their complete accuracy.
Colin: China's manufacturing sector contracted in November, for the first time in
three years. Russia is worried about investment plans and privatization, and even
prosperous Australia has cut public spending to match an income shortfall, all
blaming the slowdown in the deteriorating eurozone. The head of the EU's monetary
committee talks out the crisis. Poland chides Germany and tells it to show more
leadership. And a critical EU summit is coming up in eight days time.
Colin: Welcome to Agenda with George Friedman. George, it sounds like not much has
changed really.
George: Well, I think everybody's focused on the financial fallout, that's certainly
significant, I'm interested in a deeper issue that's inherent in Europe, which is
the idea of free trade. From my point of view, one of the problems that caused this
financial crisis was the fact that the European Union was built around the world's
second-largest exporter. Rather than having positive balance of trade, the
peripheral countries in Europe had negative balance of trade because Germany was
sending half its exports into these countries. Germany depends on these countries.
Unless these countries can become competitive with Germany, they are constantly be
overwhelmed by the trade flow which, in turn, is going to lead to both the
development of black markets off the books, protected industries in many ways, and
simultaneously, tax bases that are contracting. So everybody is spoken about how
absurd southern Europe's social spending was, the other way to look at it is the
size of the economy makes it impossible. Can Europe continue, in other words, with
pure free trade? Is it possible to solve the underlying financial crisis, the
imbalance between expenditures and the size of the economy, without some degree of
protection. We have to remember that the Germans developed in a protected
environment. So did the Japanese. The Chinese, today, operate in that. We don't live
in a free trade world, or at least we haven't lived in one, you know, for very long.
So, the real question in my mind, that's coming to the fore, is not the financial
problem, that's the expression of the underlying problem. And I really do wonder now
whether the Euro will survive or not, that's interesting in some ways, but whether
or not the European Union as conceived with open borders and absolutely free trade,
whether that is going to be able to survive.
Colin: Of course, there are quite a few groups, particularly trades unions, who are
advocating protection. But once you down that road, you get into what the free
traders call "beggar thy neighbor" policies.
George: Well, the argument would be that the current situation of Europe is "beggar
thy neighbor." I have a larger industrial plant, Germany says. Part of the reason I
have that industrial plant is was I was able to protect it in the 1950's, when it
was developing. I'm going to use that plant to sell products. I must sell products
because my industrial plant is way too big for domestic consumption. If I don't sell
products, I'm going to wind up with 15, 20 percent unemployment. So "beggar my
neighbor," I'm going to sell those products. I'm not going to allow them temporary
protection. I'm not going to allow them the sorts of things that they require to
grow. Well, we see that one of the outcomes of that has been this financial crisis.
It has other roots as well. I mean its not the only one, but it's certainly one of
them. So, the argument that you wind up in a trade war, may well be the case, but I
don't know that with the politics that is developing here, how the pro-Europeanist
elite survives. The situation in Europe is fairly disastrous. You have a political
elite that is dedicated Europeanist. By political elite, I mean not just the
politicians, I mean the bankers, I mean the journalists, and they have just
committed themselves to the idea that Europe must survive. And in many countries, a
middle and lower class that's being really pressed by this crisis, certainly it's
not only happening in Europe, it's happening in the United States and other
countries, but in Europe, it's particularly intense and it's particularly sensitive
because you have very old animosities. You have countries that remember Germany in a
different way. Many of these wonder whether or not the Germans are doing this for
their own best interest or so on and so forth.
Colin: Yes, and you have the Polish foreign minister jumping in, yesterday,
suggesting that Germans were self centered, and, interesting for a Pole, telling
them "You Germans have got to start leading."
George: Well, the problem is what does leadership mean? And where are they going to
take Europe. Germany is leading, but the interests of the different countries are so
different, the Germans ultimately have their primary responsibility to themselves.
They're badly trying to keep the European Union in place, including allowing the
Greeks not to pay their loans and so on, because it's the Germans that must have
these markets. Remember, if the Germans can't export to these markets, they're going
to be experiencing a catastrophic recession, perhaps a depression. They must have
the European Union functional. And so, many of the things that the Germans are doing
is designed to keep that market alive. And you could even argue that German and
other countries' lending practices over the past three years, the loans that can't
be paid back, were primarily designed to maintain demand for their products, and
keep the process going. At this point, you are in a situation where that isn't
working any longer. So, calling for German leadership simply puts the Germans is in
a position where they have to answer the question, "Am I a German or a European?"
And the answer comes back, "I'm a European because it's in the best interest of
Germany."
Colin: The chairman of the EU monetary affairs committee says, "We're now in a very
critical period." We've heard that before, of course. But the crunch point does seem
to be coming up with the European summit on December the 9th.
George: I think that the crunch point is well past. I think that the framework
holding the European Union together really has dissolved to the point that you
really just have a collection of nations. It seems to me that these talks, that are
coming up, face a fundamental question. They're going to be about whether or not the
other countries of Europe are going to give a degree of sovereignty to the EU, and
particularly to the Germans and the French, who will be in a position to come to
their ministries and oversee many of their operations, setting limits to what they
can. The Irish have already made it clear that they're not going to go along with
this. I don't know how many governments in Europe and Italy and Greece could
possibly survive, if they agreed to what the German recommendation is. And that's
the problem. There are solutions to this. The solutions either require these
peripheral countries to absorb a massive contraction of their standard of living
and/or give up sovereignty that many of them have fought for, maintaining formal
control. But if you can't control your internal fiscal life, you know, what do you
really have? If you don't have your budget, you have don't your government. I think
you're winding up in a situation where the price, that the Germans are asking to
keep it going, is too high. Paradoxically, the Germans are the ones who can't really
afford to let it go. So you have, you know, not a crunch. It is a reality that is
reared up, and everybody is trying to solve what I think is a fundamentally
insoluble problem.
Colin: Well, I suppose we should end an optimistic note. Central banks, led by the
Fed, have decided to make it easier for the Europeans and other to get hold of
dollars, which may stave off crisis for a few days or so.
George: But I think the most interesting part of this is, you know, we talked about
the Chinese bailing out at the Europeans for the Russians. The lender of last
resort, in the end, is still the United States. And that is one of the interesting
things when we look at the international balance of power for all the wretched
things that have happened in the United States, for all the miscalculations, for all
the incompetence, banality and everything else, when push comes to shove it was the
Americans that the Europeans turned to and the Americans that were able to provide
something of a solution. I think it is a temporary solution -- I don't think it
really solves any underlying problem, but it is a couple of aspirins to take on the
fever. It won't last for a while and I don't think the enthusiasm for it is
appropriate. I'm far more interested in the fact that, in the end, the United States
has retained his role, wisely or not, as the lender of last resort and, just as
money is fleeing to the United States for safety, so too the United States has the
ability to address this question. Whether it is wise or not is another issue that
happened to tell us about how this world works.
Colin: George Friedman there, ending Agenda for this week. Thanks for joining us,
and until the next time, goodbye.
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