Frederick Sheehan is the co-author of Greenspan’s Bubbles: The Age of Ignorance at the Federal Reserve.

His new book, Panderer for Power: The True Story of How Alan Greenspan Enriched Wall Street and Left a Legacy of Recession, was published by McGraw-Hill in November 2009. He was Director of Asset Allocation Services at John Hancock Financial Services in Boston. In this capacity, he set investment policy and asset allocation for institutional pension plans.



The European Subtext

Various interpretations of recent European elections have been put forward, one of which gets short shrift. The voters have, for the first time, been given the opportunity to approve or disapprove of the euro. They are voting nein. There is a parallel in the United States.

Before the euro was launched, both Eurocrats and national governments prevented the people from voting for (or against) the single currency (and its appendages, such as the EU’s ECB). There were at least two reasons for this. First, the desk clerks knew the commoners were not sophisticated enough to throw their allegiance behind an acronym. Second, the sophisticates did not care what the people thought, since the transfer of power to Brussels and Strasbourg isolated the masters from their help. (There have been referendums in a handful of countries over the years. Some have voted in favor, some against. In countries that voted nein, the commoners were subjected to more referendums until they understood what was best for them.)

The most important question today is whether that power is shifting. The potential shift of power was not a theme in newspaper interpretations of the French, Greek, and German elections held this past Sunday (May 6, 2012). The post-op reports followed conventional formulas, all of which fall under the heading of a vote against austerity.

One note on austerity: it has barely begun. According to James Aitken (Aitken Advisers L.L.P,), Italy has only implemented 10% of government-approved spending reductions or tax increases. Spain has barely started.

A second note on austerity: no matter who is in charge, austerity will be much larger than is generally understood. It will cross the Atlantic. There is no point guessing when that may be.

Many of last weekend’s voters surely believe tossing Sarkozy into the Seine will restore their eight-hour work week. They are wrong. Others understood they were voting to restore national sovereignty. Such a Eurocrat as Italian Prime Minister Mario Monti (European Commission, Goldma Sachs) understands where loyalties lie. He asks Italians to adopt austerity for the good of Italy.

An earlier call to internationalism died in August 1914. A fundamental tenet of Marxism was the international uniting of workers. Not a single English factory worker crossed the channel to fight beside his German comrades. The floor sweepers at Rolls-Royce assembly plants had more in common with their chairman than a single Pomeranian granadier.

The test today will be after the banking systems fail. That will follow the ECB’s inability to supply the loans or euros needed to prop the commercial banks. Brussels’ finances and authority will wither. The question then will be the legitimacy of national institutions. Without banking systems, governments will not be able to meet financial commitments. The next question will be whether the people permit national governments latitude during the chaotic austerity that follows. (Unlike Americans, Europeans have lived through this, most recently in 1945.)

The help may opt for the liberating panaceas of freedom, liberty, or anarchy. Such slogans usually boomerang and eat their own. Americans are advised to study the transfers of power. Who knows when, but the American government debt bubble will burst.

Category: Think Tank

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

4 Responses to “The European Subtext”

  1. Futuredome says:

    Marx got it backwards. It was capital who was the internationalist. It was labor who was not. It is why national socialism succeeded so well in Germany.

  2. funkright says:

    Liberating panaceas of freedom…?

    All you present are nihilistic envisionments of a dystopian future (though clouding that in the slogans put forward). This future would effectively controlled by those that hold the debt. Who exactly is that? The same people who brought us to this point. Like the heroine dealer who comes to collect his debt. He shouldn’t be paid at all, the service to society was nil, in fact it was negative. And where did the heroine dealer get his drug, why it was out of thin f*cking air..

  3. Julia Chestnut says:

    On the one hand, I agree with you that the record on referenda on the Euro was dismal. I also would argue that the ordinary citizenry can easily see what happens when you have no ability to balance your external account with a devaluation, regardless of how stupid the masters of the universe think that the people are.

    But this is way past an up or down on the Euro and into the realm of serious danger. Austerity was incredibly stupid on every single level, and serves nothing more than to make clear to the people that the bankers are firmly in charge of the government that they purportedly elected. And a 25 to 50 percent unemployment rate is NOT just the beginning of austerity – it is the end of the earth for many people.

    In these votes I see promise and danger. People are justifiably furious at what their governments have done to them – in misplaced austerity to pay off vultures, not the Euro per se – and I see properly placed anger as extremely constructive. But when I see the extreme right (and left – at the extremes both touch on the great circle of violence and power) garnering enough votes for seats in parliament ANYWHERE, a shudder runs down my spine. Anytime you place enough people in a position where they feel they have nothing to lose, that is a dangerous situation.

    But I am always concerned that when you apply the same stimulus, from at least some neurons, you will always get the same reflexive response. I’m not sure we’d survive it again.

  4. Greg0658 says:

    thanks Julia > “25 to 50 percent unemployment rate is NOT just the beginning of austerity – it is the end of the earth for many people”

    and I can hear the flipside of that ringing in my ears

    ‘the sun will rise tomorrow – rebalance is the process – all is well – return to your jobs’