WHY CONTINUE WITH THE EURO ?



Is it worthwhile to continue the experiment with this artificial currency, the Euro?



The original promise of a semi imperial Europe chosen between the best of the land was a strong incentive to those who saw the declining forces of the Empire as it stood. Ever weaker and divided facing the growing USA colossus, for whom there never was much sympathy in Europe.



Besides there was the added incentive of a new additional, well rewarded, bureaucracy, to quench the ambitions of new, as well as left behind, public personalities. And this stirred highly the ambitions of "important" persons in Europe who, naturally, fought to create the EU and the Eurozone.



The creation of the EU was partly decided on studies of a better future for Europe, but mainly by influential people who saw their return or their incorporation to an elite and well paid bureaucracy.



In the minds of many aspiring candidates this was a return to the glorious European era of knights, dukes and all the ancillary noble titled persons where what counted was not how efficient or effective they were (with very few exceptions) but who were their friends and acquaintances and to which family they belonged.



These people say that to maintain an order to surmount the small and big glitches they have it is imperative to create a political union: The United States of Europe. Let us hope that when these things are tried out they do not forget the possible Wars of Secession.



The United States people were a rather homogeneous group of people split only by the means of production of their wealth. Besides this, they enjoyed a very similar culture. Notwithstanding, they had a traumatizing Civil War. But this is not the situation in Europe.



Europe is the result of many nation states with their own and different sovereigns (compare the Ottoman Sultans to the absolutist Kings of France and to the Kings of England, who gradually transferred their power to a Parliament mainly composed by commoners.



They speak different languages and have their own views on how and where they fit into a proposed Supereurope. This is not the union of 13 US states. This is a collection of vastly different cultures, legacies, languages, traditions, treaties and wars.



All the aforementioned words are to show how difficult or impossible it is to keep trying to unite these countries using a common currency (artificial) without first trying to reach politically unifying deals stamped by the wills of their own peoples.



Italians won't like to unify with Germans and Swedes won't like to be considered as Greeks. And the whole EU bureaucracy want to keep their jobs.



It is my belief that unless a common political and cultural identity can be reached, like the United States, it will be impossible or, at the least, extremely awkward, for Europe to be able to transact with anyone in Euros.



And then there is the local currency parity position to the Euro, which can be highly influenced by power politics since economic power and development should try to help a union and not destruct it. But that's not the way this game is played. Can Albania force Germany into a specific Euro/Mark parity? Or Kosovo or San Marino for that matter?



Well, the result was that Germany got such a nice parity that it became the export motor of the world losing that first position to China only about a year ago.



Without political will there will never be a united EU. And this presages the disappearance of the Euro sometime after the EU countries realize this fact. Out of convenience, a few countries may try to keep the Euro within their own frontiers. But with a ECB making monetary policy decisions, their situation will be untenable.



Knowing how difficult it is to have the political will to change something important in a country like the United States, imagine how difficult that would be in a whole bunch of different countries.





THE FED AND GREECE

Jul 14, 2015



I sometimes speculate if world opinion would favor the US if it provides some much needed help to the Greek tragedy.



The US has very little, if any, strategic plan involving Greece. It is but a small dot on the Mediterranean and close to Turkey where the strategic interests of the US are heavy in a global plan. Greece falls under that umbrella.



Mario Draghi must be dragging his feet in the uncomfortable situation he faces. He could do something like Bernanke's QE and begin buying Greek bonds through electronically produced Euros. If he does, all hell will break loose in Germany.



He might very well feel strong pressures to resign coming from Germany and not only a slap in the wrists. And Germany commands, for now, the Euro monetary policy.



However, the Fed does not have that problem. The US might not care less for Greece. But it certainly cares about the EU. And if Greece does not keep it's side of the bargain, which has a dangerous probability given the political turmoil which could happen at any moment, the EU might get fed off. And depending of negotiations with a fed off counterpart, we might finally witness the Grexit, which up to now was only some people crying wolf.



The Grexit consequences for the EU have been discussed amply and all have concluded that it does not presage good things for the EU.



A weakened EU is not a favorable scenario for the US. So some politicians might turn a blind eye when the Fed cautiously begins buying Greek bonds. But the majority of the American taxpayers will not.



Is it worth helping Greece in order to try to keep the EU from breaking apart?



That is for politicians to decide.



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