Monday, January 16, 2012

The Eurozone and the Curate's Egg: Both Good in Parts

Punch cartoon by George du Maurier (November, 1985).
Bishop: "I'm afraid you've got a bad egg, Mr Jones";
Curate: "Oh, no, my Lord, I assure you that parts of
it are excellent!"
The fundamentals of the Euro zone "are on average sound" Herman von Rompuy

The joke about the curate's egg (see image) never struck me as particularly funny, but it is bizarre, and in a macabre way funny, to hear the same logic advanced by the President of Europe to assure the World of the soundness of the European economy and financial system.

The complexity of Europe's financial difficulties as discussed in fascinating detail by John Ward, to whom I am indebted for the above quote by Von Rompuy, is far beyond my comprehension, but to reduce matters to a thumbnail sketch, the problem seems to be as follows.

The Greek’s (and sundry others able to get away with it) are lazy bums who won’t work (LBW3), or if they work they pretend not to, so as to avoid paying tax. Then they demand a huge pension or a government job punching tickets on the Athens subway at an annual salary of $96,000 a year.

This leaves the Greek government short of cash, obviously, so they borrow it, since the morons that run banks (MTRBs) don’t care that the Greeks will never repay, since they’ve insured the debt by way of a credit default swap with JP Morgan or some other damn fool American bank (DFAB), run by morons who don’t care if their CDS’s go toes up because they know Wacky Benacky has a printing press and will bail them out without limit.

If this analysis is correct, it indicates an obvious remedy, as follows.

The ECB should print all the Euros required to pay off all the stupid debts run up by hopeless places like Greece and Italy, etc. Then they should say, “That’s it, you morons. No more of this nonsense. Anyone stupid enough to lend to those Greek morons can damn well go broke when the Greeks refuse to repay. What’s more, any of you morons too big to fail is gonna be broken up.”

This would leave a lot of Greecians, Portugalians, etc. without a job, which is why I devised the Eurozone adjustment mechanism (EAM), to restore competitiveness to countries that have been priced out of the global job market by those damn fool Germans exporting like crazy and driving up the value of the Euro.

The scheme is simplicity, itself. In each country wages are adjusted annually according to the unemployment rate. Where unemployment is above or below the equilibrium rate, wages would, respectively, be lowered or raised at the beginning of each year by an appropriate amount (say, one percent for every percentage point by which unemployment was above or below the equilibrium rate) . On that basis, wages in spain, across the board, would take a hit of something like 17% this year, whereas Germans might get a raise of one or two percent. 

If introduced, this scheme would be hugely unpopular, since it would mean that unemployed Greeks, Spaniards, etc. would have to take a low-wage job rather than live on money they've borrowed without ever intending to pay it back from those dumb Germans and other crazily productive North European protestants.

But as the alternative to the implementation of our modest proposal appears to be absolute and total civilizational collapse (ATCC), the price in unpopularity would seem to be worth paying, especially since it would be the moron politicians who'd be paying it. But then that explains why the moron politicians (actually not so moronic as they seem, evidently) will never adopt such a scheme even in a hundred years.

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