Beyond the Cusp

May 29, 2016

Why the European Union Will Die

 

After our Brexit article some inquired why we claimed the European Union would die, or more aptly, implode, as we had stated at one point. A few expressly pointed to the fact that there were signs of economic recovery and that the steps taken by the European Union were working to bring the troubled nations, especially Spain and Italy, back from the brink. While it would be quite a blessing should the European Union make a recovery of unparalleled dimensions resembling the great periods of the post-World War II era but the likelihood is slender as there is not about to be another Marshall Plan as the United States too is facing lean years and will be working on their own recovery for the immediate future. The challenges to the Western World are mounting and if not addressed and some mitigation found the refugees flowing into Europe and North America on top of the brutal effects the refugees are placing on Turkey and more so on Jordan threaten to topple leaders as the strains on the economies will be extensive.

 

The challenge for Europeans as well as Turkey and Jordan will be to alter the manner in which they treat refugees and those who come from foreign extraction and to integrate them into their society rather than all but forcing them to live in autonomous zones separate and anything but equal. The French produced a 2,200-page report, “Banlieue de la République.” The report had numerous suggestions and goals which could be enacted which might alleviate some of the difficulties but are unlikely to see the light of day. The challenges listed in the French report can easily be applied to the other nations, Germany, Sweden, Italy, Finland, Britain and other nations will be a test of whether Europe can adapt and commit to integrating those who are unlike the native population as unless the Muslims are integrated and have opportunities the probability of rioting and radicalization rises. We are not equating lack of work and the other poverty and similar tags which have often been blamed for terrorism as not even claiming that their frustration and lack of address of grievances by government will produce terrorism, we are identifying such as a drain on the finances and budgetary balancing will be a factor which may tip the scales from an affordable situation to a destabilizing financial drain. Such situations can also be exploited leading to rioting and lawlessness. The same is true for Turkey and Jordan as their economies are not so vigorous such that they can integrate the thousands upon thousands of refugees which are streaming across their borders. Jordan has the added problem of refugees streaming in from Iraq as well. Even Israel is feeling some financial effects as she is called upon increasingly to provide medical treatment both for refugees as well as injured fighters from the various factions in the Syrian war zones, many of which are bordering the Israeli Golan Heights which makes Israel the best place to get emergency treatments. 

 

What will come about is the death of the European Union as a super-governance or providing a standard currency and economic plans as it has been the disparate rules and economic plans which are not universal which has caused much of the problems. With the work week standard being a 40 hour week we find that those who do work from national average to another are surprising in the numbers we were able to find from 2013 with Greece leading at 42.0 and the Netherlands with a mere 30.0 (see below).

 

European Average Hours Worked by Those with Employment

European Average Hours Worked by Those with Employment

 

The next important, actually vital, statistic is the unemployment rate by nation. We found records for 2014 and 2015 graphed (see below) where the lowest recorded at 5% for Austria followed closely by Germany and with Greece and Spain hovering at about 25%. During our researching we found that Youth unemployment usually ran from half again to around double the figures for population in total.

 

European Unemployment by Country for 2014 and 2015

European Unemployment by Country for 2014 and 2015

 

Another measure of the health of an economy is the debt to Gross Domestic Product (GDP), a measurement where the lower the percentage the healthier the national economy. The percentages range from Sweden at 38% all the way to Greece at 157%. (see below) The one regularity which one has seen consistently was that Greece and Spain are at the end of the figures which are least desirable and Germany, Austria, the Netherlands and the Scandinavian nations tend to be the most desirable positions which also explains why these nations rated amongst the happiest of nations in Europe. The main rational behind these numerous graphs and statistics was to generate the vast disparity between many of the European Union nations and to point out why the sharing of a singular currency, the Euro, places strains and limitations on the necessary monetary policies each individual nation has at their disposal as well as economic policy restrictions. For those at the disadvantaged end of the scales their not having their own adjustable currency means that they must make allowances in policies to the largest economic powers as they drive the European Union’s viability but while doing so they imperil the lesser economies.

 

Debt Expressed as % of GDP for European Nations

Debt Expressed as % of GDP for European Nations

 

The difficulties the European Union is facing goes beyond the individual national monetary and fiscal policies and the single currency enforcing economic policies of the strongest power nations upon the least national economies thus perpetuating their difficulty and in most cases condemning them to deficit spending and an ever rising debt load with little if any recourse. The financial difficulties are aggravated further by the bureaucracy in Brussels which continues to grow and demand more and more treasure be skimmed from the economy of the entirety of the European Union nations. This results in an ever more drastic effect upon the economically weaker nations sending their finances ever further into the red. The European Union regulation are simply one more drain on every economy throughout the European Union and once more the effect is disproportionally more dramatic on the weakest once again. When one observes the growth of the European Union Legislation and Legal Action Surge one starts to realize exactly where and why the European Union will eventually legislate itself out of existence.

 

Growth in European Union Legislation And Legal Action Surge 1973 to 2008

Growth in European Union Legislation
And Legal Action Surge 1973 to 2008

 

The vote next month will tell the story and will very likely be the last chance for the Western World to finally start to turn away from socialism and its guaranteed outcomes instead of simply providing a guaranteed equality of opportunity and a level playing field. Initially when the precursor of the European Union started, the European Common Market, it worked well as it basically created a low or no tariff zone within Europe for its member states. By the time it had grown and transited into the European Union it was already showing signs of becoming a super governance which was obviously heading to becoming the central power over the entirety of Europe. This was made all the worse by the fact that many of those in positions of influence and power were unelected individuals who need not report to any individual nation as they were employed to look out for the European Union and not babysit or hold the hand of any one country. From this humble beginning the European Union began to write large edicts. Many were about certain levels of pollutants one might put into the air, water or ground and also writing the procedures for handling and disposing of poisonous chemicals. Many of these regulations were quite important such as where to store spent nuclear fuel rods safely. The European Union also set standards for each nation on pollution control due to agreements entered into either by the nations or the European Union. Soon the European Union has become a super government which rules in a dictatorial manner with the individual European nations being incapable of altering their relations once a decision has come down from on high in Brussels.

 

This is part of what has galled many British voters and it is only the youth who have graduated within the past decade and probably left university knowing less than they went in but are now assured that they know everything and it will be their charge to come out and teach those out in the workforce what is the only approved manner of performing any work. They will expound regularly the complaints about income inequality and how it is not fair that older people receive higher salaries just because they have proven their ability, which, they will tell us, is a form of ageism except this particular time it is the youth at a disadvantage. Once the youth of today become a majority, be prepared for their instruction in college to come to the fore in our society and Capitalism will disappear and Socialism will become the new perfection of society and our national problems. They will address the income inequality by setting a maximum wage one will be permitted. Let us assume we have two people, one making 35,000 Euro per year and another making 250,000 Euro per year. Without even addressing how these two individuals came to be making such different amounts but will defer to the one making the higher wage and simple make the difference far less. Their newly adjusted salaries after the equality of worth standings are applied result in the first gentleman going from making 35,000 Euros per year to making 95,000 Euros per year and the gentleman who once made 250,000 Euros per year will now be making 135,000 Euros per year leaving the government with 55,000 Euros in redistribution fees. This will be the future when the youth get to make all the decisions across Europe and then slowly the rest of the Western World. Between an economy teetering on the point of exasperation and a flooding of refugees who are largely seeking the government relief and expecting the government to feed, clothe and house them and pay them salaries as they were told was their right upon arrival. The refugees seeking such as this will be the lesser of the problems as there are those who upon arrival disappeared into the woodwork and have yet to be found and it is these individuals who are most likely terrorists planted within the midst of the Europeans and the Americans and Western nations as ticking time bombs primed and ready to detonate at a moment’s notice.

 

Beyond the Cusp

 

May 28, 2016

Brexit, Obama, Cameron and the EU Elites

 

What do Brexit’s opposition, President Obama, Prime Minister Cameron and the European Union Elite have in common along with the British Treasury, the International Monetary Fund, the Organization for Economic Cooperation and Development? They all are using hyperbolic, exaggerated paranoid economic forecasts of doom and gloom pitched with great arm waving and volume. Those supporting the British Isles leaving the European Union are equally voluminous and strident. There are entire lists of arguments favoring each side as well as dire predictions of horrific disasters with which to attack each side. So, where is the reality which a sane and measured approach of scientific study would support? The sad truth is that no such rational and unemotional report has actually been released and for good reason, leaving the European Union is a completely unprecedented occurrence. The best thing we can do in approaching Brexit is to simply add another opinion which in reality is not that different from every other opinion out there, the best we can reason out and then we will wait and see what happens should the vote go the way we would advise, but we so not expect to influence too many Brits as the other thing that has been polled is that the populace is divided mostly by age and everybody has chosen and are unlikely to compromise on their assumptions. The older generations, possibly because they remember the pre-European Union Britain, favor Brexit while those who have lived entirely as members of the European Union do not support rocking the boat. Perhaps it does break down to whether you lived in a period when Britain was not just another national entity lost within the folds and bureaucracy known as the European Union.

 

The one thing which the British have done which would facilitate their leaving the European Union much more easily than most other European Union nations is the British kept the Pound Sterling as well as accepted the Euro. This may prove to be one of the smartest decisions the British have ever made as eventually, whether it is next month or not all that far into the future of humankind when the European Union finally tears itself apart as the economic strains of retaining Greece, Italy, Spain, France, Poland and Germany as a single economic union while continuing to allow each of the aforementioned nations to rule themselves and make their own economic decisions within some unenforced presumed limitations which would have made minimal difference anyway. So, there will come a time when Britain will be leaving the European Union or the European Union will be leaving Britain along with every other member nation as it melts down from economic hemorrhage. The one thing which is easy to predict is what will happen if Brexit is voted down next month, nothing, absolutely nothing as the entire world will continue with possibly a slight amount of sighs in Brussels and a few perplexed looks from some of the financial wizards across Europe and in the United States as all their studies and predictions of the perils that Brexit will entail.

 

Pound Sterling

Pound Sterling

 

The question which needs examination is what will happen should Brexit pass. The only honest answer is that we have no idea, none at all. President Obama has predicted that should Brexit pass that Britain will lose out in every manner especially in trade with other nations. President Obama threatened that Brexit passing will necessarily place the British at the back of the line in trade with the United States. The President did not explain why this condition would come to pass; he just claimed that would be the result. Perhaps somebody should inform President Obama that first he cannot place anybody at the back of a line which does not exist and unless he was going to place trade sanctions on the British, there was nothing preventing their trade continuing with the United States without suffering any change as membership with the European Union has little effect on United States trade with Britain. The trade between the two nations would simply revert to the same manner as before Britain joined the European Union. Sure there would likely be some legislation passing through the Congress and being sent to the President reverting some of the trade regulations clarifying trade relations but even that would likely be more a reassurance than any drastic alteration such as what President Obama threatened. Even should President Obama veto such legislation, it could be readdressed come January 21 immediately after the new President is sworn in and it is doubtful that whomever should be in the White House would make any difference as such legislation is fairly innocuous and there would be little reason outside obstinacy for a veto.

 

That will not prevent us from offering our point of view. The immediate advantage the British would gain is they would no longer be constrained by the monetary policies of the European Union and the Euro. The British have had the advantage in setting some form of monetary policy free of European Union regulations as they did maintain their old currency, the Pound (we love the old term of Pound Sterling as it sounds so provincial and proud). The British also have their natural relations with the Anglosphere nations of New Zealand, Australia, Canada, United States and a few other more minor English speaking nations. Such a natural set of trading partners being made simpler by a common language grants Britain an easier transition should Brexit pass and they be free to trade under their own desires free of European Union constraints. Further, the British economy would no longer be having some of their resources diverted to support those nations which are in financial meltdown which is causing an ever more serious crisis one after another. Despite the economic restructuring and presumed limitations placed on spending pressed upon those nations suffering economic difficulties ranging from slow economic growth after the 2008 worldwide financial meltdown which began with market collapse in real estate and mortgage collapse due to lax lending standards which were dependent upon rising real estate prices to complete financial freefall such as the collapse in Greece, these nations often ignored these limitations regarding them as impinging on their national pride and being so draconian that they prevent their addressing the economic needs to climb out of their difficulties. Whatever the reasoning, the strain these failing economies place on the productive nations is slowly strangling their monetary gains, threatening to drag them down the same drain with the financially crippled nations. This could be the main reason for the appeal to many British and the reason that establishment supporters of the European Union desire to persuade the defeat of Brexit as they fear an even faster decline of the European Union should the British economy be removed from the sum total of the European Union economy.

 

What those who have as their desire the continued existence of the European Union fear most is Brexit passing as they are completely aware that Brexit would be the first and far from the last nation to exit the European Union. The reality is well known, once Britain leaves the European Union the writing is on the walls in Brussels, the end is nigh. How much longer would France or Germany remain should the British economy become positive and surging forward with a bright future becoming apparent? The answer is not long, weeks, months, but definitely not years. As the European Union is seen as the best stalwart against another ruinous European war and the only manner where the continent of Europe can fairly compete with the United States, China, Brazil, India and any other up and coming economic powers; the European Union core believers are of the mind that only as a unit does the European nations have any hope of competing with any form of equality with the far larger economies and simply larger nations which have the advantage that size brings. The European Union members see their union as the enabler of trade advantages and refuse to see that they are simply another layer of regulatory strangulation and further taxation depriving the nations and some companies from greater profits. They claim that without the European Union such companies as Airbus could never have been created and survived as it was the European Union which allowed the separate nations to work as if a single unit. The reality is that the nations would cooperate as doing so increases their financial strength and in this world of information technology the old differences and impediments which often strangled trade with tariffs and protectionism would not return as the new reality so obviously rewards cooperation between nations and so many of the corporations are now international in nature that nations no longer benefit from such measures. That is the reality and the British remember the freedom of pre-European Union Britain and with any luck, they will be able to reason and influence those without such experience and Brexit will pass and strike a mortal blow to the European Union.

 

Counter to what numerous economists claim, and luckily this is not a universal opinion, the European Union is not the answer to the problems faced by the troubled economies such as Greece, Italy and Spain but rather the result of the Economic Union and its common currency, the Euro. Whether Brexit passes inflicting a mortal wound to the European Union or if we need wait for the European Union to reach its inevitable implosion, the individual nations reverting to their natural independent currencies will initially cause some difficulties but will soon be able to alter their currencies in relation to one another and thus permit the struggling nations to have a devalued currency permitting them to have economic advantages of lower manufacturing costs and thus an economic advantage that accompanies such. That will bring a new vitality which is impossible when they must share an equal cost rate against Germany as the two nations are as different as night and day. Greece and the other struggling nations are closer to an agrarian or light industrial base while Germany is a heavily industrialized and entered the information age and has robotic manufacturing in many industries making a similar currency preposterous in the max. Brexit may just be the key to freeing Europe from Brussels and the self-appointed crowned aristocracy which has placed themselves over a continent for far too long and have reached well past the point where they have gone from a unifying and strengthening of the continent to a detractor which now regulates Europe slowly into a stagnation which was unavoidable as the simple fact that the European Union was an unelected oligarchy which thought itself above the people and not for or of the people and saw the people and individual governments and the nations as merely pawns in their social and economic games and misadventures. There may never be a study done which will find exactly when the European Union went from a path for greater economic growth and strength to a drag upon the continent and a guarantee of a slow but inevitable decline as the bureaucracy grew to the point that it became a ponderous beached whale no longer capable of reacting to financial needs and instead squelching any vibrancy making responding to changing economic forecasts next to impossible. The European Union has gone from a force for European economic cooperation to a farce siphoning off an ever increasing price dampening economic activity.

 

Beyond the Cusp

 

July 6, 2015

Greek Debt, the ‘No’ Vote, and the European Union

 

The first domino has fallen and Greece has laid down their challenge to the European Union (EU) basically asking if the European body will respect them the morning after the vote to thumb their noses at the demands made on the Greek government and its people demanding that they be further bailed out for free. The Greek people have chosen to support their government in firmly demanding they be granted support from the rest of the EU, European Central Bank (ECB) and International Monetary Fund (IMF) for restructuring the repayment schedule and not be so strict and mean demanding that the Greek government act what they define as responsibly using the restrictive austerity measures forcing the struggling nation to tighten its fiscal belt and stop the generous expenditures giving literally free tickets to the people and retired workers and other items standing directly in opposition of the demands for austerity measures for the struggling nation to be imposed by the EU, IMF and the ECB to prevent the very default on Greek debt which occurred late last week. The Greek default on their debt payment made them the first EU member to fail to meet their financial obligations slapping them in the face and throwing down their gauntlet. Now all that remains is a seemingly simple vote for the members of the EU on whether to hold the Greek government to impose strict terms in order to meet the financial demands of those attempting to collect on their ‘loans’ made with demanding Greece now act in good faith and honor the terms imposed on them and the restructure of the Greek governments debts such that they would be capable to repay those debts. The crisis was brought to a head with the Greek failure to meet the $1.7 billion payment to the International Monetary Fund as part of a previous set of further loans and restructuring made to avoid a similar crisis last year. Now an apparent ‘No’ vote is a direct challenge for all that entails.

 

The Greek people have now, with their ‘No’ vote, rejected the imposition of the austerity measures demanded of Greece by those holding the notes of indebtedness from the Greek government. This is forcing a crisis which has very few options and will now test the EU and whether its single currency policies are functional or inherently flawed. This threat to the EU single currency system was set into motion the second that there was not any central monetary planning unifying the disparate desires and quirks of the independent nations. Without such a system, the Euro was bound to produce just such a financial disaster leaving only the question as to which nation would be the first to fall off the fiscal cliff, the first to dare to tread beyond the cusp of financial responsibility. The predictions of an eventual default had raised its ugly face before threatening the very foundations of the Euro system and posing the exact challenge being faced today with the Greek rejection of the financial restraints being foisted upon them by the centralized powers within the EU. I suppose that Greece was as likely a candidate as any to be the first to face the imposition of external financial limits or simply defaulting thus threatening the stability of the Euro shared currency system. What are the questions needing to be answered and the actions available to be decided defining the path forward?

 

The questions are simple ones that get down to the basis of the Euro and through that to the entire EU. The writing is on the wall for anybody with the nerves to read the warnings telling the tale that there would be a day where a people made comfortable by the very structures put in place as a universal safety net designed to care for those unable to afford the necessities of life due to unemployment or other difficulties eventually making living off the government’s various programs sufficiently comfortable that work becomes an option and not a necessity. With such a system in place it becomes not only possible, but in some cases preferable to live a simple life permitting government to foot the bill. Eventually such a life would become far more attractive living large off the government than working and living not all that much differently and people would realize that not working was as much an option, and a far more enticing option, and simply choose to live an easy life seeking other means by which to have the government pay for more and more until there is no more and they start borrowing. This works for a while and the government stimulates the economy with infusions of money and the Ponzi scheme becomes the way of governing always staying one step from ahead of defaulting on loans. Finally there is a downturn of the economy and a country with finances so fragile becomes a nation unable to recover sufficiently to pay its debts. A nation unable to repay its debts is recognized immediately to be a threat to the entire system so this government cannot be permitted to collapse and start anew and is instead propped up by the wealthier governments and international bankers whose sources of income have always been shady and now are becoming downright unsustainable.

 

Soon another country teeters at the edge and begins to go down the exact same path as the previous, only more rapidly, then another and another until it becomes the crisis that is so large it can no longer be ignored or swept under the rug and propped up under auspices that this next new solution, austerity being the latest, will save the system, a system so broken that saving it is well past any possibility. The eventual default was set in motion at the very outset as was predicted by British Prime Minister the Lady Margaret Thatcher when she wisely refused to allow Britain to become dependent on the Euro and instead reached a balancing point that her merchants and industries would accept Euros as payment but that such payments must always be transferred into the Pound Sterling on the British ledgers and thus met by the EU. The Lady Thatcher once stated it referring to exactly this problem when during an interview with Thames Television’s This Week on Feb 5, 1976 she was quoted as saying, “I think they’ve made the biggest financial mess that any government’s ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them.” This is exactly where Greece now finds itself and where Spain, Portugal, Italy and soon potentially others find themselves all in different points on that slippery slope, it is simply further along and at a steeper point that Greece finds itself, the point where other people’s money has run out and they have become reluctant to continue providing, period, or have they. There is one option where Greece is freely given yet another infusion of monies and the marry-go-round will continue. The debt will be restructured except this time there will be no set repayment process set up but instead a demand that Greece show its good faith of intent to eventually repay the debt once profitable times return, and those providing the crutch will continue to pour good money after bad with no false expectations of ever being repaid. Greece will have become that poor wretched relative who nobody ever speaks about but find themselves constantly meeting their bills for them. This eventually leads to the next crisis, what happens when most of the family of EU nations becomes Greece?

 

The EU cannot financially choose to continue supporting Greece but not because it would be a strain on them financially, it would hardly be noticed as such is how small a percentage of the total EU financial institutions that Greece requires even if it were to totally fail and every Greek citizen were receiving government livable wages. The problem is one of precedence. Once the EU sets the precedent financially holding Greece’s hand and paying its way then the path is set for other nations to demand similar treatment should they fall upon hard times. Should one look far enough down the road and it is not difficult to paint the picture they will envision, an EU that half its nations survive and are carried by the other half, and the wealth produced by the providing half is completely consumed supporting the rest. The entirety of the EU production and profits are consumed by the other nonproductive half. That is not a system that will survive even the slightest of difficulties and that will spell the end of the EU right behind the end of the Euro. But is the other option going to end any differently?

 

Imagine if the EU forgives the parts of the Greek debts it is able and forces Greece to return to their own currency yet remain in the European Union, where will that lead? Again it becomes a matter of precedent as now any nation which is approaching insolvency will demand the same generous exit strategy gaining a partial bailout which does not need be repaid and a return to their native currency without any penalty. There will come a point where the EU will no longer be the panacea promised and instead will become a small block of successful and wealthy nations having paid the exit fee for the remaining nations who now use their own currency and benefit from EU membership solely when conducting trade within the EU. This will have greater effects outside the EU as the EU will set their exchange rates for the Euro against their own national currencies until they are determined to be financially readmitted to the Euro club once again. There will always be the possibility that these less productive and less affluent nations will find their stride economically and be capable of rejoining the Euro based nations but most would be relegated to using their own national currency. The real problem will strike when even those nations which had been marginally able to keep astride the powerhouse economies of the likes of Germany will now constitute the least wealthy of nations still using the Euro and there may come during a time of economic stress where they too may be forced to return to their own currency or an even more frightening scenario would be the most productive nations decide to be like Britain, namely accepting the Euro in payment for trade deals or from tourists but operating using their own national currency as they would realize that would benefit them in deals outside of the EU and they also would no longer be pressed into supporting the economically weaker nations.

 

Any path taken would necessarily result in the end of the Euro and the stresses from the nations all returning to their own national currency eventually dissolving the EU as it would no longer serve any purpose beyond setting unified trade agreements through the Euro. Anyway one might slice this rotting cake that started with the Greek default; the result is the same, the unraveling of the EU starting with the demise of the Euro. The Euro might continue on much as Roman coins and the Spanish Pieces of Eight hung around well after their issuing nation no longer held the sway and influence they had in their prime. The question then comes as to what Europe may look like down the road without the EU as a calming inclusiveness that it once provided largely through the sharing of a common currency. Would this signal the return to the epidemic of conflicts, much as was the way of things throughout history? What will happen when the EU dissolves and there is no European unified front and each nation is now unleashed to trade completely without any concerns or other brotherly obligations. The initial return to cutthroat trade practices with each nation set against its neighbor may, over time, exacerbate old rivalries leading to skirmishes and even on to open warfare? Violence is only one part of the problems as there may be demands for reparations from the nations which had debt forgiven under a moment of weakness and magnanimity more forced by the EU than entered into with willingness and a smile. The failure of the Greek economy to sustain any kind of parity with the major economic powers within the EU will necessarily result in the end of the Euro as a trans-European unified currency, also as Lady Thatcher had predicted in her actions to forestall and eventually put to rest any hope that Britain would fully resign control over her own currency. This will prove to be the death of the Euro, the necessity for every nation to control its own currency unless they would willingly surrender their fiscal and economic planning to a central budgetary committee appointed and solely answerable to the EU and acting independently of the member nations forcing upon each their assignments for production and receipt of funds from Brussels. Nationalism or completely collective socialism, which would Europe choose. Britain would never enter such a trap, but could the entirety of the rest of the EU nations join such a group and actually make it work, that’s a tall order for any organization. Nope, could never happen, not in a million years. The other question that would remain to be seen is how the death of the EU would affect the relations out of Europe with the remainder of the world. These are interesting times, and they appear to be getting ‘curiouser and curiouser.’

 

Beyond the Cusp

 

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