Baseball91's Weblog

September 20, 2011

When the World Was Flat

This week in football. Like had happened to all of the intercollegiate conferences over the past fourteen months in the States, off the agenda is any public discussion of the possible break-up of the euro zone , the nations using the euro for their currency. Having lost lost confidence in their European counterparts, banks in the US have started shutting European banks out of inter-bank funding markets. Speaking of globalization, eh Thomas Friedman?

In the 2011 playdowns of World Series Kick the Can, more immediately kicking Greece out was not to be spoken of. Of the European Union. Out loud.

The world was playing as if the eurozone was in some kind of neutral transition, unaware that the game was now in penalty time. In a less sophisticated continent, this would be just another week of “kick the can” from the road from one G7 weekend in Marseille along to the Wroclaw meeting of the ‘‘Eurogroup’’ finance ministers which followed seven days later, with all of the potential “irrational exuberance” by fans that their country would not be affected, and that they hoped to continue as always. If the goalkeeper stood up to expectations.

Speaking of hooliganism, the Finns are demanding “collateral” for any new loans to Greece from the central bail-out fund; the Austrians are against the Finns. Tim Geithner was there cheer-leading, urging EU policy-makers to avoid “loose talk,” in playing their variety of kick the can, with so little body contact for which Eurpean ice hockey used to be famous. Angela Merkel may only win a German vote at the end of September with opposition support, while some of her own coalition MPs in particular are fiercely opposed to taking on such a bottomless commitment to the size of the Eurozone nations. And Slovakia does not vote on the bailout until December. As one on Geithner’s team said at Marseille, “Seventy-five per cent of the dark things happening in the world economy are because of the eurozone.”

Divorce Greek-style. European Commission President José Manuel Barroso said that it was time to look at a mechanism to break apart the euro zone. So with the supposedly increased muscle since July of the European Financial Stability Facility – the central bail-out fund – the action requires parliamentary approval for each member nation’s contribution, which still is by no means a certainty. Almost as taboo as the notion of dismantling the currency itself, LIBOR rates have risen over the past thirty days, as the European Central Banks’ dollar funding scheme to stave off the onset of another credit crunch demonstrates a coming fear in credit markets. And the air around Europe provided by credit markets seemed to be polluted, seizing-up the international banking system, one day soon. Yields on Greek debt, Spanish debt, Portuguese debt, and Italian debt continued to climb. After the discussion of ‘‘euro bonds’’ – central borrowings effectively on the back of the Germans to fund all eurozone member governments – was so far from agreement.

The European Central Bank has reported an up-tick in deposits from eurozone banks, an indication the banks feel more secure with deposits in central banks than lending to one another. “To stop financial contagion and manage the bankruptcy of the Greek government, you need to support the banking system. It’s the only solution, and it is appropriate to use European Financial Stability Facility funds,” said Jan Bureš, an economist with Československá Obchodní Banka.

Jean-Claude Juncker, the Luxembourg prime minister presiding over the Eurogroup, called at least for “verbal discipline,” if no other economic discipline. With global central bankers’ support and Amerrican cheerleading, Europe started this week trying on the surface to work as a team. “Of course, it’s not easy to speak now about increasing the funds available in that mechanism, and it will take some time.”

Bank bailouts in Europe in 2011. Bailouts for banks which dull motivation for a bank to invest responsibly. A reasonable solution, and maybe the only solution to debt contagion, “another bailout raises the specter of moral hazard, the idea that in the same way bailouts for governments decrease the motivation for responsible state spending, wrote the Prague Post. “What’s more, if governments bail out banks, it could result in sending those governments into debt.”

Mutual distrust in the times of monetary wars. Visible mistrust in the LIBOR rate since the failure of Lehman Brothers.

As a new credit crisis once again infects the economy, in a stair-step process through industries until debt is destroyed and a more sustainable economic foundation takes root. Starting with Greece, spreading to the financials in French banks, engulfing even Germany. When all those European nations were in this together. And eventually all that globalization sung about at the start of the decade, eventually phases through retail, technology companies in the United States, and the creditor in China. As commodities begin to fall, signaling deflation in Europe. I wonder now what the asking price for Durty Nelly’s, the oldest pub in Ireland, in the middle of no where. It had been ten million euros in January 2010.

Back home as another NFL season got underway after a labor dispute, with the NBA still on strike, each political party is still playing kick the can over American debt. And those in the know had worries from belief that European banks are sitting on crippling losses on their government bond holdings. And in this version of sport, it was like watching the NHL All-Star game, with so little close checking by so many participants. And US government officials were heard in Marseille seeking to shift blame for America’s domestic performance onto the influences from Europe.

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2 Comments »

  1. Comment by baseball91 — December 16, 2014 @ 11:21 PM | Reply

  2. Comment by paperlessworld — October 27, 2016 @ 10:53 PM | Reply


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