Euro in Crisis

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Europe’s common currency, the euro, is in danger of losing its already shaky value by being weakened further by potential bankruptcies in debt-laden governments.

In an atmosphere of discord and hesitation, among members of the European Union, leaders convened a summit Dec. 16 and 17 to deal with the vexing financial troubles. But all that came out of the meeting was a hazy agreement to establish a permanent European rescue account at such time that the current $975 billion emergency fund is exhausted. That rescue entity will occur in 2013.

Prime Minister Jean-Claude Juncker of Luxembourg had proposed issuing “euro bonds” as a way to raise capital for those deeply indebted economies of Europe, according to The Washington Post.

Although the Italian foreign minister, Franco Fratini, agreed, fiscally hard-nosed German Chancellor Angela Merkel reacted negatively, expressing that it was a bad idea. Germany is one country that has come to its senses and has rejected the wrong-headed Keynesian notion that the road to prosperity is: Let’s get on the superhighway of government spending.

But the European leaders meeting to address their financial woes did issue another pledge to do whatever is required in the months lying ahead to keep the euro from being cheapened by bankruptcies among the European Union governments that have embraced the common currency.

So, the Europeans, in their Brussels confab, agreed, as a first step, to calm market jitters at least for the moment. As Michel Goldfarb of the Global Post writes: “Between 1871 and 1945, France and Germany went to war three times. How many times have they gone to war since? None. The story of the euro and its current crisis begins with that fact.” The idea of what today is the European Union can be traced to the 70 years of war and uneasy peace. Out of that came the EU. Europe’s collective economies grew.

“The logic of economic integration,” writes Goldfarb, “led inevitably to the creation of a single currency.” The treaty in 1999 set the EU on the path toward the euro, used today by 16 of the EU’s 27 members. “Today the EU accounts for between 27 percent and 28 percent of world GDP—a larger share than either the U.S. or China.” he said.

But now there is crisis. The global economic downturn caught the over-leveraged economies with their financial pants down. Particularly those that were, like the United States, so hugely dependent on a supposedly never ending property boom to maintain prosperity. In the U.S., the irresponsible action Congress took to prod Fannie Mae and Freddie Mac to lend mortgage money to those without a snowball’s chance in July of paying it off were at the root of our financial breakdown.

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  • USMCSniper

    Give me control of a nation's money and I care not who makes her laws. This was said by Mayer Amschel Rothschild, the founder of the Rothschild family international banking dynasty that became one of the most successful financial families in history. The decades long conspiracy to steal the sovereignty of Europe's nation states by cotrolling their currency therefore its debt and its politics) is now beginning to reveal the devestating costs of this terrible tragedy in human terms in Greece, Spain, and Ireland – and will spread across Europe in less than a decade.

  • jgreene

    The New Republican House of Representatives must begin leading America out of its current state of near insolvency by stopping the bleeding and profligate spending of our political class.

    The rise of American Citizen activists and the Tea Parties have given us a second chance. Let's not blow it, America! Get rid of as many socialist-Marxists in Congress and the White House in 2012.

    Let's Roll, America! We are NOT Europe.

    • Fred Dawes

      it will never happen open your eyes.

  • WilliamJamesWard

    Governments can not give their populations a free ride on the
    back of the few who create wealth by high taxes. Intrusion
    into business with the exception of worker safety and sane
    environmental issues is as far as government should interfere.
    The mind set of voting for public officials because they will
    open public coffers for all of one's wants and desires is the
    path of destruction. Once in the grips of the consequences of
    Socialist philandery the opening for dark side influence by
    way of bribery with large sums of money make for the potential
    of nasty bed fellows of penurious Europeans and Arab
    oil wealth. To the detriment of Israel and the spread of Islam
    on new toll roads that dead end at the last vestiges of sanity,
    Israel will be sold for a shekel………………………William

  • Theo Prinse

    I think the crisis is not caused by nor can be solved by monetary policies. US quantitative easing, Chinese money press, European Security Markets Programme, Japanese debt ratio all accrue to world wide Weimar inflation, burdening the younger generation with lower buying power and loss of pension fund security and a Third World War for minerals.
    The crisis is – since the end of the arms and space race – caused by liberal redistribution first, industrial investment later policies stagnating labor productivity and stagnating innovation.
    That’s why the Tea party must choose for an long term Nuclear Energy program and substantial Electric Automobile industry, that will liberate the US from islam-oil. (Prinse – the Netherlands)

  • SeaMystic

    Countries must start issuing their currency for Government programs directly from the Mint at an administration and production fee, and not the through the Central and Chartered Banks, then borrowing their currency from the Banks at Compound Interest as a perpetual Debt Growth, developed through the Bank of Englnd in 1694 during the Protestant reformation under William of Orange.

  • Patrick Henry

    People are raised on the idea that they have a "right" to other people's money because they need it more than the creator of that wealth. Politicians and activists amass power and prestige accommodating this experiment in the redistribution of wealth. The wealthy are too few to stop it. Its premised on the idea that labor is exploited (Marx), which von Mises and others thoroughly refuted. Keynes created clever formulas to show how counter-cyclical spending can revive a faltering economy, without revealing what the accumulation of debt would do to private saving and investing.

  • Patrick Henry

    The idea that one can create social justice by redistributing the wealth from allegedly oppressive owners to exploited workers remains a powerful force because it offers a form of redemption to the ruling class. But Keynes makes a fundamental error by assuming that borrowed money spent by the government is superior to saved money invested by individuals. Likewise with the idea that fiat currency can ever be a trusted store of value, and that manipulation of the supply of money and credit can do anything other than create artificial booms and busts.

    These fallacies must be corrected before we can reverse our course down the road to serfdom. I fear we're too far gone because how does one take back entitlements in a democracy raised on these ideas? They will vote themselves money until its worthless. That's when things get ugly.

  • Fred Dawes

    the end is here.