The radical left rises off of instability.
We have, in fact, been in a currency crisis for some time. Signs of it are all over the place. If one major currency (the Swiss Frank) can appreciate against another major currency (the euro) by one third within twenty-four hours as it did earlier this month, there is obviously something deeply wrong. The steady depreciation of the euro against the dollar — which itself is a deeply over-indebted and unsound currency — is another indicator of the flawed nature of the world’s currency regime.
The Greek election may have sounded the death knell for the Eurozone. The Eurozone is a fragile and unsustainable arrangement that cannot but disintegrate eventually. As one observer presciently put it years ago, the euro encompasses too many conflicting interests for it to be able to survive in the long-run.
Bad arrangements can last for some time but reality inevitably asserts itself in the end. The flawed euro already nearly fell apart in 2010. Things became so dire at one point that then French President Nicolas Sarkozy shoutingly threatened German Chancellor Angela Merkel with leaving the Eurozone. Had Merkel said “adieu” much future pain could have probably been averted. Needless to say the Eurozone project was preserved by a combination of bailouts, loans, stimuli and pledges amidst tensions and bickering of various Eurozone member nations pursuing different agendas.
The Greek government has incurred large debts and now it cannot repay. To be able to do so, spending would have to be cut further which is something the Greek people are unwilling to accept. It is difficult to blame them — they already have a hard time of it as large segments of the Greek population are undergoing considerable hardship and pain. It is just sad that they were not thinking of this when they were borrowing like there was no tomorrow and using the money to finance an unsustainable way of life. About 20 percent of the Greeks had jobs in the public sector with an early retirement age and generous benefits. When so much money is consumed by the unproductive sphere of the population things cannot but turn sour eventually. Reality invariably catches up in the end.
But Greece is only the tip of the iceberg. The problem of over-indebtedness is considerable across the Eurozone. Italy, Ireland, Portugal, Spain, Cyprus and even Belgium are also straining under public debts of more than 100 percent of GDP. Unfunded liabilities, implicit promises that these governments have made to their populations, are not included in this.
In the short term the focus will be on the euro and its tribulations. The dollar is likely to appreciate in the process. This itself is an indication of how tainted the world’s currency regime really is. With its public debt in excess of 100 percent GDP and unfunded liabilities of more than $200 trillion, the dollar carries greater debt burden than any other currency ever known to man. It is quite obvious that there is no way these liabilities can ever be met.
Yet, because of the way the currency system is presently set up, the defective dollar is likely to strengthen on the back of the euro’s troubles. The dollar, however, is no true King. With the United States being the greatest debtor in history, the dollar is a poor man masquerading as King. For now the masquerade continues, but the question is how long can it last.
Reality has a way of catching up in the end.
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