Target: Sustainability

Dear reader,

following the new 'doctrine' of this blog this is the explicit opinion section.  Concerning the latest Bundesbank Target debate where to the best of the authors ability all arguments for the topic have been lined up. (If you have some more please feel free to add additional suggestions as a comment)

Of course the author has an opinion concerning this aspect of the eurozone as well which is that this is yet another flaw in the 'system eurozone' not foreseen or better ignored by its founders. Yet another 'politics' before 'economic realities' example where the obvious main goal is somehow to cover up the naked, cruel truth in order never to be forced to admit a mistake. Yes of course it is currently working this system covering up the imbalances of trade and its marks it leaves on the balance sheets of banks involved in the payment clearance.

And it's true as long as the system isn't breaking up everything is fine and nothing to worry about. Except of course that there is a danger never to get any refund for delivery of goods and service to another customer even as big as a country. If this blows up my earlier thesis, that would be little difference to produce goods covered by loans (possible guaranteed for by the local government) , give the producer and its employees some cash flow and a little extra and then dumping the produced goods into the sea.

I like to remind every economist of my perhaps idealistic view that this profession is to analyze in order to expose weaknesses of economic models and thereby making it possible to eliminate those flaws in the system or even better to prevent them happening in the first place. You might consider me a 'radical' when I say that the economy is much more than a academic playground to fulfill live lasting academic mind games. It may sound 'basic' when it is said that the economy is about peoples lives , livelihoods … the difference between starvation or having a life worth living. As we can currently see in its most extreme form in Greece sometimes even a question of life and DEATH, when people commit suicide. This weighs much more than hypothetical questions like 'Giffen goods' where some economists even dare to use humans as guinea-pigs just to be able to finally prove their assumptions for most extreme scenarios. Sometimes one feels reminded to some Hollywood blockbuster movies such as 'Independence day' where a somewhat nutty professor is finally confronted with the reality when the president and his staff visits him in his underground research facility where he made isolated experiments all his life. And he cannot hide his excitement to tell president about all the funny gizmo's he an his team were able to discover and to at least partially to comprehend their functions. Only when the president reminds him harshly that this isn't fun when the existence of the entire human race is depending on this research and that those ships and those creatures are not funny toys but archenemies of the human race the professor realizes that research is more about practical results than about personal fun.

Coming back to the economy i also like to remind people that a complete failure of the system not only bring economic pain and misery to millions of people but there looms also the danger of elements in some (if not all) of our societies of political forces calling themselves 'socialists' but being either communists or fascists. Therefore a failure of our beloved capitalism also brings the real danger of dark forces taking over pretending to the people to have a better working 'solution' . We all know that this almost inevitably goes along with suppression. If the weakest link in the eurozone – Greece – goes down we will see that the traditionally strong local communists will take over the country !

Therefore the working of our economic model be it in the 'real economy' or the part responsible for a working payment/finance system – the banking sector – has to be guaranteed !

And therefore it is necessary to find the weaknesses in the system and eliminate them and not in order to be 'politically correct' to cover them up in order not to put any blame to the systems inventors. If there are misconceptions it is also worth to discuss those openly as it is being done hopefully in the blog entry referred to above. There are followers of professor Sinn and there are others with arguments against his latest findings (which are according to his statement in 'Der Spiegel' brought to his knowledge by no other than Helmut Schlesinger !)

The author reiterates his point that in principle he his in favor of a sustainable Euro currency and if there are inherent dangers to this system they must be eliminated. The idea of 'stop loss' by Beate Reszat isn't a bad one since it is showing the ability to quit something which isn't sustainable in the long run. This doesn't mean to abolish the Euro altogether but at least considering to let go those most damaging imbalances which threaten the system as a whole ! The dangers coming with it described above. It was a grave mistake to have the eurozone created with many candidates not being worth in it back then and even more so today. So now we got into this mess and it is always a first step to analyse the problem in order to get a solution. It is damaging for the system as a whole to say 'We have to save the Euro whatever the costs'. (Merkel) That's the opposite of 'stop loss' meaning 'losses forever' and what that finally means we all could see in the downfall of the Comecon System of the East. Speaking of the East: Poland and others already got 'cold feet' joining the eurozone and who can blame them not being stupid ? Or the current UK and perhaps future independent Scotland already facing the question: able to keep the pound or being forced by European treaties to join the club of financial turmoil. So it is necessary to solve the old problems of the zone first before other (possibly good candidates) join the club !

Also a reminder to politicians (once again) such as Chancellor Merkel from the East and some younger ones from the West that the Euro is 'just' a tool for payment. Not a holy grail producing wealth on it's own. (Please check the Dutch study here as well) There was an economic life before the introduction of the Euro currency albeit it somewhat (1-2%?) more expensive for currency exchange and a bit more stress by maintaining the currency exchange rates on a daily basis. And as we all can see the UK, Poland and others doing fine without the 'holy cow' and even survived the turmoil of the big financial crisis of 2008 where those politicians always warned us that without the Euro we all would have vanished ;-) Well the Brits, the Poles and others are still alive and well and so is there currency without being eaten alive by 'speculators'

So the final message is (once again) : please check all possible real vulnerabilities of our system thoroughly instead of being afraid to discover some loopholes or threats which collide with political will not to blame anyone or to put the Euro project in question. It is always better to adjust than to fail completely which we were close to already only averted by LTRO action by the ECB. Also look into other imbalances as well as real dangers besides the usual two strong arguments: Low inflation & strong standing against the USD !
The ECB points out just after the fiscal treaty has been agreed on that they have done their part in order to save the project for now. They added of course the inconvenient pledge to politicians now to do their homework. In order to do the right things later all problems must be seen first and without a politically correct view and without any tunnel vision.