unfortunately again there is a serious crisis developing within the big crisis (Spain) and again the author here hasn't got the time needed to reflect on more specific stuff like the correlation or struggle between German government and the Bundesbank for instance. Unfortunately also because the eurozone enters its next phase with serious risk of systemic failure, unfortunately foreseeable because the main 'actors' of the scene pose a systemic risk in themselves without nyone noticing or caring for that matter. The whole procedure of the demise of the European currency is a story of systematic denial , going even that far that some main players even denying that there is a crisis ! "Crisis of the Euro ? What crisis ? It's a success story .. just look at ultra low inflation figures, well within thee predefined limits !"
As always a bunch of things the author here reads almost on a daily basis reaches a critical mass sometimes and there is enough information to fill another blog post with some remarks. Remarks on the eurozone could actually need some 10-20 commentators nowadays, because of the sheer quantity of (unwanted) developments in this formally calm monetary area.To be honest the whole project was started as a kind of desperate act to prevent the eurozone to collapse , since the author here at least recognized the dangerous path it was on leading to the abyss. Simply by raising some level of awareness among the 'usual followers'. Fortunately the ECB at least had the courage to stop complete breakdown of the euro area, giving the other 'actors' in the drama the breathing space to take some necessary steps to prevent a repetition of events. So the ball was in the court of those politicians who created the whole thing with some serious flaws in its design (as we know now). It seems the effects of the double LTRO named 'Big Bertha' is coming to an abrupt ending, since once again the political leaders went to sleep yet again, instead of taking immediate and long overdue action.
The current crisis chapter is dominated by bad news from Spain, which was however not that surprising given the fact that the collapse of the real estate sector dragged down banks, confidence and perhaps ultimately the state, too. Once again events are dramatic enough in speed and scale that nothing short of brunt and large scale action can prevent a complete catastrophe. But this blog entry is not about the steps which are going to be taken by the EU without any doubt because there isn't currently much of an alternative in sight. It is more about the one way street the community of states holding the euro currency, but also others have taken. The one way street it seems to this author following more a map of insanity than reason and resulting in measures of 'there is no alternative' because the end of the road has been reached again and at that point there is indeed very little room for maneuver left.
So the final trigger of this blog entry was an op-ed article by esteemed journalist Florian Eder of the German newspaper 'Die Welt': Just spend the money, someone will pay where he states the basic flaw of current emergency measures:
"Es ist der falsche Weg. Eine Ausweitung der gemeinschaftlichen Haftung auf die spekulativen Geschäfte spanischer Banken und damit auf die Folge einer geplatzten Immobilienblase verringert die Verantwortung des Einzelnen. Sie verschleiert Verantwortlichkeit. Das ist das Grundübel der Krise ebenso wie der Versuch, Griechen, Italiener, Spaniern, Franzosen ihre Folgen weitgehend zu ersparen." engl.: "It is the wrong way. An extension of common liability of speculative deals of Spanish banks and with it of the results of a bursted real estate bubble reduces the responsibility of the individual. It disguises responsibility. That's the basic flaw of the crisis as is the attempt to save the Greeks, Italians, Spanish, French from their consequences."
Florian Eder is right to remind everyone that the very basic principles of capitalism is success and failure, risk and stability. Responsible action rewards success, irresponsible and reckless action leads to failure, bankruptcy. The problem of the eurozone however is that all, good and bad states alike, are tied together with a common currency and failure wasn't foreseen by those hopelessly optimistic creators of the eurozone and so there isn't any predefined 'opt out' or 'exit' strategy short of leaving the EU altogether. And on a lower level there weren't procedures in place to let banks file for 'orderly bankruptcy' before 2008 and what is much more unforgivable after 2008 ! Everything it seems build on principles of 'hope for the best' and optimism close to complete blindness.
At the point where failure of banks comes up there isn't even a reason of thinking Germany's banking sector is much better, healthier than the Spanish one currently suffering from severe stress invoked by the burst of the real estate bubble. What would happen to German banks if something similar happened there ? Florian Eder grinning relaxed and writing op-ed articles about the superiority of German bank wisdom and the much wiser regulations in place there ? Well there are serious doubts about that when the author here takes a blog post written by esteemed tweep (a person using Twitter) and follower @egghat:
Still und heimlich wurde eine deutsche Bank vor der Pleite gerettet
or in english:
Valovis Bank Rescued as Greek Debt Burden too Much to Bear, FAZ
Groundhog day, because in 2009:
Valovis seeks 500 mln eur in state guarantees-paper (2009)
Valovis klingelt beim Soffin (2009)
and there are other indicators that nothing much has changed since the outbreak of the first crisis in 2008. Soffin, Commerzbank, you name it. Neither national politics nor European counterparts acted swiftly enough to be prepared for the next crisis. As many of today's problems of the eurozone are in fact a direct result of the financial crisis of 2008 it is worth noting that other regions of the world had not that many problems of coping. But not only the response to immediate crisis situations is worth condemning but also the lack of growth in the eurozone, the lack cashing in the advantages of a common currency. Instead other EU states with the luxury of retaining their old currencies now have better economic data than the ones intending to have a better common market. That in itself is 'not good' but it comes along with risks, dramatic rescues with billion and even trillions of € spent on 'shielding' to protect against 'contagion' as if it was a disease and not just 'human failure'. This point is worth elaborating but unfortunately the author here has to leave for a long distance drive. There will be a second blog entry concentrating on 'group think', 'cover up', 'optimism' and economic entities suffering from effects to be explained by psychology and anthropology. Some more examples for historic failure, not only economic, will be used to show fundamental problems. For now just a preliminary conclusion:
The point is risk arises nowadays mostly from that 'bullshitting' which starts as an act of self-betrayal first and then results in inflicting damage to others (shareholders and even sovereign states) which the author here sees as a demise of culture in general and specifically of 'capitalistic culture'. It has become some kind of 'bullshitting culture' where formerly it was called 'lying'. Just as famous movie characters Jake and Elwood explained:
Jake: They're not the kinda guys who write letters. You were outside, I was inside, you were s'posed to keep in touch with the band. I kept asking you if we were gonna play again.Sound familiar 'Spanish' ? If not, just (re)read those articles:
Elwood: Well, what was I gonna do? Take away you're only hope? Take away the very thing that kept you going in there? I took the liberty of bullshitting you, okay?
Jake: You lied to me.
Elwood: It wasn't lies, it was just bullshit.
Source: 'Blues Brothers' movie by John Landis and this link here
Bankia parent group BFA posts 2011 loss of 3.3 billion euros
Bankia executives paid nearly 22 mln euros in 2011
Spain's central bank governor steps down early
June 6th 2012: Mario Draghi wasn't too amused either (CNN)