T Nation

Euro Crisis Brings World to Brink of a Depression

"When an accomplished fixer like Pascal Lamy, the head of the World Trade Organization and the longtime chief of staff for former European Commission President Jacques Delors, describes the situation in Europe as â??difficult, very difficult, very difficult, very difficult,â?? you know it is time to run for cover.

The crisis has now gone well beyond the prospect of breaking up the euro /quotes/zigman/4867933/sampled EURUSD -0.46% to the threat of a full-fledged financial and economic collapse in Europe that could plunge the world into a second Great Depression.

Few Americans are aware that a worldwide banking crisis started by cascading bank failures in Austria and Germany was one of the major causes of that earlier Depression.

It was in the summer of 1931 that the collapse of Creditanstalt in Vienna forced one of Germanyâ??s big banks, Danatbank, to fail, leading to a credit crisis that prompted bank holidays around the world and exacerbating an already severe economic crisis.

The spark in the current crisis could come from a bank failure, and not necessarily in Spain. It could be a bank in Italy â?? or Austria, or Germany. German banks are notoriously undercapitalized and poorly supervised and have created a number of mini-crises in the past few decades since the collapse of the Herstatt Bank in 1974."

The Great Collapse of the 21st century is here and now. It should be ‘softer’ in the United States as money flees Europe. But then we get WWIII…

The vaunted German export machine is sinking into the abyss. The Markit Flash Germany PMI® shows German private sector sees fastest falls in output and new business since June 2009.

Key Points

â?¢ Germany Composite Output Index(1) at 47.3 (48.1 in June), 37-month low.
â?¢ Germany Services Activity Index(2) at 49.7 (49.9 in June), 10-month low.
â?¢ Germany Manufacturing PMI(3) at 43.3 (45.0 in June), 37-month low.
â?¢ Germany Manufacturing Output Index(4) at 42.8 (44.8 in June), 37-month low

Read more at http://globaleconomicanalysis.blogspot.com/#gCPu5zfscPMWzKbJ.99

It’s so fucked in the Eurozone. Even though we don’t have the Euro it’s dragging down our economy (not that we needed any additional help lol). European politicians have dithered about this crisis for the last 3 years and now it’s going to be infinitely worse.

[quote]Bambi wrote:
It’s so fucked in the Eurozone. Even though we don’t have the Euro it’s dragging down our economy (not that we needed any additional help lol). European politicians have dithered about this crisis for the last 3 years and now it’s going to be infinitely worse. [/quote]

The British were sold out by their own politicians when they turned their back on the commonwealth to join the common market. Dumbest move in history. Now they are really going to pay for their stupidity.

This mess has been much longer than three years in the making. The Euro was doomed from the start. Several of the countries in the Euro only just barely met the conditions for joining when they were allowed in. Once they were in they were allowed to go back to bad habits.

What do people think is the most likely outcome over say the next 18 months but also 5+ years for both Europe and the world as a whole as a result of the Eurozone crisis?

[quote]yolo84 wrote:
What do people think is the most likely outcome over say the next 18 months but also 5+ years for both Europe and the world as a whole as a result of the Eurozone crisis?
[/quote]

The Euro will end, trade wars will be instituted. China and the USA sell a lot of stuff to Europe so we all suffer.

Governments are now powerless and the world will spiral downward into the Great Depression of the 21st century.

The United States will emerge as a quasi-triumvirate between the Joint Chiefs, Intell Agencies and the POTUS will be the banks’ outright puppet. We will then have a war with China over the South China Sea, which we will win but will cede sovereignty to China anyway, just to broker a peace.

We will live in a must ‘tighter’ country.

[quote]Sifu wrote:

[quote]Bambi wrote:
It’s so fucked in the Eurozone. Even though we don’t have the Euro it’s dragging down our economy (not that we needed any additional help lol). European politicians have dithered about this crisis for the last 3 years and now it’s going to be infinitely worse. [/quote]

The British were sold out by their own politicians when they turned their back on the commonwealth to join the common market. Dumbest move in history. Now they are really going to pay for their stupidity.
[/quote]

Can you elaborate on this? I’m not familiar with the history of what you’re referring to.

It is quite troubling what is going on in Europe. Lenders are no longer willing to cheaply provide money to many of these countries. It seems only a matter of time before a Eurozone member leaves, possibly beginning a chain reaction.

“Northern Europe Catching a Cold?”

http://blogs.the-american-interest.com/wrm/2012/07/25/northern-europe-catching-a-cold/

snippet:

“At this point, the troubled Eurozone has endured two years of policy fixes from Brussels. The net result? Sick countries are even sicker, and the formerly healthy countries are starting to sneeze and sniffle. On the weight of the threat of Greece?s exit from the euro and the cost of seemingly endless bailouts, Moody?s has lowered its outlook to negative for three formerly triple-A countries: Germany, Netherlands and Luxembourg.
Brussels? answer to this problem? More wishful thinking, as the Financial Times reports:
Jean-Claude Juncker, the Luxembourg prime minister who heads the group of eurozone finance ministers, attempted to calm the waters ahead of Tuesday?s market opening, issuing a statement noting the Moody?s warning also confirmed ?the very strong rating? of Germany and its fellow eurozone triple-As.
Meanwhile, Eurozone debt is hitting new highs, Spain?s bond-yields (the cost of government borrowing) are at their highest level since 1996, and Greece is still incapable of reforms.
The slow-motion Euro train wreck is now without doubt the biggest economic policy failure since the 1930s…”

[quote]MattyG35 wrote:

[quote]Sifu wrote:

[quote]Bambi wrote:
It’s so fucked in the Eurozone. Even though we don’t have the Euro it’s dragging down our economy (not that we needed any additional help lol). European politicians have dithered about this crisis for the last 3 years and now it’s going to be infinitely worse. [/quote]

The British were sold out by their own politicians when they turned their back on the commonwealth to join the common market. Dumbest move in history. Now they are really going to pay for their stupidity.
[/quote]

Can you elaborate on this? I’m not familiar with the history of what you’re referring to.[/quote]

The British had a choice between greater economic ties with the British commonwealth which is made up of all the former British colonies, ie Canada, India, Australia, New Zealand or to join the common market which was comprised of industrial nations that competed with one another.

The British government decided to tie Britain to old Europe. So the commonwealth countries that relied upon trade with Britain were then shut out of the British market. ie Lamb exports to Britain which were the largest segment of the New Zealand economy ever since the invention of the reefer ship in 1879 were ended in favor of Greek lamb.

Today the combined economy of the commonwealth is bigger than Europe and growing at 7.3 percent a year.

Here is what Daniel Hannan has to say about it. You’ll need to follow the link to see the actual graphs, but here is the bulk of the article.

http://blogs.telegraph.co.uk/news/danielhannan/100163336/look-at-these-graphs-any-possible-argument-for-remaining-in-the-eu-has-been-blown-away/

Why did we join the Common Market in the first place? What was the knock-down argument used by Heath, Jenkins and the rest? Do you remember? The Commonwealth, they told us, was finished. We needed to be part of an alternative market, one that would grow.

At the time, the claim seemed sound enough. Between 1945 and 1973, Western Europe enjoyed spectacular growth, bouncing back from the artificial low of the Second World War. Britain and her Commonwealth, by contrast, were exhausted and indebted. Much of our postwar decline was caused by successive governments eroding their debts through inflation, unaware of, or perhaps untroubled by, the damage they were doing to our national competitiveness and productivity.

We can now see that our timing could hardly have been worse. We joined the EEC in 1973. Europe’s Wirschaftswunder came to an abrupt end with the oil shock of 1974, and never properly got going again. The expansion came instead in the Commonwealth markets from which Britain had just stood aside.

Look at the graphs below, compiled by World Economics. The first two contrast the growth rates of the EU and the Commonwealth since Britain joined in 1973 (in all cases, the UK is excluded from the figures). Ouch. The third and fourth, though, are the real kickers. They contrast the share of world GDP of the Commonwealth with, respectively, the original members of the EEC and the current members of the eurozone:

The Commonwealth’s economy is about to overtake the eurozone’s. According to the IMF, the countries within the single currency will grow at an average of 2.7 per cent over the next five years â?? which strikes me as optimistic â?? while the Commonwealth surges ahead at 7.3 per cent.

These figures destroy the premise on which we joined. Our trade has been redirected, by government intervention, away from the markets to which we are connected by language and law, habit and sentiment. It never made much sense to join a customs union with similar industrialised economies at the expense of the raw producers of the Commonwealth: the whole point of a market, after all, is to swap on the back of differences. Now, the statistics spell out our choice unambiguously. Our recovery will begin on the day we rejoin the hinterland from which we have been artificially sundered.

Thanks a lot Sifu, that’s the kind of detailed, specific reply I was looking for.

[quote]Sifu wrote:

[quote]MattyG35 wrote:

[quote]Sifu wrote:

[quote]Bambi wrote:
It’s so fucked in the Eurozone. Even though we don’t have the Euro it’s dragging down our economy (not that we needed any additional help lol). European politicians have dithered about this crisis for the last 3 years and now it’s going to be infinitely worse. [/quote]

The British were sold out by their own politicians when they turned their back on the commonwealth to join the common market. Dumbest move in history. Now they are really going to pay for their stupidity.
[/quote]

Can you elaborate on this? I’m not familiar with the history of what you’re referring to.[/quote]

The British had a choice between greater economic ties with the British commonwealth which is made up of all the former British colonies, ie Canada, India, Australia, New Zealand or to join the common market which was comprised of industrial nations that competed with one another.

The British government decided to tie Britain to old Europe. So the commonwealth countries that relied upon trade with Britain were then shut out of the British market. ie Lamb exports to Britain which were the largest segment of the New Zealand economy ever since the invention of the reefer ship in 1879 were ended in favor of Greek lamb.

Today the combined economy of the commonwealth is bigger than Europe and growing at 7.3 percent a year.

Here is what Daniel Hannan has to say about it. You’ll need to follow the link to see the actual graphs, but here is the bulk of the article.

http://blogs.telegraph.co.uk/news/danielhannan/100163336/look-at-these-graphs-any-possible-argument-for-remaining-in-the-eu-has-been-blown-away/

Why did we join the Common Market in the first place? What was the knock-down argument used by Heath, Jenkins and the rest? Do you remember? The Commonwealth, they told us, was finished. We needed to be part of an alternative market, one that would grow.

At the time, the claim seemed sound enough. Between 1945 and 1973, Western Europe enjoyed spectacular growth, bouncing back from the artificial low of the Second World War. Britain and her Commonwealth, by contrast, were exhausted and indebted. Much of our postwar decline was caused by successive governments eroding their debts through inflation, unaware of, or perhaps untroubled by, the damage they were doing to our national competitiveness and productivity.

We can now see that our timing could hardly have been worse. We joined the EEC in 1973. Europe’s Wirschaftswunder came to an abrupt end with the oil shock of 1974, and never properly got going again. The expansion came instead in the Commonwealth markets from which Britain had just stood aside.

Look at the graphs below, compiled by World Economics. The first two contrast the growth rates of the EU and the Commonwealth since Britain joined in 1973 (in all cases, the UK is excluded from the figures). Ouch. The third and fourth, though, are the real kickers. They contrast the share of world GDP of the Commonwealth with, respectively, the original members of the EEC and the current members of the eurozone:

The Commonwealth’s economy is about to overtake the eurozone’s. According to the IMF, the countries within the single currency will grow at an average of 2.7 per cent over the next five years â?? which strikes me as optimistic â?? while the Commonwealth surges ahead at 7.3 per cent.

These figures destroy the premise on which we joined. Our trade has been redirected, by government intervention, away from the markets to which we are connected by language and law, habit and sentiment. It never made much sense to join a customs union with similar industrialised economies at the expense of the raw producers of the Commonwealth: the whole point of a market, after all, is to swap on the back of differences. Now, the statistics spell out our choice unambiguously. Our recovery will begin on the day we rejoin the hinterland from which we have been artificially sundered.[/quote]

I dont see why it has to be one or the other.

So pretty much, the UK tried to hedge their bets on what would be better in the long term, and fucked up big time.

[quote]orion wrote:

[quote]Sifu wrote:

[quote]MattyG35 wrote:

[quote]Sifu wrote:

[quote]Bambi wrote:
It’s so fucked in the Eurozone. Even though we don’t have the Euro it’s dragging down our economy (not that we needed any additional help lol). European politicians have dithered about this crisis for the last 3 years and now it’s going to be infinitely worse. [/quote]

The British were sold out by their own politicians when they turned their back on the commonwealth to join the common market. Dumbest move in history. Now they are really going to pay for their stupidity.
[/quote]

Can you elaborate on this? I’m not familiar with the history of what you’re referring to.[/quote]

The British had a choice between greater economic ties with the British commonwealth which is made up of all the former British colonies, ie Canada, India, Australia, New Zealand or to join the common market which was comprised of industrial nations that competed with one another.

The British government decided to tie Britain to old Europe. So the commonwealth countries that relied upon trade with Britain were then shut out of the British market. ie Lamb exports to Britain which were the largest segment of the New Zealand economy ever since the invention of the reefer ship in 1879 were ended in favor of Greek lamb.

Today the combined economy of the commonwealth is bigger than Europe and growing at 7.3 percent a year.

Here is what Daniel Hannan has to say about it. You’ll need to follow the link to see the actual graphs, but here is the bulk of the article.

http://blogs.telegraph.co.uk/news/danielhannan/100163336/look-at-these-graphs-any-possible-argument-for-remaining-in-the-eu-has-been-blown-away/

Why did we join the Common Market in the first place? What was the knock-down argument used by Heath, Jenkins and the rest? Do you remember? The Commonwealth, they told us, was finished. We needed to be part of an alternative market, one that would grow.

At the time, the claim seemed sound enough. Between 1945 and 1973, Western Europe enjoyed spectacular growth, bouncing back from the artificial low of the Second World War. Britain and her Commonwealth, by contrast, were exhausted and indebted. Much of our postwar decline was caused by successive governments eroding their debts through inflation, unaware of, or perhaps untroubled by, the damage they were doing to our national competitiveness and productivity.

We can now see that our timing could hardly have been worse. We joined the EEC in 1973. Europe’s Wirschaftswunder came to an abrupt end with the oil shock of 1974, and never properly got going again. The expansion came instead in the Commonwealth markets from which Britain had just stood aside.

Look at the graphs below, compiled by World Economics. The first two contrast the growth rates of the EU and the Commonwealth since Britain joined in 1973 (in all cases, the UK is excluded from the figures). Ouch. The third and fourth, though, are the real kickers. They contrast the share of world GDP of the Commonwealth with, respectively, the original members of the EEC and the current members of the eurozone:

The Commonwealth’s economy is about to overtake the eurozone’s. According to the IMF, the countries within the single currency will grow at an average of 2.7 per cent over the next five years Ã?¢?? which strikes me as optimistic Ã?¢?? while the Commonwealth surges ahead at 7.3 per cent.

These figures destroy the premise on which we joined. Our trade has been redirected, by government intervention, away from the markets to which we are connected by language and law, habit and sentiment. It never made much sense to join a customs union with similar industrialised economies at the expense of the raw producers of the Commonwealth: the whole point of a market, after all, is to swap on the back of differences. Now, the statistics spell out our choice unambiguously. Our recovery will begin on the day we rejoin the hinterland from which we have been artificially sundered.[/quote]

I dont see why it has to be one or the other.[/quote]

It had to be one or the other because the EU has ways of restricting what comes in from outside the EU. But more than anything else there are sinister forces at work. That’s why Britain is expected to pay a higher price for membership than any other country. Also the eu is run by marxists and communists who demand a command economy.

So the eu has the common agricultural policy, which restricts what British farmers can grow. So for example, even though changes in the climate mean that British vineyards are now producing better grapes for wine production than French vineyards, the British aren’t allowed to produce any more wine because the French have been allocated that market.

The common fisheries policy, forced Britain to scrap most of it’s fishing fleet and allow all the other eu countries to build their own fishing fleets they could send in to rape the British fisheries. Turning the British fisheries into an ecological disaster.

Why would anyone ever agree to that sort of policy?
I see what you mean about sinister forces Sifu.
Any recommended sources of further reading/study of this subject?