The Eurozone crisis and America

If the Euro collapses and Germany becomes even stronger I believe the tariff-free zone of the EU would survive.

If the Euro collapses in what industries would gain jobs? But how many manufacturing jobs would be lost? Would the people who work at whatever jobs are created by a strong mark thank Angela Merkel and vote for her. If the independent mark caused the price of German imports to rise and factories to close would those people be more likely to vote against Angela Merkel?

I don't ever remember an export based economy such as Germany, Japan or China ever supporting a stronger currency because they think the political calculation is on the side of preserving existing jobs. Certainly in Japan where the currency has appreciated 25% against the dollar there is no political support for the idea that was a good thing. Instead the Japanese are terrified that television and auto production will go offshore.

 

Good thing Germany doesn't have oil. Dutch Disease would kill that country.

 

Hollande beats Sarkozy, and pro-austerity parties in Greece get about 40 percent of the vote in parliamentary elections.

 

And the Greek Neo-Nazi party is exit polling at around 6 percent, enough to get it a share of Parliament.

 

America is stunned!

Oh wait, the S&P and NASDAQ were up and the Dow was down a little after being up much of the day.

 

Shit's getting real.

http://www.guardian.co.uk/world/2012/may/08/erozone-crisis-greek-bailout-deal

Can't blame the Greeks one bit. They have to think it can't get any worse, even if they do default. And even if it does, it returns to them at least a semblance of self-determination.

It's been ugly to see what happens when market forces collide with democracy.

 

Which is why I don't understand Ragu's posts of late.

When the electorate gets the idea that its sacred cows are going to be sacrificed by the whims of the market, that's the minute the whims of the market are sacrificed by the electorate.

It takes time, but people will vote for what protects them, not the bildebergers who ravage them. Greece and France prove this. We aren't there yet in America, and it would take worse pain than we have know to get to their point.

But when/if it happens, all bets off are as to how it effects currency, bond-holders, etc. You don't think we'd elect politicians that would protect us over the market?

I don't see a future of endless austerity. I see a future that includes concepts like "debt forgiveness", etc. People are not just going to stand by and let the market roll over them. History proves it, recent elections in Europe have proven it anew.

 

Yeah, you're just going to have an awfully hard time convincing people that they have some kind of moral imperative to sacrifice in order to repay the markets, which are after all run by the sorts of people who feel no pain at all from austerity measures.

 

The electorate is going to have to sacrifice either way.

When Greece can no longer borrow money, and therefore can no longer run a deficit, how is that different from austerity?

 

To some extent, at least, it restores autonomy. They might be in the shit heap, but at least the Germans won't be pushing them there.

 

Germany's economy is based on exports. Most of those exports are to its neighbors. If the neighbors go broke, who buys the stuff Germany makes? Eventually, perhaps quite soon, the neighbors are going to say "policy changes or the euro ends." Greece will be broke no matter what it does. So why not kick over the apple cart and see what comes next?
If the U.S. had had five years of recession and a 20 percent decline in the standard of living, our political reaction would be no different than Greece's. Worse probably -- a complete breakdown of government at all levels, with probably the military, which remains well-organized, having to run a bunch of stuff.