It is a global clusterfuck of looting at the moment. Power and money are confused to the point that ideas like corruption and ethics are simply no longer relevant. A self serving global elite has captured the levers of all of the worlds major currency systems and is looting on every continent on an epic scale. The problems begin with the United States, the monopoly issuer of a floating fiat currency that is pretending it is on the gold standard to justify as necessary a massive upward redistribution of wealth.
This policy, and a similar one at the ECB leaves open the door of currency manipulation on a global scale by entities with the economic power to execute. The Chinese have to buy bonds from both the EU and the US in order to force an export market by depressing the value of the Yuan which in turn prevents the Chinese from consuming and thus exports demand to debt selling countries. China is able to do this because both western systems pretend they are constrained in some unexplained manner from simply creating the money their economies need rather than selling debt to, among others, the Chinese.
This is a classic mercantilist strategy by China, the same one being run by Germany on the rest of the EU, made easier in both instances by floating fiat currencies run as if they were gold based. However, because they are in fact fiat currencies the mercantilists end up with nothing but IOUs while the deficit countries got the goods exported by mercantilist nations.
The rage in Germany at the periphery is a result of this mercantilism having robbed Germans for ten years of purchasing power while exporting that purchasing power through semi “sovereign” debt to periphery countries. The thing is, this was GERMAN policy, not GREEK policy or for that matter Irish policy. While Greece has a real corruption problem, the problem in Ireland is that politicians there trusted the German and French banks that were in fact looting Irelands economy indirectly through predatory unregulated Irish banks. Their fervor now in pushing austerity on Ireland and Greece is to try and preserve some real value for the IOUs they hold for their domestic populations who’s standards of living they robbed to pursue the mercantilist policies in the first place.
It cannot work out without some sort of fiscal transfer union. Period. And the angry “core” populations have been deluded into thinking the problem is profligate peripheral lifestyles when in fact the problem has always been predatory banks in the core that control the ECB and have run the Euro for their own benefit. These banks never lost the ability to do underwriting before issuing loans, they simply chose not to to goose their own earnings.
By deflecting the political anger from themselves, the core banks have created a situation in which I think it will be impossible to save the Euro without first saving the banks, but that will require admitting the problem is not with peripheral consumption but with mercantilist production and the forced domestic savings it exports to its trading partners. That so much of the debt is going bad is a much worse reflection on the quality of core bank underwriting than it is on the wrecked peripheral nations.
The Chinese have an even bigger problem, their billion people have already been rioting for three years, though not much reported in the west. The Chinese accumulation of foreign IOUs is required to maintain their mercantilism that provides huge numbers of jobs but paltry wages. The party has figured out that it needs to grow domestic wages, income and consumption if it hopes to hold its huge population out of poverty for more than a few minutes, but because its economy has been built around the accidental Marshal Plan of US bond purchases, like Germany depressing wages and consumption at home to accrue a foreign exchange surplus in this case denominated in a foreign currency, the Chinese must both re-direct income to the population and away from party bosses accustomed to controlling foreign exchange gains, and wean their economy from its dependence on exports. This last problem is the worst for China: when purchasing foreign bonds guaranteed secure growth, no one really needed to compete domestically, the competition was to draw in all foreign production: now production is in China, but they are trying to create consumption there as well, suddenly all those party bosses are competing with each other for domestic resources and the central authorities have few mechanisms to manage this.
It doesn’t really look like capitalism in either instance, more like political resource domination, an attempt to impose a sort of high tech feudalism. I’ve been looking for a good pitchfork!
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