Monday 26 September 2011

significant digits

With all the talk and nerves, one would reasonably conclude that Europe and the euro are being assaulted on all fronts not by a debt-burden or over-wrought speculation but rather by a crisis in the currency and partnership itself. European manufacturing and innovation has not been overtaken, and there is no talk of war-mongering--there has been quite a bit of thinking out loud and gloomy scenarios that have been other than helpful and have stoked panic, so I think every possibility on one's mind has already been voiced, inflation is not galloping in the marketplace (other than through shortages caused by environmental changes, like the wildfires in Russia, etc), and the euro, relative to other currencies) has only lost fractional value and is certainly one of the more stable ones.  A tenth of a cent in the exchange rate does make a difference to traders and those with dollar denominated loans--or try to out-smart the next moves, like me--being paid in US dollars. The bailout, relief programs of the States are echoed in the plans for a euro rescue fund, having wealthy member countries contribute to a pool credit that will be made available to poorer members on contingency.

What this rescue fund is, however, is not a rainy day account but rather an instrument to facilitate some countries to make more loans to others in distress without violating the founding principles of economic health for joining the EU in the first place. And it is no solution to throw more money at a problem that was precipitated in the first place in part by being overextended on easy-credit. There might be a less damaging and indentured way beyond this slump and worry--interestingly, it is the banks and investors that revealed the sovereign debt problem by refusing to extend more credit, though it took them decades to admit to themselves that this too was unsustainable, but those same financiers do not want to entertain the following alternative either: allowing some economies the option of bankruptcy (not messy and predatory and sudden) in a controlled environment, with support on hand and at the ready, provides economies with the hope of a definite end and a scheduled rebuilding.