Bye-bye to the euro?

The New Neo Posted on by

Are reports of the euro’s imminent demise greatly exaggerated? Or will we see its end in the not-too-distant future, because the life support system its richer members are trying to construct is doomed to failure?

Jeff Randall thinks it’s the latter. The euro may have been doomed to fail from the start. Almost anything can seem like a great idea and be quite successful in a boom economy (such as, for instance, subprime mortgages). But when harder times come—and they will, they will!—the piper and the bill collector must be paid:

You cannot run indefinitely a single currency with one interest rate for 16 economies, when there are such huge fiscal disparities.

What was once deemed unthinkable is now, I believe, inevitable: withdrawal from the eurozone of one or more of its member countries…

The euro was a boom-time construct. In the biggest bust for 80 years, it is falling apart…Protecting the euro has become a project via which profligate states dip their fingers in Berlin’s till…

As for the United Kingdom, we must be grateful that those frightfully clever Europhiles, such as Lord Mandelson and Kenneth Clarke, did not get their way. Had they been able to scrap the pound and embrace the euro this country would be even closer to ruin.

The surprise is not that the euro is doing poorly. The surprise is that the leaders of Europe thought it would be a good idea in the first place to hitch all of their wagons together despite the wide disparities in economies, and not expect that something like this would happen some day. But just as in this country, the prosperity was expected to go on forever—although anyone with any knowledge of history and economics (or even a modicum of common sense) should have known it could not.

As a baby boomer with parents who were relatively old when I was born, I was raised on stories of the Great Depression. It was a cautionary tale I never forgot. What’s Europe’s excuse?

Another military imposter

The New Neo Posted on by

Seems there’s a rash of military impostors, although this one certainly differs in kind and degree from the Blumenthal case:

A Texas man with no military experience managed to trick the Army into letting him enter a reserve unit as a noncommissioned officer earlier this year, putting an untrained soldier in a leadership position in a time of war…

We don’t know exactly how Jesse Bernard Johnston III managed to deceive the army or what documentation he used, so we don’t know how great their negligence may have been in failing to properly check him out. But it is very troubling indeed. One would think that, in this day of heavy computerization of records, this sort of thing would be impossible. Apparently not.

Churchill and the EU

The New Neo Posted on by

Timothy Garton Ash says that Europe needs a new Churchill to add “dynamism” to the moribund EU:

The European Union is still the world’s largest economy. It has enormous resources of hard and soft power, at present much bigger than those of the emerging great powers. But the trend is against it, and it punches far below its weight. If it still wants to shape the world in the interests of its citizens then it must close the gap between its potential and its actual power. It’s not doing so. Why?…

Instead, we have a set of new rationales for the project. They include global challenges such as climate change and the globalised financial system, which increasingly impact directly on the lives of our citizens, and the emerging great powers of a multipolar world. In a world of giants, it helps to be a giant yourself…For standard of living and quality of life, most Europeans have never had it so good. They don’t realise how radically things need to change in order that things may remain the same.

It would take a new Winston Churchill to explain this to all Europeans, in the poetry of “blood, sweat and tears”.

Ash seems to think that Churchill acted mainly as a cheerleader, and that Europe’s present deficiency is primarily a lack of pep talks. Churchill did, of course, function somewhat that way, in remarkably eloquent prose and delivery. But what gave him his extraordinary gravitas, conviction, and force was not just messaging or communication skills—it was the principles and beliefs behind his message. After all, he was much the same eloquent genius back in the 30s when he was warning Europe of the Nazi menace and no one was listening (in fact they were laughing at him). And after the war, the British wasted no time in throwing him out.

If you’re asking what Churchill would do right now about the EU, my guess is that he’d say “disband it, it’ll never work.” Only he’d say it much more gracefully (and/or bluntly) than that.

We can’t know, of course. But the British welfare state and the EU are the result of trends that began with the immediate postwar repudiation of Churchill, not as war leader but as economic leader.

Ash thinks the later EU drive was fueled by memories of the devastation of WWII and a desire to combat Communism, as well as to rehabilitate and integrate Germany. No doubt he’s correct as far as that goes, but it doesn’t go far enough. The forces that led to the EU included a leftist economic system and the desire to get away from the pesky troubles of nationalism, and it is my firm opinion that neither impulse would be one Churchill would get behind.

One of the comments to Ash’s article notes that Europe doesn’t need a new Churchill, it needs a new Thatcher. But perhaps it’s six of one and half a dozen of the other—either would probably give the same message, and it wouldn’t be one Europe would like. If Churchill or Thatcher miraculously returned to speak in full-throated voice, would Europe be interested in listening? That’s the real question.

[NOTE: I realize that Thatcher is still alive, so technically she could speak on the issue. But unfortunately, like her friend and colleague Reagan did before her at the end of his life, she now suffers from dementia.]

More on PA-12 and the 2010 election in general

The New Neo Posted on by

Here’s an excellent analysis by Jay Cost.

And John Podhoretz has some observations (surprisingly, Joe Trippi says much the same thing):

The era of political stability for incumbents and veteran political players has truly reached its end.

The point is not that every incumbent is vulnerable — certainly Chuck Schumer isn’t — but that every incumbent might be.

The threat might come, as it did to congressional Republicans in 2006 and 2008, from Democrats taking advantage of voter exhaustion with the GOP in districts and states that should have been safe conservative territory. Or it might come, as it has over the past month, from within the incumbent’s party itself.

[NOTE: I think these anti-incumbent trends are generally good—or at least they have the chance of being good. But they are hardly inevitably good. I am reminded of this, for example.

I am reminded, also, of the fact that although backlash to Barack Obama’s presidency can be seen as contributing to and exacerbating this mood, Barack Obama’s campaign and election were early reflections of it. That is, he campaigned on a vague platform of difference (“change”) from Washington business-as-usual, as an outsider and fresh face who would offer something less corrupt and more unifying. That he has clearly failed to deliver what he promised does not change the fact that he was elected in large part because people believed him at the time (in spite of a paucity of evidence)—so great was their desire to believe.]

Pennsylvania 12 special election

The New Neo Posted on by

So, is Burns’ defeat in the Pennsylvania 12 special election a debacle for Republicans? Does it mean their prospects are much poorer than previously thought for 2010?

To read the press and bloggers on the left, one might think so. And there’s no doubt the result was a disappointment to conservatives and Republicans. But I fail to see how a Democratic victory in a low-turnout special election that pulled in mostly Democratic voters (due to being coupled with an important Democratic senatorial primary) in a hugely Democratic district that had elected Democrat John Murtha to this office since 1974 is a big surprise.

The Scott Brown victory caused enormously high expectations that such a thing could (and would) keep happening. But that was always an unreasonable assumption. The Pennsylvania 12 special election is a wake-up call that should not even have been needed, saying that 2010 is going to be hard fought and difficult, and requires a fire in the belly, intelligence, and resolve. Nothing should be taken for granted.

Obama and the Democrats are still, to my way of thinking, surprisingly and undeservedly popular. Old habits die hard (and a mind is a difficult thing to change). That should go without saying. But I’m saying it anyway.

[ADDENDUM: More from Ace.]

Blumenthal, et al: what does it mean to misspeak?

The New Neo Posted on by

One thing I will never quite understand is this business of a person confessing that he/she misspoke.

You hear it all the time these days from public figures (actually, you increasingly hear it in private, too). Richard Blumenthal is only the latest, but his stance is quite typical:

“On a few occasions, I have misspoken about my service and I regret that and I take full responsibility,” Blumenthal said Tuesday. But he described those remarks as “absolutely unintentional,” and said the mistake has only happened a Ttimes out of “hundreds” of addresses he’s given.

First, let’s take care of Blumenthal’s incidence argument: yes, he only lied a few times out of hundreds of addresses he’s given. But does a lie have to be repeated and completely consistent to be a lie? Of course not. And is it really plausible that Blumenthal’s reference to having returned from a Vietnam theater of war that he in fact had never entered could be “unintentional?” It hardly seems so.

The word “misspeak” has come to be an all-purpose coverup for the purpose of avoiding admitting the truth—which is that a person has lied. However, in using the word “misspeak” inappropriately, the person is telling another lie, or at least a coverup of the original lie. Here’s the definition of misspeak:

To speak or pronounce incorrectly: The lead actor misspoke his lines.

To speak mistakenly, inappropriately, or rashly.

Obviously Blumenthal is referring to the second definition rather than the first. He is claiming careless error rather than intention to deceive. And while some such claims are plausible (for example, Obama’s odd “57 states” faux pas could legitimately be described as such), some are not. One can make an error that’s a slip of the tongue or a little brain glitch, or even state something in a manner that’s ambiguous to the listener and thus misunderstood. But Blumenthal’s statements were none of these things.

The most unequivocal one was when he said “We have learned something important since the days that I served in Vietnam.” Had he said instead, “since the days I served during the Vietnam era,” his words would have been a bit misleading and subject to misinterpretation for some listeners but technically correct (Blumenthal did serve in a Marine reserve unit during that time), and we would not be having this discussion.

But Blumenthal did not say that. And since the facts in question—where he served—are very much matters about which he had full awareness, he cannot claim ignorance.

But Blumenthal is just one example of a trend. “Misspeaking” is ever so much better than lying, and it’s the all-purpose excuse du jour. And while I have a certain amount of sympathy for those in the public eye whose every utterance is scrutinized for errors, and/or whose statements are regularly misunderstood and misinterpreted (and even misquoted), I don’t think Blumenthal falls into this category.

I would actually love it if the word “misspeak” would fall out of use. It’s awkward, for one thing. And it’s ambiguous (although for those who love it, that’s part of its beauty). Why not just say, “I made an error: I meant to say so-and-so and I actually said so-and-so” instead? Or why not (gasp!) say “I lied, and I’m sorry, and I won’t do it again.” That might actually be refreshing.

State primaries

The New Neo Posted on by

Today is primary day in four states: Pennsylvania, Arkansas, Kentucky, and Oregon. It may not sound like much, but the results will tell us a lot about current electoral trends and anti-incumbent fever. Here’s the place to discuss it if the spirit moves you.

And in other scandals…

The New Neo Posted on by

…Indiana Republican Representative Mark Souder has been caught with his pants down (metaphorically speaking) and will be resigning. The 59-year-old Souder was a big family values guy and a conservative Christian, but that didn’t stop him from having an affair. To top it all off, his paramour was a part-time staffer who was on the payroll and often traveled with Souder.

Forbidden fruit can be especially intoxicating. And, as Henry Kissinger once famously said, “Power is the ultimate aphrodisiac.”

Blumenthal, pretend warrior

The New Neo Posted on by

Democratic senatorial candidate Richard Blumenthal has succumbed to an occupational hazard of boomer political candidates: alluding to some details of military service that turn out to be a lie.

In Blumenthal’s case, his Vietnam-era stint was in a Washington DC Marine Reserve unit virtually guaranteed to never go to Vietnam. Nothing wrong with that, if he’d left it at that. But although he intermittently made it clear that he had never served in Vietnam itself, at other times he inexplicably decided to claim Vietnam vet status by saying things like ““We have learned something important since the days that I served in Vietnam.”

There seems to be something deeply enticing about claiming to have been a warrior when one is not. Vietnam is a special magnet, both for those asserting they served honorably and those who wish to accuse the US of war crimes by citing their (false) participation in them. In fact, there’s an entire book, Stolen Valor, dedicated to describing and exposing “phony heroes who have become the object of award winning documentaries on national television, liars and fabricators who have become best selling authors, and others who have based their careers on non-existent Vietnam service.”

Blumenthal is actually a fairly mild version of this genre. After all, he often admitted he did not go to Vietnam, and when he did claim service there it was not to put down his country. But the temptation to embroider was too great, the enticement to claim participation in a war he had no part of too strong, and he crossed the line into outright lies. Now those lies have caught up with him, via a very unlikely source—the NY Times.

Blumenthal is hardly alone. In fact, the tendency to exaggerate one’s service is so ancient and so common that (as Roger Simon pointed out in this 2004 essay) it was represented by the stock figure of Capitano, “The Braggart Soldier,” in traditional commedia dell ”˜arte.

Blumenthal has also used his Vietnam claims to talk about how returning vets of that era were treated. The impulse was a positive one—the context was always an effort to support the vets of today. But his good intentions do not excuse his lies.

[NOTE: At the moment, Blumenthal remains in the Senate race.]

On reparations: Henry Gates gets it

The New Neo Posted on by

Remember Henry Gates, Obama’s buddy who had a run-in a while back with a Cambridge cop? A few weeks ago he published a surprisingly balanced and thoughtful opinion piece in the NY Times that admitted the role of Africans in the slave trade, and pointed out it wasn’t just about exploitation by evil white people:

While we are all familiar with the role played by the United States and the European colonial powers like Britain, France, Holland, Portugal and Spain, there is very little discussion of the role Africans themselves played. And that role, it turns out, was a considerable one, especially for the slave-trading kingdoms of western and central Africa…

For many African-Americans, these facts can be difficult to accept. Excuses run the gamut, from “Africans didn’t know how harsh slavery in America was” and “Slavery in Africa was, by comparison, humane” or, in a bizarre version of “The devil made me do it,” “Africans were driven to this only by the unprecedented profits offered by greedy European countries.”

But the sad truth is that the conquest and capture of Africans and their sale to Europeans was one of the main sources of foreign exchange for several African kingdoms for a very long time…

Did these Africans know how harsh slavery was in the New World? Actually, many elite Africans visited Europe in that era, and they did so on slave ships following the prevailing winds through the New World…

African monarchs also sent their children along these same slave routes to be educated in Europe. And there were thousands of former slaves who returned to settle Liberia and Sierra Leone. The Middle Passage, in other words, was sometimes a two-way street. Under these circumstances, it is difficult to claim that Africans were ignorant or innocent.

Gates ends up giving up on the idea of reparations, not because he thinks they’re unwarranted but because he thinks it impossible to determine who would pay them (everybody?). Gates ends his piece with a paean to Obama the great racial healer, but we’ll ignore that and just say that his essay is both hard-hitting and brave—and that it’s sad, isn’t it, when telling the truth becomes an act of courage. But perhaps ’twas ever thus.

Another domino theory: Europe and the global economy

The New Neo Posted on by

There are frightening financial rumblings from Europe.

It’s not just about Greece, either, nor even limited to Europe. The last few decades have intertwined the economies of the entire world more tightly than ever.

This seemed like a good idea to most people at the time. I never understood why—but then, as I’ve said many times, economics is not my forte. It has long seemed to me that the more interconnected the elements of a system are, the more any flaw in that system could bring the whole thing down:

We are, of course, deeply intertwined, even without the EU. As the poet John Donne wrote a long time ago, in the early part of the seventeenth century:

No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend’s or of thine own were. Any man’s death diminishes me, because I am involved in mankind; and therefore never send to know for whom the bell tolls; it tolls for thee…

Except for a few mountain man survivalists who live in isolation entirely off the grid, those sentiments are more true now than ever before. And the result is that we’re all in trouble, because the Western countries, a huge linchpin of the world’s financial system, have become increasingly addicted to the fiction that there is a free lunch.

Did I say free lunch? Actually, it’s a free lunch plus aperitifs and dinner and then a big whopping dessert—all known as the social welfare state. That state might even be sustainable if it weren’t coupled with a diminishing commitment to actual production or even work, a bad balance of trade, politicians interested in short-term wins for themselves while ignoring long-term risks to their countries, and an ever-increasing sense of entitlement on the part of the citizenry (including immigrants from have-not countries). This trend has spread, of course, to the United States as well.

There is no dearth of articles about the current European crisis, written by people who know far more about economics and finance than I. But there’s “knowing.” and then there’s knowing. I’m afraid that it’s the nature of economics to be clear as mud, and for remedies to be more in the nature of hypotheses and hunches based on pre-existing biases than on any sort of hard science (and I say this in sorrow, because I wish it were otherwise).

Just go to RealClearMarkets and you’ll see today’s crop of pieces on the subject. The bottom line for almost all is a sense of fear and extreme crisis, with confusion about whether a remedy exists—and, if so, what it might be.

Here’s a piece that indicates that some sort of European breakup might be imminent:

“If the euro fails, then Europe fails and the idea of European unity fails,” she said. Too late, I think. The German nation is moving on. I was struck by a piece in the Frankfurter Allgemeine proposing a new “hard currency” made up of Germany, Austria, Benelux, Finland, the Czech Republic, and Poland, but without France. The piece entitled The Alternative says deflation policies may push Greece to the brink of “civil war” and concludes that Europe would better off if it abandoned the attempt to hold together two incompatible halves. “It can be done,” the piece says…No democracy will immolate itself on the altar of monetary union for long.

I’m not so sure about that last sentence, though. Breaking up is hard to do, especially when so many of Europe’s leaders are invested in the PC idea of nationalism=bad and EU=good.

What about tough love? If corporations and banks are too big to fail, aren’t countries? How long can the bailouts go on, and how widespread will they become, before we run out of other people’s money?:

The fatal flaw in the plan is that the European nations bailing out Greece — even Germany, where government debt has risen to about 80 percent of gross domestic product — have similar budget problems and even less political will to take similar medicine.

Their plan appears to rest on the hope that lenders won’t notice. Eventually they will, and when that happens, a worldwide loss of faith in government debt markets is a virtual certainty.

In other words, it is hardly good news for a creditor if a hopelessly bankrupt borrower offers to take on the debts of a hopelessly bankrupt borrower.

During the financial crisis, faith was restored in large financial institutions because toxic assets were essentially exchanged for government bonds. If government bonds become toxic, there will be no effective treatment options remaining. The collapse will have no bottom…

And that collapse could happen at any moment. If lenders decide collectively that the big Western governments have unsustainable debt positions and lack the political will to fix them, the end can come tomorrow.

This is chilling stuff. And despite (or maybe because of?) my rudimentary knowledge of economics, it seems correct to me. Living beyond your means works up to a point, but we’ve gone way beyond that point. The entire world economy was, at least in part, one big bubble, and the bubble may be in the process of bursting.