Thursday, 1 December 2011

Eurozone? It was always designed to fail!

Why do the leaders of the banks and the governments continually shuffle about with fear over the Eurozone? It is designed to fail and these are intelligent men and women who know this. Separatism or defaulting is inevitable. Even if they do cut bankers bonuses and dividends it's far too late. It's been too late for 54 years, long before the 'Eurozone' concept was even created. When the European Union(EU) joined together in 1957, (under the ECSC and EEC) it was under the précis of co-operation and unity to develop a federation and nuclear energy. Over the years it grew from 6 countries to 27 depending on economy and other stipulations. The European Monetary Union(EMU) was created to form a single currency for 17, of the now 27, countries within EU. Standing together, there was even consideration to create a United States of Europe to rival America.

Strip away the smoke and mirrors and you see a union simply juggling debts across Europe. Incidentally, the American model of capitalism is not something to be emulated. It is to be condemned as a failure and they have the advantage of language and culture on their side. In short, it doesn't matter how you label yourself or how many currencies circulate. Capitalism is always going to fail. Look at this simplistic example: I live on an island with a banker who writes money and a trader who only takes money. I borrow £100 for supplies. The bank will want back £100 plus interest of £10 for lending it to me. Recognising my debt, if I decide to dig in and give the bank its £100 back, I already owe the bank debt I cannot repay (only the bank writes money from nothing). So instead, I ignore my debt and go for growth. I spend the £100 then borrow more to continually pay for my supplies and my debt. Regardless whether I end up working for the trader or the bank, or start my own banana fuel business or lay about watching the sunset, debt has been created and can never be paid off. This seemingly perpetual motion continues until the debt is so huge that the bank will no longer lend, until I pay it off. Trading stops. With no way of creating money or paying off the impossible debt, I have no choice but to default. But...then what will happen..?

Throughout history there are periods of growth as well as periods of decline. Every decade it's a question of balancing the two and how long each period will last for. To simplifying this, so it's understood, when there is growth, politicians, economist and financiers get patted on the back, businesses thrive, employers employ, products get made and people spend. Then there follows a period of decline, the cost of living rises from all that borrowing, demand and spending, businesses can no longer sell products at premium, employers have to lay off employees and we end up having a 'credit crunch'. The nicely flowered up word to describe financial stagnation and recessions.

This is the thing. When the economy declines the government simply has two choices. Borrow money from banks or dig in to pay off debt. So which is the correct thing to do? The answer is neither. This is a no-win situation because debts grows year on year regardless. This is the fundamental flaw with capitalism. We are observing the results of a social-economic system failing on a global scale and coming into fruition after years in the making. The economy can only grow through borrowing a huge amount of money. When the economy rides the growth wave on the back of borrowing, it simultaneously has to repay the money it borrows whilst borrowing more. Money always accumulates interest (the fees for borrowing it in the first place) and therefore debt is shuffled, transferred, suffered or hidden continually and the value of money diminishes.

If the economy digs in for too long then money simply runs out trying to pay back those debts. People DO lose homes and end up impoverished because of this. So therefore short term, continual borrowing is the only way to sustain the economy until the banks stop lending altogether. After some time you have a situation like Greece. The nation needed bailing out for the 'cavalier' way they ran the economy. When the crisis hit they simply threw their hands in the air and asked 'What can you do?' In hindsight they were smart. The Greeks understand economics. They joined the Eurozone with hidden debts knowing that debt is a juggling game. It is impossible to pay off debts so it's better stacking them up and getting the Eurozone to pay for it. They have twice been bailed out now and still look likely to default. The plan? Shuffling their debts across Europe of course.

The European Union is a debt juggling exercise that ebbs and flows. Greece is the tip of the iceberg. Ireland joined with no debts but now have to bear the brunt along with countries who are more frivolous. If more countries understanding of economics is that bank debts are impossible to pay off there will surely be more transferrals or defaulting to come. Argentina did this and are now much happier but then they are part of a different trading circle. Italy, Spain and Portugal are all getting closer to defaulting finally ending up with what? Break up of the Eurozone? Banishment of failing countries followed by - sanctions? Then as we know from history, distrust, propaganda, suspicion, paranoia and trumped up hostilities as required.

War is usually enacting because of required resources, finance and/or territorial advantage. What's that you say? I'm forgetting Religion, Terrorism, Humanitarian crimes. Not at all, these reasons are how we are sold war. It's smoke and mirrors backed by media owned by the same money changers as governments. These reasons are distractions from truth. Just as the threat against Iran is not about a nuclear process that has been running since the 1950's but their rejection of the dollar as the currency of trade. Incidentally the same reason why Iraq and Libya were crushed.

Where does it leave us in the UK. No one has mentioned separatism, but who knows. You heard it here first. Come back in a decade. Separatism reduces our risk to other countries economic failures(or wisdoms) but also isolates us leaving us vulnerable to trade embargoes and the like. Nevertheless, it doesn't reduce our inevitable and continual rising debts and borrowings. Ultimately, banks flooding the market with currency would mean our pound is worth virtually nothing and the banks collapse or are forced to stop lending. Therefore we either swim alone and drowned or we swim together... and drowned.

Capitalism is doomed to fail. The rich and greedy individuals only accelerates this inevitable conclusion. The Eurozone and EU can keep sticking tape over the holes but eventually it will sink, because the model they work under cannot work. Remember if all the debt in the whole world was paid off there would be no money in circulation and we'd all still be in debt. This is fact.

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