Concerning the row that went on yesterday between Angela Merkel and
Nicolas Sarkozy (which Merkel won), one economist, Christian Schulz
of the Berenberg Bank, put his finger on it: "Unfortunately, we are
in the paradoxical situation where we are pinning all our hopes on a
new catastrophe for Berlin finally to move."
Sarkozy wants the European Central Bank to have the same power to
issue bonds (to save most of the Eurozone banks and governments) as
the US Federal Reserve. But the French (desperate that Moody's, Fitch
or S&P might downgrade their government any day now) overlook one
thing. The US Fed is married to the American government and its
tax-raising powers. The ECB, however, is married to nothing. There is
no Eurozone government. The ECB is merely a theological product of a
posse of politicians and bureaucrats that managed 12 years ago to
convince the world that the Euro is a real currency. Or as real as
the Dollar anyway.
What Merkel is saying is that until the ECB is well and truly married
to a Eurozone government able to supervise the taxation powers of its
constituent nation-states then the ECB can't offer bonds for sale to
the general public. (It couldn't offer bonds anyway. Central banks
don't do that sort of thing. Only governments do that. Central banks
merely act as convenient pawnbrokers which receive the legal paper
documents of a government bond as a pledge and issue the specified
'value' of the money in return.)
Christian Schulz is wrong. Angela Merkel is not wishing for a
catastrophe. Nor is it for Berlin to move. It's for all the other
Eurozone governments to yield their individual taxation powers and
form a super-government. They won't do that. Their tribal nature
(mankind's instinctive tribal nature) won't let them. So will there
be a catastrophe? Very possibly. Will there be a domino effect on
America? Very possibly, even though it's been trying to ring-fence
itself in the last few days. Will there be a domino effect on China?
Very possibly.
For the past two weeks,Wall Street share prices have been hypnotized
by the political antics going on in Europe. Yesterday, even Germany
couldn't sell all its bonds. Yesterday, America celebrated
Thanksgiving day. Today will be an interesting day.
Keith
Keith Hudson, Saltford, England http://allisstatus.wordpress.com/2011/11/
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