Eurozone Doomsayer Got it Right – by Stephen Lendman
Eurozone economies are cratering. Every fix tried so far failed. Combining 17 dissimilar countries under one monetary/fiscal system assured disaster waiting to happen.
British economist Bernard Connolly knew it before the euro’s 1998 introduction. His 1995 book titled, “The Rotten Heart of Europe: The Dirty War for Europe’s Money” called it a harebrained idea doomed to fail.
Saying it cost him his job. Maybe he should be running failed economies to fix them one by one. Even laymen can do a better job than current and past officials who wrecked them and ordinary households to pay bankers. More on Connolly’s book below.
On November 17, New York Times writer Landon Thomas headlined, “Words of a Euro Doomsayer Have New Resonance,” saying:
Eurozone countries are “crumbling, just as he had long predicted, yet Bernard Connolly, Europe’s most persistent prophet of doom, still” faces skeptics.
Addressing the Los Angeles-based Milken Institute last spring, he said:
“The current policy of lending plus austerity will lead to social unrest.” Troubled Eurozone countries can’t cut their way to recovery. “And one should not forget,” he said, “that of the four countries (now six) we are talking about, all have had civil wars, fascist dictatorships and revolutions. This is history.”
“And this is the future if this malignant lunacy of monetary union is pursued and crushes these countries into the ground.”
In 1995, Connolly took leave from his job as EU monetary affairs department head for his book. It remains a powerfully persuasive account of the Eurozone’s predicted collapse.
He argued that monetary union would lead to political unification dominated by Germany and France, Europe’s two largest economies. As a result, it had to be pursued quietly because people and parliaments of other Eurozone nations wouldn’t support it.
After publication of his book, Connolly was suspended, then sacked. He’s regarded as the foremost expert on European economic, monetary, and political integration.
Months before the euro’s 1998 introduction, he predicted that one or more of Europe’s weakest countries would face rising budget deficits, troubled economies, and a “downward spiral from which there is no escape unaided. When that happens, the country concerned will be faced with a risk of sovereign default.”
Introduced in 1979, Europe’s Exchange Rate Mechanism (ERM) as part of the European Monetary System (EMS), was intended to propel the continent to one European currency unit (ECU).
ERM never worked. ECU is failing. At issue is duplicity, conflicts of interest, and trapping 17 dissimilar countries in the euro straightjacket, usurping their monetary and fiscal autonomy disastrously.
Connolly said in his book:
“My central thesis is that the ERM and the EMU (European Monetary Union, the mechanism which ultimately brought the Euro into technical existence) are not only inefficient but also undemocratic: a danger not only to our wealth but to our freedom and ultimately, our peace.”
He also wrote:
“As we shall see, in France, the long arm of the authoritarian state pressurized dissident economists and bankers, deployed financial information programmes on international TV channels, threatened securities houses with loss of business if they questioned the official economic line, and shamelessly used state-owned and even private-sector banks, in complete contradiction with their shareholder’s interests and Community law, to support official policy.”
“The economic profession in Europe organized literally hundreds of conferences, seminars and colloquia to which only conformist speakers were invited; and the Commission’s ‘research’ programmes financed large numbers of economic studies to provide the right results from known believers.”
In other words, a system doomed to fail was reengineered fraudulently to look workable.
Now consulting for private clients, Connolly has many admirers. Hedge fund manager Nicolas Carn said he “shaped my views on Europe and contributed significantly to my investment performance.”
Chicago Mercantile Exchange trader Yra Harris called him “like no one I have ever met,” adding:
“Each time I talk to him, it’s like I’ve been to Harvard for four years.” He was right way ahead of his time. Today, the Eurozone is slowly collapsing. Connolly may one day write its epitaph, saying I told you so, but you wouldn’t listen.
Global Europe Economic Anticipation Bulletin’s (GEAB) Latest Assessment
GEAB calls America “the epicenter of the global systemic crisis.” On November 23, Congress’ Super Committee must agree on $1.2 trillion of budget cuts or face mandatory 2013 ones. Either way, purchasing power lost means less spending, fewer jobs, and greater public anger than today’s high levels.
Both sides are deadlocked. Failure is assured. Washington’s political system is paralyzed. As a result, expect US debt downgrades and higher borrowing costs with predictable economic consequences.
China’s Dagong Global Credit Rating agency fired the opening shot, confirming another downgrade if Super Committee members fail.
GEAB calls America’s private debt worse than Greece’s. It believes Western banks will be decimated. Crisis conditions are deepening. Rising bond yields signal trouble. Core European debt is being abandoned. France may lose its AAA rating. America’s been overrated for years. So have many European countries.
Compared with rigged higher ratings from S&P, Moody’s and Fitch, Weiss Research rated nine sovereign countries as follows:
For private firms, the lowest investment grade debt is BBB- or Baa3. For Weiss, it’s C-.
Their highest junk grade is BB or Ba1. Weiss’ is D+.
Lower Weiss ratings than C- signify red flags. Notoriously, S&P, Moody’s and Fitch grossly overrate public and private debt because paying clients demand it.
Progressive Radio News Hour regular, economist Jack Rasmus, discussed eight reasons for America’s deficits and debt. He explained that from 2000 – 2011, federal government debt rose from $5.6 – $14.8 trillion, according to Federal Reserve Flow of Funds figures that exclude trillions more from Fannie and Freddie.
Eight reasons stand out, including:
(1) $2.1 trillion in Iraq and Afghanistan war spending. Rasmus calls the figure very conservative as it doesn’t include other war costs related to military construction, department of energy costs, veterans benefits, intelligence, Homeland Security, huge black budgets, off budget secret weapons programs, and other costs plus more for inflation.
(2) $3,150 trillion in Bush administration tax cuts for super-rich Americans already with too much.
(3) $900 billion in Wall Street bailouts. Excluded are trillions of Federal Reserve dollars for troubled banks. The Fed keeps separate books, excluded from US deficit and national debt totals.
(4) $1,896 trillion in Bush and Obama administrations tax cuts and stimulus spending from 2008 – 2011.
(5) $450 billion in unfunded Medicare Part D expense.
(6) $180 billion in “excess inflation costs for Medicare-Medicaid.”
(7) $225 billion in “lost tax revenue (from) 18 million (new) unemployed.
(8) $270 billion in interest.
(4) “(P)rice gouging by health insurance companies and health services providers.”
In other words, Social Security, Medicare and Medicaid aren’t responsible for America’s debt problem. Imperial war spending, bank and other corporate bailouts, tax cuts for the rich, failed fiscal stimulus, and “price gouging by health insurance and health services providers” take full blame.
Nonetheless, American households, working poor and unemployed get strapped with the full burden.
Wall Street crooks, war profiteers, and other corporate scoundrels, including price gouging healthcare providers, got off scot-free to steal again.
No wonder OWS protesters rage against a corrupted system they want changed.
Stephen Lendman lives in Chicago and can be reached at email@example.com.
Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. All programs are archived for easy listening.