Owning a bit of currency

I’ve long been interested in the idea of alternative currencies. Many have long argued that the current status quo of a few “fiat” currencies regulated by central banks for the benefits of government (and the good ol’ boys network), isn’t in the public interest. I posted last year about a system in one US town where local traders have created their own local currency system. I’ve also made several observations about a future Scottish currency, some admittedly a little tongue in cheek. However some recent experiments online with “digital currencies” are worth discussing, as Simon Cox of the BBC reports.

Several groups, many of them libertarians, have within the last few years set up alternative currencies such as the BitCoin, Liberty Reserve, Flooz or beenz. Such currencies would, so the supporters say, be much less prone to interference by either government policy or the hanky panky antics of banks, indeed they would allow independence from both. i.e. People would no longer even need a bank account anymore. Your boss would pay you via a I-phone app and you could then spend it via a digital wallet, something of particular use in places such as Africa, where practically everyone has a phone but few people have bank accounts (and it’s not exactly safe to wander around with lots of cash) and many African countries have extremely unstable currencies.

However many of these online currencies have proven far from stable. Currently of the four listed above only “Bitcoin” is still in business (although a number of others have started up more recently). The dot-com bubble took out the Beenz and Flooz. Liberty Reserve collapsed as a result of some rather serious money laundering charges leading it to be taken down by the FBI. Indeed Liberty Reserve‘s problems have been symptomatic of the problems afflicting all of these alternative currencies.

Bitcoin too has been prone to large daily fluctuations in its value with bubble’s building and market panics (which sort of makes a mockery of its claim to allow independence from government induced fluctuations in exchange rates). There has been the electronic theft of Bitcoins from mobile phones, illegal “mining” of Bitcoins.
And perhaps more worryingly, bitcoin seems to have become a haven for criminals, notably drug dealers, who frequently use the currency to conduct transactions between each other online.

In many respects one could argue that the woe’s afflicting Bitcoin actually serve to counter many libertarian arguments on currencies rather than prove them. I would argue the problems with global currencies at present are a lack of regulation not too much of it. The reality is that the US, UK and Eurozone are in trouble because the relevant governments were asleep at the wheel in the lead up to the financial crisis. They allowed a massive speculative bubble to build, when they should have been intervening (by for example pushing up interest rates or forcing banks to hold more cash in reserve, cracking down on “casino landlords“, etc.) to head it off. But politicians were too afraid of the short term politics (as it would have meant them deliberately slowing down the economy) to do anything.

Similarly the “solutions” to the crisis have been the equivalent of using a band-aid to treat a severed limb. “Quantative Easing” in the UK and US has given some temporary relief but not solved the underlying problems. And QE has ultimately amounted to punishing savers for the crimes of reckless borrowers. Similarly the Eurozone crisis has seen a lack of proper action, and what action has been taken (such as in Cyprus) has arguably made the problems worse in the long term. Indeed some of these actions may have been responsible for building bubbles in “bitcoin” as scared savers sought a way of getting their money out of the firing line.

By way of comparison, many libertarians also favour the gold standard and argue that if economists knew a bit more about it they’d all be in favour of it too. However economists counter that actually they know full well what the gold standard entails, they remember the events leading up to its abolition and that’s why they’re against it! (and that libertarians are poor students of history).

I’m somewhat on the fence about this incidentally, but tend to come down on the side of the economists (even thought there not exactly my kind of people!). Although I did come across this site awhile ago that backed the idea for an energy backed currency (where say every dollar would be backed up by say 10 kWh’s worth of energy).

And similarly Bitcoin and its contemporaries suffers from the same problem, those behind it are letting their ideology run counter to economics. Or as Dr Adam Posen (of the Peterson Institute for International Economics) puts it:

“many of the same right-wing nut jobs who distrust the government viscerally are more likely to believe in bitcoin…it’s those who are angry about being defrauded who are likely to be the ones defrauded again”

Or in another quib:

“…gold is the investment for silly people. bitcoin is gold for people who don’t save…”

The truth is there is a reason why many see the dollar as a safe haven, even thought, thanks to QE, its been weakening in value versus nearly every other major currency since the financial crisis began. But investors are banking on the fact that they believe the US federal reserve will do whatever it takes to defend the stability of the dollar…even if it has to invade countries! (if you believe certain rumours regarding the Iraq war). It’s a case of a dollar in the hand is worth two in the euro bush….and a hundred in the bitcoin hedge!

Unfortunately it would seem that if there’s anything worse than a fiat currency backed up by nothing other than ones trust in “the government”, one has to question how sensible it is to advocate as an alternative a virtual currency that is backed up by nothing at all.

Second class status for UK (or at least England)

And speaking Europe, a group of EU Federalists have gone so far over the weekend to suggest that the UK should be offered some form of “second class” status within the EU. Their logic is that this will settle “the English question” and allow them to move on with a more Federal EU.

While this proposal might seem tempting to the Euro-skeptics I believe it also highlights the dangers to the UK of going down such a route of either EU withdrawal or second class status, as I discussed previously. Numerous professional bodies, including notably the CBI are dead set against any such idea. Why? Because they recognise that UK will be diminishing its powers of negotiation in various matters and might well find itself facing the situation where it has to accept something that all the other member states have agreed too, as a condition for continued trade with the EU.

In short if you’re skeptical of the EU the worse thing you could do would be leave or allow the UK’s veto and influence over EU policy to diminish. As the saying goes, keep you’re friends close, your enemies…even closer.

Indeed the very things the Tory’s moan most about the EU, the European Human rights act or the courts in Strasbourg making inconvenient rulings. These would not go away, the UK would still need to pass some sort of human rights act (if it wanted to remain a member of the EU, NATO, the UN and a host of other international bodies) and set up a form of supreme court to regulate that. I can guarantee you, the very same problems emerging with the Strasbourg court would thus simply relocate to London.

Immigration into the UK would not decline, indeed by shutting the door to the EU the traffic would increase (as those entering the UK to immigrate into the EU would cease to leave and the French would now have absolutely no incentive to stop anyone sneaking in via Calais).

Federal EU and underpants Gnomes
And just to show that the “underpants gnomes school of politics” extends beyond the US congress, Tories, UKIP or the SNP, the EU federalist seem to think:

step #1 – Sort out the UK euroskeptics
step #2 – ????
step #3 – United States of Europe

In reality its not that simple. Pro-EU as I am I would argue that the democratic deficit within the EU would first need to be addressed first. That is to say, a democratically elected and accountable commission and EU president, rather than the current situation of office holders being arbitrary appointed by technocrats in smoke filled rooms. They seem to believe we can sort this problem out afterward, but I would argue it needs to be sorted out before a more Federal Europe emerges.

Without this democratic deficit being addressed a Federalised EU is extremely unlikely to ever be approved by the voting public (we Irish for one will have to have a referendum and think you can guess the result!). Furthermore, as the current crisis in the eurozone shows, it would likely prove unworkable and impractical, an will inevitably end in tears.

The case against a English pull out of the EU

I know I’m a little behind the times here, but last week, there was of course an attempt by several Tories, who’ve clearly been reading the Daily Mail a little too often (tip to Cameron, insist everyone in the Party should not read it anymore!), to try to force a referendum on Britain’s membership of the EU. It was of course roundly defeated as anyone whose vaguely sane, even those like Cameron who are sceptical of the EU recognises that a British pull out would be an utter disaster for the country. But it is worrying when you here various opinion polls by the right wing media claiming as many of 70% of Brits want to leave the EU (of course it has to be remembered that this 70% of Express/Mail/Telegraph readership). But just to get the message across loud and clear let us explore the consequences for an English withdrawal from the EU.

Firstly you will note my use of the “E word”. Haven’t I forgotten about Scotland and Wales you say? Well no, its just you’re assuming that Wales and Scotland are still part of the UK and its likely they will not be. Both these regions have the most to loose from a UK withdrawal from the EU. Euro scepticism is at its strongest in England and relatively low levels in Scotland and Wales. Given the profound implications of a UK withdrawal from the EU would have on them, they would be well within their rights (and of course the nationalist parties in these regions will certainly insist on this) to demand a supplementary question on the ballot paper asking that if England withdraws from the EU that they can choose to stay in by gaining independence (rather than being dragged kicking and screaming out of the EU by England).

As I’ve pointed out in my prior post, the scales are largely balanced against Scottish independence, but excessive or unwarranted interference by Westminster in Scottish affairs could easily swing things in the nationalist favour. So the first casualty of a UK pull out could well be the United Kingdom itself (so it should really be the English Independence Party EIP rather than UKIP).

The second casualty will be the “special relationship” with America. What many forget is that the EU was originally an Anglo-American idea, a sort of “United States of Europe” (as Churchill put it). To the Americans a unified Europe won’t be fight world wars against each other, would act as bastion against communist expansion and most importantly mean they won’t have to learn all those funny European languages and the names of all those countries 😉 . Post-war a good deal of the reason why the Americans have continued this “special relationship” is because they saw the UK as their ally within the EU. Obviously if the UK is no longer in the club, then one has to question whether it is any longer in America’s best interest to maintain this relationship, rather than try to foster better links with the remaining EU countries, or pick another EU member to be their best buddy. Obviously I’m not suggesting they’ll break off relations with Britain (and take they’re Trident missiles back!) or anything like that, but they will certainly be spending more time schmoozing actual EU member states rather than wasting time with the British and inevitably the “special relationship” will then suffer or disappear.

And note that if that sounds far fetched, consider the consequences of Britain’s decision not to join the Euro – best thing that ever happened to Ireland!…or was it the worst thing? Sceptical (and hostile) though America always was towards the Euro, many American multinationals wanted a foothold in what was (and still is) the world’s largest collective economy. With Ireland now the only English speaking nation in the Eurozone, many of these companies choose to base their EU headquarters in Dublin, spurring onwards the Celtic Tiger…to the point where our economy overheated mind! But the fact is, there is a substantial element of the British/US axis that is based purely on the fact that the UK is in the EU. If England leaves the EU altogether, these same International financers will also leave and take their money with them, probably to Ireland or Scotland (if it’s now independent).

The third casualty will be the Commonwealth. If you think about, why in their right mind do the Aussies and Canadians want an elderly German lady who lives thousands of miles away as their sovereign? Why does India want anything to do with its ex-colonial masters? The simple reason why is because the Commonwealth wedges that European trade door open for them and their nations goods. It also make travelling to the EU that little bit easier. Obviously if the UK isn’t in the EU anymore the question will be asked by many why exactly are with in this club? And already many in Australia are questioning the wisdom of the commonwealth. The economic and strategic consequences for Britain of a loss of or breakup of the commonwealth would be quite significant.

Also, as David Cameron knows, it’s better to be in the room than outside it. As the expression goes keep you’re friends close, you’re enemies even closer. One of the things that is really worrying him right now is the fact that the Eurozone countries seem to be forming their own little private members club, within the EU. But at least the UK has some input into any decisions on the EU sovereign debt crisis bailout. If Britain was no longer in the EU, then it can no longer influence nor veto EU policy. Indeed it would learn about EU policy via BBC news rather than by attending summit meetings. Take the financial transaction tax on the table right now. No way that’s going ahead with Britain in the EU , although I have to say that I think its a great idea (but I accept the Tories, i.e. the Eurosceptics, don’t agree with me). With Britain outside…its a strong possibility. And the EU could well make it a condition of doing business in the eurozone that other countries must abide by this FT tax too (or face a 10% punitive tax on all transactions). This would have a very serious impact on the city of London, probably crippling it.

In another example take the Eurofighter. This is basically a taxpayer funded British welfare to work scheme. But with Britain out of the EU the temptation for the Germans and Italians to cancel their orders (buying or licence building Rafale’s or Gripen’s instead) and dump the whole sorry mess on the British taxpayer will be too much for Berlin and Rome to resist. What’s that you say? It will mean 10,000 British jobs going? What’s the German for tough tity! Another example, there is talk about harmonising energy supplies across Europe and having a pan-European energy and climate change policy. Its worth noting that the UK is already dependant, to a limited degree, on French electricity (from nuclear power stations, further note that the owner and likely builder of Nuclear reactors in Britain is a French state owned company) and Russian gas (that reaches the country via European pipelines). Once the UK is no longer in the EU it will be beholden to the risk that important decisions on these matters will be taken that will drastically effect the countries energy supply (read keeping the lights on) that it will be unable to influence or veto in any way. If Scotland leaves too (taking the oil and most of the UK’s hydroelectric and wind energy capacity with them) then basically Britain will permanently find itself a large net importer of energy, at the mercy of international events and decision taken by neighbouring governments.

The UKIP lot will often try to extradite themselves from these obvious dilemma’s by saying oh, we’ll just sign a free trade agreement with the EU. And what makes you think Brussels will agree to a free trade agreement with Britain? It will have nothing to gain from that. At the very least the UK would have to agree to keep on its books much EU law and trading standards as a condition of such a free trade agreement (which from the eurosceptics point of view would largely defeat the purpose of withdrawal in the first place!). And the EU certainly won’t entertain British “interference” in any matter that it now considers as internal EU issue, even if the decision ultimately impacts on Britain (did the EU invite Iceland or Switzerland to the recent economic summit?).

Of course the irony is that many of the things the tabloids frequently blame the EU for, Metrification, Health and Safety culture, the Human rights act, Romanian gypsies and Asylum seekers are of course not the fault of the EU. No, in many cases it is as a consequence of legalisation passed by British parliaments, and in some cases by the conservative party! While the EU may, for example, be in favour of Metrification, Merkel has never put a gun to queen’s head and said “sell beer in half litre glasses or the Corgie’s get it”. This policy has been largely driven by sucessive British governments since the 1960’s (i.e. before the UK even joined the EU in the 1970’s!) for a variety of unrelated reasons.

Pulling out of the EU would not necessarily mean that any of these problems listed above would go away. Actually some of them could get worse. Would the French now make any effort to keep Asylum seekers out of Britain if England’s no longer an EU country? I suspect they’ll start providing free shuttle busses for them from Marseilles to Calais! It’s been generally the contradictory decisions of British judges and a lack of a UK constitution that has got Britain tided up in knots with the Human rights act. Again, without the EU it’s possible this situation will get worse not better. Remember that for Labour and the Lib dems plus many smaller parties the Human rights act is a red line issue; they will not go into coalition (and will walk out of any) government that touches it (of course the same equally goes for EU membership). As soon as the conservatives are out of power they’ll re-impose it. Elf ‘n’Safety is largely a consequence of the more mercenary and litigious nature of modern day British society, again a lack of a British constitution and SAPS (Save Ass Policy Schemes) rather than anything to do with the EU, so no joy here either.

So the end result of a pull out is a probable break up of the UK, a cooling of the relations (and trade) with America, a loss of influence in the commonwealth and a general reducing of Britain….sorry! England’s standing in the world. There would inevitably be economic repercussions and those would largely be negative, hundreds of thousands, perhaps millions of jobs lost sort of stuff. Consider that trade with the EU countries represents 60% of UK’s trade (compared to 16% with the US), representing 3.2 million jobs, or 12% of the entire UK GDP (from a UK government report, supported by academic source here).

This of course raises the question, in the event of a withdrawal, as too how long before Britain has to think about re-applying for EU membership. I’m reminded of this cartoon from the Simpson’s, where Mr Burns has two doors into his office, one for new applicants to work at the plant….and a dog flat for “re-applicants” to crawl through (so he can say “well look who’s came crawling back”). I’ve a sneaking suspicion that the French will be pushing for something similar in the event of an English withdrawal. Certainly the EU is being a lot stricter these days about membership (the clubhouse is getting kind of full!) and it’s highly unlikely that England would be allowed back in under conditions as generous as it currently enjoys. There are a host of laws that without Britain in the room to veto that would get passed and inevitably the UK would now have to take on these laws as a condition for re-entry, plus a couple of other nasties (such as tax harmonisation) which the Germans and French often bring up (when they’re in a “lets yank the brit’s chain” sort of mood!)

Consequently if your pro-European one has to argue that it’s better to be inside the EU and trying to reform it (you will note I have never once suggested that everything is rosy in the EU garden) than outside sulking. And if you’re anti-EU you have an even stronger incentive to be in the EU, as who knows what the Eurocrats will get up!

Goldman Sachs rules the world?

The Beeb was the victim of a brain fart from a NY city trader the other day who let slip what traders really think of the world economic crisis. As he blatantly put it traders “don’t really care that much” about the prospect of an economic collapse and that he “goes to bed every night and I dream of another recession, another moment like this” Why? Because he and his trader buddies can make a ton of money out of such a recession, money incidentally that will ultimately come out of the rest of us mere mortals pockets. Can governments do anything to stop the collapse of many economies, no! According to him “Governments don’t rule the world, Goldman Sachs rules the world”

While I appreciate his candour, and contrary to the rumours online the Beeb has confirmed he’s for real and not a Yes Man, his words confirm what I’ve always felt about the financial markets – they do more harm than good to our economy. Clearly the half assed measures governments are now bringing in after the last economic crisis (4 years too late!) are wholly insufficient. A Tobin tax of some sort, that being a small tax on all trading activity worldwide, would now seem a good idea. This would provide a substantial review stream to fund a variety of projects worldwide (such as climate change prevention and emergency funds to deal with financial crises in the future, p). Also a Tobin tax would reduce the “take” or profit a trader can make from any individual trade while increasing his costs of engaging in speculative trading bets. In short this would greatly reduce the incentive to engage in dangerous and economically damaging speculative betting, possibly to the point of stopping it altogether.

But personally, if this trader is to be believed I’d say that a Tobin tax just doesn’t go far enough anymore. We need to consider a blanket ban on short selling or other mechanisms such as high-frequency trading as well as a crack down on Phantom Share trading (see video on that here). The penalties for violating trading rules needs to be raised higher (mandatory life sentences for certain serious breaches as well as fines equal to the economic damage caused plus punitive damages on top). Indeed I’d even go so far as to question whether it is any longer reasonable to allow financial firms to maintain their “limited liability” clause. This means that currently shareholders or board members can’t be held responsible if the company collapses and leaves behind massive debts beyond its ability to pay back. Even if the shareholders/board members pocketed billions the years leading up to the collapse creditors can’t go after a shareholders personal wealth, even if the companies collapse is clearly his fault (through incompetence or deliberate action). If I go down to the bookies and bet recklessly I loose everything. Is it reasonable for us to allow large financial firms to bet recklessly with our money, loose it all, but make lots of money for themselves and walk away not only scot free but with a massive bonus cheque? And obviously we need to tax these guys more heavily, as I’ve outlined here and here.

And I would remind traders that it is in they’re interest to see things change. There is still huge public anger at the bank bailout and I suspect that if we see another financial crisis where the fat cats profit while main street suffers I don’t think the people will take that lying down. The pressure on governments to do something about it will be fairly intensive. And there are plenty of politicians at the fringes of the main parties, or in populist right wing and socialist parties, who would jump at the chance of doing such things if they were ever elected to power. It will be a little hard for Goldman Sachs to rule the world after the FEC and FBI catch it out breaking various federal trading laws and bang all the traders up in Sing-Sing for a decade or two!

Another disturbing article by the beeb here. It seems the mathematical whiz kids are back using high tech computer programs to plan and implement trading decisions without any human intervention. People who fail to learn the lessons of history are doomed to repeat them! This mirrors the events of the collapse of Long Term Capital Management back in 1998. They had a trading strategy devised by a bunch of Harvard math’s whiz kids and also controlled by computers. However, their model found itself unable to deal with the consequences of good old human irrationality. Consequently when an Alcoholic Yelsin threw his Vodka bottle out of the pram and refused to pay back certain Russian debts, the computers found themselves unable to cope with the turmoil and LTCM wound up insolvent and owing literally Billions of dollars. At the time it was argued (by as many right wingers as well as lefties) that the US federal reserve should sit on its hands and perform no bailout (of either LTCM or the other wall street firms that could also go under if it went down) as well as take the management of LTCM to the cleaners over this debacle. But predictably they did ride to the rescue. This is precisely where the “too big to fail” moral hazard that led to the 2007 financial crisis has its origins, as it showed to companies like Bear Stearns, AIG or Lehman’s that they could screw up royal and the government would ride to the rescue and the bosses who screwed up would get away either scot free or with a slap on the wrist fine and a golden parachute.

Our Gordon-Gecko-is a-Commie-bastard-next-to-me Alessio Rastani also said that if you’re “prepared” for the coming financial crisis they we’ll be okay. Prepared? how? Withdraw that 5 million I don’t have in the bank and put it into US treasury bonds? Sell my soul to Beelzebub? The preparing I’d advise would be nevermind gold (which is now falling anyway) I’d invest you’re savings in canned food, bottled water, firearms (if legal in you’re area!) and maybe a few Molotov cocktails 😉 as we could well be on the verge of a perfect economic storm.

The Eurozone "crisis"…what crisis?

Just got back from me hols in Ireland. Contrary to what you might read about the Emerald Isle in the Daily Mail we are not all on the bread line, nor is a great depression in full swing. Exports are up and we are currently running a trade surplus on manufactured goods. The reason why the rish economy is still stuck in the doldrums is largely due to three things (1) the Irish building industry (home and abroad) has gone from a massive boom to a complete bust with a near full stop in all construction (2) the economic costs of this, notably the effect that its had on the banks (quick summary – they’re all broke!) and (3) the effect this has had on Ireland’s national debt, after we foolishly bailed out some of the banks, which we should have left to go to the wall. It’s the fallout of this building boom and its effects on the banks that acting like a lead weight tied around Ireland’s ankles.

Of course Ireland’s sovereign debt “crisis” is part of a wider “crisis” across the Eurozone. However, what the commentators in London and New York fail to mention, is that in the grand scheme of things €200-300 Billion Euros isn’t a huge amount of money when compared to the whole of the eurozone economy (around a € 8.4 Trillion GDP). Worst case scenario the eurozone might have to perform have a minor default of some sorts. This is of course precisely what the UK and USA have been doing for the past few years with “Quantitative Easing” – or printing more money and giving it away to the banks to put it in layman’s terms. This of course makes the debts the UK and the USA owe worth less (as there are more US dollars or British pounds floating around). However it also punishes savers by reducing the value of their savings and it also amounts to a default on ones loans by the back door. It is of course somewhat Ironic that Ireland, Greece, Portugal and Spain’s credit rating are being cut, due to the “risk” we might default, even though the UK and the USA who are already effectively in the process of defaulting, yet they have AAA+ ratings :??:. Of course the fact that the same spiv’s and speculators who run the big US/UK banks also set the credit ratings and have everything to gain from hammering the Eurozone is just a huge big coincidence ;)!

Don’t get me wrong, several eurozone economies are in a mess of their own making (Ireland included) but it’s also clear that some of the traders in London and New York are taking the opportunity to kick the Irish while we’re down. Many of these traders bet that the Euro house would burn down back in 2009. When it didn’t they now seem determined to make sure it does, even if they have to light the fire themselves. Much of the current debts of these EU countries is a consequences of the high interest rates we’re being asked to pay, not the original debts themselves.

Casing point, as part of Ireland’s IMF bailout the Irish proposed a “hair cut” of the debts owed by Irish banks to international lenders, downgrading said debts by a rate of 2/3’s their original value. In other words the Irish were proposing that those who stupidly lent money to Irish banks in the middle of our housing boom should take some hit for such foolishness, rather than taxpayers (either Irish or Internationally through the IMF). This was also inline with Irish domestic policy which basically said the same thing (the state only puts its hands in its pockets after those who bet foolishly during the boom take a hit). For example, in setting up NAMA to take large property loans off the bank’s the Irish government imposed a 30% “hair cut” on the banks. However, such “capitalist” thinking was shot down by none other than Timothy Geithner the US Treasury Secretary who threatened to veto such a move by the IMF as it would mean US banks (including his former employer’s AIG and Goldman Sachs) taking a $17 billion or so hit. No, Geithner thought that instead governments and taxpayers (Irish, British, European and American ones) should pay the cost of Ireland’s rescue, i.e Main Street should again bailout Wall Street (or in this case Stephens Green).

This is perhaps the wider problem. Yes, the ECB could announce a program of quantitative easing in the eurozone tomorrow. A modest programme of this over several years would wipe out all of these toxic debts relatively quickly. It would also put the cat among the pigeons as far as the rating agencies in London and New York are concerned. They couldn’t cut the eurozone credit rating (which for some countries is only a notch or two above junk status anyway) when the eurozones doing exactly what the US and UK are doing. Indeed they may well have to raise the credit rating to the same level as US/UK even though the Eurozone was now defaulting on its debts via the back door!

Unfortunately the eurozone isn’t run by spiv’s and speculators and the good olde boys network, as London and New York are. It’s run by economists who can add and subtract and who don’t like the idea of burning savers to save foolish gamblers (so the low credit rating of the eurozone is more a reflection of the fact that the rating agencies fear that the eurozone ministers will act responsibly!). There is also a lack of joined up thinking. Despite having a single currency there is a failure of the EU to recognise that this is a joint problem that effects the entire eurozone area. Leaving Ireland and Greece to sort out the mess on our own in a single currency is not only unfair on these smaller countries but in the longer term risky as it means there is a danger of the problems not being fixed effectively and then spreading and growing larger in scale, possibly to the point that they could affect a much larger eurozone economy (such as Spain or Italy) and then we really would have a crisis!

As I see it some sort of “hair cut” (of banking debts) or default by default (such as quantitative easing) is the only way out of the crisis now, its really only a matter of timing. The timing being, how long it takes for the larger eurozone economies to wake up and smell the coffee. And the longer the eurozone dithers the worse the problem becomes.

Bringing back the Punt or the Drachma (as the right wing newspapers in the UK gleefully like to predict) would be silly. Neither currency would survive for very long in the current economic climate and it’s doubtful anyone with half a brain would led to Ireland or Greece if it held its debts in such a small and potentially unstable currency. I also would note that the only people seriously proposing this are far-left political parties (such as Sinn Fein) so it’s a little ironic how right wing hacks seem to like the policies of a hard-left Republican party. Any talk of this (as recently came out in Der Spiegel) is likely just a Greek ploy to wind up the Germans.

Equally the spiv’s and speculators in London and New York and their political lackies need to realise that what goes around comes around. With the very same people who caused the last banking crisis (and the dot com bubble before that… and the bubble before that…and the one before that…:no:) still in charge, all of whom show no sign of having learnt any lessons from the crisis (other than the ease at which they can persuade governments to bail them out) its almost a certainty that another economic bubble will be built up by in the Anglo-American economy (which may already be building in the form of excessively high gold and sliver prices) and burst. When it bursts, expect little sympathy from the EU. Indeed, you can expect a quiet nod from the ECB to French and German currency speculators for permission to go out and screw the UK/US over by doing onto them what they are doing onto the Euro right now (i.e by start a massive run on Sterling or the Dollar). This is a particular issue for the US, as they are making absolutely no effort to tackle their current budget deficit, even with a Democrat in charge. Inevitably once a Republican takes over (and wants to cut taxes, start a war and build a massively expensive missile defence system…or write fuck off china on the moon with a giant laser or something) there is even less chance of this problem being tackled. Obviously once the Chinese and OPEC states realise this, and the current Eurozone crisis is over (but the EU still angry about the behaviour of the US), we are looking at the makings of a perfect economic storm hitting the dollar sometime in the next few years.