The German Luftwaffe is on its way to help Greece by bombing the enemy and to protect its empire. The French are also making statements but unfortunately they are famous for losing wars. Most of us would be surprised to know about the war raging in Europe. For a change all the major European countries are fighting on the same side. Germany and France are all deeply worried as they hear frenetic calls for help from many countries, primarily Greece and Spain, presently fighting at the frontiers after the fall of Latvia and Iceland.
The adversary does not have a standing army and has not fired a bullet yet but is effectively paralyzing country after country in Europe. Is it some terrorist organization emanating from the lawless regions of central Asia or a failed state in Africa? I am sure most of us would be eager to know about this new ‘enemy of Europe’. The enemy is an age-old adversary of profligate governments and has an excellent track record of winning every single war ever since the invention of fiat paper money.
We are talking about an entity called ‘The free market’. It is comprised of battle-hardened people who identify weakness and do not mind losing everything they got to make the best of an opportunity. The mainstream media calls them ‘greedy speculators’ and many other names but they take it in their stride and march on relentlessly. In the financial world, they make up that invisible force behind ‘Darwinian evolution’ and help cull out the weaklings for a better tomorrow.
The weaklings in Europe that were culled out last year were Iceland and Latvia and now it is the turn of Greece and soon it would be Spain, Portugal, Ireland Italy and many more. The list is long but the adversary is untiring and the foot soldiers keep coming like fire ants. The factors that make each country vulnerable are a bit different. Iceland binged on free credit and exotic financial instruments in the heydays of the first decade of the millennium. It was the global leader with the highest density of financial engineers armed with MBAs. Now it is a desolate country as about 40% of its population (of about 0.4 million) have either left or are leaving the country on account of severe stagflation. In plain English stagflation is ever increasing prices and decreasing jobs.
The rulers in Latvia believed in developing the country with other people’s money and borrowed a lot of hot money hand on fist during the days of easy credit. The tide ebbed and the hot money flowed out like a gushing torrent after a flash flood, Latvia lays wasted. With GDP and employment in shrinking in double digits the country has lost the battle and lives in penury while its citizens flee west to make a living. All this did not make headlines last year as these countries are not ‘too big to fail’ but too small to be bothered about as they are in the European union but not part of the European monetary union that shares the currency called Euro.
On eastern front of Europe, Greece is losing and the legendary warrior Achilles seems to be busy nursing his wounded heel at best or confused at worst for he is unable to spot the adversary attacking his compatriots and the denizens of mount Olympus are not helping either. The lords of Europe, Germany and France are now serious about rushing additional troops, as a fall of Greece would mean end of euro and their European monetary union (EMU) empire.
Most of us would be surprised to know as to what happens in the actual battlefield and the rules of the game as well. A country is said to be losing when it needs to borrow more and more at ever increasing interest rates to keep itself in vogue. In this war, a steep drop in the price of treasury bonds is akin to signing on a surrender treaty. The bonds are issued to cover the expenses of the government. Borrowing is the most popular political option in any country as it keeps subsidies in and direct taxes out. About half of working age Greek population is on government payrolls for shirking work and striking at will. Many other purported social welfare measures that reward people for staying from working hard have weakened Greece over the years and have become the vulnerable heels of the nation of Achilles.
Germans have been the most prudent of all Europeans so far but now they have a tough choice that every imperial nations faces. It is a choice between the mother country and the empire and eventually the empire is sacrificed as is evident from history. That’s the reality in future but for now the blitzkrieg is on and the German Luftwaffe is about to drop cash on Greece to ward off the enemy and protect its empire. The French are also making statements but unfortunately they are famous for losing wars not winning. Wars don’t come cheap and the Germans and the French would have to pay a heavy price for this war for the empire that they would eventually lose.
Britain has learned its lessons about empire management and so it did not join the European monetary union. However it is mired in financial problems of its own. The country is an expert at fooling its people about winning a war until the bombs start obliterating London. Quantitative easing or creating money out of thin air and buying government bonds is what is keeping the Brits from realizing that they are losing the war. Inquiring minds are already seeing the effects of the war in empty commercial spaces all across London.
The German Luftwaffe would soon have to fly many sorties with cash round the clock to guard the EMU Empire as Spain and Portugal are also reporting major losses from the western front. Spain has the highest unemployment rate within the EMU Empire and an intransigent housing sector that refuses to wake up. The French contribution, could at best be some wine and saucy literature to keep the troops amused.
Most of us would wish to know as to what it would take for Europe or any other country to win the war. As always ‘solutions to complex problems are often simple’. Restoration of a gold standard and abolition of social security measures will reverse the tide lead to victory on all fronts. Simple solutions are not sweet but are effective.
For those in India, the worst-case scenario could be a repeat of October 2008 if Germany loses the battle (yet again) after fighting valiantly. Dinakarananda and Arthayantra hope the India investor keeps an eye out for our alerts on facebook and AY site and some money in short term debt instruments ready to be deployed when opportunity enveloped in adversity arrives soon. Dinakarananda wishes you all a happy Mahashivaratri.