News & Analysis
Back to the Future ... Millennium-Old Thaler Seen for Northern EU as Elite Dream Dies?
The professors called for study laying out the pros and cons of a return to the D-Mark, or the creation of a new currency or "North Euro" led by Germany, the Netherlands, and like-minded states. The idea of a North Euro -- or "Thaler", the coin of the late Holy Roman Empire -- was first noted by the former chief of the German Industry Federation, Hans-Olaf Henkel. It would let southern EMU states to keep the euro and uphold euro debt contracts. The region could reflate and regain trade competitivenes with a weaker exchange rate. While the letter is unlikely to sway thinking in Berlin, such radical proposals are gaining a wider hearing. Georg Schuh, chief investor of Deutsche Bank's DB Advisers, said the crisis is terminal. "A break-up of the eurozone is very likely. Capital markets have already priced it it. I think we are in the end-phase," he said. – Washington Times
Dominant Social Theme: We need new ideas so why not return to an old one?
Free-Market Analysis: As the EU continues to unravel the idea of a Northern EU complete with its own currency seems to be becoming more feasible.
Top mainstream journo Ambrose Evans-Pritchard is doing a good job of keeping us up-to-date on the desperate proposals floated by various Eurocrats as they seek to salvage the bad job that is the current union.
Previously, we reported on Evans-Pritchard's elaborations about a Euro-wide "sinking fund" that would constitute one or two trillion euros and be backed by Italian and Spanish gold. You can see our article here: "Germany's Backing of Redemption Pact Signals End Game for Europe?"
This sinking fund concept seems the most feasible way of salvaging something that is basically unsalvageable but presumably it, too, is a difficult sell as it demands that Southern Europe part with its gold.
The trouble with all these "fixes" is that at this point they are terribly complicated by political and emotional tensions in Southern Europe. The elites' idea that a certain amount of chaos would inevitably cause a closer political union doesn't seem to be working especially well at the moment.
In fact, as we've indicated regularly, the Internet Reformation has made all such manipulations a good deal more problematic. If people don't know they're being manipulated, then it is fairly easy to do what needs to be done.
But when people distrust the situation and believe those in charge have had a hand in causing whatever has gone wrong, well ... manipulative strategies work a good deal less well in such circumstances. We'd argue that is what's happening now.
And thus it is that numerous remedies are being considered for the unrolling disaster that is Europe. The truth is, of course, that a sinking fund would not address the fundamental difficulty of the euro, which is that half of Europe performs better than the other half.
And so we come to the idea of euro-Lite ... or half-a-euro. This concept does make more sense, as it would address the fundamental problem, which is that there are basically two Europes rather than one.
On the other hand, the Eurocrats now in charge do seem fairly determined to keep the EU together. Evans-Pritchard's article (the one we are focusing on today) mainly profiles the bad idea that is the upcoming dual bailout of Spain and Italy.
The thaler is mentioned as something of an afterthought, though to us that is the most compelling part of the article. A dual currency (thaler in the north and euro in the south) would at least recognize Europe's economic schizophrenia. Here's more from the article:
G20 summit: perils of a half-baked rescue for Spain and Italy ... Germany and France are doubling up on a high-risk gamble. The tentative deal at the G20 summit to mobilise the EU's rescue machinery to douse the raging fire in Spain and Italy comes in the nick of time, but is fraught with fresh dangers ...
Chancellor Angela Merkel and President Francois Hollande have to do something. The market reaction to Spain's €100bn EMU rescue for its banks has been calamitous. Monday's explosive rise in Spanish two-year bond yields was a warning that Spain's crisis would spiral out of control within days, taking Italy with it. Yet the deal explored over ceviche and mango at Los Cabos in Mexico remains murky. Any plan will backfire horribly unless conducted in the right way, and with overwhelming force.
From what we know, the eurozone's leaders aim to deploy the European Stability Mechanism (ESM) to cap borrowing costs for Spain and Italy by purchasing sovereign bonds on the open market. Unfortunately, the ESM fund does not yet exist. It has not been ratified by Germany and Italy. When it does come into being, it won't have much money. It has a theoretical limit of €500bn -- a nice wish -- but its paid up capital will start at just €22bn.
Britain's George Osborne cautioned against exuberance. "One thing we have learnt is: don't expect a single summit to solve the eurozone's problems, otherwise you are going to be disappointed. The eurozone is inching towards solutions."
Inching toward solutions it may be, but this latest bailout sounds dubious indeed given that the ESM "does not exist yet." One wonders for how long Europe's top men and women can continue to offer up unworkable solutions.
A sinking fund or two-track currency are actually more viable than these endless proclamations about assets being brought to bear that actually don't exist yet. Back a fund by gold and you might actually get the market's attention.
The bottom line, as we've written before, is that this is increasingly obviously a manipulated crisis. The power elite that wants to run the world built up the EU with the idea that eventually it would have to surmount the problems it now faces.
They built it up by subterfuge, claiming it was a free-trade zone while planning a new super-state behind the scenes. But now, thanks in part to what we call the Internet Reformation, all that is unraveling like so many other elite dominant social themes.
Frightening the middle classes into giving up wealth and power to globalist institutions via fear-based promotions is how elites have gotten their way for the past 100 years. But the advent of the Internet makes this manipulation increasingly problematic.
It is a risk the elites have taken – one steeped in contempt and arrogance. Now that they are facing the full blowback of their imperious attitudes, alternative solutions are being offered with greater fervor.
The advent of such solutions indicate the desperation that these apparatchiks now seem to feel. A two-track Europe would be a great comedown. Charlemagne's grand vision would be considerably attenuated.
We've argued that the Internet era has considerably weakened elite control over society around the world. That a two-track Europe is even being considered is further evidence of this situation, in our humble view.
If the EU really does split asunder, we'll place the carcass beside that of global warming, the war on terror, Peak Oil, etc. – all scarcity memes that the elites have found increasingly less persuasive in the past decade.
As we've indicated before, the 21st century's conflict is between technology and elite promotional methodologies. The trouble the elites are facing is that every time they address the issue in one place, another trouble spot expands. Elite prophylactics were developed for the 20th century.
Conclusion: But in the 21st, the elites are faced with a problematic process, not a series of episodic challenges. If the EU does eventually split up, or the euro founders, this will constitute a profound elite defeat. The ramifications for the elite's dream of a one-world order would be significant as well.