STAFF NEWS & ANALYSIS
EU on the Brink?
By Staff News & Analysis - February 05, 2010

The European Commission has ordered Greece to slash public spending and spell out details of its austerity plan within "one month", invoking sweeping new EU Treaty powers to impose a radical shake-up of the Greek economy. Greece's labour federation immediately called a general strike for February 24, dashing hopes that Europe's provisional backing for Greek crisis policies would restore investor confidence. Joaquin Almunia (pictured left), the EU economics commissioner, said tough measures were "extremely urgent" to prevent a further flight from Greek debt. "The huge imbalances from which the Greek economy is suffering are not sustainable in the long run. The fact of the matter is that markets are putting on pressure. This pressure cannot be ignored." Mr. Almunia said concerns have spread beyond Greece to other eurozone countries where public finances are spinning out of control, chiefly Spain and Portugal. "In these countries we have seen a constant loss of competitiveness ever since they joined the eurozone. The external financing needs are quite big," he said. Yields on 10-year Portuguese bonds jumped 21 basis points yesterday as funds switched their fire to the next "domino", questioning whether the government of Jose Socrates can deliver spending cuts without a parliamentary majority. "The lightning rod has been passed to Portugal: who is next – Spain?" asked Marc Chandler, from Brown Brothers Harriman. George Papandreou, the Greek premier, has agreed to a rise in fuel taxes and a partial freeze in public wages to stop the country "falling off a cliff". Even this will not be enough to satisfy Brussels – itself under pressure from Germany and the European Central Bank. The EU's hard-line faction is afraid that fiscal discipline will break down altogether across "Club Med" nations unless Greece first suffers public flagellation. – UK Telegraph

Dominant Social Theme: Challenges to overcome? …

Free-Market Analysis: The fight to maintain the European Union has been joined, and it is not clear what the outcome will be. It is possible that result will be a shrunken EU, even a shattered EU – or perhaps a EU that fights through the difficulties now arising and maintains its federal integrity in some sense. The latter possibility carries with it ramifications of its own, however, having to do with the EU's degenerating economic and regulatory reality and the increasingly questionable status of the euro.

But in this article we want to examine an even larger point, one having to do with investing and dominant social themes. Readers of the Bell, will recall that the EU's unraveling has been a preoccupation of this modest paper, and that the Bell has in fact pointed out that the EU is what could be seen as a power elite promotion – a theme that has been enlarging and coalescing for almost half a century. It is fear-based as all power-elite themes tend to be (a union such as this one is needed to avoid another world war) and the solution is of course authoritarian – power must be delivered into the hands of a few wise men, elected and unelected, who will wield unaccountable power on behalf of hundreds of millions of voter-citizens.

Here are just a few articles (we figure we've written perhaps 30-40 over the past two years) that chart the decay of the EU, and place the inevitability of the present crisis into a referential framework:

Monday, February 01, 2010

The Great Greek Unraveling of the EU

Wednesday, January 20, 2010

Merkel's Germany to Let Euro Die?

Tuesday, February 24, 2009

Germany's Precarious Predicament: Continue to Stand on the EU Gallows or Walk Away

Monday, February 16, 2009

Failure to Save Eastern Europe Will Lead to Worldwide Meltdown

Friday, October 10, 2008

Who is Going to Bail Out the Euro?

We've been aware, based on reader response, that our EU articles may have seemed a bit trivial compared to larger and more pressing investment realities. But as we have tried to show, investing in today's theme-driven world MUST try to take a long-term view when it comes power elite promotions – and the EU promotion to our mind was a most important and weighty endeavor. The unraveling of a dominant social theme can be infinitely more important to one's financial position than the success or failure of, say, an Apple iPad.

Here's a headline from the Drudge report posted yesterday:

BLAME IT ON EUROPE – DOW FIGHTS 10,000 … Dow Tumbling Toward 10,000 … Stocks tumbled 2 percent Thursday, putting the Dow dangerously close to breaking through 10,000, amid worries about the US job market and Europe's ability to get a grip on its debt. Major indexes were down more than 2 percent. Alcoa, JPMorgan and Bank of America led the decline on the Dow Jones Industrial Average. Just one of the 30 Dow components was higher – Cisco. The CBOE volatility index, the market's fear gauge, spiked above 25. Global markets started the day's spiral amid worries about debt in Portugal, Spain and Greece and those countries' abilities to get it under control.

We've pointed our recently that global warming promotion – evidently and obviously an elite meme – has seemingly unraveled for the moment, and with it, astonishingly, some trillions of potential carbon-trading revenue. The ramifications are huge not only for global corporations and banks but also for myriad "green" industries and alternative power utilities and products. The failure, or potential failure, of a power elite meme is a big financial event – and those who are willing to admit they exist and are therefore willing to evaluate them and follow them as the promotions they are, will in our opinion have an advantage over those who are still locked into stock picking, mutual fund diversification, etc.

One can practice, of course, any kind of standard investment methodology, but if one does not understand, or is not willing to accept, that the power elite is seemingly locked in a desperate struggle to retain the credibility of manifold dominant social themes, then one is refusing to recognize the availability of a most important tool. Power elite memes in fact are absurdly easy to spot once one accepts their reality. The impediment to such recognition, of course, is the refusal to accept that one lives in a world in which a privileged few try to manipulate a harried multitude. It is perhaps too depressing.

Then there are those – and we have noticed this recently – who have begun to take the opposite tack. Now that power elite themes are less deniable (and more obvious) commentary is appearing on the ‘Net to the effect that the elite – in its shadowy manner – has decided that the implosion of its memes is a preferable and necessary objective. By detonating the credibility of long-established dominant social themes, the elite (so the logic goes) will so destabilize Western society that some sort of "one world government" will be seen as preferable to the impending chaos.

We are not so sure. We do believe in the existence of an evident obvious power elite, one that has invested time and treasure in current promotions; we find it hard to believe that it would simply sacrifice them, at least some of them, without fighting hard for their preservation. We don't see, necessarily, that the destruction of the global warming meme serves the interests of the elite (not even by bringing "science" into disrepute). We don't see the unraveling of the EU, after 50 years construction, as desirable to the elite either. In fact, a signature of elite themes of course is that they utilize the power of governance to continue to be viable even when they are seen to be otherwise generally discredited.

What is clear to us is that the Internet continues to pose a difficulty to the implementation of elite promotions. Like the Gutenberg press before it, the Internet (in 20 years rather than 100) has destabilized most power elite memes and made some into a laughingstock. There is more to come because the information presented by the Internet has already penetrated popular (Western) culture and the younger generation especially is aware of the gap between the "official" reality and the world as it is. In fact, the Internet's effects have been felt worldwide, and the reverberations in our humble opinion have not fully manifested themselves.

We don't know what is going to happen to the EU, or even to Greece. We've made some informed guesses, but we don't think anyone can say with any certainty. What one CAN do is observe the conversation and decline to interpret these unfolding events as merely serial serendipity. They have a meaning and they are animated by forces we think we understand, at least in a macro way, and hope you do too.

A final point: The above Telegraph article spends a good deal of time concluding something that we have reported on numerous times as well – that the EU is ultimately a German mechanism now and will live and die to a degree depending on what the Germans wish to do or can be harried into doing by the political establishment. This does not mean that the Germans control the EU, in that we believe it is ultimately an Anglo-American creation (historically it certainly was) aimed at providing a stepping stone toward worldwide currency consolidation. But the Germans have a good deal of say within the framework that has been erected. Eyes on Germany, therefore, would be advisable.

EU FlagNOTED: EU instructs Sweden to store all citizen data … The European Court of Justice has told Sweden that it must implement a 2006 measure requiring telecom operators to store information about their customers' phone calls and emails. The European Union directive, known as the Data Retention Directive, was approved by Brussels in March 2006, but Sweden has yet to implement the measure more than three years after its passage. The Swedish government conceded to the court that it had not fulfilled its obligations and assured the court that the EU directive 2006/24 can be expected to pass into Swedish law on April 1st 2010. But hours after the verdict was made public, Justice Minister Beatrice Ask told news agency TT that the government would not be preparing a legislative proposal on the issue prior to this autumn's general election. "The extent to which private companies should be forced to store information about the activities of individuals is an important matter of principle. That's exactly what this is about," Ask told news agency TT. The minister added that the government would at least wait until the completion of an inquiry into police methods, the findings of which are expected to come at the start of the summer. – The Local (Ed Note: Sweden has seemed fairly pro-EU in the past, especially the political class. Wonder if this will make them reevaluate.)

After Thoughts

We'll surely follow this most important (imploding) dominant social theme, as we have in the past. We are sure our readers will, too, as it may ultimately have a goodly impact on their pocketbooks. It may even have an impact on metals markets. If the euro really does unravel, we wonder if that may provide some impetus for a free-banking gold-and silver private-market standard. We're on record as believing that the implementation of such a standard is not so outrageous as it sounds. After all, the idea that the global warming meme would fall into disrepute or that the EU itself would face some fairly difficult challenges may once have seemed far-fetched. But we live in interesting – and even unprecedented – times, as does the elite.

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