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Guest Post: Why The European Union Is Doomed

Tyler Durden's picture


Submitted by Charles Hugh Smith from Of Two Minds

Why The European Union Is Doomed

The structural flaw at the heart of the E.U. dooms it and the euro to either dissolution or radical tranformation.

To understand the structural flaw which dooms the European Union, we need to start with the Union's fundamental financial characteristics.

The European Union established a single currency and trading zone for the classical Capitalist benefits this offered: a reduction in the cost of conducting business between the member nations and a freer flow of capital and labor across borders.

This "liberalization" of trade and capital flows is often referred to as Neoliberal Capitalism: short-hand for opening markets and enabling free enterprise to take on tasks formerly reserved for government (the Central State) or State-sanctioned corporations.

The key feature borrowed from Classical Capitalism is that the risks of enterprise and the investing of capital are (supposedly) transferred from the State to the newly liberalized private sector. But this turns out to be a charade played out for propaganda purposes: when the expansion of credit and financialization ends (as it must) in the tears of asset bubbles deflating and massive losses, then the Central State absorbs all the losses which were supposedly private.

I define Neoliberal Capitalism much differently: markets are opened specifically to benefit the central State and global corporations, and risk is masked by financialization and then ultimately passed onto the taxpayers. The essence of Neoliberal Capitalism is: profits are privatized, losses are socialized, i.e. passed on to the taxpayers via bailouts, sweetheart loans, State guarantees, the monetization of private losses as newly issued public debt, etc.

The Central State benefits from the explosion of tax revenues created by financialization and the expansion of credit, and from the vast swag showered on political parties and apparatchiks by the global corporations.

From a Neoliberal Capitalist perspective, the union consolidated power in a Central State proxy (The E.U.) and provided large State-approved cartels and quasi-monopolies access to new markets.

From the point of view of the citizenry, it offered the benefit of breaking down barriers to employment in other Eurozone nations. On the face of it, it was a “win-win” structure for everyone, with the only downside being a sentimental loss of national currencies.

But there were flaws in the structure that are now painfully apparent. The Union consolidated power over the shared currency (euro) and trade but not over the member states’ current-account (trade) deficits and budget deficits. While lip-service was paid to fiscal rectitude via caps on deficit spending, in the real world there were no meaningful controls on the creation of private or state credit or on sovereign borrowing and spending.

Thus the expansion of the united economy via the classical Capitalist advantages of freely flowing capital and labor were piggy-backed on the expansion of credit and financialization enabled by the Neoliberal Capitalist structure of the union.

The alliance of the Central State and its intrinsic desire to centrally manage the economy to benefit its fiefdoms and Elites and classical free-market Capitalism has always been uneasy. On the surface, the E.U. squared the circle, enabling stability, plentiful credit creation and easier access to new markets for all.

But beneath this beneficent surface lurked impossible-to-resist opportunities for exploitation and arbitrage. In effect, the importing nations within the union were given the solid credit ratings and expansive credit limits of their exporting cousins, Germany, The Netherlands, France, Finland, et al. In a real-world analogy, it’s as if a sibling prone to financing life’s expenses with credit was handed a no-limit credit card with a low interest rate, backed by a guarantee from a sober, cash-rich and credit-averse brother/sister. Needless to say, it is highly profitable for banks to expand lending to credit-worthy borrowers.

At the same time, the mercantilist exporting nations had engineered an immensely profitable fixed-currency zone which kept their exports cheap within importing nations, regardless of whatever imbalances developed. In the pre-euro days, current-account (trade) imbalances between, say, Germany and Italy were resolved by Italy devaluing its currency to the point where German imports became expensive and Italian exports became cheap. That ability to re-balance capital and exports flows was sacrificed by the imposition of the euro on all member nations.

This dynamic is illustrated in this chart:

Credit at very low rates of interest is treated as “free money,” for that’s what it is in essence. Recipients of free money quickly become dependent on that flow of credit to pay their expenses, which magically rise in tandem with the access to free money. Thus when access to free money is suddenly withdrawn, the recipient experiences the same painful withdrawal symptoms as a drug addict who goes cold turkey.

Even worse--if that is possible--free money soon flows to malinvestments
as fiscally sound investments are quickly cornered by State-cartel partnerships and favored quasi-monopolies. The misallocation of capital is masked by the asset bubble which inevitably results from massive quantities of free money seeking a speculative return.

The E.U.’s implicit guarantee to mitigate any losses at the State-sanctioned large banks--the Eurozone’s equivalent of “too big to fail” banks--enabled a financial exploitation that is best understood in a neocolonial model. In effect, the big Eurozone banks “colonized” member states such as Ireland, following a blueprint similar to the one which has long been deployed in developing countries such as Thailand.

This is a colonialism based on the financialization of the smaller economies to the benefit of the big banks and their partners, the Member States governments, which realize huge increases in tax revenues as credit-based assets bubbles expand.

As with what we might call the Neoliberal Colonial Model (NCM) as practiced in the developing world, credit-poor economies are suddenly offered unlimited credit at very low or even negative interest rates. It is “an offer that’s too good to refuse” and the resultant explosion of private credit feeds what appears to be a “virtuous cycle” of rampant consumption and rapidly rising assets such as equities, land and housing.

Essential to the appeal of this colonialist model is the broad-based access to credit: everyone and his sister can suddenly afford to speculate in housing, stocks, commodities, etc., and to live a consumption-based lifestyle that was once the exclusive preserve of the upper class and State Elites (in developing nations, often the same group of people).

In the 19th century colonialist model, the immensely profitable consumables being marketed by global cartels were sugar (rum), tea, coffee and tobacco—all highly addictive, and all complementary: tea goes with sugar, and so on. (For more, please refer to Sidney Mintz’s classic history, Sweetness and Power: The Place of Sugar in Modern History.)

In the Neoliberal Colonial Model, the addictive substance is credit and the speculative and consumerist fever it fosters.

In the E.U., the opportunities to exploit captive markets were even better than those found abroad, for the simple reason that the E.U. itself stood ready to guarantee there would be no messy expropriations of capital by local authorities who decided to throw off the yokes of European capital colonization.

The “too big to fail” Eurozone banks were offered a double bonanza by this implicit guarantee by the E.U.: not only could they leverage to the hilt to fund a private housing and equities bubble, but they could loan virtually unlimited sums to the weaker sovereign states or their proxies. This led to over-consumption by the importing States and staggering profits for the TBTF Eurozone banks. And all the while, the citizens enjoyed the consumerist paradise of borrow and spend today, and pay the debts tomorrow.

Tomorrow arrived, and now the capital foundation--housing and the crippled budgets of post-bubble Member States--has eroded to the point of mass insolvency. Faced with rising interest rates resulting from the now inescapable heightened risk, the citizenry of the colonized states are rebelling against the loss of their credit-dependent lifestyles and against the steep costs of servicing their debts to the big Eurozone banks.

Concurrently, taxpayers and voters in the mercantilistic/exporting member states such as Finland and Germany are rebelling against being saddled with the ever-rising costs of bailing out their weaker neighbors.

Now that the losses resulting from these excesses of rampant exploitation and colonization by the forces of financialization are being unmasked, a blizzard of simulacrum reforms have been implemented, none of which address the underlying causes of this arbitrage, exploitation and financialization.

Understood in this manner, it is clear there is no real difference between the monetary policies of the European Central Bank and the Federal Reserve: each seeks to preserve and protect the “too big to fail” banks which are integral to the Neoliberal State-cartel partnership.

Both are attempting to rectify an intrinsically unstable monopoly-capital/State arrangement--profits are private but losses are public--by shoving the costs of the bad debt and rising interest rates onto the backs of the home-country taxpayers. The profits from this vast arbitrage and Neoliberal colonialist exploitation were private, but the costs are being borne by the taxpaying public.

Any policy maker or pundit who is confident this is a stable arrangement will find his/her confidence was misplaced.

On related topics:

The European Model Is Also Doomed (February 7, 2009)

When Debt-Junkies Go Broke, So Do Mercantilist Pushers (March 1, 2010)

Why the Euro Might Devolve into Euro1 and Euro2 (March 2, 2010)


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Mon, 03/28/2011 - 13:30 | 1109326 Billy Shears
Billy Shears's picture

I've seen the horror. Horrors that you've seen. But you have no right to call me a murderer. You have no right to call me a murderer. You have a right to kill me. You have a right to do that, but you have no right to judge me . It's impossible for words to describe what is necessary to those who do not know what horror means. Horror. Horror has a face, and you must make a friend of horror. Horror and mortal terror are your friends. If they are not, then they are enemies t o be feared. They are truly enemies.
I remember when I was with Special Forces--it seems a thousand centuries ago--we went into a camp to inoculate it. The children. We left the camp after we had inoculated the children for polio, and this old man came running after us, and he was crying. He couldn't see. We went there, and they had come and hacked off every inoculated arm. There they were in a pile--a pile of little arms. And I remember...I...I...I cried, I wept like some grandmother. I wanted to tear my teeth out, I didn't know what I wanted to do. And I want to remember it, I never want to forget. And then I realized--like I was I was shot with a diamond...a diamond bullet right through my forehead. And I thought, "My God, the genius of that, the genius, the will to do that." Perfect, genuine, complete, crystalline, pure. And then I realized they could stand that--these were not monsters, these were men, trained cadres, these men who fought with their hearts, who have families, who have children, who are filled wi th love--that they had this strength, the strength to do that. If I had ten divisions of those men, then our troubles here would be over very quickly. You have to have men who are moral and at the same time were able to utilize their primordial i nstincts to kill without feeling, without passion, without judgment--without judgment. Because it's judgment that defeats us.
I worry that my son might not understand what I've tried to be, and if I were to be killed, Willard, I would want someone to go to my home and tell my son everything. Everything I did, everything you saw, because there's nothing that I detest more than t he stench of lies. And if you understand me, Willard, will do this for me.


Sorry, just had to post it...carry on.

Mon, 03/28/2011 - 13:39 | 1109366 Vergeltung
Vergeltung's picture

awesome scene, from an awesome movie!


Mon, 03/28/2011 - 13:55 | 1109447 AnAnonymous
AnAnonymous's picture

The guy does not like the stench of lies and came up with the story about severed arms.

Just like the Iraqis snatched babies from incubators in Koweit. It must be true because a nurse who was not a nurse but the daughter of a Koweiti ambassador, not on location when it was supposed to happen, testified before the US congress. You cant lie to the US congress, it is perjury. And she could not live in NYC after that. So it must be true.

Mon, 03/28/2011 - 19:32 | 1110672 BigJim
BigJim's picture

You're never in trouble for telling lies the government WANTS to hear, silly.

Mon, 03/28/2011 - 18:54 | 1110562 IQ 145
IQ 145's picture

 The formal Euro financial, or fiscal, arrangements are very interesting; like an alarm clock built by an eight year old; it's missing a couple of little gears.

Mon, 03/28/2011 - 13:28 | 1109327 Sudden Debt
Sudden Debt's picture

Shit happens you know...

and then you move.

Mon, 03/28/2011 - 18:31 | 1110493 IQ 145
IQ 145's picture

 the people who pass the test; "Move First; then the shit happens". Just sayin.

Mon, 03/28/2011 - 13:32 | 1109344 London Dude Trader
London Dude Trader's picture

Bullshit, only an American who's never had a passport could come up with this drivel.

The EU will still be around even when most of the US has become a Spanish-speaking banana republic.

Mon, 03/28/2011 - 13:44 | 1109399 Bearster
Bearster's picture

Only a euroweenie who's only encounters with Americans are on TV and fat stupid tourists could come up with your comment.  The USD is going to collapse--after the other paper currencies.  The US may collapse, but not until after the eurozone is an Arabic-speaking part of the Caliphate.

Mon, 03/28/2011 - 13:52 | 1109411 London Dude Trader
London Dude Trader's picture

I'm from Chicago you idiot, and unlike most Americans I've been to most US states....

Personal attacks are not appreciated.


Mon, 03/28/2011 - 13:52 | 1109436 Horatio Beanblower
Horatio Beanblower's picture


Mon, 03/28/2011 - 14:01 | 1109458 Calmyourself
Calmyourself's picture

Yes, as a transplanted commie from unionized bammy land you start with a lowered expectation of your compatriots..  Eg: very few of us are from Chicago where you need a permit from the union to plug in an electrical socket.  Yes, Chi-boy the U.S. will be here long after the Muslims outbreed the teat-suckling euro trash..  Have you traveled England extensively?  If so you will agree large parts of its cities are reminisent of trash heaps and are reverting quickly.  Scotland's reversion to the mean is nearly complete.

Mon, 03/28/2011 - 14:07 | 1109501 GDE
GDE's picture

You seem happy in believing Europe will become an islamic continent. Am I correct ?

Mon, 03/28/2011 - 15:31 | 1109809 Calmyourself
Calmyourself's picture

That's an interesting characterization of my emotional state.  Do I also seem happy that the demographics in Texas and the southwest of the U.S. show those of Mexican heritage will soon take that area.  If I project that feeling let me reiterate what I have said in the past.  No, the situation in both areas bodes poorly for the U.S. in many ways both tacticallyand strategically.  That does not change the reality on the ground, and the practitioners of Realpolitik will need to factor it in by doing things like Libya.

Mon, 03/28/2011 - 14:24 | 1109581 kaiten
kaiten's picture

I dont know about muslims outbreeding "the teat-suckling euro trash", but here´s what an american demographer thinks about mexicans out-breeding the anglos in the good ole America.



Mon, 03/28/2011 - 15:37 | 1109823 Calmyourself
Calmyourself's picture

Yobs, Chav's, teat-suckling Euro trash, call them what you will but the Euros have more history of living off the beneficience of the state, hence the name. I am well aware of the situation in the sw and am no fan of that demographic situation, see my post above.  Not because I dislike any nationality over another but America or the rebuilding of America will require the most educated and entreprenurial of us to outnumber those of less education.  The Mexican state of education generally is poorer than ours.

Mon, 03/28/2011 - 21:33 | 1111131 Vampyroteuthis ...
Vampyroteuthis infernalis's picture

The vatos breed like rabbits. We will soon all be darker.

Mon, 03/28/2011 - 14:03 | 1109476 High Plains Drifter
High Plains Drifter's picture

Tell them, Mr LDT, so they will understand and know. The EU is here to stay. It is written.

Mon, 03/28/2011 - 14:19 | 1109541 Crummy
Crummy's picture

The common economic and trade ties that gave rise to the treaties of Rome and eventually the EU are evaporating in front of your eyes. With no common culture to hold it together what is it that you think will keep the EU from fracturing?


Please, consult your magic passport and report back ASAP.




Mon, 03/28/2011 - 14:20 | 1109559 High Plains Drifter
High Plains Drifter's picture

they do most certainly have a common culture. they are sheep and they are to be controlled and the controllers don't give one good damn about nationalism and differences of opinion.....

Mon, 03/28/2011 - 15:50 | 1109870 Calmyourself
Calmyourself's picture

Cultural cohesiveness is key and they have precious little of that most important of glues.  The Muslim penetration of the EU as a stopgap labor measure to extend the parasitic state is indicative of a great collapse to come starting as economic problems or cultural divisiveness it matters not, it is coming and that right quick..

Tue, 03/29/2011 - 11:04 | 1112771 Buckaroo Banzai
Buckaroo Banzai's picture

There is a big difference between economic collapse and political collapse. Yes, without a doubt, the EU is doomed economically speaking. But just as the Soviet Union persisted as a political entity via the use of force, ignorance, corruption, and moral relativism, so will the EU (and Britain) grind on relentlessly as a political entity, as the people get gradually transformed into animals and the power of the state swells into an Orwellian monster.

Remember, their mission is to crush the United States, as it is the only country left in the world that offers a safe harbor against the global forces of nihilism. Once the US is brought to heel, the way is clear for the satanic globalist fantasy as articulated by Orwell himself: "If you want a vision of the future, imagine a boot stamping on a human face - forever."

Mon, 03/28/2011 - 14:23 | 1109577 Lord Welligton
Lord Welligton's picture

What is it you don't understand about this sentence?

"The structural flaw at the heart of the E.U. dooms it and the euro to either dissolution OR radical tranformation"

Mon, 03/28/2011 - 13:35 | 1109349 bugs_
bugs_'s picture

Nice, thanks.

Mon, 03/28/2011 - 13:40 | 1109372 midnight
midnight's picture

Only a single paragraph is needed to prove how this is all garbage

"Concurrently, taxpayers and voters in the mercantilistic/exporting member states such as Finland and Germany are rebelling against being saddled with the ever-rising costs of bailing out their weaker neighbors."

It's a LOAN at 5+%, idiot. A LOAN. Nobody is giving money away like the Americans had to in 2008



Mon, 03/28/2011 - 15:24 | 1109786 Newsboy
Newsboy's picture

I know you don't know me, but will you please loan me $5?

I'll gladly pay you back with interest when you loan me $10 next week.

Mon, 03/28/2011 - 15:32 | 1109811 akak
akak's picture

Rhetorical bullshit.

A "loan" that both parties, in advance, know can and will never be repaid is simply a giveaway and a bailout, call it what you will. 

Mon, 03/28/2011 - 16:30 | 1110024 midnight
midnight's picture

You're the one with rhetorical bullshit. Show PROOF that will never be repaid or it's meant that way

Mon, 03/28/2011 - 16:40 | 1110057 akak
akak's picture

Showing any proof to an ostrich with his head in the sand is useless.

I imagine that you think that the US Federal Reserve's continued and increasing monetization of the US federal debt is a wise and sustainable policy as well.

Tue, 03/29/2011 - 11:16 | 1112831 Buckaroo Banzai
Buckaroo Banzai's picture

Actually, you're the one with rhetorical bullshit. What you are asking is the same as PROVING that the sun will come up again tomorrow. You can be pretty sure it will, but it's impossible to actually prove it.

Mon, 03/28/2011 - 19:37 | 1110696 BigJim
BigJim's picture

A loan at 5+%... in a mileau of 6+% inflation. Hmmm. Sounds like a good deal to me! As a borrower, of course....

Mon, 03/28/2011 - 20:50 | 1110959 malek
malek's picture

The Americans didn't do that either in 2008.

The problems started only when the loans had to be PAID BACK.

Mon, 03/28/2011 - 13:41 | 1109377 Lord Peter Pipsqueak
Lord Peter Pipsqueak's picture

The horror story that is EMU -European Monetary union is well known,as are all the excesses,fraud and corruption outlined above,and yet the Euro is still an extremely strong currency when compared to the $ qnd the £,both are showing long term bullish flag patterns that look like they are about to break out to the upside.So what do the forex markets know that we don't?If the Euro as a currency and the Eurozone as an economic experiment were so doomed,why would the Euro be so strong against the dollar and sterling?

Mon, 03/28/2011 - 14:28 | 1109599 High Plains Drifter
High Plains Drifter's picture

excellent question and observation.  doomed is one thing that we are. but doomed is not what the EU is , that is for sure. America is doomed unless these lazy boys get off the couch and in the street and quickly too. but you look at the golf channel and rich men are playing golf and the crowd is silent as they tee off etc and there is nothing wrong in the world. you turn on mtv and the quidoes are holding court at jersey shore and partying and drinking and laughing and nothing is wrong. you go to the store and spoiled taken care of american women are driving around in their suv's and talking on their cell phones and going inside and buying things to make dinner for their sweeties and nothing is wrong. so nothing is wrong here in the states. i know this for a fact, because i look around and nobody cares about anything except themselves and nobody thinks there is anything wrong so ..........nothing is wrong..........



Mon, 03/28/2011 - 14:46 | 1109665 zaknick
zaknick's picture

To Pipsqueak's speculation:

I also think that there is more than meets the eye here. I remember Alex Weber's reports being backed by BIS. There are informed guesstimates of a private fortune in Europe worth @ $100 trillion. If this is true, which I believe it is, and this is the same power center behind joooden fetzen in the US and EU, then of course if he signals strength in the euro, PIIGS pecadillo chump change be damned.

Mon, 03/28/2011 - 15:41 | 1109853 Calmyourself
Calmyourself's picture

HPD, many have taken the right pill, but they will fight to preserve the system. I am no martyr, you?

Mon, 03/28/2011 - 13:43 | 1109387 High Plains Drifter
High Plains Drifter's picture

as usual mr smith, the one eyed carpenter and blogger from Frisco,  does not take into account "other factors" . it is not the european union that is doomed. it is the united states. if any leader or politician in the EU gets out of line and off the reservation, so to speak, then something happens to him or her. for example

Mr Haider, Austrian nationalist, gaining popularity is killed in a car wreck. oh my. the classic mossad operation where they make your car speed up and then make you crash and then it looks like the accident just happened.

the new roman empire is going nowhere anytime soon. it is useful now and it will be used.

to think otherwise, betrays a complete misunderstanding of the hidden hand that is at work in this world.

Mon, 03/28/2011 - 14:03 | 1109480 Calmyourself
Calmyourself's picture

Forget all the links, ours simply do not have the balls to take on the MSM..

Mon, 03/28/2011 - 14:18 | 1109542 High Plains Drifter
High Plains Drifter's picture

look at ron paul. all this talk about how he was going to take on the FED. so what has really happened so far? anything of importance? now, all this man talks about is what? oh he doesn't say much auditing the FED anymore does he? he talks of running for President again. Yeh and the sheep will waste their vote on a man who they have chosen to be their leader when he has been there for almost 20 years and nothing of importance has ever come about as a direct result of him being in washington dc.  But its Ron Paul in 2012 for many of them no matter what anyone says. That is the way it is. I have not voted for over 20 years now and I will never vote again in this country, that is for sure. It is a complete waste of time. Like the Bible says in Revelations 13. Who is like the beast and who is there that can make war on him?  Who indeed?  Just a thought from the cheap seats high in the nose bleed section, watching all of this unfold and dreaming dreams.......

Mon, 03/28/2011 - 15:24 | 1109778 Shameful
Shameful's picture

What would you like him to do?  What would you do in his place?  Surly it must be easy for one man to move the system form the inside.  So when are we going to see your congressional run to go be sheriff and clean up the town?

There is only so much any one man can do.  You're saying he is not active enough.  Well fine, go show him how it's done.  But I hate the bagging on the one guy who as at least been throwing out an attempt.

Mon, 03/28/2011 - 16:48 | 1110087 High Plains Drifter
High Plains Drifter's picture

i think he is a stalking horse. a guy who offers hope to the disaffected masses but in the end is controlled by the same enemy we all face. perhaps you are ron paul supporter and you have voted for him. what is it you , you want him to do? if i ran for office and got elected, i might get in trouble very fast, when i started asking questions about the men dressed in black with the funny pigtails, who walk around in the halls of congress......kapiche?

Mon, 03/28/2011 - 18:41 | 1110516 IQ 145
IQ 145's picture

 I'll never forget a David Letterman episode I watched; long, long ago. He promised the "late night" crowd, in the studio in New York, that if he were elected president, he would return power to the people and chop down the plans of the multi-nationals and super corporations; but you would be able to tell that he was sincere because he would be assasinated with two weeks. No one laughed; as a joke it failed. The audience was fairly sophisticated and just took it as an unpleasant reminder of the way it is.

Mon, 03/28/2011 - 21:39 | 1111152 High Plains Drifter
High Plains Drifter's picture

Donald Trump, said that Ron Paul cannot be elected.  The Donald wants to buy the election. He is complete idiot and he would be the biggest joke of a president we have ever had , the present one not withstanding.  That joke that Letterman told is just about the way it is. I am glad no one laughed. Its not like it hasn't happened before. fire in the minds of men. the first revolt was a revolution. The second one was an attempt to break free from the hidden hand. The third one , must be a counter-revolution.

Mon, 03/28/2011 - 17:15 | 1110216 Jack Sheet
Jack Sheet's picture

Probably a simple biological issue - age. With the greatest respect to Mr Paul Sr.


Mon, 03/28/2011 - 14:28 | 1109588 Ahmeexnal
Ahmeexnal's picture

What about Pim Fortuyn, murdered by a moslem extremist?

Are you implying that Allah is a mossad colonel who commanded Fortuyn's death?

The answer is no.

Neither moslems nor jews are to blame for the greed, arrogance, petulance and stupidity of europeans.

Europe is toast. The EU was meant to collapse BY DESIGN and trigger another world war in a continent where national egos are very easy to exploit for such purposes.

Mon, 03/28/2011 - 18:32 | 1109679 falak pema
falak pema's picture

You sound like a professional hit-man now retired. Assuming that you do have first hand knowledge at it, as it is a leitmotif in your posts, like say, 'anti-Reaganomics' is in mine, did you take out any well known high fliers in your life time or was it just small time corporate target practice? Don't feel obliged to reply; we live in a free world.

Apart from that I do share your view that Mr Smith needs to go to the Senate, and use the toilet, but that is only as he does not understand that no European country has 'neoliberal' economic politics in place... except the USA, since Reaganomics days, practiced not by a central bank but by a pseudo-central, in reality, PRIVATE bank, who only reported to its shareholders and protected their interests: those TBTF PD's created by Imperial USA's greatest scions, an ode to their entrepreneurial past like Wild Bill Hickock.

In the annals of Western Civilization, and I measure my words, NEVER HAS SO MUCH FINANCIAL POWER BEEN DELEGATED BY SO MANY TO SO FEW, FOR THE BENEFIT OF PRIVATE INTERESTS THAT BETRAY THE VERY ESSENCE OF CIVILIZATION. One would have to go back to Hitler's election to measure a geo-political event of similar dimensions.

So to come back to Mr Smith and his sleight of hand for transferring the pretended Neo-liberal paradigm to Europe, concocted and practically protected by 'copyright' as 'Reaganomics', imperial America's legacy to economic History, where private profit feeds the centralized 'ferocious' beast and financialized losses are reported in public accounts; Mr Smith exports this true mystification making it into a European centralized concoction. Like the Gulf of Tonkin false flag exercise pinned supposed belligerence on the Vietnamese enemy. Paranoia and bad faith know no bounds in toxic minds fed on hubris, Unable to accept moral defeat or even acknowledge factual truth, inheritance of Socrates going back to our origins. To purport that the current mega-financial crisis started in Eurozone due to it's own inherent corruption of centralized design, instead the ripple effect of USA's toxic tsunami, is a piece of left hand logic that is breathtaking by its audacity. It would have impressed Stanley Kubrick, when he made Dr Strangelove. What a magical bullet this is determining that the Eurozone be chastised like it deserves, instead of being the victim of collateral damage!

So Mr High Plains Raider, you are in good company, but for different agendas!

Mon, 03/28/2011 - 20:52 | 1110972 malek
malek's picture

"that no European country has 'neoliberal' economic politics in place..."

Why exactly was the Euro created in the first place?

Tue, 03/29/2011 - 08:18 | 1112104 falak pema
falak pema's picture

The Euro (SMU) was coordinated to give the european continent more clout in face of USD WORLD DOMINATION as currency reserve, against its inordinate hegemony. It was a defensive monetary strategy in the US age. Not hegemonial strategy. 

The ECB was created to coordinate monetary policy for the SMU. But the fiscal policy was national in EU. This makes the the ECB very weak to ensure 'NEO' liberal policy mixes. It's role as Central Banker is very constrained. As it cannot discuss Economic policy (Fiscal+Monetary) with ANY one central government. It's creation was a MINIMAL agreement involving national concessions to SMU creation. ECB is NOT FED. It did not start the shit hitting the fans in 2008. It will get taken down as Collateral damage...But then we live in the American Imperial age...It's current tough strategy is to protect the German economy against the PIGS collapse...under the effect of collective tsunami that has spread to Euro zone as the Euro private banks have participated in it deeply, once the toxic rip-off started in WS...Now the people pay as in the USA!

Wed, 03/30/2011 - 01:24 | 1115992 malek
malek's picture

Sorry dude, you are mixing vows from ancient times, wishful thinking and official figleafs into some crude worldview of yours.

You are saying the Euro was introduced as a counterweight to US domination? And you mean by mimicking the US currency hegemony somehow the Euro could magically avoid using the same "neoliberal" methods??

Whatever the ECB was designed to be on treaty papers: the Maastricht rule is dead, the no-bailout rule has been circumvented already twice, and the new facilities take away more and more "non-central" government powers and constraints.

The remaining question everybody has to answer for himself is if that was all an unfortunate accident or a planned accident for the Euro.

Wed, 03/30/2011 - 10:47 | 1116818 falak pema
falak pema's picture

what accident do you refer to? There is only one INCIDENT of relevance: US economy melt down in 2008/2009. I don't relate vows from ancient times. I relate the history of Euro construct. YOU CANNOT HAVE NEO LIBERAL economics without fiscal/monetary COORDINATED INTERPLAY.

The "no-bail" outs was circumvented for the 'exceptional' conditions created by the mega-shit drop by US private bankers in 2008. Nobody could foresee such an evil scenario. They tried to cope with it as SURVIVAL of EU, inspite of potential Euro meltdown, is a NON-NEGOTIABLE ISSUE. EU area is now too economically integrated; THE POLITICAL CONSEQUENCES WOULD BE TERRIBLE, UNACCEPTABLE TO ALL.

As for Neo-liberal intentional policy by ECB, as surrogated serfs to their national banking sector, alike US reality, is an impossible FACTUAL reality in EU. CAPITO?

It just isn't possible for reasons above. All Euro can do is APE USD as contrarian shadow OR eventual ally. But the USD LEADS, and it did...over the cliff...

Thu, 03/31/2011 - 20:42 | 1123567 malek
malek's picture

So the problems of Greece and Ireland were caused only (or mainly) by US banks, either as trigger or already in the run-up?
By vows I was referring to things like the Maastricht treaty. Cannot call it a law, as then it would need to have real, enforceable consequences for wrongdoers.

You are talking in too many absolutes: Nobody, non-negotiable, unacceptable, impossible... These are symptoms of ivory tower theory thinking, ignoring real life. How do you prevent the absolutes from being breached? What's plan B???

It leads nowhere to discuss belief systems. Either we talk about facts or we cease discussion.

Mon, 03/28/2011 - 15:01 | 1109710 DavidPierre
DavidPierre's picture


 As declassified U.S. government documents will reveal, American spying and covert warfare agencies will run a heavily financed campaign throughout the 1950s and 1960s with the goal of creating a single European market and political structure.

By amazing coincidence, it's exactly like the current European Union.

Doubtless, the theory is that it's easier and cheaper for the boys in the back room to control one set of politicians and bureaucrats than twenty or thirty different sets.

The instrument designed to bring this new Utopian Europe about is the American Committee on United Europe (ACUE) which is dedicated to funding and directing the European federalist movement.

The first chairman of the ACUE is Wall Street lawyer, General William J. Donovan, former head of the Office of Strategic Services (OSS), the wartime predecessor to the Central Intelligence Agency (CIA).

A memorandum, later declassified, bearing Donovan's signature and dated dated July 26, 1950 gives instructions for a campaign to promote a fully fledged European parliament.

The vice chairman of ACUE is none other than Nazi shyster, Nazi war criminal escape organizer, Rockefeller front man and CIA Director-to-be Allen Dulles.

 The board of ACUE includes Walter Bedell Smith, the first director of the CIA, and a gang of current and former OSS and CIA agents and functionaries and various members and minions of the U.S. ruling class.

The documents, declassified in 2000, prove that the CIA front ACUE financed the European Movement, the most important federalist organization in the years following World War Two, providing more than half of its operating budget.

 Other organizations working towards a European Union, such as the European Youth Campaign, were entirely funded and controlled by the CIA.

The Council of Europe, the European Coal and Steel Community and the proposed European Defence Community were all funded by the CIA's ACUE.

Much of ACUE's own funding came directly from U.S. ruling class via the Rockefeller and Ford Foundations and from American business groups with close ties to the CIA.

Tue, 03/29/2011 - 01:47 | 1111742 Kobe Beef
Kobe Beef's picture

Dear David Pierre,

Source, please?



Tue, 03/29/2011 - 08:25 | 1112122 falak pema
falak pema's picture

boeuf stroganoff!!

Mon, 03/28/2011 - 13:46 | 1109402 alexwest
alexwest's picture

In the pre-euro days, current-account (trade) imbalances between, say, Germany and Italy were resolved by Italy devaluing its currency to the point where German imports became expensive and Italian exports became cheap. That ability to re-balance capital and exports flows was sacrificed by the imposition of the euro on all member nations.

tired of hearing THAT KIND OF NONSENSE.. it just shows
those 'blubbers' ,ooops blogers , know nothing about real world and world trade..

THIS PRINCIPLE OF BALANCING trade via cheaping currency WORKS ONLY IN CASE OF trade of same products.. got it?

no matter how cheap italian lira would be , no matter currency rate nobody in right mind would buy alfa-romea instead of BMW/MB.. its different products..

same for exmaple France / Holland.. no matter of rate gulden/frank nobody would have bought vine from Holland instead fine bottle of Bordeaux...( excl of course
stupid Americans who knows shit about fine food/vines)

so point is ... its not that simple .. read works of great David Ricardo.. its might help


Mon, 03/28/2011 - 14:22 | 1109573 sangell
sangell's picture

Try again! Exchange work in both directions. Your BMW can't be imported as it is too dear. Even if your exports don't increase with devaluation ( unlikely) your imports will fall.

As to Ricardo, his comparitive advantage theory might have had some validity in the 19th century. In the 21st not so much. The concentration of auto manufacturing around Detroit, e.g., was once taught as an example of comparitive advantage. Iron ore from Minnesota could be transported cheaply across the Great Lakes to steel mills on that same littoral and shaped into autos. Now, you can pretty much locate an auto plant anywhere. Japan or Tennessee. Mexico or India. Doesn't really matter where.

Mon, 03/28/2011 - 13:45 | 1109405 Long-John-Silver
Long-John-Silver's picture

The USA crash will be 2-weeks behind the crash of Europe. 

Mon, 03/28/2011 - 14:12 | 1109516 Sudden Debt
Sudden Debt's picture

You're probably right. I don't know about the sequence but who cares :)


Mon, 03/28/2011 - 18:45 | 1110526 IQ 145
IQ 145's picture

 You are probably going to care. The people who pass the test Move First; then the shit happens.

Mon, 03/28/2011 - 13:54 | 1109417 fearsomepirate
fearsomepirate's picture

Here's the problem with your theory:  It's called the United States of America.  People take the "one nation, one currency" thing for granted, but it wasn't so at the beginning.  In fact, unifying the states under a single monetary standard and forbidding interstate trade barriers was a big freakin' deal.  Most of the supposed "structural problems" with the Euro exist within the several states.  Michigan and Texas, for example, have very different economies, their state governments have very different fiscal issues, and Michigan is economically weak while Texas is robust.  Yet in this case, economists don't get confused and blame the problem on the fact that TX and MI are both on the dollar; they usually and correctly point to MI's irresponsible government and anti-business laws and regulations.  And no one contests the fact that free, unfettered trade among the "several states" has made the union far, far richer than if each state had its own currency and could set its own tariffs and trade barriers.  Somehow, the people who think banning trade with Canada would make us rich understand that banning imports of grain from the Plains States would starve New York, not enrich it.  The fifty states are in essence the modern world's first large-scale experiment in nearly completely free trade (you can't buy health insurance across state lines) and a unified currency--and the results have been pretty good, if you ask me.

The real problem in Europe isn't the Euro, it's that we now live in a world where it's taken for granted that literally nothing is worse than a government default, that governments must be enabled to consume and spend at the expense of the very lives of the citizens if necessary.  Banks loaned to the PIIGS at low interest rates on this assumption, and they were vindicated.  The problem is not the Euro, it's that 21st century man lacks the moral clarity to tell the banks and the governments "no more," to deal with the consequences of his own folly, and to learn from his mistakes.  The banks bet that the other EU countries would take the fall for the irresponsible behavior of the Greeks, and they were right.  But there's no technical, structural reason it has to be this way.  The problem is that man looks to government as a god that must be appeased and maintained.

The secret to capitalism is allowing failures to fail, it's that when entities that make stupid decisions are allowed to fall, others learn from their mistakes and make decisions that result in greater prosperity.  But when no one is allowed to fail, paradoxically, everyone does.

Mon, 03/28/2011 - 13:59 | 1109464 john39
john39's picture

Drifter, no real disagreement here...  but, that same hand also runs the U.S.  So the question becomes, how does this play out?  Collapse the U.S. or the Eurozone first?  Hell, why not both at the same time?  economic collapse is not the same thing as empire collapse anyway.  if anything, collapse is the means to an end.

Mon, 03/28/2011 - 14:07 | 1109502 High Plains Drifter
High Plains Drifter's picture

who really knows the time table. even they operate on a need to know basis. only a select few are privy to such info.  Our collapse should have happened in 2008 but it didn't because they wanted a intervention and our spineless traitorous politicians did not stand up for us and instead bent low and kissed their arse's. perhaps like a tsunami, it will happen very quickly i predict. that is of course when the event itself is scheduled and even with the finanical achemy going on, the laws of financial physics will right themselves one way or the other. it is said that no fiat regime has lasted more than 100 years. we are now in year 98. i say we are getting close to the end now. they are pushing hard on many fronts now. those who have eyes can see it.

Mon, 03/28/2011 - 14:25 | 1109578 Stuck on Zero
Stuck on Zero's picture

Gee, did you think that Michigan's problems were caused by corruption in Washington?  The "Free Traders" sold out the midwest to the mercantilists?  GM, Ford and Chrysler pay huge taxes and all the foreign auto companies pay not taxes.  A Buick doubles in price when it goes to Japan.  A Toyota costs half as much here as in Japan.  If Michigan were allowed to issue its own currency and make its own foreigh policy it would be a rich state.

Mon, 03/28/2011 - 14:51 | 1109673 fearsomepirate
fearsomepirate's picture

"GM, Ford and Chrysler pay huge taxes and all the foreign auto companies pay not taxes."

Toyota pays Japanese corporate taxes, which are even higher than in the US.  I could look up what Hyundai, Nissan, Honda, and Kia do, but you are clearly making up your own "facts," and I'm not going to spend hours of my valuable time Googling things when you refuse to do it.

"A Toyota costs half as much here as in Japan."

Because it costs far less to build a Toyota in Texas or Kentucky.  And are you sure it's 50%?  Or are you making things up again?

"If Michigan were allowed to issue its own currency and make its own foreigh policy it would be a rich state."

Because people in the other 49 states would totally quit buying cars made in Alabama, Georgia, Texas, and Kentucky if Michigan imposed steep tariffs on imports and started printing money.  Plus, with everyone in Michigan a trillionaire and immediately spending their paychecks on the scant amount of locally-grown food that Michigan produces (think how many jobs would be created in Michigan if they stopped buying grain from Nebraska!), they'd enjoy Zimbabwe-like levels of growth!




Mon, 03/28/2011 - 15:56 | 1109891 Stuck on Zero
Stuck on Zero's picture

Excuse me.  Toyota pays no tax in the U.S. and no tax in Japan on repatriated profits.  US corporations pay tax here and the dividend receivers pay taxes.  Kentucky handed out half-a-billion in credits to relocate foreign auto plants there.  US cars entering Japan are socked with import fees and VAT.  All taxes are removed from cars exported from Japan. I have personally priced cars here and in Japan. The Japanese are very good mercantilists.

Here's a question for you ... since the cost of labor and materials is less here than in Japan why doesn't Japan build here and export back to Japan?

Mon, 03/28/2011 - 17:16 | 1110220 TK7936
TK7936's picture

"US cars entering Japan are socked with import fees and VAT"

You answered your own question. First of all Japan does build alot of Cars in the US, Second it would make no sense to import them to Japan and pay import fees on there own cars because import fees are based on origin of product not origin of Company.

Mon, 03/28/2011 - 13:55 | 1109435 AN0NYM0US
AN0NYM0US's picture

speaking of doomed (Current top headline via Drudge)

Iranian propaganda video with translation by Reza Kahlili

Mon, 03/28/2011 - 13:54 | 1109438 kaiten
kaiten's picture

Gee, he writes a lengthy analysis, but doesnt even know the difference between EU and EMU.

Mon, 03/28/2011 - 14:00 | 1109463 Urban Redneck
Urban Redneck's picture

The farce of financial sovereignty (fiscal policy) that was allowed to remain after the adoption of the EMU, was VERY intentional.  The intention being that in the event of the inevitable financial crisis caused by conflicting fiscal policies within a single monetary policy, that the central government could strip the last vestiges of financial sovereignty of the member states, as this was not politically feasible at the time of EMU adoption.


The 64 trillion euro question is- Does the maniacal plot to centralize authority succeed?  Or does the entire union survive intact?  Or do the strong expel the weak to maintain the union?  Or do the strong leave the union in disgust, and could the union even survive without the strong?

Mon, 03/28/2011 - 14:10 | 1109510 Alea Iacta Est
Alea Iacta Est's picture

Actually we are all doomed.  Some of us will just get there first.


Nothing like arguing about the dining room furniture while the house is burning.

Mon, 03/28/2011 - 14:12 | 1109515 CJLopez21
CJLopez21's picture

marc faber. . . . "we are all doomed"

Mon, 03/28/2011 - 14:14 | 1109533 raios_parta
raios_parta's picture

Calling this central planning socialist attempt of a union "neoliberal capitalism" is an insult to great men like Hayek and Milton Friedman. I am used to hear the communist union liders thorwing that expression around to spike the anger of the mindless and ignrant masses that listen to them, but I am shocked to read it here.


Mon, 03/28/2011 - 14:31 | 1109610 zaknick
zaknick's picture

Get a clue, slob. This disaster is of Friedman's making. He gave it "respectability" but it is all a fiat scam.

Btw, he worked for the same joooos who financed communism, you putz!


Mon, 03/28/2011 - 18:07 | 1110424 MSimon
MSimon's picture

And we financed capitalism too. Then got them fighting each other. Tidy profit there. Spikes in Jew hatred are extremely good for all kinds of business.


We thank you for your free help.



Mon, 03/28/2011 - 18:12 | 1110435 MSimon
MSimon's picture

Hayek was Jewish?  Who knew?

Mon, 03/28/2011 - 14:14 | 1109536 jmc8888
jmc8888's picture

Actually they merely used the sophistry that tax collections would rise and thus be good for gov't , and the bought off politicians accepted that bullshit.

It was never good for gov't.  Just those that drank the koolaid, who happened to be in gov't, when it was being lobbied for, and implemented.

It was ALWAYS for the big banksters, the big corporations, etc.

It was ALWAYS to screw gov't, and then by extension, the people.

Mon, 03/28/2011 - 14:20 | 1109554 Stuck on Zero
Stuck on Zero's picture

The problem with the mercantilist/consumerist model is that debts cannot be repaid to mercantilists without turning them into consumerists.  For example, Japan is a quintessential mercantilist.  If they decide to stop their export machine and sell US bonds so that they can consume products from the U.S. thirty million jobs get sucked out of Japan and go to the U.S.  How do you get around that?

Mon, 03/28/2011 - 14:23 | 1109562 Alea Iacta Est
Alea Iacta Est's picture

Print Money?  Seems to work for everything else.

Mon, 03/28/2011 - 15:49 | 1109876 fearsomepirate
fearsomepirate's picture

Same way it happens on an individual level.  When I switch from a personal trade surplus (saving money every year) to a personal trade deficit (spending some savings every year), I don't necessarily quit my job.  I might just increase my consumption.  I might work (i.e. produce) a little less.  Same goes on the national're just drawing the circle a little wider.  Increasing your domestic consumption doesn't automatically mean that every single export-related job disappears (have you noticed that the U.S. is one of the world's biggest exporters?  Running a trade deficit doesn't mean we export nothing.).

Mon, 03/28/2011 - 14:25 | 1109576 zaknick
zaknick's picture

And all of this madness is courtesy of


Mon, 03/28/2011 - 15:10 | 1109739 Holodomor2012
Holodomor2012's picture

Same criminals in charge, same outcome.

Mon, 03/28/2011 - 18:03 | 1110403 MSimon
MSimon's picture

That is a cover story run by the real criminals.

Mon, 03/28/2011 - 14:26 | 1109583 THE DORK OF CORK
THE DORK OF CORK's picture

Excellent article - although the consumerist nirvana of the 90s and 00s were a nightmare for me - The Irish landscape and inner life has been ripped apart by infusions of credit heroin with little wealth created - unfortunately anybody who tried to talk sence to these drug addicts were greeted with bile and venom.

The one advantage of the collapse is that you can get a ringside seat on the local vultures who sucked the teat of this whore - they are now biting and probing each other as the dead meat is getting scarce.

In many ways the empty financial savannah is a beautiful vista.

Mon, 03/28/2011 - 15:37 | 1109841 akak
akak's picture

I truly love your way with words, Dork!

Mon, 03/28/2011 - 18:20 | 1110466 falak pema
falak pema's picture

....The one advantage of the collapse is that you can get a ringside seat on the local vultures who sucked the teat of this whore - they are now biting and probing each other as the dead meat is getting scarce.

In many ways the empty financial savannah is a beautiful vista.....

Lol, this is so pungent with black humor.... You can't lose if you have B. O'Driscoll on your side. Guinness for all...cheers n bottoms up!

Mon, 03/28/2011 - 18:53 | 1110549 IQ 145
IQ 145's picture

 Yes. Your inner life is fine. a quiet place in the countryside and good books. As you say, less screeching from the credit whores.

Mon, 03/28/2011 - 14:26 | 1109595 Hannibal
Hannibal's picture
"Why The European Union Is Doomed"

Pure garbage and bullshit.




Mon, 03/28/2011 - 14:58 | 1109700 Jack Sheet
Jack Sheet's picture

So ? What will happen and when ?

Mon, 03/28/2011 - 15:39 | 1109849 Cochise Johnson
Cochise Johnson's picture

This is the 15th year the EU hasn't been able to get an accountant to sign off their books. They steal more than the US Congress, bound to go down first ;-)



Mon, 03/28/2011 - 18:27 | 1110486 falak pema
falak pema's picture

That's because they won't talk to the big four accountants who doctor accounts in the USA. Can't afford to pay those vultures...That's why they'll survive!! 

Mon, 03/28/2011 - 17:10 | 1110175 TK7936
TK7936's picture

Why would Europe give up the euro ,which is stronger than the USD -if the United States wont give up the Dollar ?

Mon, 03/28/2011 - 18:00 | 1110396 MSimon
MSimon's picture

You left out the opium trade:


The Opium Trade

"If the trade is ever legalized, it will cease to be profitable from that time. The more difficulties that attend it, the better for you and us."
-- Directors of Jardine-Matheson

Mon, 03/28/2011 - 18:24 | 1110478 falak pema
falak pema's picture

sounds like derivatives trade in WS...registered in shadow banking ledgers...stashed in tax we you see me now you don't...!

Mon, 03/28/2011 - 19:13 | 1110617 Fiat Money
Fiat Money's picture

"Why the European Union is Doomed" -

Oh, bulls*** !! 

  IF the Euro is "doomed," it is because no one has a solution to the "BRIBERY, WARMONGERING, and SOCIALISM for THEM... social safety-net DESTRUCTION for everyone else"  economic/political EXTORTION  model of the TREASONOUS  Neo-Cons.

"Socialism for them" as in AMERICAN TAXPAYER DOLLARS funding  LUXURY CONDOS on STOLEN Palestinian lands for the most fanatical and ferverent Likudnik "god told us to massacre Jericho" 'settlers.'

 (Although the buildings themselves may be funded by "private" donations; once they are started, the STATE rushes in with ALL the services - water, electric, security, communications, roads -  FUNDED BY the state, = SOCIALISM for them.) 

  GolddamnSachs BLATANTLY BRIBED Greek officials to MASK Greece's  DEBT LEVELS, so GS execs could shove another billion or three in "Economic Hit Man" loans down Greek citizen's throats.   THAT's why Greece is in financial trouble.

    Right down the line, the problem is that the Treasonous banksters DO NOT have to abide by LAWS or stringent accounting - they have BRIBED and BULLIED the politicians in EVERY country in the world,  including our own (America's) treasonous Treasury Secretary, who SAID (on video in hearings) that Congress IS INFORMED of how much the Fed is handing out to member/OWNER banks of the private 'Federal' Reserve banking cabal, when of course even so-called "liberal" Congress-critters and senators like Barney Frank and  "give me a sweetheart mortgage" Chris Dodd are IN THE POCKET of the banksters, so con-gress has NO IDEA  how many TRILLIONS of dollars the banksters have taken in "bailouts" or GIVEN THEMSELVES in dollar debasing "money expansion" (Bernanke's money printing.)

   "STRUCTURAL PROBLEMS' is mighty fancy words for treasury looting, nation gutting  BRIBERY, DECEIT, and FRAUD. 

Mon, 03/28/2011 - 20:04 | 1110788 Vuvuzela
Vuvuzela's picture

Did we declared bankrupcy in '33 ? We meaning the US of A

Some research on the net my point in that direction.

So whos next ?



Mon, 03/28/2011 - 20:46 | 1110944 PulauHantu29
PulauHantu29's picture

Not why, but when will the EU end?

When the Germans get tired paying for all the Bailouts of other less-then-indutrious countries.

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