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Euro Division
Europeans Back Trump’s German Grievances
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  • WigWag

    “The common European currency has fallen sharply against the dollar because countries like Greece, Italy, Portugal, and Spain are part of the currency union, and fears over their health and the long-term prospects of the euro reduce the value of the currency even as German exports soar. Perversely, this means that a decade of recession and austerity in much of the eurozone feeds the German boom, and the worse things are in Athens and Rome, the better they get in Frankfurt and Munich.” (Via Meadia)

    This is precisely right and its at the heart of Trump’s criticism of the EU and its single currency. But the converse is also true, not only would German Deutch Mark appreciate dramatically in value but for the Euro, but the Drachma, the Lira and other Southern-tier currencies would plunge in value making the economies of the countries issuing those currencies far more competitive.

    Here’s what Professor Mead in particular gets wrong; Europe is not becoming an ever more useless ally of the United States in spite of the EU, Europe is becoming an ever more useless ally because of the EU.

    The EU is killing Europe; the only question is whether the prosperity and security of Europe is still salvageable.

    • ljgude

      The best article I have read explaining some of the forces tearing the EU apart. And a top notch comment. Sadly the EU is structurally flawed with a single currency and something like 28 separate national budgets and fiscal policies. But the biggest problem of all is the EU’s absolute denial that they have a problem. All you have to do is look at the faces of of the EU parliamentarians when Nigel Farage harangues them on these very points. So the EU is toast, and the next question is how and how soon it will come apart. Perhaps the Roman Catholic countries (and Orthodox Greece) who prefer inflation to bill paying could form a new Holy Roman Empire with a highly elastic currency know as the Romo. Personally I would prefer to see the return of national currencies so that each country’s currency more perfectly reflects its fiscal irresponsibility. But a Romo might give the internationalists cover to carry on the terribly important work of regulating the size of Brussels sprouts.

      • Curious Mayhem

        Agree completely — brilliant comment. It’s the EU itself that is doing the damage. The unbalanced euro currency relationship between Germany and the other surplus countries and the weaker, deficit countries has done terrible damage, and everyone in Europe is now willing to talk about it in public.

        Of course, the large deficits and debts run by the weaker countries are funded by that German surplus. But if Italy can’t make it, then the euro and probably the EU itself are toast.

  • Andrew Allison

    Wait, wait! Trump got something right? Be still my beating heart!

    • Curious Mayhem

      Trump knows where to push the buttons, where the pain points are. He’s like a really good, but completely drunk, chiropractor.

  • Tom_Holsinger

    Germany is the leading European cause of instability in Europe. I.e., European stability requires the breaking of Germany’s long-standing economic model.

  • Dhako

    I am sorry but I beg to differ with Walter in here. In other words, there is a large issue that is at stake in here. But before I get there let me say some of the criticism of the Euro is spot-on. And in fact it’s what everyone who wants to see a strong EU (as one pillar of the multilateral world) are hoping to see. Which means the Germans need to stop obsessing about their “historical ghost” about inter-war period of hyper-inflation and worthless currency, and act by allowing high rate of consumption in Germany and wage inflation to occur. And in that way it will be easy for the southern Euro states to use that German-based economical demand that will be created as a linchpin to come out of that deflationary circle that they are now stuck on. Which means they can then export their way to a prosperity and on the back of that German-led demand.

    However, having said all of that, what this episode on the part of Mr Trump’s administration shows is that they are using the “usual grumbles” in Europe about the over-mighty German’s economy as a way of creating a “wedge issue”, or a handy “cudgel” to which to beat Germany first and then to the Euro Zone second.

    And that desire on the part of Mr Trump’s administration stems from the agenda of essentially wanting to dismantle any regional economic formation (such as the EU) in which the US can’t dominate. And that is the reason Mr Trump was so delighted with Brexit and even congratulated the British Prime-Minister (i.e., Mrs May) for the Brexit outcome in her recent visits to the White-House. And this in turn means, that, just like hungry wolf out for his lunch, Mr Trump’s administration would prefer to deal with individual weak European’s countries that can be picked off one at the time, rather deal with a behemoth like the EU, which can in turn hold its own end in any economical competition against the US. Or for that matter can have its own economical muscle that can withstand anything the US throws up in the negotiation of a trade agreement. Hence, the reason I said it, Mr Trump, is delighted with Brexit, particularly with the hope of destroying the rest of the EU, so that then the US can impose a “one-sided-free-trade-agreement” that is in US’s favor on each individual EU’s states.

    Similarly the reason the US has backed out of the TPP as a multilateral trade-agreement in favor of imposing individual free-trade agreement on each country that would have formed in the TPP, if was allowed to be created it. And of course now those states who originally signed up for the TPP will know what will awaits them if they accept the “version” of bilateral free-trade in which Mr Trump’s administration will bring forth and are determine to inaugurate it.

    Hence these countries will be doing an “economical suicide” on themselves if they accept what he is selling to them, since to him the idea of allowing others to win as much as you will win (even if you win more than them) is essentially non-starter. Which means, his bilateral free trade will be one that will be seen as America winning hands-down and others losing it (not in perception, but in reality on real time basis). This, incidentally, is what awaits Mrs May in her desperate hope of getting some kind of a bilateral free trade agreement with Mr Trump’s America.

    Moreover, his hope (nay, his intention) is to work the disintegration of the EU (while using the over-value of the Euro currency as a weapon to set the southern Euro states against the Northern Euro states). And then force each EU state, that, if they want to export to US, as well as get the “protection” of US’s defensive umbrella (under NATO) then they would have sign his free trade agreement, which will be a “Zero-Sum-game” in favor of America. Of course the notion of saying to any state in Europe that you will only “protect” them against its enemies when they pay America with this kind of one-sided trade deal may come across to them as nothing but a “Mafia-like” talk, and will suitably horrify others, but it surely will gladden the heart of Mr Trump, since in his view this how business ought to be conducted. Even if it’s the business of state-to-state interaction.

    Furthermore, this tactics could also be applied to US’s multinationals, in the sense of saying to them: “that unless they return their manufacturing plants and most crucially of all their supply-chain components makers back to the US, then the US’s government will use its power in taxation and regulation to go after these entities, such as Apple and others who already established a world-wide supply-chain”. And if you were to accept that “offer” from Trump’s administration, then the government will also look favorably to any regulations you may not like, with the view of getting rid off it. Hence it’s going to be (like the Mafia’s movies) an “offer” these US’s multinationals can’t refuse.

    Hence its now evident that Mr Trump will proceed to tear up the rule book of global commerce, proceed to intimidate any small country that refuse to sign up his “bilateral-one-way-trade-deal” that will benefit the US. And for good measure, he is planning to dismantle (as best he can) any larger multilateral trading agreement that doesn’t specifically accept American’s right to win and others to lose. Which means the WTO will be the first casualty when the US will begin either to withdraw from it, or start ignoring its ruling (which will amount to the same thing). And in that sense EU will also be on the cross-hair of this new attack. Even if it comes under the guise of talking up how the Germans are taking advantage of the other weaker EU’s states.

    All in all, we are in for a rough time. For America seems to have decided that the rules it created and the institutions it had established no longer are conducive to US’s interest (as Trump understand that). Or more specifically the US is losing the economical competition under those old norms, rules, and institutions, in which it had created. Hence the best thing to do (according to Mr Trump) is to tear up that globalized world, and return to a nearest that we can get back to a global clean-slate. Or perhaps to an “economical tabula rasa” (as it were). Consequently, whether that is even possible is a moot point since an attempt to achieve that will be made regardless of the cost or the consequences that will follow from it.

    • seattleoutcast

      It is probably in the better interest of each country to trade individually with the United States rather than in one economic bloc. So your idea that driving a wedge between countries is doing a disservice to other countries is wrong. Americans will buy BMWs from Germany whether or not they are part of the EU.

      As far as intimidating smaller countries, there is nothing to stop countries from forming blocs, regardless of Trump’s opinion. (OPEC comes to mind.) And, certainly, other countries may refuse to trade with the US. In fact, many Asian countries may wish to pursue individual trade policies with the US to escape the clutches of China.

      • Dhako

        I think you you are contradicting yourself in here, my friend, regardless of whether you know that or not. In other words, the reason the EU’s member-states are better in dealing with US as a block, in which Germany alone can’t do it, is that of the scale. Which means the American will always buy BMW cars regardless of whether the Germany is in the EU or not. However what you are forgetting is that we are talking about trade deal which will entail, market regulation, rules of origin, labor protections, external tariff, environmental standard, government subsidies, intellectual protection, and all myriad other details that forms the modern trade agreements, whether they be a free bilateral trade agreement or whether they be a multilateral trade agreement.

        Hence, the US can impose its preferred trade regime on, say for example, Austria. But it will be well-nigh impossible for America to do so when Austria comes to the table as a member of the EU. Which means selling things on individual countries or as an individual companies is whole different ball-game when we are talking about a trade deal that “Regularized” two way trade deals.

        Moreover, the reason the US have nixed the TPP was precisely because the US saw it as multilateral institution that will “restrain” American’s bullying in forcing each state in that TPP to accept the American’s definition of trade, in which each country that start having a large trade surplus with America will be brow-beat to reduce that, or else the US will impose a “punitive tariff” on their exports. And since that sort of “unilateral acts” is specifically precluded from the multilateral outfit like the TPP, is the reason – and the sole reason – Mr Trump had reneged on, and decided to abandon it.

        As for these states in the pacific wanting to make a bilateral deal with US in-order to escape the clutches of China (as you alleged), that is another delusion that will be shattered when Mr Trump start offering a bilateral deal to these nations. And he then will find out that since the TPP was destroyed for no reason other than to give US a better “whip-hand” to which to lash these states if they do not allow the US to have “its cake and eat it” (to quote the Brexit’s delusion about what awaits UK in her negotiation with the rest of the EU) these states (once scorned) are not that enthusiastic for the kind of “trade deal” Mr Trump is selling.

        And in fact as soon as the TPP was dead, the pacific states who were going to be the members of the TPP have wasted no time in “queuing” up to join the Chinese multilateral trade deal call the RCEP. Hence so much for your fiction that says these states are “chomping at the bit” to join what Mr Trump is flogging to them. But we shall see.

        • Tom

          No, Dhako, you’re still not the center of the world. Deal with it.

      • Curious Mayhem

        Precisely. Bilateral agreements are already the trend now and will become even more so in the future. The era of big multilateral agreements is over. It started to end 10 or 15 years ago, if anyone noticed.

  • QET

    Germany making life miserable for the rest of the world? Again?

    Who thinks Merkel’s immigrant follies are intended to divert the world’s attention away from German predations?

  • PCB

    In my view, Germany has finally achieved with the EU what it was unable to achieve in two World Wars; and with never having to have fired a single shot.

  • Jacksonian_Libertarian

    The best solution for America to balance foreign trade, is to payoff all foreign holdings of US Treasuries $6+ Trillion. These US Treasuries were accumulated by our crooked trading partners in order to reduce the supply of Dollars in their economies, raising the price of the Dollar in their currency, and giving an unfair price advantage to their exporters. By paying them off all at once, their economies would be flooded with Dollars, and it would be America that has a price advantage for the first time in over 40 years.

    The question becomes: Why did America let them manipulate our currency like this? The answer: During the cold war America felt trade was the best way to inject the superior American culture into foreign countries, and thereby make them more like us, reducing the chances of war. So, America began trading away its working class’s interests and allowing currency manipulation, in order to tear down trade barriers, and the Iron Curtain. It was a brilliant strategy. It uplifted 2 or 3 billion people up out of abject poverty and squalor. But now it’s time to rebalance foreign trade, and the first step is to payoff all foreign holdings of US Treasuries, and renegotiate unfair trade treaties from a position of Power!

    This would also present the opportunity to privatize Social Security. The $6+ Trillion in US Treasuries could be combined with the $2+ Trillion already sitting at the Federal Reserve Bank, and individual SS accounts created for every naturally born American. This is the perfect time to do this, now that the blue model is crashing.

  • Mark Byron

    Three items might explain the trade surplus; money sent “back home” by immigrant workers (unilateral transfers in Forex-speak), EU tax money that flows to the poorer regions, and purchases of southern European bonds to help finance budget deficits there. Germany needs to get the money for all three from somewhere, and a trade surplus is the likely sourse

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