May 24, 2012
By Kevin Michael Grace
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A wild week for gold, with the big gains of last Thursday and Friday wiped out and more but a recovery of $11 today. Gold was down (at press time) $15 (-1%) for the week to $1,559.40, and silver was up $0.20 (+0.7%) to $28.26. Various news organizations posited various explanations for the gyrations, with liberal use of the nouns “Greece,” “Eurozone,” “US dollar” and “safe haven.”
Searching for a metaphorical peg for this column, one discovers just the thing, used in this space almost a year ago. So here it is again, Danny from Withnail and I: “Politics, man. If you’re hanging on to a rising balloon, you’re presented with a difficult decision—let go before it’s too late, or hold on and keep getting higher. Posing the question: how long can you keep a grip on the rope?”
Greece has been hobbled and may yet be wrecked, but our world leaders pretend will not let go of the rope. The last hope to save the European Monetary Union as currently constituted vanished when Chancellor Merkel ruled out issuing Eurobonds (as they would violate Germany’s constitution), and yet the talks go on. Ambrose Evans-Pritchard reports that “the smart money crowd” is counting on the risk of Greece’s exit being so discounted that “a brisk—if brief—market rally” would result.
Evans-Pritchard is not so sanguine. He writes, “The danger for Euroland is slow contagion…once the sanctity of monetary union is violated, compounding the underlying crisis as Portugal, Spain, and Italy sink deeper into (policy-driven) debt-deflation.” He points out that nothing EU leaders say can be trusted. Witness the pronouncements: “1. There would be no bailouts. 2. Sovereign defaults inside EMU were inconceivable. 3. EMU exit was out of the question, lunatic and so forth. Every one of these claims has been shown to be untrue.”
“Catastrophic,” is the word used by former Prime Minster Lucas Papademos to describe the consequences of Greek withdrawal from the Eurozone. Evans-Pritchard responds, “This is a religious incantation or possibly just a threat. It would be catastrophic, if EU leaders and the IMF chose to make it catastrophic. That is a political decision. Such shroud-waving borders on political blackmail.”
But one could hardly expect any different from a man who was, successively, professor of economics at Columbia, senior economist at the Federal Reserve Bank of Boston, Governor of the Bank of Greece, Vice President of the European Central Bank, professor of public policy at the Kennedy School at Harvard and senior fellow at the Centre for Financial Studies at the University of Frankfurt.
Consider, if you will, the indignity suffered by Prof Papademos in having to resort to blackmail, indeed having to resort to words. Time was when a mere nod or wink from any of the august members of the International Brotherhood of Smart Guys would put the nations of the world in their place.
The Brotherhood’s media minions are feeling the heat as well. In the Guardian, Gaby Hinsliff faces the dispiriting task of having to explain why a British exit from the EU would be unthinkable. Unfortunately, that “requires having good reason to believe in Europe. And the trouble is that even many of us who feel instinctively pro-European increasingly struggle to articulate precisely why.”
Time was the minions would resort to that old reliable, the argument from superiority. “It used to be easy. If you were irresistibly drawn towards florid men sporting pound sign badges and complaining about ‘political correctness gone mad,’ then you might be pro-withdrawal. Otherwise, not so much.”
Nowadays, however, supporters of another EU referendum include not only Daily Mail readers, UKIP voters and other troglodytes but also, shudder, Labour Party leaders. Oh dear, what is Hinsliff to do? In the event, she resorts to that new reliable, the argument from TINA—there is no alternative. “Britain is no longer just in the club but inextricably of it. No referendum can remove us from an international banking system that has welded one country’s fortunes to another’s through a complex chain of lending and borrowing across borders, a distant echo of the moral obligations binding one human to another.”
So, International Finance equals Liberté, égalité, fraternité? Isn’t the Guardian supposed to be a left-wing paper? Clearly, the binary division of politics into left and right wings which came out of the French Revolution has exhausted its utility. By traditional standards, all political leaders (the “conservative” parties included) are now left-wing, but they are all utterly beholden to bankers, who have always been considered right-wing.
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