The Italian people have had enough of their government’s economic failure, and is refusing to give it more power.
The EU and the euro project have been an economic disaster for all participants, including Germany, which will eventually be forced to write off the hard-earned savings she has lent to other Eurozone members. We know, with absolute certainty, that the euro will self-destruct and the Eurozone will disintegrate.
We know this for one reason above all. The political class and the ECB are guided by economic beliefs – I cannot dignify them by calling them reasoned theory – which will guarantee this outcome. Furthermore, they insist on using statistics that are incorrect for the stated function, the best example being GDP, which I have
This article takes a column written by William Hague for the Daily Telegraph published earlier this week to illustrate the depths of misunderstanding even a relatively enlightened politician suffers, with this mix of nonsense and statistical
Lord Hague basically blames the euro for all Europe’s ills: “…...
Before the euro came into existence, different currencies offered different interest rates, reflecting the
After the introduction of the euro, interest rates for sovereign borrowers converged towards the lowest rate, which was Germany’s. The reason for this was banks could gear up their lending in the bond and money markets to make easy money from the spread between German
These same operatives bent the rules they themselves had originally set to allow countries to join the euro. Under the Maastricht Treaty, budget deficits were to have been less than 3% and government debt to GDP less than 60% for a state to qualify for membership. Neither Germany nor France qualified at the outset. And when it came to Greece, the Greek government simply lied, with the full knowledge and encouragement of the other members. No, Lord Hague, it was the policy makers that were at fault, not the currency itself.
But he continues: “Membership of the euro has put the Italians on a permanent path to being poorer”. Not so. It was the Italians who used cheap euro-denominated money to borrow profligately. They, and they alone are responsible for the mismanagement of their economy and their debt problems, which incidentally now exceed the Maastricht 60% limit by a further 75%.
So, who is policing that?
Lord Hague also trots out the canard about how the euro benefits Germany: “Germans keep exporting easily and running up a surplus, while the Italians struggle and go deeper into debt”. This statement in quotes is undoubtedly true
Lord Hague provides an exception to his argument and conclusion, by citing Germany’s greater productivity and suggesting that the only way out was for Mr Renzi to enact bold reforms to raise Italian productivity to the same level as Germany’s. He doesn’t say what these reforms might be. I can tell him: the new government should downsize from 52% of GDP to less than 40%, the lower the better. The redeployment of capital from government destruction to private sector progression will work wonders. Tax policies should
Finally, Lord Hague’s conclusion, while correct legally, is incorrect from a strictly economic point of view. He states that leaving the euro is a far more difficult problem than leaving the EU, there being no Article 50 to trigger. He implies that if Italy simply returns to the lira, there can be little doubt that it will rapidly collapse taking its banks with it, because Italy’s creditors will still expect to be repaid in euros while the cost of borrowing in lira is bound to increase rapidly, undermining government finances.
However, contrary to everything Keynesians have been taught and in turn
But will it be done? Sadly, there’s not a snowball in hell’s chance, and here we must agree with Lord Hague. In common with their opposite numbers everywhere else, Italian politicians have surrounded themselves with economic yes-men, trained at the expense of the state to justify state interventions in the economy. It has become a
Lord Hague, while respected as a senior British politician is at least not involved in Italy’s monetary or fiscal policies. Far more dangerous potentially is someone with his hand on the monetary tiller, Mark Carney, Governor of the Bank of England. This week he made a speech in Liverpool, which put the blame for the failure of his monetary policies on everyone but the Bankii. He said politicians need to foster a globalisation that works for all. Really? How are they going to do that? He blames economists for been at fault for not recognising “the realities of uneven gains from trade and technology”. But surely, we all know that establishment economists, including the Bank’s own, have an unrivalled track record of getting things wrong. To expect them to suddenly exhibit forecasting prescience is Carney’s personal triumph of hope over reality. Carney berates companies for not paying tax. This is the classic “someone else’s fault” line, and ignores the easily proven fact that money deployed by the private sector in pursuit of profit is productive, while giving it to government is wasteful. More tax paid may be desired by the state, but it is anti-productive.
The Governor then claims the Bank’s monetary policy has been “highly effective” and that “the data do not support the idea that the period of low rates has benefited the wealthy at the expense of the least wealthy.” He has obviously been unable to make the connection between the falling purchasing power of fixed salaries for the low paid and for pensioners relying on interest income, while stock markets roar to all-time highs on the back of suppressed interest rates and injections of money through quantitative easing. Yes, Mr Carney, my middle-class friends have done very well out of their investments and property, thanks to monetary inflation, but they still pay their gardeners and maids roughly the same depreciated wages.
This is relevant not only to the mismanagement of the UK’s economy, but also that of Europe. Carney attracted considerable criticism, rightly, for falsely threatening economic hell and damnation in the event of a vote for Brexit. This presupposes that everything in Europe is considerably better than for Britain on its own, and confirms that his opposite numbers in Europe, who were pushing the same line, have as much grasp of the economic situation as he has. Carney got this as wrong as he possibly could, but there’s no mea maxima culpa.
If Mr Carney and Lord Hague want to
- Source, Goldmoney