Berlin’s anal retention of Greek debt is ridiculous in the context of broken China
Unusually for me (and it bounced back anyway) I sent an email to the EC this afternoon asking if Germany would be footing the bill for a Summit it kicked off by saying, “We are not budging a millimetre”. As the diktat – a carefully chosen German word – came from Berlin’s Finance Ministry, it represents a gross (another German word) dereliction of duty from Schäuble’s fiefdom of bile. It would have been courteous to the taxpayers he so often claims to represent, would it not, had the human wheelybin informed us all last week that this was to be their position?
The never-ending American joke about how many people it takes to change a lightbulb has unsurprisingly been applied to the Bundesrepublik in the form of “Ve are NOT changing ze lightbulb!” but in reality what we have here is the EU house heading for complete darkness and thus unable to read the data because the Germans refuse to replace the dead lightbulbs.
Let me try if I may to put all this prancing, preening, scheming, spinning and stamping of clay feet into some kind of context. In the last twenty four hours, the Shanghai index has fallen 8%. A 12th of its value. A lot.
In $US, the losses come to 600bn over that period…four times the real debt owed by Greece after five years of ‘bailout’. In the last fortnight, the Shanghai valuation loss has eradicated over $2.4 trillion in wealth—a figure roughly 10 times the size of the Greek economy.
The European Union – and the Commission specifically – has established since 2008 a reputation for one thing above all: being surprised by every eventuality. The North/South imbalance in the eurozone, the deflationary effects of embracing former Soviet satellites, the North African migrant disaster, the failure of austerity…all of them either surprised the amateur red-carpet thespians on the Great International Stage, or are still being denied as facts. These Amdrams are, in reality, like wannabe celebs pitching up to the Oscars having not gained a single good review in years.
So we can all rest assured that – when China Syndrome destabilises the world’s biggest economy by volume, and contagion charges headlong via Japan and Australia into the West – the EC/Eurogroupe/Creditors/Gangsters/Troika2 or whatever they want to be called this week will be….surprised.
This is not in any way to denigrate the Greeks themselves, whose population may be small but whose resolve deserves our unalloyed admiration. Rather, it is to remind all our listeners how the altered reality that put them on the sacrificial altar of the euro is coming home to roost: the amount the Greeks ‘owed’ in 2010 has gone up – some bailout, huh? – but it still represents a homoaeopathic 0.21% of what Shanghai alone will lose if the bourse nosedive there continues at its current rate.
That said, I must confess to finding myself confused as to what the post-Varoufakis Greek negotiation thinks it is at. After being elected, Syriza called out ‘no more bailout programs’ as a Red Line it would never cross. Now it transpires they’ve asked for three more years of the same. Am I missing something here – what is this going to achieve beyond making the improbable impossible?
On the other hand, perhaps Varoufakis replacement Tsakalotos has taken one look at (a) the Shanghai meltdown and (b) this morning’s hugely convenient ‘glitch’ on the NYSE to decide the Planet is screwed, so what the Hell, let’s just string this out.
But the New York bourse ‘event’ is just one more thing the Troikanauts need to have on their radar. Bear in mind that this time around, however, the self-styled ‘creditors’ are not, on the whole, savvy Wall Street bottom feeders: in this the sequel they are Belgian, German, Dutch, Italian and Finnish. So – more Tower of Babel than Street of Mammon.
Not a peep has come out of any media liaison EC group about the obvious China contagion that almost certainly played some role – however convoluted – in the NYSE trading problem today. The Exchange PRs themselves hilariously promised that it would be “open for the close” – perhaps the Freudian Slip of the year to date – and we’d all do well to note that prior to the glitch, China knock-on was depressing both stock prices and commodity futures.
On a broader canvas, it will no longer do to dismiss glitch events as conspiracy theory. As I’ve tried to point out endlessly over the last ten years, Gold prices, Libor rates, QE, Zirp (and US bullion holdings on behalf of others) all turned out to be blatant fact, not theory. I think we need, from now on, to see every claimed outage as a potential outrage.
* Perispasmos is a Greek word meaning distraction. While the khaos in Europe is distracting from Armageddon elsewhere, that is no conspiracy; rather, it is the triumph of ego over ergo.