A matter of CULTURE or PSYCHOLOGY in Europe?

Are the European and more specifically the Euro-zone problems purely a matter of cultural differences, engrained in generations of ‘Nation Staters’ or something deeper in each nation-people’s psychology?

 

Countries using the Euro de jure Countries and...
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It cannot purely be a difference of political ideology between the leaders and individual nations of Europe that has lead us to the brink of the Euro abyss. But, yet maybe the way the debate and challenges facing Europe are being framed, has a great part to play in it.

 

Europe always seemed to be a halfway house between cultures, trade, ideologies, beliefs and norms. And the fact that the Euro single currency zone was stitched together based on these ‘halfway house’ ideas should therefore not have been a surprise.

 

How long does it take to build a vision? Or rather, why did Europe take so long to get to the chasm, build a rickety Monetary Union bridge, without firming up the foundations that holds together the infrastructure once the traffic crossing that bridge started increasing in volume?

 

If there is something Trade theory should have taught us, it must be that once opportunity (to trade and create wealth) is established, the trickle would eventually turn to a steady stream and the steady stream to an eventual throng. Yet not one European leader or institution foresaw this? Takes us full circle to the original question, namely: “How long does it take to build a VISION?

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The truth might lie somewhere in the nature, establishment and deep rooted psyches of the Europeans themselves. Europe might be the collective noun; yet staunch nation state individualism (the communities we all hunker after) is the actual bedrock and foundation of the people who live in Europe. Unlike the USA, with a common language, full monetary and federal fiscal union, Europe is and will always remain a loosely led together community (but not a collective) of nation states and peoples.

 

Fairness, freedom, equality and openness, some of the most fundamental tenets of a market and community to function properly, are not necessarily on the agendas when ideological political, rather than economic (for the greater good), issues are considered by both politicians, technocrats and bureaucrats in the institutions and fabric at the heart of a (dis)United Europe.

 

Therefore, until and unless we can prize Europeans from there deeply held ‘national interest’ debates and frames of reference, in terms of establishing a common and united front; we feel that there is no hope of sustainably solving the Euro-zone sovereign debt and monetary union problems.

 

A possible mechanism might have to be the establishment of a ‘fourth branch’ of governance, outside the Executive, Legislature and Judiciary, being an outside force or rather an Adjudicator comprised of non dominant European member countries and quite possibly with an Advisory Board consisting of non Europeans themselves, to allow for the establishment of a fair, free and an open implementation of the Legislature’s policy decisions, hence and overseer of the Executive, but an equal to the Judiciary, with a final veto by the citizenry of Europe themselves, as a balancing mechanism, should a stalemate ever arise.

 

The enabling driver of such an European Adjudicator must surely be the Digital Economy with its various platforms and reach extending now and in the future across the ‘Net’ that is European integration.

 

theMarketSoul ©2012

Irony and Downgrade Anger

It is with a little amusement that we scanned through the Economic headlines today, following Standard & Poor’s decision to finally downgrade France’s and other Eurozone nation’s Sovereign Debt rating.  France lost its prestigious triple A (AAA) grade to AA+.

Sarkozy and French anger?  Indeed!

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Off course the irony is that an “outsider market agency” has at last pushed a button it has threatened to utilise, forcing a pause for both governments and investors alike.

But the problem is timing as far as Mr Sarkozy is concerned.  This is a Presidential election year in France, so this comes as a slight humiliation to Mr Sarkozy.  And so it should be! He should be shamed out of office! Therefore, hopefully S&P’s decision will  help the voters and tax payers of France sit up and realise that incompetent leadership and decision making in the Eurozone economies now urgently needs to be ‘punished’.

Thank you S&P, for taking this action, because the actions (or rather inaction) of the Eurozone bureaucracy and leadership so far in addressing the root causes of the multiple crises, is continuing to drag the global recovery off course.

Decisions to circumvent exiting (inadequate) European Institutional frameworks and pulling the wool over European Citizens eyes over the inadequate administrative burdens the bureaucrats have imposed on its Citizenry must finally come to an end.

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Image by slolee via Flickr

Hopefully, we’ll see some slightly more competent new faces in the Eurozone leadership pool and summit photo call line ups very soon… Innovation in Europe might have to start with a new set of leaders?

Countries using the Euro de jure Countries and...
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theMarketSoul ©2012

More and Bigger Europe –Part 2 – It is MORE…

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We pick up from the introductory article by expanding on the issue of MORE Europe, which we did not cover in enough depth.

More Europe

It is without a shadow of doubt that belonging to an enlarged common market has huge beneficial advantages to all its participants.

However, the question of the Cost / Benefit analysis dynamics is never really explored in more detail. Perhaps it is easier to focus on just one or the other of the two interlinked dynamics, but for it to be a balanced appraisal; we need to focus on the interactions of both COST and BENEFITS.

And when the leaders of Europe cannot tell anymore what the difference is between a COST and a BENEFIT of being in a single currency Eurozone, then what chance do the rest of us have? Is our COST the misplaced belief that leaders will make decisions in our best interest that will BENEFIT us in the long run?

But if the COST is the lesson of Moral Hazard, why have they not learnt yet that working towards an orderly default is better than raiding the futures of millions of current and future taxpayers in Europe. The COST of an uncompetitive and stagnating Europe (which has been brewing and developing for a few decades now), is that we have lost the ‘child like’ curiosity of inventing and innovating our why towards sustainable economic development and growth.

Rather than embrace the opportunity to learn from the younger cultural of the Eastern European and Baltic States integration onto Europe, we are in danger of smothering their youthful exuberance with a bureaucratic Welfare State super-state, with a healthy dose of Welfare and Debt dependency for decades to come.

Countries using the Euro de jure Countries and...
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No-one is saying that the transition will be painless, but it seems that most leaders in Europe have forgotten to keep an eye on both the COST and BENEFIT dynamics. Except for the brave decision made by David Cameron on Friday morning.

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Veto the madness and risk what some call isolation, but we here at theMarketSoul call the grasp for our economic sanity.

We can still be part of a common market and then there is still a Common Wealth to leverage, should both the EU and the USA decide to marginalise Britain on the international stage, as some commentators are fearing.

Maybe a true third balancing force and alliance will help us move out of the doldrums of the CRISES of 2008 – 2011 (and quite possibly beyond).

theMarketSoul ©2011

More and Bigger Europe…Is that what we really want?

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Yes, it will be more bureaucracy and bigger financial problems down the line…

We pick up our analysis this week in the dusky glint of the aftermath of the (latest) EU Leader summit to put together a rescue package for the Euro.

More bureaucracy?

The inspiration for this comes for the ‘people pulling the wagon versus the people in the wagon’ analogy utilised by Dan Mitchell of International Liberty.

In an article we wrote earlier this year we very clearly called for INNOVATION as an engine of growth in Europe, yet all the politicians and bureaucrats can deliver are bigger EU institutions, hence, more and more people piling into the wagon!  Aren’t some of us getting not just tired of pulling the wagon, but frustrated and exhausted too.   Are these not some of the ingredients necessary to breed and incubate extremism?

Deutsch: Europäischer Rechnungshof English: Eu...
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Bigger financial problems?

In another of our earlier articles we mentioned the dangers of Moral Hazard.  By not addressing the fundamental problems of big bureaucracy (we are in danger of starting a circular argument here), debt accumulation, regulatory stifling, the ‘EFFICIENCY’ drive will permanently drive INNOVATION (and hence future growth) out of Europe.  Let’s face it, if it was not for the expansion of the EU towards the vigour of the Eastern and Baltic states, there would be no growth and opportunity and Europe would not be an attractive place to do business.

Europe’s maturity (and risk averse cultural norms) are now so engrained and an anchor and drag on innovation that attracting Foreign Direct Investment (FDI) (and purchasers of sovereign debt) will come more and more of a challenge in future.

The brave thing to do, in our opinion, was to stand up for a fragmented Europe, as David Cameron was prepared to do, because to be lead blindly down the alley, just to be beaten and bruised by the rest of Europe, would not only be folly, but a disaster for Britain.

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Only time will tell, but the Eurozone and sovereign debt crisis has dominated the headlines for long enough, and will continue to do so for some time to come…

theMarketSoul ©2011

…and here is some good news…

 

Adding further value to our conversation on The Market eQuation we introduce the concept of the:

RISKed RETURN on MARKET (RdROM) today on 11.11.11.

RISKed RETURN on MARKET adds a counter balance to the Efficient Market Hypothesis and Rational Market Theory, Black Scholes and CAPM, amongst others.

More detail to follow in due course…

theMarketSoul ©2011

The Big Design: Moral Hazard, and the EU

Irrespective of how the twists and turns of the Greek political system plays out over the next few days and weeks, we believe that the Big EU (Eurozone more specifically) players and their leaders only have themselves to blame for Greece‘s seemingly petulant behaviour.

If at the fundamental level we cannot understand that ANY form of bail-out will always support and lead to Moral Hazard, then we have learnt nothing from the past and the more recent debt and financial crisis of the 2008.

Previously we mentioned the ‘Credit Quake’ with lots of after tremors (attributed to Dennis Cox of Risk Reward), will last for a number of years and this is exactly what we have playing out as daily deadlines in front of our eyes at the moment.

However, to return to the point at hand:  The age of economic dilemma of Moral Hazard has reared its monstrous head again and is in danger of ‘nabbing us in the butt’ (yet again), because the leaders of the EU (more specifically the Eurozone 17) do not want to understand that all their actions in supporting Greece is only leading to a more dangerous form of Moral Hazard and flies in the face of the Austrian School‘s ideas of ‘Creative Destruction‘.

Without effective mechanisms in place to deal with European regions at different cycles of development (not even to mention the basic lack of sound  fiscal management), is to ask for problems (on a continuous basis).

Until a sound framework of either full fiscal and monetary union with appropriate checks and balances are rolled out in Europe, with a single capital market instrument (Gilt / Bond or EuroBond) and mechanisms for dealing with localised ‘failures’ of the market to clear itself effectively (never mind efficiently); we will continue to wretch and lurch about with market confidence eroded and leaders running around like headless chickens trying and implementing inappropriate tools for the job a sound framework is supposed to deal with.

It is not more regulation we want.  It is simply BETTER regulation.  It is that simple.

theMarketSoul ©2011