Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

Slowly, It's All Coming Together


Do you EVER have anything good to say?!


In four days France is scheduled to vote up or down the 300 page EU Constitution, and absent a sudden change of heart, the French will give it the thumbs down. While such news will likely not make the 5th page of most newspapers, I am going to guess that in ten years May 29, 2005 will be looked upon as the beginning of the end of the European Union, and eventually its currency. As I suggested in my very first piece for the 'Ville, this outcome is virtually inevitable, and a phenomenal piece by uber-service Stratfor nails the reasons why. Here are the key excerpts:

"There were two reasons for creating the EU. The first was to build
institutions that would prevent a fourth war between France and Germany. The catastrophic record of European statesmanship created the impulse to tie the hands of European politicians by creating overarching institutions. In other words, transnationalism was designed to overcome Europe's ruinous nationalism.

Second, the European Union, and the European Community before it, were designed to facilitate European prosperity. It was reasonably assumed that a Europe without protectionist barriers would do better than a Europe fragmented into multiple, exclusionary markets. On this level, the EU had a purely utilitarian goal: It was designed for economic ends, and the only justification for its existence was how readily it achieved those ends and how universally it could distribute those benefits across national lines. The European Union was designed to allow Europe to be competitive in the global marketplace.
. . . .

But there is a huge difference in the ways political systems function in
relatively prosperous times and in more austere times. Things that are
acceptable when the economy is healthy become less tolerable -- or
intolerable -- when the economy is weak. This does not mean that the primary issue is economic. The chief obstacle to an EU constitution in France and elsewhere is political and social -- it is the unwillingness to abandon sovereignty. This sensibility is always there, but it is activated when the political ambitions of the new regime interact with hard times. This is doubly the case when people believe that their own problems and votes might have no bearing on the actions or policies of the new political system."

Meanwhile, financial symptoms of this untenable structure are spreading all around. Europe has joined the U.S. in the noise for protectionist measures. For now China is the preferred target, but the underlying economic and fiscal imbalances are growing between European countries as well. In addition, Italy is joining France and Germany in disregarding the Maastricht's deficit boundaries, the mechanical heart of the Euro currency.

I am aware that to loyal Minyans I must sound like a broken record. And it is also likely that none of today's circumstances will probably mean much tomorrow. But the more I step back, the more I grow convinced that these events are yet more pieces of the puzzle coming together. As night follows day, financial imbalances lead to protectionism, which in turn leads to worldwide financial crisis. When Hoofy will ultimately hit the fan, people will look back and blame the General Motors (GM) bonds, hedge funds, or the housing bubble. And in another 75 years, the very root causes of the debacle will be ignored again, and our grandchildren will, once again, be heard arguing that "this time is different."

No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos