Tonight we discussed the Eurozone crisis, mainly via this article presented by Roger:
The article focuses on the conflict in the EU between advocates of a stronger central banking authority, led by the European Central Bank (ECB), and Germany, which opposes greater centralization (i.e. pooling national debts). All of this comes after interest rates on Italy’s bonds exceeded 7%, Belgium’s credit rating got downgraded to AA+, and even Germany had a weak bond auction (bad because Germany has been the economic powerhouse for the EU). Banks are responding by hoarding capital and giving fewer loans, which threatens to send the Eurozone into recession.
The ECB is now trying to push through a proposal for a European Stability Mechanism, which would have the authority to draw on a pool of $700,000 billion euros to ‘bail out’ struggling countries by buying their bonds (debt). It would have legal immunity, no democratic oversight, and the authority to increase that pool without individual countries being able to do anything about it.
We talked about how the proposed ESM and the current ESFS (European Financial Stability Facility) are just surrogates for more or less what we have in the U.S. — a quasi-autonomous Federal Reserve with the authority to set interest rates and lend money at will — which would be illegal under current EU law.
We also wondered what would be the effect of individual countries choosing to go off the Euro and whether the resulting recession/depression (b/c investors would pull their money out) would just be short term, or would cause the huge disaster mainstream economists predict. James suggested Greece (which is probably the most screwed right now) could basically move to barter even for international trade and would be better off. There were other digressions (on Malthus, Chris Hedges, and anarchism) but that’s more or less it for the Eurozone.