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Contagion Affects Europe

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Contagion Affects Europe

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Deepening European crisis.

by Stephen Lendman

Europe keeps sinking deeper into financial crisis. Eurozone straightjacket rules force 17 dissimilar countries to live by one size fits all diktats. Flawed planning preordained eventual disaster.

Monthly more systemic cracks emerge. Money creation alone prevents collapse. That game only works for so long. 

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An unstoppable slow motion train wreck promises to be ugly on impact. Too much damage was done to undo it. When it's coming who can know. Only Cassandra was good at forecasting. Her specialty, however, wasn't calling economic peaks and troughs.

Greece is most troubled. Conditions there go from bad to worse. Insolvency approaches in weeks without more cash. The more it gets, the greater amounts needed.

The Eurozone experiment is in crisis. Bailouts and fixes don't work. Grexit is inevitable. Economist Nouriel Roubini says leaving in an orderly fashion buys time but nothing else.

Other conservative analysts and euro system apologists think it's coming later this year or next. Disruption will follow. In July 1997, Thailand's baht devaluation was thought too insignificant to matter. The Asian economic crisis followed.

Thailand's economic weakness affected the region. At the housing bubble's peak, so-called experts said it reflects only 5% of GDP. Again they got it wrong. Its decline had a disastrous multiplier effect. Financial instability keeps increasing.

Expect worse when Greece exits. The ECB alone holds 50 billion euros of Greek debt. Default will hit hard. Banks with large holdings will feel it. Breaking up is hard to do.

An ugly divorce seems likely. Ellen Brown suggested five creative alternatives.

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(1) "The open marriage." Adopt a dual currency system. Combine the drachma and euro. 

Better still, adopt the Argentine solution. It works. 

From April 1991 - January 2002, Argentina maintained a currency board. The Argentine peso was pegged one for one to the dollar. Massive fiscal deficits accumulated.

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I was born in 1934, am a retired, progressive small businessman concerned about all the major national and world issues, committed to speak out and write about them.

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