A short time ago, I was desperate enough to take up position against the current performance of our government in a polemic and critical way. I discussed the great Euro uproar in EURO and EURO 2.
I still find it hard to accept the way in which the media inflate the Euro crisis. And I find it equally hard to see how, in the midst of it, our Federal Chancellor elects herself the rescuer of Europe. Nonetheless, here is an attempt of mine to write a (hopefully) objective – if cynical – afterword on the topic EURO.
As a matter of facts, I do not believe we have a EURO crisis. To me, it looks more like a national debt crisis which currently gets worse for a very simple reason.
Higher interest rates!
Regardless of lower key interest rates.
If you take the interest rates all states inside the European Union (including Germany) have to pay if they take up fresh credit and then compare them with what the European countries still had to pay not too long ago, both for medium and short-term loans, then you are in for a massive surprise. The numbers increased significantly.
Of course, this is a catastrophe for the federal budgets. Even today, we have to use up a considerable part of the budget for repaying debts and interests. Since the interest rates were on the lowest possible level for many years and the loans were partly short-term, this might cause twice or even thrice as much to be repaid in interest out of the budget in a very short time. And that is something that will explode into the face of all European budgets, especially in the country with the absolutely highest debt: Germany.
Now all that remains for us to hope for is that the problem of federal budgets will be solved as softly as possible by inflation. It might just work, because inflation is due, anyway. Just remember the increase in prices, for instance, for property in the 1980ies. They were followed by a long phase of stability of over twenty years. So it stands to reason that it might very well begin again now.
Of course, the scenario also has its negative sides. If, for instance, we assume that prices for necessities climb by 50 – 100 % in a short time while the income from labour only increases by 10 % – 20 %, we are being realistic. Such a development would also cause grave changes, but hopefully not total collapse.
So far, the interest climbing wave has not reached all the borders of the financial market. But I am now predicting that it will be no more than 6-12 months before the interest rates for mortgages will also climb.
The interest earned will also go up, regardless of the amounts of money federal US and European banks throw onto the market (the only thing it can be compared with is the amount of pollutants pumped into the environment by the humans collectively). This will, however, take a little more time. After all, the banks are the world champions in one discipline: increase the interest on debt while not giving the customers suitable interest earned.
🙂 Well, there is only one thing you should do: indebt yourself and invest!
Many things fit into this scenario: the development on the raw material market, the necessary Yuan reassessment, the increased world-wide demand by China and India and a lot more.
Consequently, it will come as it has to come. Neither the hectic way in which our federal leaders force “measures for which there is no alternative”, nor the constant repetition of a mantra full of stupid platitudes will make any difference.
The time when anybody could still have changed anything is long past (if there ever was such a time). Now all that is left to do is enjoy in a morbid way the slow downfall of the European Countries and their Union.
But there is no reason to despair: if you do it the right way, you can live quite well even with inflation. The German history, too, is full of famous examples.
RMD
(Translated by EG)
P.S.
Incidentally, it is rather a surprise to see how little per-capita debt a (crisis) nation like Spain has if you compare it with Germany.
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