Reparations

The current book I am reading is Lords of Finance: The Bankers Who Broke the World.  Great book, long book, and I am one-third through it.

Britain and France borrowed a lot of money from the US to fight WWI.  After the Allies won the war, they pushed the costs of the war onto the Germans, partly in an effort to defray their costs of repaying the US.  The Germans could not bear such a load, and it  led to renegotiations, hyperinflation, etc.

Germany needs to be thankful that eventually the victors gave up pressing their demands, and that after WWII, the Americans not only did not ask for Reparations, but sent the Marshall Plan to rebuild Europe.  Germany is not as merciful as America in the 1940-50s.

But Germany is not as generous toward the Euro-fringe as the the US was toward Germany.  Much as Greece and others cheated to get into the Eurozone, it is not as if intelligent people could not see the dodge.  The Eurozone was/is a political construct to unify Europe.

Now Germany and the rest of the core extends loans to the fringe at rates that they will not be able to pay back.  Now admittedly Greece has problems, but those are Greece’s problems.  If they are not willing to deal with abnormally early retirement, or tax evasion, that is their problem, and they should feel the effects of their idiocy.

But after reading the history of post-WWI Europe, I am less optimistic that imbalances can be easily addressed.  Better that Germany should support its banks, and let the fringe fail.  It would be the best solution for all involved, after all, currency unions have never worked without political union.

The analogy is not exact, but there is a lot of trouble trying to get other nations to go along when it means making capital outflows.  No one in the euro-fringe is ready to send any significant amount of capital abroad.

Personally, I expect this to end with a smaller Eurozone, minus the fringe.  Then the new Eurozone can fight over smaller issues.

My view is that the Eurozone will implode before China or the US implodes.  Personally, I think the US will be the last of the bunch — that’s  just the way of the US, DV.

My main point is to make clear that the instabilities of Europe need not affect the US much.  I invest money looking at the world as a whole, attempting to make money for clients.