Letter From Europe

imageI have been in both Paris and London over the last few days and I would say that the mood here is extremely unsettled. There are two aspects to this unrest. The first is the specter of a kind of 1930’s economic malaise that combines both inflation and currency volatility. The decision yesterday of the Swiss central bank to stop defending the Swiss Franc’s rise against the Euro caused the Swiss market to fall 9% in one day and the Swiss Franc to rise 8% as local traders sold Euros. The general perception is that the European Central Bank is about to embark on a massive “Quantitative Easing” program in order to stop the deflationary trends that are evident everywhere in Europe (with the exception of the Central London property market driven by the influx of money fleeing Russia). The Germans of course cannot get the 1930’s Weimar image of people buying a loaf of bread with a wheelbarrow full of Deutschmarks, and so the thought of printing money to stop deflation fills them with dread.

The central problem of course is that the post 2008 crisis of deleveraging has not played itself out here in the way it has in the United States. In general U.S. Corporate balance sheets are in the best shape in half a century with some companies like Apple, Google and Microsoft having so much cash that they see very little investment opportunity beyond buying back their own shares. That the best Apple could do with its $120 billion pile was to buy a headphone company (Beats) for an inflated $3 billion tells you something. Many Eastern European companies borrowed from Swiss Banks to expand their natural resource and commodity production and now those prices are falling and they will have to repay the loans denominated in francs with devalued local currencies. For Russia the falling oil price has nothing but inflationary crisis signs everywhere.

In the shadow of this economic malaise lies Europe’s second crisis, the Islamic Immigration predicament. The ability of right wing parties in France, England, Germany and Holland to exploit the Charlie Hebdo terror attack will only make a bad situation worse. Here in London the unease with the whole EU project is being exploited by Ukip, the nationalist, anti-immigration party. The coming general election where five parties (Conservative, Labor, Liberal, Green and Ukip) split the vote could make forming a ruling coalition very tricky and could end up looking more like Israeli politics than the world of Winston Churchill. Somehow the French may once again emerge as a model of Liberty, Equality and Fraternity. I think the rallies of last weekend were a model of civility; where Muslims, Jews, Protestants, Atheists, Catholics marched as Citizens of the Republic in solidarity against the barbarity of the Jihadists.

For the U.S., it all has one clear message. We have managed our economy post 2008, far more responsibly than the Europeans, Chinese or the South Americans. Whatever anyone may think of President Obama, we are in a uniquely strong and delevered position in relation to the other world economic powers. But the message that Europe clearly sends is that zero interest rates alone cannot grow us out of the current global stagnation. It’s so clear from this vantage point that our dysfunctional political system needs to do two things in the next year. First, we need to take advantage of falling oil prices to pass a significant national energy tax. There seems to be growing consensus from both Republicans and Democrats alike that now is the time to do this. Then we need to take the billions from those tax revenues and invest them in a massive Marshall Plan to rebuild the crumbling American infrastructure, most of which was built in the 1930’s during the Great Depression. Not a day goes buy when some water main or gas pipeline doesn’t rupture in a major city. Our mass transportation systems are Third World and our bridges are cracking. Putting three million people back to work building this would be an added benefit.

From this perspective “across the pond”, it’s clear that the last 15 years of America playing the global cop in Dick Cheney’s Endless War has spent both our blood and our treasure in a Clash of Civilizations with blowback that we are still unable to contain. John McCain (and maybe even Hillary Clinton) want to continue this war, but my guess is that the average American knows that the task of taming Jihadism lies with the Muslim community itself. No amount of American firepower will bring an end to it and so we should take the opportunity of our new energy independence to pull back from George Washington’s dreaded “foreign entanglements” and rebuild our own republic.

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8 Responses to Letter From Europe

  1. Fentex says:

    It’s a strong test of economic theories that so far makes people like Krugman and the Keynesian school of thought look the wisest of the competing opinions. Their predictions are being borne out while the arguments of austerity and confidence driven expansion are failing to be supported.

    Personally I don’t think the happy balance sheets of big business in the U.S is something to be so pleased about. That money should be out and working and that it isn’t suggests to me that there’s too much capital in too few hands in the U.S which is not a good thing for the countries long term health.

  2. Fentex says:

    years of America playing the global cop

    And I wish you’d stop saying that. The U.S’s Imperial adventures were/are not police actions on anyone else’s behalf. Don’t try and paint them as philanthropic gifts to others – they were cynical exercises in attempting to shape the world to suit U.S interests.

    • sonredjhon says:

      I think the connotation of global cop does not necessarily insinuate any philanthropic intent. In fact it’s quite inherently the opposite for many, like me for instance, when they say or hear ther term. I see it as very synonymous with overt efforts of cynical control.

    • Jon Taplin says:

      Clearly Cheney/Bush were not philanthropists, but they painted the GWOT as a civilizational battle as “the West against the rest”.

  3. sonredjhon says:

    Some very good points. Unfortunately, I see no indication that anything will be done to resolve the problems, and in fact the opposite. I loathe conspiracy theories. And none are needed to see that since the invasion of Iraq, nothing has happened to slow our creeping towards more violence and war. Look at the mid-term results and what the winners are doing. The goalposts move farther and farther toward war – or some cul-de-sac that only opens out into war, despite average american sentiment moving farther away from it. That is, it seemed to be, right up until the Paris attacks and the great lie that those attacks were against Free Speech was pronounced. Then all of a sudden, even anti-war liberals are taking a hard line stance. Now of course they do so while denouncing violence. They say “peace, peace” and advocate non-violence. But it is impossible to take a fundamentalist position such as “Free Speech is to be unhindered without exception” without stoking the engines toward violence. That’s the very nature of fundamentalist positions. Well, that and hypocrisy. The issue of free speech is one we combat and litigate and negotiate in continuation. We set limits on it, and we choose not to, and we also let speech combat speech. But we do not believe nor practice it as an unhinderable force, and we never have. I’ve had a good back and forth on twitter with Harry Shearer on the issue the last several days. Unfortunately, 140 written characters and the volatility and complexity of the issue have not led us to find much common ground. He’s all in that satire is not to be limited in any way. And I agree with him on principle. I just do not accept that that is our actual reality in America, let alone France. There are basic limits. We have just “somehow” decided that those limits work in only one direction. But I digress. The fact is, people and public opinion are being squeezed, intentionally by some, unintentionally by others. By people with an agenda, but also by people with no agenda per se, just their own fears. And I’m not sure how we alleviate the pressure. I don’t think one person or a small percent of people can break through the fog. But I guess I write this to say we must insist on trying. And I wholeheartedly hope that the suggestions re: rebuilding infrastructure gets on the table quickly. But it’s not enough. I live in Europe now almost a decade, and I can’t stress enough that Americans need to do more to understand and embrace how interconnected they are, we all are, even though the rest of the world seems so far away. It’s not. Infrastructure at home is infrastructure in the world. Reducing consumption at home, is reducing consumption in the world. Getting off oil and coal at home is getting off oil and coal in the world. It doesn’t matter who goes first. As long as somebody does. And if America, Americans, want to continue to enjoy the fruits of a country among the world’s true leadership, uh, we ought to be leading more in getting the right things done. So that’s my two cents from across the pond as well. Hope you accept euros.

  4. Fentex says:

    I wonder if this is a cultural difference between us – to me ‘cop’ means helpful agent of law and order and to call someone such is a compliment.

    Calling the U.S military exploits such is therefore, to me, an insult to policemen doing good work as it implies the unravelling of Afghanistan, brutal dismantling of Iraq and ongoing acts of war in Pakistan and Yemen et al are well intentioned helpful things.

    They are not. Do you not see/feel the implication of calling the U.S the world cop/policeman is to imply agreement through compliment of the policies?

    sonredjhon says they do not see it as such, and I take it from their reply that ‘enforcer’ is a more accurate word for their opinion.

    Do we differ in language in this regard?

  5. len says:

    The challenge of the religious dimension is that unlike America where the civil sides divided along racial barriers, they were united by a common religion for the most part. That jihad is a sworn oath and that this conflict projects it’s own foundation in terms of Islam means the conflicts with the other great religious orders are inevitable if this continues as jihad. This challenge can be met by teachers of the great faiths who can courageously and rightfully teach the great work of all religions: to ensure to the spiritual foundation of the family of man. This commonality of purpose is before God assured among peaceloving peoples. For the European being well educated about the great work is a prime responsibility of citizenship.

  6. sonredjhon says:

    Cultural difference perhaps. Context is everything. The issue I see is the confusion between the role of cop – and who gives that authority. It’s quite presumptuous to assume the role, even with the best intentions. The fact that ours are anything but creates monumental barriers of disconnect and resentment on the top of natural difficulties in relationships across borders and cultures and various levels of socio-economic strength. It’s not unlike the problem of calling the cops for help, and they show up and bust you instead for some unrelated petty issue, and if you protest they add charges and next thing you know they own your house, and then whatta ya know – some friend of a friend of the chief of police wanted to buy your backyard. And now he can. And even if you fight and get your house back, you’re not really made whole. That’s cynical alright. But also way too accurate and frequent as an analogy. And reality has a way of swapping denotations for connotations.

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