Over the past few years no journalist has exposed the incompetence of the Eurocrats as mercilessly as Ambrose Evans-Pritchard:
The US, Japan, Britain, as well as the Swiss, Scandies, and a string of states around the world, are actively driving down their currencies or imposing caps.
They are tearing up the script, embracing the new creed of nominal GDP targeting (NGDP), a licence for yet more radical action.
The side-effects of this currency warfare — or “beggar-thy-neighbour’ policy as it was known in the 1930s — is an escalating leakage of monetary stimulus into the global system.
So don’t fight the Fed, and never fight the world’s central banks on multiple fronts.
Stock markets have already sensed this, up to a point, lifting Tokyo’s Nikkei by 23pc and Wall Street by 10pc since June.
. . .
The euro will reach $1.44, just as austerity bites in earnest, a ruinous mix. As France loses 50,000 jobs a month –and its car industry — FranÃ§ois Hollande will agitate for use of Article 219 (2) of the Lisbon Treaty, exhorting the ECB force down the exchange rate. By then it will be too late. Scorched-earth policies will have destroyed is quinquennat.
Italy’s lira parties will not win the February elections. But a scotched Silvio Berlusconi will be more dangerous to the 2nd Monti commissariat on the outside, with his sharp media teeth. Italy will be ungovernable. But there will be no `Badoglio’ moment, no walking out, this year.
Spain’s jobless rate will ratchet up from 26pc to 30pc as Mariano Rajoy does what he is told, slashing and burning, in the midst of an accelerating housing crash. The anomaly is why the Left — in Spain, and across Europe — continues to back a reactionary EMU agenda that sets policy in the interest of creditors and drives youth unemployment rise to 55pc. La trahison des clercs.
It is always hard in socio-politics to foretell a snapping point. It can come suddenly, by a chance event, like Britain’s Invergordon ‘mutiny’ in 1931, or the shooting of French dockers in 1935.
Yet I see little to disturb Europe’s grim status quo this year. The riots of 2013 will be just as ineffectual as the riots of 2012. Contraction will grind on. Germany’s Wolfgang SchÃ¤uble will have his way.
Yet it will be a Pyrrhic victory. Euroland will be left behind as the rest of the world moves on, lagging US growth by almost 3pc of GDP for a second year, and certain to lag again in 2014, the “new normal”.
This is the year when it will become clear to many that Europe is in far deeper trouble than supposed; that it risks tipping into irretrievable decline; that it is wasting its precious youth at the worst moment, as the aging crunch nears, when it should have none to spare; that it is resorting to ever more coercive measures and autocratic methods; and all to save a currency that is the elemental cause of the disaster in the first place, and should morally be broken into its democratically-controlled parts.
There is no place for a monetary dictatorship in 21st Century Europe.
Clarity is a good start.
Read the whole thing.
Matt Yglesias once said that:
The Great Recession has revealed lack of capacity for engaging with monetary issues to be a major institutional weakness of the progressive movement.
That’s doubly true for the euro-left.
PS. My support for Japanese reflation does not imply support for the more loony aspects of the Abe administration.
HT: Bruce Bartlett