Feckless (adj.); "Lacking purpose; feeble, weak, ineffective, careless, irresponsible, incompetent, futile".
The feckless European "leadership" has failed yet again to accomplish anything of importance. The EU finance ministers met and failed to agree on a plan for a banking union to regularize bailouts and produce a plan for dealing with insolvent financial institutions. As has been detailed in previous columns in this series, one of the serious problems with this proposal is that it misdiagnoses the illness as one of illiquidity rather than insolvency, so that if the ministers had indeed decided on a plan, it would have solved nothing. In short, in this case, fecklessness actually can be said to have been a blessing.
But that would be too facile. The fact is that the only measure that the countries involved have been able to agree upon since the inception of the crisis, six years ago, is to flood the market with ever-greater quantities of liquidity, which adds to the overall level of debt and which is not used by insolvent institutions to finance productive economic activity. As a result, Europe sinks back into recession while ministers and central bankers make constant contributions to aggregate demand for hotel rooms and caterers. The most recent country to submerge is France.
In the meantime, while the finance ministers were dithering, the central bankers were busy continuing to punish savers with extremely low interest rates and flood the credit markets with money created, if not out of nothing, out of junk collateral. Japan has just entered that picture with both feet. Both the European Central Bank and the Federal Reserve System have signaled that so-called "quantitative easing" (what used to be called "monetizing the debt") will continue into the mists of the impenetrable future, thereby ensuring that genuine capital formation does not take place at anywhere near the rate that would be necessary to mobilize the factors of production, not to mention providing resources for the elements of the third industrial revolution; 3-D manufacturing, advanced robotization, fracking, etc., the only hope of rescuing Europe from its own misguided and yes, "feckless", elites.
Even the Bank for International Settlements (BIS), the central bank of the central banks, once a fortress of orthodox financial and monetary wisdom, has capitulated. In a recent publication, "Central Bank Finances", the BIS essentially blesses the massive, indeed, unlimited creation of credit essentially from the thin air. One must suppose that this is morally superior to grand theft of private bank accounts, as was the case with the "bailout" of Cyprus, but just barely.
A Portuguese think-tank, on the "Day of Europe" earlier this month (the day Portugal joined the EU), issued a declaration which, among other pithy comments, said that Portugal's membership in the EU and its monetary union, had led to a society in which "The working class has no work; the middle class has no means, and the upper class has no class". Amen
Prime Minister Netanyahu has been busy visiting alternative markets for Israeli goods, such as Russia, India and China. He is right to do so, because Europe will not become again a growing market for Israel any time in the near or medium-term future.
Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and a researcher at the Center for National Security Studies, University of Haifa.
Published by Globes [online], Israel business news - www.globes-online.com - on May 20, 2013
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