Eurorant of the day: Not sure who needs medication more, bipolar markets or the rest of us?
So let me see if I understand this latest round of eurozone mania. The crack dealers and the police have gotten two junkies onto methadone and we are supposed to celebrate? The junkies are still hooked. The dealers are still peddling their poison. The cops are still unable to address the core issues that are ...
So let me see if I understand this latest round of eurozone mania. The crack dealers and the police have gotten two junkies onto methadone and we are supposed to celebrate? The junkies are still hooked. The dealers are still peddling their poison. The cops are still unable to address the core issues that are key to solving the long-term bigger drug problem. There’s no political leadership to speak of the question. And therefore, no real progress has actually been made. Yet, down at Delancey’s bar and stock exchange it’s drinks all around.
What the heck, folks? Do we need to shove markets into a cold shower of perspective every day now? They veer from irrational fear to irrational exuberance with such regularity that I am starting to think that the solution to Europe’s financial problems — for which the above was an ever so subtle metaphor — may actually be drugs. Like lithium maybe.
Today, the markets swing back to hope because Italy has taken steps to embrace austerity, Don Bunga Bunga is headed his next career as a professional defendant, and the Greeks and Italians both seem to be opting for technocrats to right their capsized economies. That these same technocrats bought into the mainstream delusions and misrepresentations and miscalculations that led to these problems in the first place is no matter. All that markets care about is that it seems like they will follow the banks’ prescriptions for preserving bank cash flows at the expense of the people of their home countries. Or as it was put in my favorite tweet of the morning, from Dave Johnson retweeted by Markos Moulitsas, founder of the Daily Kos, "Greek PM says let PEOPLE vote, immediately booted, replaced by a BANKER."
(It’s remarkable that the "moral" obligation of countries to repay debt that never should have been made available to them in the first place is actually so immoral — both because it rewards enabling malefactors and because it penalizes innocents. The banks again make money coming and going as they did playing both sides on the volatile trading in between. Wouldn’t the world be a better place if those who underwrote government debt couldn’t also engage in trading it — which creates the opportunity to profit from deals they might not otherwise do? I’m just saying…)
Meanwhile there is still no progress on the eurozone’s larger structural issues. There is still no consensus about how to restore growth to the damaged economies of the south and those nearby who they are dragging down. There has really been no change … except for the worse … with regard to the financial soundness of many of Europe’s big banks. There is still no orderly path by which a country can opt out of the eurozone … even though the existence of such a path would have helped nip this problem in the bud even before it began. There is still no clarity about whether or not the countries of Europe want the ECB to have the resources and regulatory tools needed to actually effectively play the role of lender of last resort. And frankly, it seems ever less likely that the IMF will actually get the additional capital it needs to play the role for which it was envisioned.
Look, I’ve dated people who were more or less bipolar. I learned a few things from the experience. One was that while you were in the relationship it made sense to try make the most of the highs. They could be great. But I also learned that the lows were when you had moments of real clarity about the unsustainability of it all. The highs would always be a lie until you fixed the core problem. I also learned that took time and patience and often a radical restructuring of the relationship…by which I mean I discovered how healthy an exit can be for all interested parties. (On this point, see Paul Krugman’s very good piece today entitled: "Legends of the Fail.")
I also discovered that you can’t live on the roller coaster forever. It’s just too damn exhausting. That’s how I’m starting to feel about this problem in the Eurozone. And I am inclined to think that’s how the world is starting to feel too. Patience with authorities who don’t deal with the big issues and seek to frame every minor triumph as something larger than it is will wear thin. It won’t just be the Papandreous and Berlusconis who won’t survive all this. Absent real progress on the bigger issues, Eurocrisis fatigue will soon start doing in the Merkels, Sarkozys, and Camerons. That’s the one thing that is clear. One way or another, as far as this crisis goes, it’s probably best to stand clear of the door marked "Exit."