A satirical piece on one of the finance/econ blogs the other day went through a whole list of these inane geography lessons trotted out to reassure bond markets that Country X will not fall apart like Greece, that Ireland is not Portugal, Spain is not Italy and Bangladesh is not Tuvalu.
The point is that despite the second domino (Ireland) falling yesterday after weeks of pious promises to the contrary, all the central banker poo-bahs are rushing to promise that the Euro zone is in fact not buckling but rather that things are fully ‘under control’. When a prominent finance ministry official intones phrases like, ‘The Euro is not in danger’, you know that the opposite is true.
Ireland may be not Greece, but perhaps it should aspire to reach that category. Instead, the Emerald Isle looks depressingly like 1970s Zambia or soon will once the ECB and the IMF get through with it. Remember the bad old days when African, Asian and Latin American countries would get slammed by the suits from Foggy Bottom and have to impoverish whole generations to pay off their debts to first-world banks? When Chicago-educated Friedmanites would swarm into town to give the powerless lessons in monetarism and how to do things right, the way we do them up in Thoroughly Modern America?
Now Ireland is being handed a bunch of money in exchange for hocking future generations to the needs of the reckless banking class, exactly as occurred here. It’s amazing how consistent these guys are: the cancerous, overblown financial sector runs rampant and drives the ship of state onto the rocks, and yet they’re the ones who get into the lifeboats while the rest of us dog-paddle our way to shore—or don’t.
Welcome to the new world order where globalization now enables everyone to have the Zambian experience. If Greek, Portugese and Irish consumers can be put on cat food diets, are the rest of us far behind? Long before today’s anticipated denouement with the Irish handing over the keys to French and German bankers, the bond tyrants had set their eyes on Portugal and Spain. But some experts say none of the Eurozone countries are really safe because their capital markets are interlinked, and the exposures will reverberate in Frankfurt and London if any country should simply declare itself unable to pay up.
Argentina was warned off this course in the early 2000s and had to default anyway, which was extremely painful. But as subsequent events have shown, it was not the deadly Armageddon all the wealthy experts said it would be, and the country bounced back quite nicely once it got the debt monkey off its back.
The Irish populace seems far too supine at this point to do much more than throw the current helmsmen out of office when what they need to do is storm down to the parliament buildings and eat these guys’ lunches, for starters. But if the bank-friendly rearrangements continue throughout the continent, how long will the social peace remain? And who will be targeted? The right? The left? Bankers? Politicians? Immigrants? Jews? No one can anticipate with confidence any one outcome if this slow-motion train wreck continues.