Currencies and Centralization

Any financier will tell you that diversification of portfolios is important. You don't want to put all your capitol in any one asset (or even in any one market), because you don't want to risk being wiped out by any one plunge. The classic "Wealth without risk" business plans were all similar, and all simple: put away a little money each month, into a portfolio balanced between stocks, bonds, and other assets. Generally speaking, problems in any one market trigger a boom in other markets, so with a diversified conservative portfolio, your total assets would ride out most transitory market volatilities, and generally grow at a modest but appreciable rate.

Economic diversity is HEALTHY. This includes competition not just between businessmen and business entities, but also competition between nations, and competition between currencies. While looking through rose-colored glasses shows us a unified peaceful world with efficient energy and food markets - everyone cooperating and laughing, with enough to eat, running water, and good healthcare - the general reality is that those ideals don't work. In order for markets (including energy and food and healthcare) to be healthy, there needs to be competition. There needs to be strife. There needs to be incentive (read: objectively verifiable profit margins and dividends) for companies, markets and industries to be lean and efficient. Otherwise, they look a lot like governments: lots of talk, publicly funded, without substantial impact.

Historically speaking, Europe has been an ongoing hotbed of political and economic intrigue. Nations not necessarily at war with each other (they've long since reached consensus about where borders should be) but absolutely in competition with each other. England vs. France vs. Germany. Lean, efficient competition across the boards. And since each country had its own currency, they managed to avoid any systemic meltdown, even in the face of any number of shortages, regional crop failures, or even extended military conflict. Rough times in France? Some dry seasons in the agricultural areas? Maybe some poorly run banks, and the Franc running weak? Good news in London and Berlin! English and German firms - that are lean(er) and strong(er) - open branch offices in Paris, and governments buy up Francs on the cheap, to stockpile economic capitol for when the shoe, inevitably, shall be on the other foot. And because of that competition, the Franc regains value, French businesses have to get better or get replaced by English and German companies, and either way, the economy French economy rebounds.

The European continent, because of the intrinsic diversity of having a dozen countries with different currencies, was chaos. A paperwork and exchange rate nightmare, with rampant speculation and opportunism that made the World Cup tournament look like a game of patty-cake. But the continental economy nonetheless ran well, efficiently, and effectively. The strong were strong, because they had to be, and with weakness and slack being seized or seized upon, shit got done. The competition and strife made it ugly and distasteful, but guaranteed that a problem in any one (or any five) nations wouldn't pull the whole system down. It just meant that nations that handled their economics badly would end up with their economies being run by foreign interests.

But in the interest of working towards that rose-colored world, a lot of the strife and diversification has been intentionally done away with. Enter the Euro, the unified currency of a dozen nations, who have agreed to band together in economic unity. In effect, it was in many ways unionization of the European economy. During periods where that joint economy was strong, it was REALLY strong, since it allowed a unified push by not just individual national economies, but by most of a continent. That's a lot of industry, and when it's all running well and in the same direction, it can match any economic bloc on the planet.

The problem, of course, is that times are not always good, and when times are bad, problems in even one nation become the problem of the Union as a whole. The co-mingling has made partners where there used to exist competitors.

In the past, if things in, say, Portugal, Italy, Ireland, Greece, and Spain (PIIGS) ran into the red, and if those governments started deficit spending like there was no tomorrow, it was not really that big a deal in the grand scheme of things. It just meant that the lire, peseta, etc., lost value and got bought by investors, and that either the local economies got lean and healthy, or else got bought out and replaced by foreign interests. Companies that were competitive in competitive places (England, Germany, etc.) stepped into the game in less competitive (lazier) markets, and immediately became the best player in the local game. And, as a result, the economy improved. Individual countries would periodically stumble, but in the face of the wolves already at their national door, they got lean and pulled through, or they got bought out, and pulled through.

But no more. These days, when Portugal, Italy, Ireland, Greece, and Spain run into double-digit national deficits (which they have, even through the EU RULES say that no country shall run higher than 3% in the red), the solution is different. In the past, the wolves would drool. They would look to take over. Far from worrying, Germany and England got EXCITED when the lire or peseta ran weak, since that was an opportunity for Germans or Englishmen to make money by doing a job leaner, better, and more efficiently than the locals seemed able. They certainly didn't feel compelled to prop up and support nations that had their heads up their asses. Let those fuckers over-extend their credit and spend their own currency into worthlessness. It's THEIR currency, after all, and their ongoing inflation and other financial bullshit will just make it easier for us to buy them out and turn them around.

Except now, of course, it's not just THEIR currency. These days, when PIIGS and other nations run massively into debt, and have to conjure up a billion or so euros through drawing on credit, there is no differences between the euros being devalued and suffering from inflation in Greece, and the euros that - but for happenings in Greece - should be strong and robust in Germany or England. In order to protect the underpinning of their own economy (the euro as a currency), economically healthy places, rather than preying on stupidity and weakness - as has clearly arisen in places like Portugal, Italy, Ireland, Greece, and Spain - instead need to prop up, assist, and bail out those places from their own errors.

The practical upshot, as evidenced by recent headlines: Germany and England, to avoid threat to their OWN economies, must subsidize social welfare, bureaucrat salaries, and foolish economics in Greece. Rather than a net improvement in efficiency and effectiveness, we see a net decline in efficiency and effectiveness. The strong, rather than compelling the weak to get with the program or get replaced in a preditory stance, instead are compelled to prop up the weak, and subsidize the foolishness rather than driving it out.

Socialized economics in action! Please, lets keep all semblance of this sort of shit on the other side of the pond.