Financial thoughts have been warning about the fundamental weaknesses of Euro creation and the problems it causes to Eurozone and rest of the world. It seems that after Napoleonic Continental System introduced in Europe in early 1800s, Euro is the most unstable, inconsistent and unsustainable proposition Europe has seen.
Under the burden on unbearable terms of Continental System, Russia broke away from the system in 1810, triggering a massive war that has not seen by the world till then. The war achieved a reverse result. Russia seemed weak and was about to get defeated by Napoleon's aggressiveness, instead the passive strategy of Russia paid off in the end.
In the new gamble of Euro, the Russia's role is taken by Greece, who - just like Russia in 1810- cannot bear the terms of agreement of Euro. Like Russia it has no other option but to break the agreement. In 1810 it brought about the wrath of Napoleon on Russia.
From 2010 onwards, Greece is playing Russia’s role of 1810. Recently in late October 2011, Germany and France led a marathon meeting once again that last about 11 hours. One of the results was the announcement of a package for Greece. Instead of agreeing to it, the Greek prime minister put it for referendum, attracting the wrath of France & Germany. This time, Europe does not have a single, mighty, powerful genius like Napoleon, but has several midgets making it for him. They are turning the anger on Greece!
Two hundred years back, it would have been seen by the world that a meek Russia is about to baulk down at the pressure of mighty Napoleon. However by early 1813, it was evident that the glory and mighty days of Napoleon was over as the white winter licked him while Russia stood battered but intact! In the same manner, it may appear now that meek Greece would bow down and the Eurozone powers will bask in glory. But as the currency unsettling battle is emerging in the Eurozone with major European powers try to kick Greece into economic humiliation , little do they realise that it could be the tame end of another 'Continental (currency) System' much like Napoleon’s grand inconsistent and unstable Continental System.
Inconsistencies of Euro are many and well written – i.e. (1) monetary union without political union does not provide any cohesiveness, but a nightmare (2) it is just ludicrous that Eurozone has one currency but different states have to borrow at different rates. Whilst Germany borrows at low rates, Spain and Italy have to pay high interest rates. (Just imagine what it would be like if Delhi state of India borrow at low rates while West Bengal is forced to pay high interest rates). (3) Eurozone has one single currency but has several states with different credit ratings. So, how do you decide currency rating level – someone told me that Euro has mainly replaced Duetshe Mark and hence, one need to look at Germany. Is that true? (4) Why does Germany and France take major role in talking about Euro, what about the rest of the 20-odd states that is supposed to be part of Euro. Is there a class system in action?
Well some of the inconsistencies may not appear immaterial, however no one can deny that there some strong inconsistencies do persist!!
Hold your breath – as the financial markets of the world will go for a tailspin as modern “Continental System’ is preparing itself to break up. Do take a hard-look at your portfolios and decide - this black swan may decide to appear sometime in the near to not so distant future!
Under the burden on unbearable terms of Continental System, Russia broke away from the system in 1810, triggering a massive war that has not seen by the world till then. The war achieved a reverse result. Russia seemed weak and was about to get defeated by Napoleon's aggressiveness, instead the passive strategy of Russia paid off in the end.
In the new gamble of Euro, the Russia's role is taken by Greece, who - just like Russia in 1810- cannot bear the terms of agreement of Euro. Like Russia it has no other option but to break the agreement. In 1810 it brought about the wrath of Napoleon on Russia.
From 2010 onwards, Greece is playing Russia’s role of 1810. Recently in late October 2011, Germany and France led a marathon meeting once again that last about 11 hours. One of the results was the announcement of a package for Greece. Instead of agreeing to it, the Greek prime minister put it for referendum, attracting the wrath of France & Germany. This time, Europe does not have a single, mighty, powerful genius like Napoleon, but has several midgets making it for him. They are turning the anger on Greece!
Two hundred years back, it would have been seen by the world that a meek Russia is about to baulk down at the pressure of mighty Napoleon. However by early 1813, it was evident that the glory and mighty days of Napoleon was over as the white winter licked him while Russia stood battered but intact! In the same manner, it may appear now that meek Greece would bow down and the Eurozone powers will bask in glory. But as the currency unsettling battle is emerging in the Eurozone with major European powers try to kick Greece into economic humiliation , little do they realise that it could be the tame end of another 'Continental (currency) System' much like Napoleon’s grand inconsistent and unstable Continental System.
Inconsistencies of Euro are many and well written – i.e. (1) monetary union without political union does not provide any cohesiveness, but a nightmare (2) it is just ludicrous that Eurozone has one currency but different states have to borrow at different rates. Whilst Germany borrows at low rates, Spain and Italy have to pay high interest rates. (Just imagine what it would be like if Delhi state of India borrow at low rates while West Bengal is forced to pay high interest rates). (3) Eurozone has one single currency but has several states with different credit ratings. So, how do you decide currency rating level – someone told me that Euro has mainly replaced Duetshe Mark and hence, one need to look at Germany. Is that true? (4) Why does Germany and France take major role in talking about Euro, what about the rest of the 20-odd states that is supposed to be part of Euro. Is there a class system in action?
Well some of the inconsistencies may not appear immaterial, however no one can deny that there some strong inconsistencies do persist!!
Hold your breath – as the financial markets of the world will go for a tailspin as modern “Continental System’ is preparing itself to break up. Do take a hard-look at your portfolios and decide - this black swan may decide to appear sometime in the near to not so distant future!
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