Exiting the euro; a female perspective «

    Exiting the euro; a female perspective

    The Wolfson Economics Prize is about to close January 31, 2012. Sponsored by Lord Wolfson of Aspley Guise in the UK it’s a 250,000 Sterling prize (roughly 400,000USD) to the economist (or any other person) who can offer a solution to the legal, economic and political ramifications of a country exiting the euro.

    I thought to address limitations that will impact the contest to its detriment and to offer the female perspective, which is very under-represented amongst economists.

    First – The prize is addressed primarily to economists. I counter that economists will not provide a workable solution. They will submit many ideas and will have much to say: plenty of theory, not-so-much practicality, even less imagination. Economists at best can offer an interpretation from their perspective as male, white, affluent, argumentative, short-term, and risk-prone individuals of how a set of events may unfold. No one is able to take into consideration all the varied parts that make up the real world.

    Second – Let’s not forget that economists created the euro in the first place.

    The euro was first “wholesaled” to Europe by Germany (and France) to make German exports cheaper to the rest of Europe. In the early 1990’s, Portugal, Spain, Greece, Ireland, Romania, and some of the smaller European nations were strong manufacturers of all types of goods on the very, very cheap. Germany had manufacturing competition in its back yard and by proposing the creation of a new common currency, was primarily looking out for its own self-interest. Even at the last Bundestag speech in December, Angela Merkel concluded her speech with “The path ahead is long and it is difficult but it is the right path for the joint good of a strong Germany in a strong European Union, for the benefit of the people in Germany and in Europe.” Germany is always first.

    In essence, Germany devalued the expensive German Mark, called it by a new name, killed the competition in it’s back yard, and put the smaller countries on the hook for re-payments of mortgages, bonds, and other financial lovelies for decades to come because the smaller countries were naïve to trust and oh-so desperate to join the high-class, posh, elite and exclusive world of the European Big Boy’s Club. Fresh from the euro’s conquest of Europa, the “retail” push began onto the rest of the world. “The euro will replace the US dollar as the next reserve currency!” went the rallying cry. I ask the reader, has this part of the plan come to pass?

    The conventional wisdom is that economists and their financial modeling can solve all our financial problems. I beg to differ. From my perspective, it looks like this: an entire continent buying hook, line and sinker, the sales pitch that the creation of a new single currency (the euro) will make their economies more globally competitive against the US dollar, no safety net required. To turn now to the very same economist for help is the equivalent of – pardon the expression- “running home to momma”.

    Third – Economists and politicians (especially in the US) love the laissez-faire argument but the past three years have proven that capitalism run amok does not work. Plunder by trade has replaced plunder by raid but plunder by any other name is still plunder.

    Fourth – Human behavior can’t be formulated. The behavior of crowds and the reaction of people will not fit into a precise, predictable and objective formula.

    Thus, the basic premise of the competition, that an economist will be able to formulate a way out of the euro is flawed precisely because it is based only on the intense economic passions of companies, institutions, organizations and individuals with lots of “skin in the game”. A game played with great hubris at the expense of millions and lost miserably.

    I ask – Do economists follow a code of ethics? And I don’t mean just simple disclosures of financial ties or conflict of interest guidelines. Disclosures are merely disclosures. The finance profession also has financial-ties and conflict-of-interest disclosure requirements. Disclosures never prevented actions or transactions. These are not high enough standards for a profession that can impact for better or for worse on the monumental scale. What I mean is something more along the line of what the medical profession uses: “First, Do No Harm.” I’d like to see economists adopt the First, Do No Harm Oath as a pre-requisite for practicing. All those in favor, vote with your LIKE.

    Is there a solution, a way out? Always!

    1. Stop acting like corporations passing down the cost of poor economic and financial decisions on the consumer. Be better. One can blame both sides for their actions.

    2. At best, forgive all debt in its entirety and permanently.

    3. At worst, re-characterize the loans, or mark-to-market the values, collect a one-time payment no matter how large or small in euro’s and move on without the smaller countries.

    4. Allow smaller countries to work out for themselves’ what currency they wish to adopt or how they wish to move forward. Germany’s way is not Greece’s way or Portugal’s way …etc.

    5. Keep it simple.

    6. Sell good-will.

    Most important, the average European’s trust in the euro as a relevant currency is beginning to show signs of fraying. Just this week Reuter’s ran a story on how 55% of Italians no longer trust the euro as a single currency and 31% would prefer to see the comeback of the lira.

    It doesn’t matter that Italy’s debt is 120% of GDP. It doesn’t matter that Italian politicians have pushed through austerity programs dictated by Germany. It does matter that Italians are used to and have historically lived with high-debt. And it does matter that when ordinary people are fed up, they start revolutions. Think Arab Spring or even French Revolution.

    My call: When in Rome, do like the Romans – watch for unrest and stand ready to say arrivederci to the euro.