on: January 29, 2015, 10:34:32 AM
Started by Crafty_Dog - Last post by DougMacG
Hugh Hewitt, who I like, is sure that Hillary is running and is the Dem nominee and says the R candidate needs to study and be an expert on the records of both Bill and Hillary Clinton (long, sordid, and often criminal history) in order to win. (The DB forum could be offered up as a resource.) Hewitt takes liberal and media guests on his radio show and in particular likes to pin them down on what are her accomplishments. On the release of a most recent Hillary biography, the author could not name a positive accomplishment of hers at State.
Hewitt: "...the GOP nominee should be the individual best positioned to beat her, which means first knowing her history and especially her record at State and her time as the architect of Obamacare 1.0 from 1993-1994. It means knowing her endorsement of the president's immigration executive order and her Twitter applause of the president's State of the Union including its doomed plan to tax 529 plans.
Yes, it means even reading her ghastly and grindingly dull memoirs. And it means preparing, memorizing and delivering a concise recollection of the Bill Clinton years, one that always ends as his tenure did with the name Marc Rich.
To be the GOP nominee coming out of Cleveland should require knowing everything about Hillary and Bill and being able to effortlessly detail her almost unbelievable record of failing upwards
over her twenty-five years in the Beltway."
I love his summation of her career, "failing upwards".
Hewitt, continued: "It is a huge advantage for the GOP to know their opponent this far out." ... "Every great coach --Urban Meyer, Nick Saban, yes, even Belichick-- would kill for a year and a half to prepare a game plan for one opponent on whom the tape in the vault is endless."http://townhall.com/columnists/hughhewitt/2015/01/29/draft-n1949979
on: January 29, 2015, 08:54:21 AM
Started by Crafty_Dog - Last post by objectivist1
NATIONAL REVIEW ONLINE
JANUARY 29, 2015 12:00 AMCan Israel Survive?
Traditional pillars of the tiny democracy’s security have begun to erode.
By Victor Davis Hanson
Israel is the only liberal democracy in the Middle East and North Africa. Eight million Israelis are surrounded by some 400 million Muslims in more than 20 states. Almost all of Israel’s neighbors are anti-Israeli dictatorships, monarchies, or theocracies — a number of them reduced to a state of terrorist chaos.
Given the rise of radical Islam, the huge petrodollar wealth of the Middle East, and lopsided demography, how has Israel so far survived?
The Jewish state has always depended on three unspoken assumptions for its tenuous existence.
First, a democratic, nuclear Israel can deter larger enemies. In the Cold War, Soviet-backed Arab enemies understood that Israel’s nuclear arsenal prevented them from destroying Tel Aviv.
Second, the Western traditions of Israel — free-market capitalism, democracy, human rights — ensured a dynamic economy, high-tech weapons, innovative industry, and stable government. In other words, 8 million Israelis could count on a greater gross domestic product, less internal violence, and more innovation than, say, nearby Egypt, a mess with ten times more people than Israel and nearly 50 times more land.
Third, Israel counted on Western moral support from America and Europe, as well as military support from the United States.
Israel’s stronger allies have often come to the defense of its democratic principles and pointed out that the world applies an unfair standard to Israel, largely out of envy of its success, anti-Semitism, fear of terrorism, and fondness of oil exporters.
Why, for example, does the United Nations focus so much attention on Palestinians who fled Israel nearly 70 years ago but ignore Muslims who were forced out of India, or Jews who were ethnically cleansed from the cities of the Middle East? Why doesn’t the world worry that Nicosia is a more divided city than Jerusalem, or that Turkey occupies northern Cyprus, or that China occupies Tibet?
Unfortunately, two of these three traditional pillars of Israeli security have eroded.
When the United States arbitrarily lifted tough sanctions against Iran and became a de facto partner with the Iranian theocracy in fighting the Islamic State, it almost ensured that Iran will get a nuclear bomb. Iran has claimed that it wishes to destroy Israel, as if its own apocalyptic sense of self makes it immune from classical nuclear deterrence.
Senator Robert Menendez (D., N.J.) summed up the Obama administration’s current policy on Iran as “talking points that come straight out of Tehran.” Obama has cynically dismissed Menendez’s worries about negotiations with Iran as a reflection not of the senator’s principles, but of his concerns over “donors” — apparently a reference to wealthy pro-Israel American Jews.
Symbolism counts, too. President Obama was about the only major world leader to skip the recent march in Paris to commemorate the victims of attacks by radical Islamic terrorists — among them Jews singled out and murdered for their faith. Likewise, he was odd world leader out when he skipped this week’s 70-year commemoration of the liberation of the Auschwitz concentration camp.
Obama is not expected to meet with Israeli prime minister Benjamin Netanyahu, who will address Congress in March. An anonymous member of the Obama administration was quoted as calling Netanyahu, a combat veteran, a “coward” and describing him with a related expletive. Another nameless administration official recently said Netanyahu “spat in our face” by accepting the congressional invitation without Obama’s approval and so will pay “a price” — personal animus that the administration has not directed even against the leaders of a hostile Iran.
Obama won’t meet with Netanyahu, and yet the president had plenty of time to hold an adolescent bull session with a would-be Internet comedian decked out in Day-Glo makeup who achieved her fame by filming herself eating breakfast cereal in a bathtub full of milk.
Jews have been attacked and bullied on the streets of some of the major cities of France and Sweden by radical Muslims whose anti-Semitism goes unchecked by their terrified hosts. Jewish leaders in France openly advise that Jews in that country immigrate to Israel.
A prosecutor in Argentina who had investigated the 1994 bombing of a Jewish community center in Buenos Aires that killed 85 — an attack widely believed to have been backed by Iran — was recently found dead under mysterious circumstances.
Turkey, a country whose prime minister, Recep Tayyip Erdogan, was praised by Obama as one of his closest friends among world leaders, has turned openly non-secular and is vehemently anti-Israel.
Until there is a change of popular attitudes in Europe or a different president in the United States, Israel is on its own to deal with an Iran that has already hinted it would use a nuclear weapon to eliminate the “Zionist entity,” with the radical Islamic madness raging on its borders, and with the global harassment of Jews.
A tiny democratic beacon in the Middle East should inspire and rally Westerners. Instead, too often, Western nations shrug and assume that Israel is a headache — given that there is more oil and more terrorism on the other side.
— Victor Davis Hanson is a classicist and historian at the Hoover Institution, Stanford University, and the author, most recently, of The Savior Generals. You can reach him by e-mailing firstname.lastname@example.org
. © 2015 Tribune Media Services, Inc.
on: January 29, 2015, 07:00:45 AM
Started by Crafty_Dog - Last post by objectivist1
It's time if you haven't already - to make sure you have food supplies, water, firearms, and GOLD & SILVER. Paper investments will be worth next-to-nothing. IGNORE AT YOUR PERIL - Please read the article below carefully and take it seriously. There is not much time left. If you don't have at least 50% of your liquid assets in gold and silver - you will be very sorry later this year. Don't be foolish - it's easy to stay in denial and tell yourself this is nothing more than alarmism:
Failing Stimulus And The IMF's New 'Multilateral' World Order
Tuesday, 27 January 2015 05:24 Brandon Smith
My theme for 2015 has been the assertion that this will be a year of shattered illusions; social, political, as well as economic. As I have noted in recent articles, 2014 set the stage for multiple engineered conflicts, including the false conflict between Eastern and Western financial and political powers, as well as the growing conflict between OPEC nations, shale producers, as well as conflicting notions on the security of the dollar's petro-status and the security and stability of the European Union.
Since the derivatives and credit crisis of 2008, central banks have claimed their efforts revolve around intervention against the snowball effect of classical deflationary market trends. The REAL purpose of central bank stimulus actions, however, has been to create an illusory global financial environment in which traditional economic fundamentals are either ignored, or no longer reflect the concrete truths they are meant to convey. That is to say, the international banking cult has NO INTEREST whatsoever in saving the current system, despite the assumptions of many market analysts. They know full well that fiat printing, bond buying, and even manipulation of stocks will not change the nature of the underlying crisis.
Their only goal has been to stave off the visible effects of the crisis until a new system is ready (psychologically justified in the public consciousness) to be put into place. I wrote extensively about the admitted plan for a disastrous “economic reset” benefiting only the global elites in my article 'The Economic End Game Explained'.
We are beginning to see the holes in the veil placed over the eyes of the general populace, most notably in the EU, where the elites are now implementing what I believe to be the final stages of the disruption of European markets.
The prevailing illusion concerning the EU is that it is a “model” for the future the globalists wish to create, and therefore, the assumption is that they would never deliberately allow the transnational union to fail. Unfortunately, people who make this argument do not seem to realize that the EU is NOT a model for the New World Order, it is in fact a mere stepping stone.
The rising propaganda argument voiced by elites in the International Monetary Fund and the Bank For International Settlements, not to mention the ECB, is not that Europe's troubles stem from its ludicrous surrender to a faceless bureaucratic machine. Rather, the argument from the globalists is that Europe is failing because it is not “centralized enough”. Mario Draghi, head of the ECB and member of the board of directors of the BIS, tried to sell the idea that centralization solves everything in an editorial written at the beginning of this year.
“Ultimately, economic convergence among countries cannot be only an entry criterion for monetary union, or a condition that is met some of the time. It has to be a condition that is fulfilled all of the time. And for this reason, to complete monetary union we will ultimately have to deepen our political union further: to lay down its rights and obligations in a renewed institutional order.”
Make no mistake, the rhetoric that will be used by Fabian influenced media pundits and mainstream economic snake-oil salesmen in the coming months will say that the solution to EU instability as well as global instability is a single global governing body over the fiscal life of all nations and peoples. The argument will be that the economic crisis persists because we continue to cling to the “barbaric relic” of national sovereignty.
In the meantime, internationalists are protecting the legitimacy of stimulus actions and banker led policy by diverting attention away from the failure of the central planning methodology.
Mario Draghi has recently announced the institution of Europe's own QE bond buying program, only months after Japan initiated yet another stimulus measure of its own, and only months after the Federal Reserve ended QE with the finale of the taper.
I would point out that essentially the moment the Fed finalized the taper of QE in the U.S., we immediately began to see a return of stock volatility, as well as the current plunge in oil prices. I think it should now be crystal clear to everyone where stimulus money was really going, as well as what assumptions oblivious daytraders were operating on.
The common claim today is that the QE of Japan and now the ECB are meant to take up the slack left behind in the manipulation of markets by the Fed. I disagree. As I have been saying since the announcement of the taper, stimulus measures have a shelf life, and central banks are not capable of propping up markets for much longer, even if that is their intention (which it is not). Why? Because even though market fundamentals have been obscured by a fog of manipulation, they unquestionably still apply. Real supply and demand will ALWAYS matter – they are like gravity, and we are forced to deal with them eventually.
Beyond available supply, all trade ultimately depend on two things - savings and demand. Without these two things, the economy will inevitably collapse. Central bank stimulus does not generate jobs, it does not generate available credit, it does not generate higher wages, nor does it generate ample savings. Thus, the economic crisis continues unabated and even stock markets are beginning to waver.
As demand collapses due to a lack of strong jobs and savings, it pulls down on the central bank fiat fueled rocket ship like an increase in gravity. The rocket (in this case equities markets and government debt) hits a point of terminal altitude. The banks are forced to pour in even more fiat fuel just to keep the vessel from crashing back to Earth. No matter how much fuel they create, the gravity of crashing demand increases equally in the opposite direction. In the end, the rocket will tumble and disintegrate in a spectacular explosion, filled to capacity with fuel but unable to go anywhere.
Oil markets have expressed this reality in relentless fashion the past few months. Real demand growth in oil has been stagnant for years, yet, because of stimulus, because of the real devaluation of the dollar, and because of market exuberance, prices were unrealistically high in comparison. The crash of oil is a startling sign that the exuberance is over, and something else is taking shape...
The disconnect within banker propaganda could be best summarized by Mario Draghi's recent statements on the ECB's new stimulus measures. When asked if he was concerned about the possibility of European QE triggering currency devaluation and hyperinflation, Draghi had this to say:
“I think the best way to answer to this is have we seen lots of inflation since the QE program started? Have we seen that? And now it's quite a few years that we started. You know, our experience since we have these press conferences goes back to a little more than three years. In these 3 years we've lowered interest rates, I don't know how many times, 4 or 5 times, 6 times maybe. And each times someone was saying, this is going to be terrible expansionary, there will be inflation. Some people voted against lowering interest rates way back at the end of November 2013. We did OMP. We did the LTROs. We did TLTROs. And somehow this runaway inflation hasn't come yet.
So the jury is still out, but there must be a statute of limitations. Also for the people who say that there would be inflation, yes When please. Tell me, within what?”
Firstly, if you are using “official” CPI numbers in the U.S. to gauge whether or not there has been inflation, then yes, Draghi's claim appears sound. However, if you use the traditional method (pre-1990's) to calculate CPI rather than the new and incomplete method, inflation over the past few years has stood at around 8%-10%, and most essential goods including most food items have risen in price by 30% or more, far above the official 0%-1% numbers presented by the Bureau of Labor Statistics.
But beyond real inflation numbers I find a very humorous truth within Draghi's rather disingenuous statement; yes, QE has not yet produced hyperinflation in the U.S. (primarily because the untold trillions in fiat created still sit idle in the coffers of international banks rather than circulating freely), however, what HAS stimulus actually accomplished if not inflation? Certainly not any semblance of economic recovery.
Look at it this way; I could also claim that if international bankers lined up on a stage at Davos and danced the funky-chicken, hyperinflation would probably not result. But what is the point of dancing the funky chicken, and really, what is the point of QE? Stimulus clearly has about as much positive effect on the economy as jerking around rhythmically in tight polypropylene disco pants.
Japan and the ECB are in fact launching sizable stimulus measures exactly because the QE of the Federal Reserve achieved ABSOLUTELY NOTHING except the purchase of 5-6 years without total collapse (only gradual collapse). And what is the real cost/benefit ratio of that purchase of half a decade of fiscal purgatory? When the breakdown of debt and forex markets does occur, it will be a hundred times worse than if the Fed had done nothing at all. Which brings me to our current state of affairs in 2015, and the IMF plan to take advantage...
IMF head Christine Lagarde put out a press release this past week, one which was probably drafted for her by a team of ghouls at the BIS, mentioning the formation of what she called the “New Multilateralism”.
Lagarde begins with the same old song about accommodative monetary policy:
“Besides structural reforms, building new momentum will require pulling all possible levers that can support global demand. Accommodative monetary policy will remain essential for as long as growth remains anemic – though we must pay careful attention to potential spillovers. Fiscal policy should be focused on promoting growth and creating jobs, while maintaining medium-term credibility.”
Of course, as we have already established, monetary policy does nothing to inspire demand. So, what is a global syndicate of bankers to do? Promote maximum interdependency! Lagarde laments the impediments of the sovereign attitude:
“No economy is an island; indeed, the global economy is more integrated than ever before. Consider this: Fifty years ago, emerging markets and developing economies accounted for about a quarter of world GDP. Today, they generate half of global income, a share that will continue to rise.
But sovereign states are no longer the only actors on the scene. A global network of new stakeholders has emerged, including NGOs and citizen activists – often empowered by social media. This new reality demands a new response. We will need to update, adapt, and deepen our methods of working together.”
And here we have a more subtle insinuation of the planning and programming I have been warning about for years. Because national sovereignty is no longer “practical” in an economically interdependent world (a world forced into economic interdependency by the globalists themselves), we must now change our way of thinking to support a more globalist framework.
The first big lie is that interdependency is a natural economic state. Historically, economies are more likely to survive and thrive the LESS dependent they are on outside factors. Independent, self contained, self sustaining, decentralized economies are the natural and preferable cultural path. Multilateralism (centralization) is completely contrary and destructive to this natural state, as we have already witnessed in the kind of panic which ensues across the globe when even one small nation, like Switzerland, decides to break from the accepted pattern of interdependency.
Also, take note of Lagarde's reference to the growing role that developing nations (BRICS) are playing in this interdependent globalized mish-mash. As I have been warning, the IMF and the international banks fully intend to bring the BRICS further into the fold of the “new multilateralism”, and the supposed conflict between the East and the West is a ridiculous farce designed only as theater for the masses.
Lagarde reiterates the IMF push for inclusion of the BRICS (new networks of influence) into the new system, as well as the IMF's role as the arbiter of global governance:
“This can be done by building on effective institutions of cooperation that already exist. Institutions like the IMF should be made even more representative in light of the dynamic shifts taking place in the global economy. The new networks of influence should be embraced and given space in the twenty-first century architecture of global governance. This is what I have called the “new multilateralism.” I believe it is the only way to address the challenges that the global community faces.”
The IMF head finishes with my favorite line, one which should tell you all you need to know about what is about to happen in 2015. I have for some time been following the progress (or lack of progress) in the IMF reforms presented in 2010; reforms which the U.S. Congress has refused to pass. Why? I believe the reforms remain dormant because the U.S. is MEANT to lose its veto powers within the IMF, and the IMF has already made clear that lack of passage will result in just that.
“Against this backdrop, the adoption of the IMF reforms by the United States Congress would send a long-overdue signal to rapidly growing emerging economies that the world counts on their voices, and their resources, to find global solutions to global problems.
Growth, trade, development, and climate change: 2015 will be a rendezvous of important multilateral initiatives. We cannot afford to see them fail. Let us make the right choices.”
Why remove U.S. veto power? Because BRICS nations like China are about to be given far more inclusion in the IMF's multilateralist order. In fact, 2015 is the year in which the IMF's Special Drawing Rights conference is set to commence, with initial discussions in May, and international meetings in October. I believe U.S. veto power will probably be removed by May, making the way clear (creating the rationale) for the marginalization of the U.S. dollar in favor of the SDR basket currency system, soon to be boosted by China's induction.
In 2015 what we really have is a sprint towards currency and market devaluation across the spectrum. India, Japan, Russia, Europe, parts of South America, have all been debased monetarily. The U.S. has as well, most Americans just don't know it yet. The value of this for globalists is far reaching. They have at a basic level created an atmosphere of lowered economic expectations – a global reduction in living standards which will at bottom lead to third world status for everyone. The elites hope that this will be enough to condition the public to support centralized financial control as the only option for survival.
It is hard to say what kind of Black Swans and false flags will be conjured in the meantime, but I highly doubt the shift towards the SDR will take place without considerable geopolitical turmoil. The public will require some sizable scapegoats for the kind of pain they will feel as the banks attempt to place the global economy in a totalitarian choke hold. While certain institutions may be held up as sacrificial lambs (including possibly the Federal Reserve itself), the concept of banker governance will be promoted as the best and only solution, despite the undeniable reality that the world would be a far better place if such men and their structures of influence were to be wiped off the face of the planet entirely.
on: January 29, 2015, 01:45:08 AM
Started by Crafty_Dog - Last post by Crafty_Dog
Escalation Between Israel and Hezbollah Is Possible
January 28, 2015 | 23:46 GMT Text Size Print
The aftermath of the Jan. 28 attack by Hezbollah fighters on an Israeli patrol along the Lebanese border, in which two Israeli soldiers died, has forced Israel to formulate an appropriate response. The current retaliatory dynamic began with the Jan. 18 Israeli airstrike against a Hezbollah leader and Iranian general in the Golan Heights. Hezbollah had been expected to respond to that airstrike. Israel's casualty-averse nature and its history of heavy retaliation to similar incidents could lead to an escalation through retaliations following the Jan. 28 attack. It is important to see these events in the broader context of the Syrian civil war, which has consumed considerable Hezbollah resources, and of upcoming Israeli elections. This backdrop will cause both sides to walk a fine line between showing the strength to deter actions by the other and avoiding over-commitment to a new conflict.
On Jan. 28, a unit belonging to the Tzabar Battalion of Israel's Givati Brigade came under fire — allegedly including mortar fire and anti-tank missiles — at the Lebanese border. During the exchange of fire, seven Israeli troops were wounded and two, including a captain, were killed. Hezbollah claimed responsibility for the attack and called it retaliation for the Israeli airstrike 10 days earlier. The Israel Defense Forces responded to the attack by firing up to 30 rounds of artillery into southern Lebanon. The potential for further escalation remains, because Israel's government will feel compelled to show strength in response to the killing of Israeli soldiers.
The retaliation so far appears incomplete compared to retaliations or escalations following similar attacks in the past. Both the 2012 incursion into the Gaza Strip and the 2006 incursion into Lebanon followed acts of escalation that included similar attacks on Israeli military vehicles. The 2006 cross-border Hezbollah raid that led to the larger conflict not only caused several deaths but also resulted in the kidnapping of two Israeli soldiers, another red line. The Israeli population is sensitive to such incidents, even if the casualty count is not particularly high, and will expect the government to act resolutely. The latest Israeli casualties come as campaigning for March elections begin. Moreover, Hezbollah is already committing a large amount of its resources to the Syrian conflict and could be in a weakened position.
What is a Geopolitical Diary? George Friedman Explains.
However, for the Israeli government, a repeat of the 2006 conflict (which was seen as botched) would be politically disastrous. Further retaliation will be constrained as Israel tries to avoid overcommitting while still taking decisive action and exploiting Hezbollah's weakened position. The last fight in Lebanon went badly for Israel, and this will make the Israelis think long and hard before sending ground troops into Lebanon again. Such actions on the ground would make a further escalation particularly significant, as opposed to reciprocal artillery fire across the border. Israel has a spectrum of responses to choose from that fall short of a ground incursion, such as high-value target strikes, assassinations, shelling and airstrikes. These could lead to an escalation between Israel and Hezbollah without necessarily sparking a full-fledged ground incursion.
There are already some signs that Israel is positioning itself for a further response that goes beyond political rhetoric or at least serves as a deterrent against further Hezbollah actions. The continued deployment of heavy military equipment, including armored vehicles for the Givati or Golani brigades and heavy artillery pieces, along the Lebanese border and increased air force activity over southern Lebanon indicate that Israel is wary of further Hezbollah action. However, it also shows Israel is keeping its options open to conduct more offensive actions against the group. On Jan. 28, the Haifa Airport was closed temporarily to accommodate Israeli air force operations, and civilians along the border have been advised to remain indoors.
At the same time, there are indicators of restraint on the Israeli side. The government has requested U.N. Interim Force in Lebanon peacekeepers to maintain their positions in southern Lebanon, despite competing claims of Israeli or Hezbollah shelling leading to the death of a Spanish U.N. soldier on Jan. 28. Israel's intention to keep the U.N. peacekeepers in place, at least for now, indicates that the Israelis are not considering an immediate launch of significant ground incursions. Evidence that further escalation has not yet occurred is the lack of called up reservists and the major unit redeployments required for a ground incursion.
Despite the military buildup, daily life in the north is not being significantly disrupted; national parks and schools will be open Jan. 29 in the northern Israeli areas near Lebanon. This lack of disruption is likely a consequence of Hezbollah's reluctance in applying its potential rocket capabilities, suggesting the group's own level of restraint. However, as political pressure for retaliation grows and further Hezbollah provocation remains possible, the incidents of the last week still hold the seeds of a significant escalation.
Read more: Escalation Between Israel and Hezbollah Is Possible | Stratfor
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on: January 29, 2015, 01:42:10 AM
Started by Quijote - Last post by Crafty_Dog
The New Drivers of Europe's Geopolitics
January 27, 2015 | 02:00 GMT Print Text Size
By George Friedman
For the past two weeks, I have focused on the growing fragmentation of Europe. Two weeks ago, the murders in Paris prompted me to write about the fault line between Europe and the Islamic world. Last week, I wrote about the nationalism that is rising in individual European countries after the European Central Bank was forced to allow national banks to participate in quantitative easing so European nations wouldn't be forced to bear the debt of other nations. I am focusing on fragmentation partly because it is happening before our eyes, partly because Stratfor has been forecasting this for a long time and partly because my new book on the fragmentation of Europe — Flashpoints: The Emerging Crisis in Europe — is being released today.
This is the week to speak of the political and social fragmentation within European nations and its impact on Europe as a whole. The coalition of the Radical Left party, known as Syriza, has scored a major victory in Greece. Now the party is forming a ruling coalition and overwhelming the traditional mainstream parties. It is drawing along other left-wing and right-wing parties that are united only in their resistance to the EU's insistence that austerity is the solution to the ongoing economic crisis that began in 2008.
Two Versions of the Same Tale
The story is well known. The financial crisis of 2008, which began as a mortgage default issue in the United States, created a sovereign debt crisis in Europe. Some European countries were unable to make payment on bonds, and this threatened the European banking system. There had to be some sort of state intervention, but there was a fundamental disagreement about what problem had to be solved. Broadly speaking, there were two narratives.
The German version, and the one that became the conventional view in Europe, is that the sovereign debt crisis is the result of irresponsible social policies in Greece, the country with the greatest debt problem. These troublesome policies included early retirement for government workers, excessive unemployment benefits and so on. Politicians had bought votes by squandering resources on social programs the country couldn't afford, did not rigorously collect taxes and failed to promote hard work and industriousness. Therefore, the crisis that was threatening the banking system was rooted in the irresponsibility of the debtors.
Another version, hardly heard in the early days but far more credible today, is that the crisis is the result of Germany's irresponsibility. Germany, the fourth-largest economy in the world, exports the equivalent of about 50 percent of its gross domestic product because German consumers cannot support its oversized industrial output. The result is that Germany survives on an export surge. For Germany, the European Union — with its free-trade zone, the euro and regulations in Brussels — is a means for maintaining exports. The loans German banks made to countries such as Greece after 2009 were designed to maintain demand for its exports. The Germans knew the debts could not be repaid, but they wanted to kick the can down the road and avoid dealing with the fact that their export addiction could not be maintained.
If you accept the German narrative, then the policies that must be followed are the ones that would force Greece to clean up its act. That means continuing to impose austerity on the Greeks. If the Greek narrative is correct, than the problem is with Germany. To end the crisis, Germany would have to curb its appetite for exports and shift Europe's rules on trade, the valuation of the euro and regulation from Brussels while living within its means. This would mean reducing its exports to the free-trade zone that has an industry incapable of competing with Germany's.
The German narrative has been overwhelmingly accepted, and the Greek version has hardly been heard. I describe what happened when austerity was imposed in Flashpoints:
But the impact on Greece of government cuts was far greater than expected. Like many European countries, the Greeks ran many economic activities, including medicine and other essential services, through the state, making physicians and other health care professionals government employees. When cuts were made in public sector pay and employment, it deeply affected the professional and middle classes.
Over the course of several years, unemployment in Greece rose to over 25 percent. This was higher than unemployment in the United States during the Depression. Some said that Greece's black economy was making up the difference and things weren't that bad. That was true to some extent but not nearly as much as people thought, since the black economy was simply an extension of the rest of the economy, and business was bad everywhere. In fact the situation was worse than it appeared to be, since there were many government workers who were still employed but had had their wages cut drastically, many by as much as two-thirds.
The Greek story was repeated in Spain and, to a somewhat lesser extent, in Portugal, southern France and southern Italy. Mediterranean Europe had entered the European Union with the expectation that membership would raise its living standards to the level of northern Europe. The sovereign debt crisis hit them particularly hard because in the free trade zone, this region had found it difficult to develop its economies, as it would have normally. Therefore the first economic crisis devastated them.
Regardless of which version you believe to be true, there is one thing that is certain: Greece was put in an impossible position when it agreed to a debt repayment plan that its economy could not support. These plans plunged it into a depression it still has not recovered from — and the problems have spread to other parts of Europe.
Seeds of Discontent
There was a deep belief in the European Union and beyond that the nations adhering to Europe's rules would, in due course, recover. Europe's mainstream political parties supported the European Union and its policies, and they were elected and re-elected. There was a general feeling that economic dysfunction would pass. But it is 2015 now, the situation has not gotten better and there are growing movements in many countries that are opposed to continuing with austerity. The sense that Europe is shifting was visible in the European Central Bank's decision last week to ease austerity by increasing liquidity in the system. In my view, this is too little too late; although quantitative easing might work for a recession, Southern Europe is in a depression. This is not merely a word. It means that the infrastructure of businesses that are able to utilize the money has been smashed, and therefore, quantitative easing's impact on unemployment will be limited. It takes a generation to recover from a depression. Interestingly, the European Central Bank excluded Greece from the quantitative easing program, saying the country is far too exposed to debt to allow the risk of its central bank lending.
Virtually every European country has developed growing movements that oppose the European Union and its policies. Most of these are on the right of the political spectrum. This means that in addition to their economic grievances, they want to regain control of their borders to limit immigration. Opposition movements have also emerged from the left — Podemos in Spain, for instance, and of course, Syriza in Greece. The left has the same grievances as the right, save for the racial overtones. But what is important is this: Greece has been seen as the outlier, but it is in fact the leading edge of the European crisis. It was the first to face default, the first to impose austerity, the first to experience the brutal weight that resulted and now it is the first to elect a government that pledges to end austerity. Left or right, these parties are threatening Europe's traditional parties, which the middle and lower class see as being complicit with Germany in creating the austerity regime.
Syriza has moderated its position on the European Union, as parties are wont to moderate during an election. But its position is that it will negotiate a new program of Greek debt repayments to its European lenders, one that will relieve the burden on the Greeks. There is reason to believe that it might succeed. The Germans don't care if Greece pulls out of the euro. Germany is, however, terrified that the political movements that are afoot will end or inhibit Europe's free-trade zone. Right-wing parties' goal of limiting the cross-border movement of workers already represents an open demand for an end to the free-trade zone for labor. But Germany, the export addict, needs the free-trade zone badly.
This is one of the points that people miss. They are concerned that countries will withdraw from the euro. As Hungary showed when the forint's decline put its citizens in danger of defaulting on mortgages, a nation-state has the power to protect its citizens from debt if it wishes to do so. The Greeks, inside or outside the eurozone, can also exercise this power. In addition to being unable to repay their debt structurally, they cannot afford to repay it politically. The parties that supported austerity in Greece were crushed. The mainstream parties in other European countries saw what happened in Greece and are aware of the rising force of Euroskepticism in their own countries. The ability of these parties to comply with these burdens is dependent on the voters, and their political base is dissolving. Rational politicians are not dismissing Syriza as an outrider.
The issue then is not the euro. Instead, the first real issue is the effect of structured or unstructured defaults on the European banking system and how the European Central Bank, committed to not making Germany liable for the debts of other countries, will handle that. The second, and more important, issue is now the future of the free-trade zone. Having open borders seemed like a good idea during prosperous times, but the fear of Islamist terrorism and the fear of Italians competing with Bulgarians for scarce jobs make those open borders less and less likely to endure. And if nations can erect walls for people, then why not erect walls for goods to protect their own industries and jobs? In the long run, protectionism hurts the economy, but Europe is dealing with many people who don't have a long run, have fallen from the professional classes and now worry about how they will feed their families.
For Germany, which depends on free access to Europe's markets to help prop up its export-dependent economy, the loss of the euro would be the loss of a tool for managing trade within and outside the eurozone. But the rise of protectionism in Europe would be a calamity. The German economy would stagger without those exports.
From my point of view, the argument about austerity is over. The European Central Bank ended the austerity regime half-heartedly last week, and the Syriza victory sent an earthquake through Europe's political system, although the Eurocratic elite will dismiss it as an outlier. If Europe's defaults — structured or unstructured — surge as a result, the question of the euro becomes an interesting but non-critical issue. What will become the issue, and what is already becoming the issue, is free trade. That is the core of the European concept, and that is the next issue on the agenda as the German narrative loses credibility and the Greek narrative replaces it as the conventional wisdom.
It is not hard to imagine the disaster that would ensue if the United States were to export 50 percent of its GDP, and half of it went to Canada and Mexico. A free-trade zone in which the giant pivot is not a net importer can't work. And that is exactly the situation in Europe. Its pivot is Germany, but rather than serving as the engine of growth by being an importer, it became the world's fourth-largest national economy by exporting half its GDP. That can't possibly be sustainable.
Possible Seismic Changes Ahead
There are then three drivers in Europe now. One is the desire to control borders — nominally to control Islamist terrorists but truthfully to limit the movement of all labor, Muslims included. Second, there is the empowerment of the nation-states in Europe by the European Central Bank, which is making its quantitative easing program run through national banks, which may only buy their own nation's debt. Third, there is the political base, which is dissolving under Europe's feet.
The question about Europe now is not whether it can retain its current form, but how radically that form will change. And the most daunting question is whether Europe, unable to maintain its union, will see a return of nationalism and its possible consequences. As I put it in Flashpoints:
The most important question in the world is whether conflict and war have actually been banished or whether this is merely an interlude, a seductive illusion. Europe is the single most prosperous region in the world. Its collective GDP is greater than that of the United States. It touches Asia, the Middle East and Africa. Another series of wars would change not only Europe, but the entire world.
To even speak of war in Europe would have been preposterous a few years ago, and to many, it is preposterous today. But Ukraine is very much a part of Europe, as was Yugoslavia. Europeans' confidence that all this is behind them, the sense of European exceptionalism, may well be correct. But as Europe's institutions disintegrate, it is not too early to ask what comes next. History rarely provides the answer you expect — and certainly not the answer you hope for.
Editor's Note: The newest book by Stratfor chairman and founder George Friedman, Flashpoints: The Emerging Crisis in Europe, is being released today. It is now available.
Read more: The New Drivers of Europe's Geopolitics | Stratfor
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