This morning’s key headlines from GenerationalDynamics.com.
* Last-ditch plan to save the euro begins to emerge
* Manufacturing data shows unexpected slowdown in Asia and Europe
* Voyager spacecraft detect new type of ultraviolet light
* Russia delivers anti-ship missiles to Syria
Last-ditch plan to save the euro begins to emerge
Olli Rehn, Europe’s Economic and Monetary Affairs Commissioner, said on Wednesday that there are only a few days left, until December 9, to save the euro. December 9 is the date of the next major summit meeting of eurozone leaders, and they have to announce their “Big Bazooka” plan on or before that date. The plan that is starting to emerge was hinted at on Thursday by the following comment by Mario Draghi, the new chief of the European Central Bank (ECB):
“The ECB’s monetary policy is constantly guided by the goal of maintaining price stability in the euro area over the medium term – and this applies to price stability in both directions.”
The key phrase here is “in both directions,” referring to both inflation and deflation. Based on this and numerous economists’ remarks about the danger of deflation in the eurozone, it’s now thought that Draghi is about to reverse himself and agree to a substantially looser monetary policy for the ECB than he’s previous said he’d allow. Thus, the emerging plan to save the euro is roughly as follows:
- Draghi’s ECB will lower interest rates.
- On Monday, French President Nicolas Sarkozy and German Chancellor Angela Merkel will announce a plan to amend the Lisbon treaty to create a “fiscal union,” giving Brussels (and Berlin) much tighter fiscal controls on eurozone countries.
- In return, Draghi will agree to allow the ECB to “print” trillions of euros of new money to purchase toxic bonds from Italy and Spain, in order to bail them out.
- The entire package will be announced with great fanfare on December 9.
After that, work will begin to get all 17 eurozone countries (and perhaps all 27 EU countries) to agree to the Lisbon treaty amendments. Telegraph
The Germans are being heavily pressured to agree to this plan to save the euro. But with less money in the world every day, the ECB will have to “print” more and more money to purchase toxic bonds. This will freak a lot of people out, including the Germans, and it remains to be seen whether 17 (or 27) countries will agree to cede their fiscal control to Brussels or Berlin. At any rate, from the point of view of Generational Dynamics, this new plan has no more chance of succeeding than the previous plans, all announced with great fanfare.
According to the “Kick the Can Theory,” the December 9 meeting will announce some package that will commit to nothing but will promise to get everything fixed next year. According to this theory, the ECB may promise to step up its purchasing of toxic bonds, but only by a minimal amount, without completely bailing out Italy and Spain. But there will be a commitment to do it sometime next year.
From the point of view of Generation Dynamics, the euro WILL be saved, but not in the way people expect. Europe will be split down the middle during the war, but once the war ends and enters a recovery era, the survivors will form a new European Union with a new euro currency, and they’ll vow never to fight again.
Manufacturing data shows unexpected slowdown in Asia and Europe
New data from China shows that manufacturing has slowed down much more than expected because of weak demand from Europe and the United States for China’s exports. According to a Chinese official, “It’s going to be painful, and it’s going to be nasty. What policymakers are aiming for is a smoothing of the path. The current crisis, to some extent, is more serious and challenging than the international financial crisis following the fall of Lehman Brothers [in 2008]. It’s keenly important for countries around the world to work together in the spirit of ‘co-operating in the same boat’.” Other data released on Thursday shows contraction in manufacturing in most of Asia and across Europe. However, although the outlook for the euro countries has deteriorated significantly recently, Germany is doing well, with products that are in greater demand abroad than ever before. India Times and Spiegel
Voyager spacecraft detect new type of ultraviolet light
NASA launched the Voyager 1 and 2 twin spacecraft in 1977, and they’re still transmitting data back to Earth. They’ve been traveling out of the solar system, and they’re now more than 100 times as far from the sun as the earth is. Their enormous distance from the sun is allowing them to detect a type of ultraviolet light from other regions of our Milky Way galaxy that had been previously all but invisible, since it was drowned out by radiation from the sun. The Voyager probes have already lasted far longer than expected, and they may continue to transmit new discoveries back to earth for years to come. National Geographic
Russia delivers anti-ship missiles to Syria
Russia has delivered anti-ship cruise missiles to Syria in the last few months, fulfilling a $300 million weapons contract. “This weapon allows coverage of the entire coastline of Syria from possible attack from the sea,” according to a Russian source. A United Nations commission of inquiry recently called for an arms embargo on Syria, but Russia and China have consistently blocked such an embargo. Reuters