Thursday, May 20, 2010

Euro-zoned & BangBangkok

Two crises seem to be in the headlines here---the Euro currency crisis and the brewing civil war in Thailand.  One, a potential financial tragedy and, the other, well...just a tragedy.

With practically all countries in the Eurozone, except Germany, running budget deficits well in excess of the 3-4% GDP guidelines (the US, with a deficit at nearly 10% GDP, is running close to Spain's 11% and on the way toward Greece's 13.6%), the economic measures that traditionally grapple with these kinds of extreme situations (e.g., currency devaluation) are not available under a unified currency regime.  The combination of tax increases and spending cuts to solve deficit challenges can work when there is robust activity to tax.  Or, if there is a highly developed export sector that benefits from the decline of the Euro relative to other leading global currencies.  In Greece, the fear is that severe deficit reduction measures send the economy into a death spiral.

The headlines in the Times suggest that an exit from the Euro may be imminent for several leading countries in the EC---including, perhaps, Germany.  The German people are understandably impatient with the notion of funneling several hundred billion to rescue southern economies such as Greece.  Who can blame them?  After nearly two decades of post-reunification financial rescue of the eastern sector by the west in the German republic, the Germans may be suffering from financial rescue fatigue.

Am no economist, but it always seemed to me that a unified currency without a strong central bank running monetary policy and a strong central government controlling national budgets and fiscal policy, the Euro had no real long term future.

Poor Thailand.  Always a dream country for me.  Hard not to fall in love with the country and its people.  I have been there 3-4 times and seeing how the situation has devolved into tragedy saddens me.

This appears to be a conflict over the role of the monarchy and central authority after the much-anticipated death of the current king, now in very ill health.  What started as a political dispute over winners and losers in parliamentary elections has deepened into a struggle for the soul of the nation.

Gunfire in the streets.  Now, random rioting, curfews, dire warnings of civil war.  Utter chaos.  An ex-lover decided that this was the opportune time to go visit friends in Bangkok, one reason among many that he is an ex.

Hard to see the path forward, with an absent king and no strong bipartisan national leader.  Wish them well.

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