An ever larger problem

Can Mark help George?

Mark Carney, praying for the UK economy? Mark Carney, praying for the UK economy?
An ever closer union is the mantra of the EU, but is this possible beyond the sharing of debt and juggling of liabilities? And another question, what to do about Cyprus, what do the money men think? From an article in the Telegraph by Harry Wilson -

Jim O'Neill, outgoing chairman of Goldman Sachs Asset Management. said the eurozone had revealed again that it was a group of 17 countries with very different interests. He said that most deals seemed to be about what politicians thought they could "get away with" in their parliaments. "The European Monetary Union (EMU) in effect continues to be a union of 17 countries that don't see their collective shared interests as the same," Mr O'Neill said. "Much decision making is not actually decided by the European Union or eurozone bodies but by key politicians whose main criteria is what they 'can get away with' with respect to their parliaments. "Can EMU ultimately survive. or indeed, can EMU survive with this system?

It's worth remembering that while Lehman Brothers Holdings Inc. failed the stress test of the present world recession Goldman Sachs has prospered. So what O'Neill says is worth listening to, it's true and although not mentioned by name the most significant key politician is Angela Merkel. She and other German politicians have showed they are floundering and cannot solve the problem. In fact Germany is part of the problem as we posted HERE. This post, written in August 2010 - 'Some things come in pairs' explores the delicate balance between buyer and seller, importer and exporter. Retold is the story of Bank of England Governor, Mervyn King,

and the moment he realised that what he calls the, Great Recession, will be harder to get out of than you might think. King was at a posh conference on the world circuit with the great and the good, the politicians who lead us, and was both amused and horrified to hear them all declare they would get out of the mess by exporting. Clearly for this to work buyers and sellers must come in pairs. But at the conference in question all the world leaders were sellers.

This is of course the heart of the problem and the Germans are fools if they want to pretend otherwise. In the August 2010 post we also wrote -

Running parallel to this political move is the dogma of exporting at the expense of all other considerations, ask yourself, has it worked? At the moment the Germans say rude things about the Greeks. The general drift is that they are lazy and don't work hard enough. However, the Germans should reflect on how the Greeks buy so much of their industrial output. They should also reflect on how the massive trade imbalance between Germany and Greece has caused so many problems for them both. Perhaps if the Germans were not so industrious? The basic flaw with the EU is its assumption that free trade will cure all the ills a country may have. The idea that two countries, A and B exist on the basis of A sells its widgets to B and B sells its widgets to A and all is well has its limitations.

It's very arrogant for the Germans to loftily declare 'the Cyprus business model is dead' when not only Cyprus and Greece but all of the other EU counties in financial trouble have a massive and unsustainable trade imbalance with Germany. It suits the German export drive to hide behind a basket case currency. The Germans should be grateful to these countries. If the Cyprus business model is dead then the one for the EU is very sick too.

We should also remember that some important people have worked for Goldman Sachs. On this list is Mark Carney, ex Governor of the Bank of Canada and soon to replace Mervyn King as Governor at the BoE.

The Tory party aware of the fact that George Osborne has done little in his time as Chancellor are looking to Carney to help them with some ideas. Well let's hope he can do something, the UK needs all the help it can get. On the other hand if he's as direct as O'Neill then George Osborne and David Cameron might not like what they hear!