At this time of writing, the latest in an apparently endless procession of
eagerly awaited events has taken place: the European Central Bank Governing
Council has held its regular biweekly meeting and ECB President Mario Draghi has
held his post-meeting news conference. The Governing Council decided to do
nothing; i.e., it held the ECB’s interest rates unchanged.
Draghi, at
least to judge by the reaction of the financial markets in Europe and the US,
also did very little – in any event, much less than had been hoped for by the
markets.
However, this assessment may change within an hour or a day.
Even if it doesn’t, the markets will quickly move past this latest
disappointment and refocus on another event scheduled within a few days: the
next meeting of the FOMC, the committee of the Federal Reserve Bank that decides
on interest rates and monetary policy generally. If and when the markets’
desperate hope for an announcement of additional “monetary loosening” – meaning
extra liquidity – is again dashed, it will merely shift its ever-optimistic gaze
toward the next “event.”
This syndrome of forever imminent salvation has
been going on all year and, in many senses, has been under way for the past
three and a half years. One can regard it as pathetic (as discussed in last
week’s column), or as well-intentioned foolishness, or as sensible
self-preservation on the part of the financial institutions that dominate the
markets – because from their point of view, if the central banks do not
consistently pump more and more money into the markets, there is a strong
likelihood that the financial system will suffer a systemic collapse, which will
destroy most, if not all, of the major financial institutions.
In other
words, how you look at things depends on what you have on the line. There is
very little scope for objective assessments when what is at stake is
existential.
Understanding this principle is critical for making sense of
the Middle East, especially vis-à-vis Iran. Only if it is appreciated that not
only Israel, but also Saudi Arabia, Kuwait and the Gulf states generally view
Iran as an existential threat to them, in the fullest sense of the word, do many
seemingly weird and inexplicable developments in the region make
sense.
But that’s merely life-and-death stuff. Far more important is the
potential existential threat to the world’s largest financial institutions, the
bonuses of their top executives and the salaries of their rank-and-file
employees – not to mention the parallel threat to the European Monetary Union
and the well-being of the supra-national institutions in Brussels, Frankfurt and
elsewhere who run it, and the numerous clever, multilingual bureaucrats who run
these institutions.
Any sensible person who has the well-being of Europe
at heart – indeed, anyone who cares deeply about the future of the human race –
will agree that no effort must be spared to thwart this threat, to stave off
potential disaster and to ensure that the euro survives intact. In truth, who in
his right mind could disagree with Mario Draghi’s assessment that the euro
cannot be dismantled. The commitment of the ECB to buy the sovereign debt of
euro-zone member states, in unlimited quantities, is simply the translation of
the Draghi’s previously announced readiness to “do whatever is necessary” into
practical terms.
Yet it must be admitted that some people, for no fault
of their own, might see things very differently. The 24.4 percent of the Greek
workforce now officially unemployed – an almost-unbelievable increase of nearly
a full percent in a single month, according to official data released Thursday –
might wonder why they have to suffer year after crushing year of declining
living standards and rising hopelessness just to ensure that the German and
French banks stupid enough to lend excessively to Greece in the pre-crisis years
of make-believe should not suffer the consequences of their actions.
If
there is any truth to the report in a British paper earlier this week that
Greece’s creditors are set to demand that the dwindling number of Greeks still
in full-time employment switch to a SIX-DAY working week, that too might color
the way the average Greek views the crisis and how he might prefer a somewhat
different approach to solving it. His Spanish peer, who already longs for an
unemployment rate of less than 25%, would probably agree with him.
At the
end of the day, the crisis in Europe is centered on the sociopolitical rift that
has developed between the haves, and their minions who run the EU and its
agencies, and the have-nots who run nothing – until they snap and run amok. All
the contrived events and phoney solutions that the markets pretend to place
center-stage cannot alter that underlying reality.