The end of the EU and the Balkans as China’s foothold in Europe

Though the end of the European Union is inevitable, the proponents of a further integrated or federal superstate are busy making a last effort to achieve their goal. The opposition against the project is mounting with every day. Europe is suffering from economic stagnation, and is facing a demographic calamity.

The pro-European establishment’s last hope was the newly-elected French President Emanuel Macron who was to revive the economy and integrate the European Union under French leadership. Gefira was of the opinion that all these expectations were misplaced. The once great nation is broken beyond repair. France’s problems are much worse than those of Italy. Though Italy has a higher debt-to-GDP ratio than France, France has a larger budget deficit, and the difference is that while Italy has a trade surplus France has a trade deficit, so the country cannot pay for its imports.

While the Italian “populist” Mateo Salvini is earning the nation’s respect, Emmanuel Macron’s popularity is at a historic low. All of France is engulfed by riots, civil unrest and looting. In city after city, village after village, protesters have been clashing with the police for weeks now while President Macron has nothing to offer to appease them, unless he violates the budget deficit boundary of 3%.

Like the Soviet Union once was, France is a sizeable social-multicultural experiment, and like the empty shops in communist countries, the demographic changes in France are visible in every section of the society, but nobody dares to name them. Once the whole world saw that the French team playing at the FIFA World Cup was made up of almost exclusively Africans, and even on Twitter Africans boasted about it. Yet, the French establishment insisted that those Africans were genuinely French. Dissenters were branded as racists or Nazis. Continue reading →

Guest post: By André ten Dam and Jean Wanningen

Abstract

This article reviews an alternative option for Italy to devalue in order to deal with its economic problems, while keeping its EMU membership and the euro as its currency. Referring to the Keynes’ views, the crucial role of the rigid one-size-fits-none euro in the Italian economic malaise is analyzed. And the reason is explained why Italy needs a devaluation, in particular versus Germany. Because a euro-exit with re-introduction of the lira currency by Italy will be accompanied by several complications, disadvantages and risks, The Matheo Solution (TMS) is presented as a more suitable, simple, smart and elegant alternative. Via implementing a national unit of account for every individual euro country, the ‘lean & mean’ TMS model introduces monetary flexibility regarding exchange(value)-rate adjustment and interest rate differentiation on a national level within the Euro Pact. Keynes probably would have considered the TMS model himself, if he had the time to live. Although in 2010 intended for a Eurozone-wide implementation, Italy, then regaining the crucial parts of its monetary sovereignty, can implement the TMS model unilaterally as well. After devaluing the newly introduced Italian unit-of-account the Italian economy, employment and state finances will instantly improve.

Since the introduction in 1999 of the common European one-size-fits-all euro-currency in Italy, the third euro-zone economy is struggling. Instead of the promised growth and prosperity the common currency has thrown the country into a situation of stagnating economy, structural high unemployment and (as a consequence) deteriorating state finances. And the outlook for the future isn’t very bright either.

In this downward spiral well educated youngsters (the Italian human capital) move abroad, industrial production move to other countries with lower labor costs and the Italian banking system finds itself in a state of collapse.

Two relevant questions are:

1. What is the main cause of the Italian troubles?
2. What could Italy do to turn the disastrous tide?

Keynes lends a helping hand. Continue reading →

After the Second World War, many economists racked their brains to answer the question of how Hitler managed to finance his armament, boost the economy and reduce unemployment. Today his trick is well known. The economic miracle of Führer’s time became possible thanks to the so-called Mefo promissory notes. The notes were the idea of the then President of the Reichsbank, Hjalmar Schacht, and served not only to finance the armament of the Wehrmacht for the Second World War, but also to create state jobs, which would otherwise not have been possible through the normal use of the money and capital markets, i.e. the annual increase in savings in Germany.

The Reich thus financed the armaments industry by accepting notes issued by the dummy company Metallurgische Forschungsgesellschaft GmbH (hence the name Mefo) rather than paying them in cash. The creation of money was in full swing from 1934 to 1938 – the total amount of notes issued at that time was 12 billion marks. The Reichsbank declared to the German banks that it was prepared to rediscount the Mefo notes, thus enabling the banks to discount them.

Because of their five-year term, the redemption of notes had to begin in 1939 at the latest. This threatened with enormous inflation. Since Schacht saw this as a threat to the Reichsmark, he expressed his doubts about the Reich Minister of Finance. But it did not help, and Schacht was quickly replaced by Economics Minister Walther Funk, who declared that the Reich would not redeem the Mefo notes, but would give Reich bonds to the Reichsbank in exchange. At the time of Funk, the autonomous Reichsbank statute was abolished, the Reichsbank was nationalized, and inflation exploded in such a way that Mefo notes with a circulation of 60 billion Reichsmark burdened the budget in post-war Germany. Continue reading →