Viewing the euro crisis from Britain

By Felix Salmon
May 20, 2010
Charlemagne was unimpressed by my euro fantasia this morning: apparently I was the BBC's second choice for the spot, and was approached only after they had been turned down by more sober journalists.

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The Economist’s Charlemagne was unimpressed by my euro fantasia this morning: apparently I was the BBC’s second choice for the spot, and was approached only after they had been turned down by more sober journalists.

There is enough noise out there about Anglo-Saxon newspapers talking down the euro without dragging The Economist into a spoof about the death of the single currency… the whole idea felt unworthy of the BBC. …

The British media is handling this crisis with unusual complacency, tinged with a certain glee.

Charlemagne even manages to call the Times (of London) “criminally irresponsible” for writing about a break-up of the euro.

All of which represents a level of hypocrisy in the Economist that I’d previously suspected, but not noticed due to highly evasive skills.

Exhibit A:

Economist Cover.jpg


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Vietnam, Heart of Darkness, ’90s wingnut ‘Black Helicopter’ fantasies, WWII revisited, Planet of the Apes-in-Athens… Yikes.

Posted by MattF | Report as abusive

I’d like to point out that this was the cover to the *American* edition of the Economist. The British cover was geared towards the upcoming UK elections, and was quite different. I know this because I wanted a copy of the cover, and was disappointed when I got to the nearest newsstand here in London.

Of course, it is a British publication, even if they alter the content slightly for different markets….

Posted by aTree | Report as abusive

Yes, that is funny, one of the worst Economist covers I can remember, even the headline is a lame pun which was doing the rounds for weeks beforehand.

Doesn’t make your use of BBC Sound Effects Volume 2 any less embarrassing though…

You’re all in the same plague pit.

Posted by lubumbashi | Report as abusive

This is unfair. The cover of a magazine is mostly a marketing/design decision geared towards selling the stuff. Surely Charlemagne has no input into it. I accept it’s the editor’s choice in the end, but nevertheless, the audience is fully aware that mag cover are essentially ads to entice buyer rather than serious columns.

I must say, I mostly agree with Charlemagne’s views. It’s not the end of the Euro. The Euro is still above $1.20 – come on! – it was below parity soon after its birth. And in 07/08 (until the lehman induced struggled to get hold of USD) and in 09 again, the media was full of obituaries of the USD. Now, it’s the turn of the Euro. Well, in fact, the Euro is just adjusting back down just like GBP and USD did before it. Partly, it’s the fact that the EU economy is mostly sound (people do and did not lose their houses – mostly). And the effect of the crisis always take longer because EU economies have more automatic stabilisers – you still need adjustment to happen, but it takes longer and tend to be less painful.

Clearly, the likes of Merkel/Sarko/Berlusconi and the EU structures are not helping – but the attitude of many British eurosceptics is frankly disgusting. They feel vindicated. But they forget that the British banking system would have gone the way of Iceland if it wasn’t for the help of the Fed and the ECB – sure brown/darling intervened but they were aware of the potential issues. See Willem Buiter’s blog on at the time.

Also, I head Lord Lamont the former UK chancellor reminding people that having your own currency is no panacea. Witness the UK in the 70s, Iceland had its own currency. When push comes to shove, you need a big daddy of a central bank with a bazooka, grenade launcher, and an attitude that it will act in the interest of the zone at all costs. The ECB is not there yet, but I wouldn’t bet againtst it.

Posted by fxtrader14 | Report as abusive

oh, and Today’s segment was trashy – if you’d posted that here, I would have thought fine – a view and some interesting questions raised. But on the Beeb? come on!

Posted by fxtrader14 | Report as abusive

If it’s any consolation The Economist is even worse on its LatAm coverage. It’s facile, superficial and offers zero insight into the region (with the possible exception being the guy that covers Peru who does social issues pretty well).

Posted by ottorock | Report as abusive

Leaving aside the questionable taste of calling oneself Charlemagne… well, just leaving it aside and leaving it at that, the blogger doing so made some points and overshot a few others. But that still doesn’t make your audio clip any more entertaining, apt or educational in what-if history terms than replaying the DVD of V For Vendetta which is as timely now as it was on first release.

You’re welcome to try again though, Felix. The compromised Pound has a bit of a pounding ahead of it too, and it won’t be alone. Get ‘er early and get it good!

Posted by HBC | Report as abusive

Your piece about euro collapse was indeed truly, totally ridiculous nonsense and here is why.

Let us first use the example of US from 2008. You could write in similar tone *before* October 2008 about “How US economy might collapse”: the banking system will go to a standstill and next day Great Depression will start. Why it did not happen we know, FED acted by circumventing the banking system and contained the problem AT A PRICE of printing money.

It is clear now that, if needed, the same happens with euro after the first step to quantitative easing was taken. Now you may say “but the price will be terrible”. Right, the price may be terrible but otherwise the price will be terrible too. And actually, equally well the price MAY NOT turn out to be terrible as we can see the dollar becoming strong and valuable after all the printing.

So the real scenario is this: all PIGS are unable to raise money from the market anymore. ECB starts buying unlimited quantities of their debt. Obviously market shorts on euro in a biiig way, escaping in droves to the dollar. That makes Euroland extremely competitive, exports surge fenomenally. Any hope of getting US economy out of the hole by increasing exports dash completely, the US trade deficit bombs. Simultaneous huge budget deficit and trade deficit become an issue of Armageddon proportions for the US.

So what happens next? Eyes turn on the US problems, euro raises, confidence in Euroland gets huge kick since it is showing up they are dead serious about their deficits. Now euro starts becoming safe haven, and the US gets its turn for coming close to the black hole.

Posted by Boomgloom | Report as abusive