The beginning of the end?

Europe has been the center of finance for centuries and discipline if I add so. But in a global village, it is quite natural that a policy in one nation shall affect its trading partner(s).

Abolition of Glass Steagall Act was blamed for excessive bets using public money and no wonder Europe is feeling the brunt of this global mess created by the United States. If I borrow $100, then it's my problem to repay you; but if I borrow $100billion, then it becomes your problem. The vicious circle of debt is like an Abhimanyu's Chakravyuha. One can easily enter, but only the smartest of all can get out of the circle. And, not all can be Arjuna. When the glut of liquidity flows nonstop, it lifts up all asset prices like a tsunami. Clearing that debris after such shocks is very painstaking for all participants and a long drawn process, though not impossible. Solutions can effectively be found if policy makers work with common sense; and not making sense out of everything. It is easier said than done. Be it army or at home, discipline has to be inculcated in a hard way. The world is multi-trillion such homes and I know it will be much harder to incorporate the financial discipline.

The solution to a debt problem cannot be a debt again. What Angela Merkel is pushing absolutely makes lot more sense. You got to cut down your expenses, follow austerity measures, have budget discipline. But at what cost? That is the trade off. No one actually knows what shall be the cost. If Poland and Czech remain largely unscathed that tells us that the solutions were already been found and incorporated effectively. The PIGS need to learn, may be in a hard way and not just complain about Germany's stand.

America propaganda is - Greed is good; and did everything they can to make it a land of opportunities. The results - the rising chronic capitalism that created startling inequalities; and its only rising now. The great American dream failed!

The climax to the debt trap cannot be in EU, it has to be in US. Once, all excess leverage is taken out from the system; and the sea of liquidity has dried out, we shall be in a happy planet. The bubble has to burst and asset prices have to deflate. We are yet to see that happen. Till such time the world needs a Germany, not America. With finite resources, Germany may not be big, but they have the solutions and more importantly the intention to resolve.

The catastrophe has been postponed for now, may be deferred sine dine; the world is waiting who will bell the cat first. Let that be the United States of Europe and prove yet again to the world that Europe is the global center of finance and discipline.