Finally, one more foray into geopolitics. The proportions of the U.S. fiscal debacle have been mitigated by a flight of money from a Europe that is judged even more worrisome than America because the currency itself could come unstuck. The heart of the Eurozone, Germany, has no debt problem; enjoys robust economic growth and moderate unemployment; and has nearly half of its GDP in sophisticated manufacturing exports. If, as I have also predicted in this space, the German government authorizes use of Germany’s credit for the issuance of European Central Bank bonds for the benefit of the more distressed countries in Europe, in exchange for their replication of German entitlement, tax, and labor-market reforms, Europe will quickly become economically stronger than the United States.
Then, unfashionable though such a perspective is at the moment, huge amounts of capital will flow back to Europe, and the pressures on this country to pull itself together will become too intense for even the most blasé administration and obtuse Congress to ignore. The U.S. has done nothing to assist Europe, with the mad Obama-Geithner wails to paper the ground with freshly minted euros from the Vistula to Gibraltar and the North Cape to Cyprus. But Europe could, by jettisoning the unaffordable and demotivating chunks of its failed social democracy Obama so admires, help the U.S.
— Conrad Black is the author of Franklin Delano Roosevelt: Champion of Freedom, Richard M. Nixon: A Life in Full, and, just released, A Matter of Principle. He can be reached at cbletters@gmail.com.
It pays to know how things go.