When French and Dutch voters were given an opportunity to vote for the European constitution in 2005, which would have transferred considerable sovereignty from their countries to the European government and its unelected bureaucrats, they “unexpectedly” killed it. An unforgettable lesson for politicians: don’t let the riffraff decide. Such matters are best handled by the elite—politicians, bankers, and unelected bureaucrats. And on Wednesday, they were busy handling such matters.
It’s been an unrelenting process. Survey after survey has shown that wages haven’t kept up with inflation since the wage peak in 2000. Families earned less at the end of the decade than at the beginning, a phenomenon not seen since World War II—the process of hollowing out the middle class. But now there is a new phenomenon: the unmentionable class, the class that doesn’t exist in America, is ballooning.
France is mired in a stagnating economy. The private sector is under pressure, auto manufacturing in a depression. Unemployment hit a 13-year high. Over 3 million people are out of work. Youth unemployment of 22.7% belies the catastrophic jobs situation in ghetto-like enclaves. Gasoline and diesel prices are near record highs. So there are a lot of very unhappy campers. And it could turn ugly.
Hope was once again in vogue Thursday night in President Obama’s acceptance speech, after having gone the way of the green shoots. Hope has been swirling around the financial markets as well. The Fed keeps dangling QE3 out in front of them. And ECB President Mario Draghi injected a mega-dose of it with his bond-buying promise. It goosed the markets even more and powered them to multi-year highs. Then came the jobs report.
The Republic of Cyprus, with its 840,000 people, has been in the Eurozone for less than five years. It and its banks burned through mountains of euros faster than anyone could count. Now they need a bailout whose magnitude balloons every time someone blinks. Yet, Cyprus has something other Eurozone debt-sinners don’t have: Russian money flowing back to Russia!
Bring home the bacon, or the speck, as it were, was the guiding principle for German Chancellor Angela Merkel when she frolicked in China last week. But her pleas to get the Chinese to buy the crappy bonds of debt-sinner countries in the Eurozone fell on deaf ears. This week, US Secretary of State Hillary Clinton was hobnobbing with the Chinese elite. It turned into a clash fest, and instead of bringing home the bacon, she argued with the Chinese over everything and the South China Sea.
Slovenia joined the Eurozone in 2007, went on a borrowing binge that blind bond buyers eagerly made possible, dousing some of its two million people with riches, creating a real estate bubble that has since burst, and driving up its external debt by 110%. And in October, it may go bankrupt, admitted its Prime Minister. Because borrowing binges can last only so long if you can’t print your own money. And in Germany, the debate itself may tear up the Eurozone.
Why would France suddenly prohibit shale gas exploration? Sure, there are environmental issues: flammable drinking water, earth quakes, cows that die, radioactive sludge in sewage treatment plants…. But French governments have had, let’s say, an uneasy relationship with environmentalists. Its spy service DGSE, for example, sank Greenpeace’s flagship, the Rainbow Warrior, in the port of Auckland, New Zealand, killing one person. No, there must have been another reason.
People are holding their breath. Fed Chairman Ben Bernanke is to speak in Jackson Hole. There isn’t a soul in the markets that can shrug off even a single syllable. If his answer isn’t a clear yes, TV economists will parse his speech down to the last iota and look for commas that they haven’t seen before. Headlines stir the excitement. My blood pressure is up, my nails are bitten down to the quick, I haven’t slept in days. I’m ready. Oh dear Ben, I’m praying, let us have more QE.
It started on Monday. “Poverty is returning to Europe,” said Jan Zijderveld, head of Unilever’s European operations. The third largest consumer products company in the world was adjusting its commercial strategy to this new reality, he said, by redeploying to Europe what worked in poor countries of the developing world. Other stars of the industry affirmed it. “The logic of pauperization,” L’Oréal CEO Jean-Paul Agon called it.