Why Europe is much more fragile than anyone thinks
Economists are spending too much time concentrating on things they can count. Meanwhile, says Merryn Somerset Webb Europe is starting to crumble.
Russell Napier is one of MoneyWeek's favourite strategists. And in his Solid Ground Fortnightly, he has had a look at the things we're not thinking about in Europe. I'm worried about the redistributory and social effects of quantitative easing, and about the shock effects of Greece leaving the euro. But he is thinking more of Europe as a whole, and the attempts to create clearing prices in a federal whole.
"Have we totted up the impact on emigration from Ireland and on family life as prices in that country adjust to their clearing level? Have we calculated the faith of the people of Spain in the democratic process as prices in that country adjust to their clearing level? Has anybody put a figure on the impact on political stability of the loss of sovereign power dictated by the move to federalism under a single currency?
"Ultimately all these things which are not counted, because they are in essence unquantifiable, remain crucial to stability and the sanctity of property rights, and may be the only thing which actually does count to investors in the single currency experiment."
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Think back, says Napier, "to the occupation of Washington DC by an army of 43,000 unemployed WWI veterans in July 1932" after Andrew Mellon, Secretary of the Treasury decided it would be a good idea to "to "liquidate labour, liquidate stocks, liquidate the farmers, liquidate real estate" in order to let everything find its clearing price.
On that occasion the appearance of General Douglas MacArthur, Major George Patton and Major Dwight Eisenhower on Pennsylvania Avenue with a heavy presence of infantry, cavalry, tanks and tear-gas made it clear that finding clearing prices can come with risks that can't be counted.
At the time "the great speculator, head of the SEC, US Ambassador to the Court of St James and much else besides", Joseph P Kennedy, was worried. He would, he said, have been "willing to part with half of what I had if I could be sure of keeping, under law and order, the other half." No one in Europe feels quite like that yet. But as Napier points out, we once again find ourselves surrounded by economists who refuse to see what actually counts.
It might, he says, be "time to stop counting and to start watching." Because "it is clearer every day that the people will not consent to a process which forces upon them a decline in both living standards and state sovereignty. Without such consent there can be no single currency. And there are now, right across Europe, any number of people loudly voicing that discontent and non-consent."
It's a more fragile time than our politicians would have us believe.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
-
What the Employment Rights Bill means for your job
New workplace reforms are set to give employees new rights to benefits and flexible working
By Marc Shoffman Published
-
GSK share price surges after $2.2bn Zantac drug settlement
GSK has settled lawsuits in the US that alleged the drugmaker’s now-discontinued heartburn drug Zantac triggered cancer
By Chris Newlands Published
-
Beating inflation takes more luck than skill – but are we about to get lucky?
Opinion The US Federal Reserve managed to beat inflation in the 1980s. But much of that was down to pure luck. Thankfully, says Merryn Somerset Webb, the Bank of England may be about to get lucky.
By Merryn Somerset Webb Published
-
Rishi Sunak can’t fix all our problems – so why try?
Opinion Rishi Sunak’s Spring Statement is an attempt to plaster over problems the chancellor can’t fix. So should he even bother trying, asks Merryn Somerset Webb?
By Merryn Somerset Webb Published
-
Young people are becoming a scarce resource – we should value them more highly
Opinion In the last two years adults have been bizarrely unkind to children and young people. That doesn’t bode well for the future, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
Ask for a pay rise – everyone else is
Opinion As inflation bites and the labour market remains tight, many of the nation's employees are asking for a pay rise. Merryn Somerset Webb explains why you should do that too.
By Merryn Somerset Webb Published
-
Why central banks should stick to controlling inflation
Opinion The world’s central bankers are stepping out of their traditional roles and becoming much more political. That’s a mistake, says Merryn Somerset Webb.
By Merryn Somerset Webb Published
-
How St Ives became St Tropez as the recovery drives prices sky high
Opinion Merryn Somerset Webb finds herself at the epicentre of Britain’s V-shaped recovery as pent-up demand flows straight into Cornwall’s restaurants and beaches.
By Merryn Somerset Webb Published
-
The real problem of Universal Basic Income (UBI)
Merryn's Blog April employment numbers showed 75 per cent fewer people in the US returned to employment compared to expectations. Merryn Somerset-Webb explains how excessive government support is causing a shortage of labour.
By Merryn Somerset Webb Published
-
Why an ageing population is not necessarily the disaster many people think it is
Opinion We’ve got used to the idea that an ageing population is a bad thing. But that’s not necessarily true, says Merryn Somerset Webb.
By Merryn Somerset Webb Published