Most analysts agree that, for Europe, the latest resurgence in confidence is only skin deep.After the November central bank intervention, the December cash-for-crap-assets lending program (LTRO), and headlines about Greece’s new bailout, the trading mood has turned optimistic even as progress lags and remains unsteady.
An anonymous blogger at Fabius Maximus writes a brilliant recap of all that can still go wrong, but we were most struck by his inclusion of the paragraph with which economist John Maynard Keynes opened his landmark book The Economic Consequences of the Peace back in 1919:
Very few of us realise with conviction the intensely unusual, unstable, complicated, unreliable, temporary nature of the economic organisation by which Western Europe has lived for the last half century. We assume some of the most peculiar and temporary of our late advantages as natural, permanent, and to be depended on, and we lay our plans accordingly. On this sandy and false foundation we scheme for social improvement and dress our political platforms, pursue our animosities and particular ambitions, and feel ourselves with enough margin in hand to foster, not assuage, civil conflict in the European family.
This analysis rings true for the Europe of today. Its leaders continue to operate under the assumption that their system is sustainable and that the preeminence of Western economies is unassailable.
So they pander to their political followings and attempt to make examples of each other (read: Greece) and deny that the floor of their union is buckling beneath them.
Say what you like about Keynes, but it’s hard to deny the accuracy of his insight on what would happen in Europe after WWI.
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