By Karl Smith
"Quod Me Nutrit Me Destruit"
It's hackneyed in the U.S. blogosphere to say that the euro or, at minimum, the European Central Bank has been a disaster. The two are responsible for the most devastating economic crisis to afflict the Western World since the Great Depression. And at the rate things are progressing, the devastation in Southern Europe will soon clearly surpass the Great Depression.
It's perhaps surprising then that Pew finds the majority of Europeans in all countries surveyed to be in favor of keeping the euro.
This should not surprise us. Money -- whether its form is gold, sea shells, dollars, or euros -- has potentially devastating effects precisely because folks are reluctant to give it up. For each individual abandoning a currency means abandoning everything that he or she has built with that currency. The savings of the people of Europe are denominated in euros. Their salaries are denominated in euros. Their land and houses have prices in euros. To see the euro go would mean seeing the price of the very artifacts of their lives set adrift on the wind.
This, however, is what makes the arrangement so devastating. For one man's savings is another man's borrowings. One man's salary is another man's wage bill. One man's land is another man's rent. When these prices are too high then loans are not repaid, workers are laid off, and families cannot afford the monthly rent. Everyone would be better off if all prices adjusted simultaneously, but no one individually wants to give up what he or she is owed.
It is the same for the euro. Everyone would benefit from a devaluation, and at this point perhaps outright abandonment. But no one wants to see the nominal value of his or her assets collapse. And so Europe is stuck. It will not, however, be stuck for too long. For several years I have had a hard time seeing how the European project survives continual economic and monetary mismanagement. Little has happened to change that assessment. It appears that public opinion in France has turned decidedly against the project. Equally as important is that the French, like everyone else, blame their own leaders more than they blame the EU.
This implies that new elections will bring new leaders who will be quite aware that it is either Brussels or themselves. They'll blame everything on the European Union and push unreasonable demands as a way of divorcing themselves from poplar outrage.