On a BBC forum with Howard Davies, I noticed George Soros was bearish about the continued existence of the Eurozone. There is a great quote in 'Alchemy of Finance' which seems to presage more pain to come, even with new ministers or belated structural reform.
With the periphery in tow, can the Eurozone ever overcome her fiscal inadequacies?
In Phase 1 of his 'real-world' trading experiment, Soros penned this quote in the midst of the Plaza Accord negotiations in 1985:
'My optimism is tempered by the insight that when the past excesses are corrected is the period of greatest risk. The excesses were meeting a certain need; otherwise they would not have developed in the first place. Can the system function without them? Moreover, the process of correction can develop its own momentum, setting off a self-reinforcing trend in the opposite direction'.
Uncontroversially Soros stated, 'We are living in interesting times'.
Let’s transplant the Plaza problem into our current predicament. If the Euro gradually begins to recover and spreads hypothetically narrow - not an (immediately) forseeable prospect - will the reverse trend be too much in the opposite direction?
In short, what is the real Quantum of damage likely to be?!
(As an aside, but another crucial matter – Trichet’s approach, one could argue, exhibited Thorstein Veblen and Herman Kahn’s ‘trained/educated incapacity’ with regard to inflation targets, deficits and central bank governance).
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