I heard two WSJ economists discussing this issue online. At first they talked about how nobody’s convinced by Mario Draghi and the ECB. They said the market has reacted negatively to him. They said that America trades mostly with England, but England would be pummeled by the implosion of the Euro Zone. And it would negatively affect American wallets.

At the end of the day it came down to that one question about Germany bailing out the rest of Europe. They predicted that it would, and that was what the market was waiting for.

English and American economists must understand that Germany doesn’t think like this, especially without controls put on the rest of Europe to make it do what it wants. Once again it reminds me of World War II being fought on the stock exchanges instead of in tanks.

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_ All year long no matter what Merkel and Sarkozy did, the markets liked it for a day or two and then went back to their doldrums about the EU bond crisis. In July there was euophoria when they supposedly reached a deal about the second Greek bailout. But that was very short-lived. Merkel and Sarkozy have tried more and more measures since, including the most recent proposed treaty change. Apparently the markets think that these are all steps in the right direction, but none of them go far enough.

What would be far enough? If having a new treaty with teeth isn’t enough for the bond investors, they must think that there must be a political union of Europe and not just an economic one. Countries would have to be governed from Brussels and not just their economies. Everybody knows that’s never happened in all of history in any kind of democratic fashion, the latest attempt being the Third Reich.

So maybe all this does signal an eventual breakup of the EU. Not just Great Britain will be out but everybody.

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_ For the first time in 39 years — 1972 — a British Prime Minister has used a veto to block an EU agreement. Camero said he wanted protection for his banking sector. But everyone else thought that banks were the problem to begin with and needed more regulation, not less. All the other Europeans couldn’t see why British banks should be singled out for special treatment.

In fact Germany and its allies deliberately opted to pass rules unfavorable to the British banking sector. It was a way to test Britain’s commitment to belonging to the EU. Many think they weren’t committed to begin with. They never agreed to the open borders policy. Nor did they adopt the euro. And they’ve constantly rebelled against control from Brussels.

So extreme was the revulsion against what Britain had just done that Sarkozy refused to shake Cameron’s hand.

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_ When it comes to the current EU deal to put fines on countries that violate the rules and to bring offenders before the European Court of Human Rights the U.S.A. seems to be behind Germany. The U.S. wants to please the markets and bond investors. It will settle for almost anything that succeeds in doing that and avoiding a Lehmann Brothers like financial collapse. It makes sense. In the West Germany is the second largest financial power behind the U.S.A.

But when it comes to foreign policy, the USA’s all British. The current American sphere of influence mimicks the Old British Empire almost exactly. Where Britain was once involved, such as Egypt, Iraq, Afghanistan, and the Middle East, we get involved almost by default. So though George Bush and Tony Blair were partners and allies in the War in Iraq and the War in Afghanistan, the current occupant of the White House and David Cameron will not be allies when it comes to the EU debt crisis.

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_ All EU nations indicated that they might join the intergovernmental agreement about the currency — except Britain. David Cameron adamantly refused. He said he wanted protection for Britain’s financial sector that produced about 10% of the country’s wealth. But really he was objecting to entering into anything run by Germany.

This is understandable after fighting two world wars against Germany. But this time England can’t play the America card the way Churchill did with Roosevelt. America doesn’t care what Europe does as long as the market likes it. We want to avoid another recession ourselves.

So David Cameron can go bark up his own tree.

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_ During the last days of the Third Reich Hitler’s staff loyally followed him because they thought he had a secret weapon. The worse things got, the more likely they thought he was to deploy it. They had only to trust the Fuhrer and he would get them through the war.

This is eerily parallel to the feelings of many in the EU right now. They have a faith in Sarkozy and Merkel to pull them through the Euro Crisis.They are not quite sure how it would work, but they just know the leaders won’t let things get worse.

It could be that the leaders won’t know what to do to get through the crisis and will let the EU fall apart just as Hitler couldn’t stop Germany from being conquered.

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_ The idea that Germany’s idea of a treaty change for the Euro Zone is not democratic is a political ploy that Britain is trying to mount against Germany in a move that looks like a continuation of the World Wars of the last century. Anyone who watched the “Yes Minister” or Yes, Prime Minister!” series on the BBC knows that the aim of Britain’s foreign policy for hundreds of years has been to keep Europe weak and divided. They fear the growth of a German super state with continent-wide influence. It was this fear that led the British and Churchill to give up their Empire during World War II just to defeat Hitler.

The truth is that Germany has been growing in influence and economic power since the unification of Germany in the mid-nineteenth century under Bismarck. This continued under Kaiser Wilhelm II during the First World War and Hitler during the Second World War. The Germans could never seem to get it right. Britain fears that this time they may have gotten it right.

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_ S&P has threatened to downgrade most of the countries in the EU. Some people get quite upset by this. But anybody who knows a little history would see through it.

All the major credit rating agencies are Anglo-American. They think like Anglo-Americans. They expect the Germans to appeal to the lowest common denominators, while preserving a certain class consciousness, of course. But the Germans have a different philosophical bias. They believe in standards that everybody should be raised up to.

The threat of a credit downgrade is just a way of trying to enforce an Anglo-Saxon mold on the Germans. That is futile. Viva la differance!

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_ Merkel and Sarkozy hope to push through the treaty changes at the meeting of EU leaders set for Thursday and Friday in Brussels. They claim they would ideally like agreement among all the members of the European Union. But they would be satisfied with agreement only among the 17 members of the currency bloc.

They claim they have reached an agreement on all the proposals and are ready to act. They hope this accord will restore investor confidence.

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This is the week when everybody says everything is at stake. December 9 is billed as the date that makes or breaks the Euro Zone. It’s roiling the world’s economic markets.

But according to Der Spiegel the Germans feel good. The Christmas markets are busy. The shopping malls are crowded. 55% of Germans say they aren’t personally involved in the Euro Crisis. They have faith in their Chancellor. Her popularity rating is above 50%.

Despite the fact that they think worse is yet to come for the euro before everything settles out, they like the fact that Merkel holds firm on her positions and doesn’t yield. They like being the leaders of Europe. They don’t want to return to the German mark. They realize the euro is good for exports, and Germany is an export-oriented country.

It’s expressed best by Volker Kowder, the floor leader for Merkel’s CDU. He says, “Europe is speaking German.”

People in Anglo countries may think this sounds like a chauvanistic statement for a country that lost two world wars. But from a broad historical point-of-view Germany’s been emerging since unification in the mid-nineteenth century. It’s the powerhouse of Europe. And despite defeats, it still wants to figure out how to be the leader of Europe. Germans think they may have finally figured it out.



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