_ Not only is the U.S. holding free trade talks with the EU, it has signed a secure trade pact with Europe. It doesn’t act as if it expects the Euro Zone to dissolve tomorrow. To prove that point today, Wednesday, November 30, 2011 the Fed announced that it was going to lend money to European banks. The Bank of the United States becomes the Bank of Europe. Obviously in the wake of World War II we want Europe to become the United States of Europe.

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_ In 1940 National Socialist economists wanted to join Europe together into one giant economy. It was an ideal that was of course never realized. Hitler never moved on it. During the summer of 1940 he was totally preoccupied by the British, Churchill, and whether he was going to invade or attack England. Then of course the next year he was preoccupied with Russia. After that it was all downhill.

Over fifty years after the end of World War II the Euro Zone became a reality. After taking so long to bring it into being, the Germans want to keep it going despite the latest economic news from Italy and the declining French credit rating in jeopardy.

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Wolfgang Schauble of the German Finance Ministry said, “We are working intensively for the creation of a Stability Union. That is what we want to secure through treaty changes, in which we propose that the budgets of member states must observe debt limits.”

The German Finance Minister said you can’t get an agreement among the twenty-seven member states. They are aiming for an agreement among seventeen instead. The big thing is that they must do it quickly. The markets won’t wait. He thinks the shortcut is additional protocol to the EU’s Lisbon Treaty.

He doesn’t care if small states like Luxembourg and Finland have expressed reservations. Euro Zone countries have to give up budget sovereignty.

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_ If you were a Martian you might think that the narration I’m reading in The Duel about the summer of 1940 is taking place right now in 2011 in the EU. Germany is lawing down the law for the rest of Europe. They are setting the standard and are insisting that everybody else conform — or else.

But instead of the Third Reich we have the Euro Zone and the EU. And what is happening is that Germany has bribed France to go along with its insistence on treaty changes to give it more power. How did it bribe France? All along France wanted Germany to agree to issue Eurobonds. Germany has now agreed to do so only if France agrees to the treaty changes.

Germany knows that certain countries like Ireland, Greece, and Portugal probably won’t go along. And even if all the Euro Zone countries did, it would take over one year. The markets won’t wait that long. So Sarkozy and Merkel are planning a summit in early December to announce a treaty signed by 8 to 10 of the member states of the EU. Everyone else won’t get to vote on it. But if they don’t conform to the new rules, they will be out of the Euro Zone.

There’s no democracy here. But before Americans object, remember that the Fed isn’t elected either. And there always will be an unwritten Italian exception. No doubt Italy will sign the treaty, but then won’t do everything it’s supposed to do. And no one will kick Italy out of the Euro Zone. It’s just too European.

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_ Germany will not bend on the issues being debated within the EU. They will not permit ECB intervention or printing money that brings back bad memories of the hyper-inflation of the 1920’s. Nor do they approve of Eurobonds which would put a burden on German taxpayers. Merkel says, “This is not a matter of give and take.” To her it’s a matter of simple necessity.
It doesn’t matter that Italy is appealing directly to the IMF for aid. Germany would be satisfied with a union that included only northern European states that think the way they do such as the Netherlands, Austria, Finland, etc.

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_ There’s been a media campaign by the German tabloid, Bild, portraying the Greeks as lazy and irresponsible. 76% of the German taxpayers are opposed to Eurobonds. Only 15% favor them. The interest rates on German bunds would go up if they issued Eurobonds. This would cost the German taxpayer billions per year. This is why the Germans want teeth in the laws if they take a risk and introduce Eurobonds. They want to be able to enforce good economic practices throughout the Euro Zone.

Merkel has no wiggle room on the issue of Eurobonds that are so popular with the French, the Italians, the Spanish, and everybody else in the Euro Zone. The two other parties in her coalition are totally opposed to them.

Nor do the Germans and Merkel want the ECB to become the banker of last resort. Not only does this violate the treaties, it reminds the Germans of the hyper-inflation of the 1920’s. This was one of the causes behind the rise of the Third Reich.

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The news is that Merkel is being pushed to accept the idea of eurobonds or at least to accept the idea of the ECB buying bonds of Portugal, Spain, Italy, and Greece. Although she keeps insisting that they must first have treaty changes to be able to take member countries in front of the European Court of Human Rights if they violate the rules, many think that’s just political talk.

But the English have their own unique take on events. Journalists at the Telegraph predict Eurogeddon, or the implosion of the euro currency. Perhaps this is all wishful thinking on the part of the English who want to keep Germany down. They’ve been losing out to them for more than a century now despite defeating that country in two world wars.

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_ The Germans held a bond auction. It went south. Investors are starting to lose faith in the euro currency all together. But if the euro fails, it will be the biggest failure in the settlements and arrangements made in the wake of World War II. If the Anglo-American idea of capitalism and democracy can’t spread to the continent, it can’t safely spread anywhere. And I fear someday it will fail everywhere.

It doesn’t help my belief in the future of Anglo-American capitalism/democracy to hear bragging in an article on the Fidelity.com website this morning that Americans need only print more money. They boast that investors will buy treasuries no matter what because they have no choice. Someday they will have a choice.

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Bond yields are rising everywhere. It’s like a contagion. It began in Greece, a Balkan land, the kind of place that started World War I. Then it spread to all the pigs: Ireland, Portugal, and Spain. Finally it affected Italy and even France.

The most recent out of control development is that it is irrationally affecting the bond yields of countries who have sterling balance sheets such as the Netherlands, Austria, and Finland. Every last member of the Euro Zone has been adversely affected except one. That one is Germany.

As investors flee everything else they pour their money into what they consider to be two safe havens: the U.S. treasury bond and the German bund. In England they buy gilts.

The more things change, the more they remain the same.

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The Germans want to unify Europe into one economic “super state” controlled from Brussels. The officials who make the decisions would not be elected. The British cry foul. They think the Greeks should be able to vote for their leaders as well as the Portuguese, the Italians, and the Spanish. They shouldn’t just have to take orders from the Germans.

But the continental Europeans don’t find this emphasis on democracy native. All the empires of the past were not from the Roman Empire to the Holy Roman Empire to the Napoleonic Empire to the Third Reich. There are too many differences within the countries in the Euro Zone to permit votes on all issues, according to their way of thinking.

It’s only the Anglo-American tradition that emphasizes voting on everything. But even the British Empire wasn’t totally democratic. Even the United States, if you think of it as an empire, wasn’t very democratic with “Manifest Destiny” and their treatment of Native Americans, or Indians.

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