Soros: Germany's Flawed System

       The good news is that Soros has it totally right. The bad news is that it's not directly up to him. You might hope that the Merkel's and the Mario Draghii's of the world will heed the words of a such a savvy investor with his track record but not much seems to get through to such opague people.

         "Soros said that too much blame had been placed on peripheral euro-zone countries such as heavily indebted Greece and Spain, and that creditors like Germany had to share responsibility."

        “The “center” is responsible for designing a flawed system, enacting flawed treaties, pursuing flawed policies and always doing too little too late.

         “In the 1980s, Latin America suffered a lost decade -- a similar fate now awaits Europe,” he said. “That is the responsibility that Germany and the other creditor countries need to acknowledge.”

           http://www.cnbc.com/id/47642499

            Soros is certainly right about just what a flawed system the euro is. Nobody saw this coming when it was formed:

            “In retrospect, it is now clear that the main source of trouble is that the member states of the euro have surrendered to the European Central Bank (ECB) their rights to create fiat money. They did not realize what that entails – and neither did the European authorities,” he said.

             "The euro zone needs a European deposit insurance scheme for banks, Soros said, as well as direct financing by the European Stability Mechanism (ESM) for banks, which “must go hand-in-hand with euro-zone-wide supervision and regulation.”

              Again, the good news is that Soros is right. The bad news is that this seems to be 180 degrees from Merkel. Draghii has been sounding better at least about the idea of the ECB being able to basically do a European TARP where the ECB can infuse money directly into the banks rather than solely to governments.

               He thinks that the EU has about 3 months to get this right. Everything we know about it suggests that whatever it will do will be too little too late. The hope is that perhaps Germany may reconsider seeing how beaten up its own stock market has been lately. This ought to tell them that the market knows quite well there's not chance of Greece leaving and everything being ok.

              "Soros argued that the focus on austerity instead of growth had been a mistake by the European authorities."

              “The authorities didn’t understand the nature of the euro crisis; they thought it was a fiscal problem, while it is more of a banking problem and a problem of competitiveness. And they applied the wrong remedy: You cannot reduce the debt burden by shrinking the economy -- only by growing your way out of it,” he said.

             “The crisis is still growing because of a failure to understand the dynamics of social change; policy measures that could have worked at one point in time were no longer sufficient by the time they were applied,” he said.

             "These views are echoed by well-known economists including Paul Krugman. An increasing number of politicians in the euro zone are also arguing for less austerity and more promotion of growth. The debate has come to prominence during both the Greek election campaign and the Irish referendum on the EU fiscal pact for euro-zone-wide austerity measures."

              If only the EU's miserable policy making hurt only itself. But all the gleefulness of the Republicans right now shows that the terrible effects of EU's mismanagement may be exported everywhere.