The Decline and Fall of Europe – Book Review

The Decline and Fall of Europe - Book ReviewThis book is written by a man who wants to see the European experiment succeed, but is not confident that it will succeed.  I think this is a fair book on the topic; it does not absorb all of my biases on why I think the Eurozone is hopeless: a) Currency unions have never worked; they must either become a nation, or break up.  b) I have a saying, “Governments are smaller than Economies, and Economies are smaller than Cultures.”

This saying puts things in their place.  Government can’t in the long run prevent things that are economically successful, those things fill human needs.  But cultures are bigger than economies; we don’t live to consume. We live for ideals.  Different cultures have different ideals, and it means that a purely individualistic or collectivist view of economics won’t be accepted in the Eurozone.  They muddle in the middle.

The Eurozone is a political and economic experiment, and was pretty successful and harmless until they began to seek a common currency.  Yes, there were other problems, bureaucrats in Brussels, seeking human perfection though regulation, helped to strangulate a previously more competitive Eurozone economy.  That said, the common currency offered some offsetting advantages of efficiency.

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Other Troubles

But there are other troubles.  There are unaffordable pensions in many countries that lie behind that economic problems.  As one who is 51, and well off, why should anyone, aside from oil wildcatters, who endure a lot of physical stress retire at from 62 age 50 on the largess of the taxpayers, that is, if you have taxpayers.

Even retiring at age 60 is ridiculous, which France has recently reverted to from 62.  France will never be able to afford it as a nation.

But then there are cultural issues: do you care what your laws are?  Would you care if immigrants are ruled by Islamic Law?  Would you care if your grandchildren, a minority like the Maronites (Roman Catholics) in Lebanon, are ruled by Islamic Law?

The Main Economic Issue

After all of the strangu-regulation, what if economies can’t grow at levels sufficient to exceed the rates at which they borrow?  They slowly fail, as debts grow, and doubts about repayment grow.

In the Euro-zone this is particularly pertinent, because countries can’t depreciate; they must repay in Euros.  When the Euro was introduced it was heaven for many nations, because they could borrow cheaply.  Eventually, they had too much debt, and lenders rebelled.

This is the nature of an area that is not a natural currency area — the Eurozone.  This was an experiment doomed to fail.

Quibbles

None, but I would be a full Euro-sceptic.  This can’t work.  More effective human labor is always better than less.

Who would benefit from this book:   If you want to learn about the problems in the Eurozone from someone that is fair, you will find it here.  If you want to, you can buy the book here: The Decline and Fall of Europe.

Reviewed By David Merkel of The Aleph Blog

Author’s Full disclosure: The PR flack asked me if I wanted the book, and was kind enough to send me the book.

If you enter Amazon through my site (Alephblog.com), and you buy anything, I get a small commission.  This is my main source of blog revenue.  I prefer this to a “tip jar” because I want you to get something you want, rather than merely giving me a tip.  Book reviews take time, particularly with the reading, which most book reviewers don’t do in full, and I typically do. (When I don’t, I mention that I scanned the book.  Also, I never use the data that the PR flacks send out.)

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David J. Merkel, CFA, FSA — 2010-present, I am working on setting up my own equity asset management shop, tentatively called Aleph Investments. It is possible that I might do a joint venture with someone else if we can do more together than separately. From 2008-2010, I was the Chief Economist and Director of Research of Finacorp Securities. I did a many things for Finacorp, mainly research and analysis on a wide variety of fixed income and equity securities, and trading strategies. Until 2007, I was a senior investment analyst at Hovde Capital, responsible for analysis and valuation of investment opportunities for the FIP funds, particularly of companies in the insurance industry. I also managed the internal profit sharing and charitable endowment monies of the firm. From 2003-2007, I was a leading commentator at the investment website RealMoney.com. Back in 2003, after several years of correspondence, James Cramer invited me to write for the site, and I wrote for RealMoney on equity and bond portfolio management, macroeconomics, derivatives, quantitative strategies, insurance issues, corporate governance, etc. My specialty is looking at the interlinkages in the markets in order to understand individual markets better. I no longer contribute to RealMoney; I scaled it back because my work duties have gotten larger, and I began this blog to develop a distinct voice with a wider distribution. After three-plus year of operation, I believe I have achieved that. Prior to joining Hovde in 2003, I managed corporate bonds for Dwight Asset Management. In 1998, I joined the Mount Washington Investment Group as the Mortgage Bond and Asset Liability manager after working with Provident Mutual, AIG and Pacific Standard Life. My background as a life actuary has given me a different perspective on investing. How do you earn money without taking undue risk? How do you convey ideas about investing while showing a proper level of uncertainty on the likelihood of success? How do the various markets fit together, telling us us a broader story than any single piece? These are the themes that I will deal with in this blog. I hold bachelor’s and master’s degrees from Johns Hopkins University. In my spare time, I take care of our eight children with my wonderful wife Ruth.