Lest you think an existential financial crisis can’t have its laughs, hats off to Financial Times‘ Alphaville for this imaginary send-up of European Central Bank President Jean-Claude Trichet channeling Jack Nicholson in A Few Good Men:
Reporter: What is your answer to German people and economists who want the return of the DM?
Trichet: You want answers?
Reporter: I think the Germans are entitled.
Trichet: You want answers? (SHOUTING)
Reporter: Germans want the truth! (SHOUTING)
Trichet: *You can’t handle the truth!* (SHOUTING)
Trichet: Son, we live in a world that has prices, and those prices have to be guarded by men with bonds. Who’s gonna do it? You? You, Silvia Wadhwa? I have a greater responsibility than you could possibly fathom. You weep for Lehman Brothers, and you curse Ben Bernanke. You have that luxury. You have the luxury of not knowing what I know. That Lehman’s collapse, while tragic, probably saved banks. And my existence, while grotesque and incomprehensible to you, saves banks. You don’t want the truth because deep down in places you don’t talk about at parties, you want me on that committee, you need me on that committee. We use words like rate, target, expectation. We use these words as the backbone of a life spent defending something. You use them as a profitline. I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of price stability that I provide, and then questions the manner in which I provide it. I would rather you just said congratulations and went on your way. Otherwise I suggest you pick up a Greek bond, and suffer a haircut. Either way, I don’t give a damn what you think you are entitled to!
Beyond this, the situation in Europe is grim, with dangerous prospects for the world economy.
For many, the so-called sovereign debt crisis is about lazy Greeks (or Spaniards, Portuguese, Italians) spending too much on public jobs and running deficits. It is, in fact, a banking and monetary crisis. Big European banks lent money to countries during the boom, even though their actual ability to repay them was in doubt. They then bundled them into CDOs and other exotic securities and sold and resold them. Sound familiar? Now French banks are facing a Moody’s downgrade and American banks lend heavily to their French counterparts as part of the regular overnight movement of billions that keep the capital markets going. A seize-up, a la fall 2008, is not out of the question.
Germany, which has the continent’s strong economy and the euro’s bulwark, is growing unwilling to prop up its weaker neighbors. Hence, the economic minister floating the idea of an “orderly default” by Greece, whatever that means considering the fallout from interrelated bank counterparties as the assorted swindles sold to investors prove worthless. A year ago, saying the future of the euro is in doubt would have seemed alarmist, if not insane. Today, it’s a real possibility. And the damage won’t stop at water’s edge.