Germany Out of the Euro or the Great Synthesis Has Begun?
By Staff News & Analysis - April 23, 2013

German 'Alternative': Parallel Currency Idea Carries Great Risks … A new German protest party is proposing the gradual re-introduction of the national currencies of highly indebted euro-zone countries. While the party's spokesman insists the idea solves everyone's problems, it has one major drawback: Economists agree it won't work. – Der Spiegel

Dominant Social Theme: This is a great new party for Germany and marks the emergence of the anti-euro faction.

Free-Market Analysis: We would like to be able to write otherwise, but we don't believe much that comes out of Western political systems these days. That's not to say every particular evolution is noxious. In the United States, the Tea Party has contributed to a change in the freedom debate and Senator Rand Paul has lifted up a quasi-libertarian flag, from a rhetorical standpoint anyway.

But as we've pointed out many times, globalists are a particularly shifty lot and it doesn't take a lot of insight to guess that much of what goes on politically is being manipulated to ensure that the current cozy mercantilism enjoyed by Money Power remains firmly in place.

In Italy, rising star politician Beppe Grillo is not perhaps what he seems. We've written about that here:

Italy's Top Pol Beppe Grillo Being Groomed for Disruption by Soros?

The idea, when it comes to Grillo and those like him, is to create alternatives that form a Hegelian conversation … Thesis, antitheses and then synthesis. If you are clever, the synthesis you create can be moved in any direction you like. By creating an "opposition," you develop a controllable conversation.

Grillo seems involved in this sort of strategy; we would tend to believe that Bernd Lucke, spokesman of the newly established Alternative for Germany Party, offers the powers-that-be a similar strategy. When we looked up his background we found he was an alumnus of the World Bank.

Let's be clear. This does not mean Lucke is some sort of political "double agent" … only that he moves in the same circles as those whose views he is criticizing. It means that he is a member of the same establishment he's tipped his cap against. The apple, in other words, may not fall so far from the tree.

Here's more from the Der Spiegel article:

Lucke and his flock of supporters believe that the euro crisis can be solved if the Southern European countries leave the monetary union — not with a big bang, but slowly and quietly. The professor wants to see these countries ejected from the monetary union in a civilized way, so that their withdrawal occurs as gently and harmoniously as a person's withdrawal from a school glee club.

And what is Lucke's miracle cure for a crash without side effects? He proposes that the Southern European countries introduce parallel currencies — that is, bring back the drachma, the peseta, the escudo and the lira alongside the euro. The countries' national central banks would then tie these currencies to the euro at fixed rates. The professor essentially wants to combine the best of both worlds, allowing Greece, Spain, Portugal and Italy to remain connected to the euro zone and yet receive their own currencies. This would allow them to devalue their currencies and still have a calculable form of payment at their disposal. At the same time, argues Lucke, this will reduce the cost of their goods in world markets without assets losing their value overnight.

It is a patent remedy with which the professor and party spokesman wants to avoid the horror scenario that most economists associate with a sudden breakup of the euro zone: bank failures, financial collapses and mass layoffs. In other words, a financial and economic crisis that many believe could easily surpass the catastrophic consequences of the Lehman Brothers bankruptcy. But if parallel currencies are introduced, Lucke suggests, the risks could be reduced. Withdrawal from the euro would take place "in an orderly and certainly cautious manner," and could possibly be reversed after a few years through a complete return to the monetary union.

The plan that Lucke advocates is certainly appealing, but it has one drawback: It doesn't work. "A parallel currency is the worst conceivable way to solve the euro crisis," says Peter Bofinger, a member of the German Council of Economic Experts, which advises the government. And Clemens Fuest, head of the Center for European Economic Research (ZEW), sees "considerable disadvantages" in the concept. …

This is also borne out by historical experiences. Parallel currencies have indeed become established in many countries in the past. The deutsche mark was a common currency in the Balkans in the 1990s, and the US dollar is popular in several Latin American countries today. El Salvador even declared the greenback as its official currency in 2001.

Whether it was dollars or deutsche marks, the strong currency has always prevailed over its weak counterpart … Even Lucke probably senses that his proposal doesn't really solve the current problems. When it comes to the side effects of his recipe, he issues a typical caveat: "It goes without saying," he writes, "that the transition to a second national currency entails a number of technical problems."

We can see from this Der Spiegel article that Lucke's proposals are brought up only to be promptly dispatched. This is the beauty of having a formal opposition operating within the ambit of the approved political process. Without such an organized opposition a formal conversation is difficult to maintain let alone create.

We don't have any insight into what will come out of the debate that is now taking shape. But it is our suspicion that even though Lucke's new party is portrayed as an unwelcome development by Germany's euro-gatekeepers, it is a necessary one that has been tacitly encouraged by the same forces that cultivated Italy's Grillo.

Are the arrivals of Lucke, like Grillo in Italy, a political coincidence? FDR famously said there were no coincidences in politics, and we would tend to agree. These occurrences seem to indicate to us that something bigger may be in the works.

The globalists that put the EU together, and now the euro, seem to be realizing, finally, that the current gridlock could result in a massive destabilization that could shake not only the euro but the EU itself.

Yes … reading the proverbial tea leaves, it seems those responsible for the formation of the EU and the implementation of the euro intend to be more proactive about a solution.

After Thoughts

That has import not only for the EU itself but also those involved in it from a financial and investment perspective.