Sunday, December 11, 2011

Read of Cameron's Veto and the Merkel Initiative and Unavoidable Outcome for the EZ

Cameron's veto has been not a negative but an additive evolution to the remedy for the EZ sovereign debt crisis.

First, Cameron's veto should in the end deepen the UK involvement with the EU if not end with swift membership in the EZ and the UK adoption of the Euro. The UK will quickly find itself unbearably isolated. Scotland will take this opportunity to sue for secession, seeking to stay in the EU, for their ties to the EU have deepened as shown by the recent appointment of Scotland's Anne Glover to Chief Science Advisor for the EC to the recent August 2011 "Scottish Bill - EU Involvement" where Scotland is using the direct repesentation at the EU as a lever to further devolution to also reasonable concern to have a voice in Scottish fisheries and offshore natural resources. Cameron's actions will further encourage the use of this strategy to where now a case can be made that Scotland must secede from the UK so as to be directly represented in the EU. The continued EZ membership of Ireland and now the risk the City of London is exposed to losing significant market share to Frankfort, Milan, and Paris - all will seriously pressure the UK.

The UK will now have two possible choices. One is to deepen and refresh the "special relationship" with the USA to the point of considering leaving the EU altogether and joining NAFTA. The irony that would have for still incarcerated Conrad Black.... Or the other path, so as to maintain the dominant position of London in the financial community, the UK will now discuss adopting the Euro and joining the EZ, but the interest and strategic need for the UK to do so and how they will do so will be of immense value to the EZ crisis resolution. I do not think the USA path will be taken but that Cameron's veto will result in the UK joining the EZ, but after changing the EZ so it is compatible with the UK democratic legacy.

The USA has shown an extraordinary tin-ear towards the EZ crisis which might in hindsight be perceived as a significant foreign policy failure. The US has a most bizarre mis-perception of both their power in the EZ and also their "right" to be a full partner in designing the remedy. The US is without a doubt the most powerful voice in the EZ and to now understand this has the US contributing greatly to the confusion and also raising significantly the risk in what events develop as the road to remedy is set. Also the US has unquestionably full partnership rights to being a voice in the EZ resolution. This crisis should be scene as the last act of WW II, where the obvious US designed European common initiative was first (and Merkel still states this is the case today) to contain and force Germany to pursue long term peaceful co-operation and integration with all of Europe and to form a security force to contain Russia. The USA until recently invested immense treasure towards the success of this effort, with up to 300,000 men providing substantially all the hard power for Europe's defense, and with still less than 100,000 men in Europe now. It is impossible for Europe to have any defensive capability until they form a federation, a 'United States of Europe", and until that status is reached they mist be partnered with the USA. but, the terrible USA policy response to date both startles Europe in terms of their long range security as well as provide opportunists to expand their portfolio at the seemingly weakness of the USA. The best example of this error is that Sec Geithner is the main USA voice in Europe now, and Sec Clinton is not involved - showing the USA does not understand this is a constitutional crisis but perceives it as a financial crisis. The most important positive impact the USA could have on Europe is that if this were in the portfolio of Sec Clinton, the Bush Doctrine values would be foremost and this would mean important counter to the "democracy deficit" now in the EZ along with prodding a remedy which will honor democratic values. But these topics are, by definition, not areas of expertise or power in the Department of the Treasury.

Which brings us back to the UK. Of all the countries in Europe, the UK has the most solid and pristine record, the longest record, of a constitutionally based democratic government. This is the completely correct underpinnings for Cameron's decision as the current situation coudl not allow him to act as the elected head of state of a democracy. He cannot join in with Merkel and others in accepting the current "post-democracy" technocratic approach which shows not only a democracy deficit but a cynicism in regards to the hoi polloi's ability to be responsible and thoughful, a way of thinking of the electorate that is a throwback to the age of absolutism, be it corporatist or authoritarian or monarchist governments which have done so much damage to Europe in the last 200 years.

And this is of course why the Merkel initiative will fail. It is not democratic, it is authoritarian without checks and balances and the debate that democracy requires. This will mean that even if the initiative accomplishes in whole what Merkel hopes, any dis-enfranchised people in Europe will consider themselves and perhaps actually be within their rights to revert to violence or civil strife or pursue secession to find remedy. Merkel's approach will lead to violence and chaos. It is not democratic.

This is where the UK, given the strange absence of the USA in assisting or guiding Europe, can be of great historical relevance. As the Merkel initiative flounders - and it will - the UK can enter into the fray as the "honest broker" and do much to define the remedy. The interlocking non-democratic form of governance of the EZ now with three Presidents and the Franco-German cabal and then the almost independent Brussels plutocracy has to be eliminated and a constitutionally designed federalism implemented to replace this current structure. There can be no other way. With as much "credentials" in terms of democratic structure as the USA, and perhaps more if one remembers the works of the like of Bagehot and Macaulay, is the UK. Driven to re-engage Europe, but on terms that are acceptable to a democracy, the UK will be the deciding input on the new EZ form, Europe will need the UK as Germany and France exhaust their credibility and also will want to keep the UK from joining NAFTA. also the UK will wish to do this to slow the devolution of Scotland.

The UK solution for the EZ, the price for them surrendering the pound and adopting the Euro will be startling and perhaps one fo the most important historical markers in the history of democracies.

Just as Hamilton and Washington agreed to the capital of the newly created USA to be moved to Washington DC so as to placate the South, the UK will gain the dominant geographic positioning of the EZ financial markets and its regulation and most importantly the site of the ECB. The ECB will be redesigned, yet maintaining the almost the identical independence and federal powers that it now has (the ECB is the only federalist and empowered institution in the EZ), but immediately adopting the philosophy of the Bank of England as outlined over 160 years ago by Bagehot, eliminating the BUBA legacy and the crippling pseudo-gold standard of the current ethos of the ECB. In addition the EZ will immediately become a federal construct. the current heads of state will devolve to either a senator like "house of lords" type of structure with equal voting power per country, or to become like the USA state governors or more likely the Canadian premiers. They will continue to be directly elected. The EC will be disbanded as will as the EU presidency and the attached bureaucracies and powers they enjoy. The EP will now become the popularly elected legislative capability and assume power of budget and taxation. Either the senior legislative body, the senate, has a Prime Minister, or a French/American type of executive is popularly elected.

I feel the UK will have the ability to persuade and lead the EZ towards this event - or the UK will become irrelevant and the ward or the USA - or even worse, Germany.

I do not think the Merkel technical initiative can work, nor should it work given the massive insecurity it will present the EZ as well as the massive civil strife that will without a doubt develop otherwise. A weak confederate structure permanently a ward of the ECJ rules based with a permanent austerity of always balanced budgets will fail and will not be able to provide the hard power security for Europe nor allow it to be of significance on a global basis going forward.

Note the above does not mention the sovereign debt crisis. This is because if the EZ is seen correctly through the lense of a constitutional crisis the dent crisis is appropriately placed as a minor and temporary symptom of the true problem. If the sovereign debt crisis is perceived as the main problem then it becomes extremely hard to remedy, if not impossible to remedy, via any series of technical solutions offered - including the Merkel initiative now. If the EZ is dealt with as a historical constitutional crisis then it becomes easily and near immediately resolved as the appropriate constitutional remedy is applied. it is very interesting and I think this will be a direct precedent for the EZ, that Hamilton from 1787 to 1790 had the new federal government pay up to par for all of the newly created states debt. Massachusetts debt traded from 15 to 100 in this process. as the correct constitutional fix is applied, this will be what happens to Greek debt.

There really is no other path available to the EZ but the formation of a democratic federalist government. No other but strife ruination chaos and likely civil war.

The UK will be the surprising "actor" who will be critical to bring about the Untied States of Europe's birth. And it would be even better if the USA would realize their role, their righteous say in the EZ, and start to act within the pattern fo the great historical moment that Europe has arrived upon.

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