Yesterday, in a story about the seriousness of the current crisis, the BBC’s business reporter Robert Peston wrote:
“There was a bit more of what most people these days call ‘muddling through’ by eurozone finance ministers. They agreed the terms and conditions of how to enlarge the firepower of the bailout fund, the European Financial Stability Facility, to somewhere between 830bn euros and 1.25tn euros.”
He also wrote:
“But whether the idea of Italy’s debt being ‘mutualized’ (or shared with German taxpayers) via some kind of shield provided by the IMF will appeal to the German parliament and German central bank – which are set against any such central-bank lending to any eurozone member state – seems highly doubtful.”
Is it Adam Smith’s invisible hand that is guiding the finance ministers? (He mentions it seven times in The Wealth of Nations.)
That is a metaphysical question.
Less metaphysical is the thought that the German parliament and the German central bank have the ultimate power.
That seems to be the view of the The Times, which wrote on November 23:
“The Bundesbank policy on the euro crisis is to present the other countries of Europe with a stark ultimatum: either they accept German economic directives, German monetary theories, German financial practices and even governments imposed by Germany as part of a draconian regime to deal with national insolvency. Or they must face financial chaos and expulsion from the eurozone, under a new exclusion procedure now demanded for nations that refuse to submit to German rules.”
Back to the metaphysical question about the “invisible hand.”
Adam Smith, of course, meant the Market.
The European finance ministers, who are so desperately trying to muddle through the current crisis, would probably be more specific: the Bond Market.
Which brings us to the thought that had it not been for the war, the Bond Market would definitely have brought down Adolf Hitler.