What happens when Greece defaults? (2)
by Gemma Laming
Posted May 26, 2011
THE BIG PLAYER IN THIS IS CHINA. [Not mentioned in Andrew Lilico’s article below: What happens when Greece defaults (1)]. China has some real bearing on this issue. China still exports a great deal of its manufacturing to Europe, so letting this crumble for the sake of a few billion simply is not worth it for the Chinese, who after all, have the money sloshing around in their giant coffers. Okay, so maybe it is a little more than “a few billion” but to the Chinese this sort of thing is found in the footnotes.
What is at stake here is more than principle, more than European Union, or much else to do with Europe. It is to do with China’s establishment of their own advanced economy, and this will not happen for a few years yet. In the meantime, political unrest or an outright currency crisis would harm world trade, and this is not in China’s interest.
For the same reason America’s foolishness in profligate money-printing is being tolerated, but with China seeking a more stable currency to deal in, it is unlikely to be tolerated for very long. To my mind this behaviour on the part of the US – the arrogance – is annoying the Chinese because it is not allowing them their fair share in the dealings. This American stand-alone stance of printing more money when China could simply have poured in the required amount from its almost limitless reserves of foreign currency is seen from Beijing as outright contempt. This to any China hand is not a good omen for in China the Kao-Tao is still well respected and indeed required, especially of foreigners who in times past could easily lose a head to a sharp Chinese sword. To a Chinaman, it is the subtlest and most pleasing thing for a foreigner to genuinely humble himself without first being asked or told: for this is an occasion for bringing out the finest pu-erh.
Remember that the Chinese have traditions so ancient that they make the Hebrew traditions seem as freshly baked. That the western cultures have consistently ignored these has been the greatest slander in China’s long history. To those in the know, the destruction of the Temple of the North and the Temple of the South was seen as an uprooting of the firm base upon which China’s culture was founded only to be replaced with the flimsy and worthless spectre of materialism.
So what does this mean for Europe and the problems that she faces? I doubt if the mythical fate of Europa on the back of the Jovian bull will happen just yet, but it will be the final outcome unless Europe does manage to pull herself up by her own bootlaces. We in Europe still have a few years yet, whatever the nay-sayers might suggest. The ECB will find finance from Beijing, for this will be in China’s interest, whatever the cost in the short term might be and short term economics does not interest Beijing.
The problems of the Greek economy are pretty small stuff in European terms. As mentioned in one of the rare serious comments on the Telegraph blog, their economy is around the size of Munich in Germany. The Chinese have not yet established the Remimbi or the Yuan as the reserve currency, which leaves the Euro as the most sensible option. With that in place the US can do what it likes with its dollar for the sharp Chinese sword will have fallen: the US has been too arrogant for the Chinese to worry about US heads.
In short, Greece will remain part of the Eurozone, if by the skin of its teeth. China will buy Piraeus – if the deal has not already gone through – as well as the airport and goodness knows what else. China will have circumvented the US dollar and established itself as rightful heir to the world’s number one economy with the Euro group in second place.
In ten year’s time, when the Chinese economy has grown to a sufficient size, Europe will be cut adrift to its own fate. If – and it is a very big “if” given the usual short-sighted policies of the Europeans – if the Europeans have gotten their act together and have worked with China then there is a possibility that Europe will develop its own sure-footed economy from the problems they collectively face. But it will take determination and courage and some very special technologies and some very clever thinkers to keep abreast of the Chinese. Not to do so will speed Europe’s decline to third-world status.
I really don’t know if China will help Europe or not; if she does not then it is curtains for us, but the Chinese will certainly suffer too. So really, this is the only plausible alternative I can see. Put simply: in the short term, China needs a relatively stable reserve currency, and probably the only one that qualifies for the job is the Euro.
Another scenario: The dollar and euro both crash through poor management of their banking sectors and the colossal borrowings that this led to. This will mean misery for millions of people as they will have nothing to live on but grass and nettles, for their gold will not be worth much as it cannot be eaten. Quite how far this scenario goes I cannot see, but what I do see is that there will be a world currency and a world leader who will rise from the ashes of the modern world and put it all to rights. [This could also be the scenario when China pulls the plug on Europe after the Europeans have been found sleeping on the job].
* Pu-erh is a speciality Chinese tea, and much revered in China. Ordinary stuff costs around 5-10 times what English quality teas cost and a good one – a very good one – can cost around $10,000.
Gemma Laming: short biography:
Escaped housewife, passionate compost maker and part-time furnituremaker. Early years spent in Thailand, South Africa and emigrated to Europe on getting married. A move to England shocked her into realizing that people in advanced nations did not take their democratic rights seriously and led her to question why. Recent visits back to Thailand led to the realization that the Thais, despite being poor, had a high level of self esteem, which could possibly be the answer to many of Europe’s problems.