On the evening of 21 September 1961, the mining town of Castleford, in the heart of the Yorkshire coal region, was
immersed in his ordinary sadness. Vivian Nicholson watches television after a hard day's work. She lived she is 25 years old and has three children. She earns £7 a week as a waitress, just like her husband a miner. England is
a country impoverished by two wars and the proud defense of a great empire that has finished falling apart and dissolved in just the previous months.
Food rationing ended a few years ago, but frugality and austerity continue to unite all social classes. The television announces the winning lottery ticket. The Nicholsons have a jolt. For two hours they search their house. Eventually they find the coupon in his back pocket. They won 152 thousand
pounds, the equivalent of three million today They spend the night without sleeping a wink. The second one also goes by awake
night.
On the third day, Vivian called the bank and took the train to London. Upon arrival she sees so many people in the station and she is surprised because it is not rush hour. And in fact they are not commuters, but reporters and photographers of all the kingdom's press. Among the flashes of her someone asks her what she will do with all that money. Vivian concentrates for a moment, gives a big smile and replies "Spend, spend, spend".
Victorian morality collapses forever at that precise moment. It's not the Beatles, who are still in Hamburg singing for cheap. It is not Mary Quant who will invent the miniskirt three years later. They are not intellectual or political movements. To change the course of Western history is a nonconformist, cheerful and lively proletarian who does not even cross her mind with the idea of keeping something aside for old age or exercising a little
philanthropy as Victorian morality would prescribe in such cases.
Vivian keeps her word. She buys a house, all kinds of clothes and a sports car that changes every six months. She is unstoppable. In 1965 the troubles begin. Husband crashes his car on the highway. The widow discovers that there are only £30 left, she tries to make up for it in the stock market and loses everything. The descent into hell is worthy of a medieval morality play. Three new husbands die one after the other. The lawsuits are all lost. To survive her Vivian she tries to sing in striptease clubs, but she can't resist for long. The song is called Spend, Spend, Spend, just like a musical inspired by her story, from which she also earns nothing.
Years and decades go by. Swinging London comes and goes, Britain sinks into debt, Thatcher shuts down the coal mines and Soros deals the final blow to the pound. Vivian turns to alcohol and lives on memories. Today she is a Jehovah's Witness, she has found a balance and is once again brilliant and combative. On the street they still recognize her. She's Spend, Spend, Spend, isn't she? Today Europe is plunged into sadness like the Castleford of 1961, but without the stern greatness of the generation that fought the war and saved Europe from Nazi-fascism.
Instead of the morals of the Victorians we are guided by the sporting motivation of Merkel and Schauble, who want to go down in history as the two figures who eliminated the public deficit and started to decisively reduce the German debt. They've been working there for years, it's a lifelong dream and if someone asks them to spend, spend, spend to save the euro, they feel like a mountaineer a few meters from a great unclimbed peak who is asked to go back immediately because they need him at home.
In the name of its public spending fetishes, Germany agrees to have little growth, to have highways clogged at almost all hours of the day, to waste energy for lack of major transmission lines, to have weak productivity growth, low education and investment insufficient. The justification is that in Europe, the continent of ci
cale, we need someone to set an example and act as an anchor. Without an anchor, Europe's creditworthiness would drop sharply and all rates across the continent would be higher. It was once true, perhaps, but in times of central banks that keep rates low by monetizing debt, the argument no longer applies.
It is impressive to see Paul De Grauwe, a liberal Flemish economist who has spent his life for Europe, sinking into pessimism and being certain that the euro will not survive for long. De Grauwe, once a market investor, after the Great Recession opened up to the role of the state as an anti-cyclical counterweight to the volatile emotions of private individuals. The problem, he says, is that in Europe politics has worked in a cyclical sense, aggravating the problems, as in 2011, instead of mitigating them. Today's European crisis is more serious than that of 2011-2012.
The spread, high then and low now, is an indicator of political will, not structural health. And health deteriorated. Germany, with its recipe for internal devaluation by the cicadas, might as well have been right three years ago. However, faced with recalcitrant patients (Italy and France) who have been treated very badly (many taxes and no cuts) or have not been treated at all, you need to have a plan B. Germany does not have a plan B and at the most it grants tax deferments and circumventions of monetary obstacle through the ECB, which, moreover, continually puts a spoke in the works.
Of course, Merkel's position is very difficult. The liberals have died out and in their place an anti-euro party like Alternative fur Deutschland has sprung up like a mushroom. As if that were not enough, a group of hawks has formed in the CDU, the Berliner Kreis, which accuses Merkel of not having understood the cry of pain that rises from the country over the loss of sovereignty and the costs caused by the euro.
We will therefore have to get used to a hardening of tones on the part of Merkel, Schauble and Weidmann and hope that it is only a matter of facade attitudes followed at the last moment by sudden flexibility. Prisoner of its taboos, Europe will end up once again engaging in particularly twisted and Byzantine agendas. Unable to call federal debt by its name, which evokes ghosts of mutualisations, the Eurozone will stretch its bailout funds and bailout banks to the max, make them issue large amounts of debt which will then be bought by the ECB.
By making some cover smoke one hopes to distract the public. However, it will be difficult to get this disguised form of Quantitative easing and federal debt to accept the aggressive economists and jurists who lead Alternative fur Deutschland. Let me be clear, spending on public infrastructure works well only when it is circumscribed in terms of time and objectives, such as the American Interstates wanted by Eisenhower or the French high-speed train under Pompidou and Giscard. Self
becomes recurrent and dispersed, it progressively lowers, instead of raising it, system productivity. Faced with the extreme evil of a Europe that is unable to recover after seven years of crisis, one can nevertheless accept any lifebuoy that is thrown into the water, while being aware that a lifebuoy can buy time, but it is not a structural solution.
As bad as Europe's problems are, the Eurozone will manage to survive the next round as well. October will close with a Grand Bargain in bonsai version. The ECB will put a weak euro, Abs and Tltro on the table. Germany will turn a blind eye to fiscal overruns and demand structural reforms in return. The Commission will put the 300 billion investments promised by Junker. All good, on paper. The problem is that, as usual, the cicadas will promise heaven and earth with the firm intention of keeping their commitments as little as possible.
Germany, for its part, will pretend to believe their promises. The climate of uncertainty will not dissolve. The most remarkable aspect of our times is the divergence between the widespread trust in the financial markets and the distrust in those who should invest in productive activities. Governments, moreover, do not contribute much to reassure businesses. In even hours they loudly proclaim their willingness to cut taxes, in odd hours they go wild against multinationals, declare the hunt for tax inversion open and define any move they make as elusive.
The stock bull market is tired. There are fewer and fewer ideas and the buybacks are proceeding on automatic pilot. It is possible that tiredness is the form, on the whole benign, taken this year by the autumn correction. We remain long dollars and purses (despite everything). And let's cultivate the secret and impossible dream that the chancellery of Berlin will be entrusted to Vivian Nicholson for a few months.
