(05d) PM Merkel is against Eurobonds - I agree to some extend

I'm having again Internet after almost a three months break. Finally, back to the world.

Many European politicians (and certainly economists) want to introduce Eurobonds and as I understand it, the EU may take some (most, all?) of the debts of poorer European countries and spread it over Europe so that both strong and weak shoulders will carry the problems.
Of course, it is only understandable that Europe wants to help countries that are in need (as it should do because they are members). But, as the German PM Angela Merkel (a woman who thinks differently than most men and wants other solutions then the usual ones), I am against spreading debts because it will weaken every country that take some of the debts (it is similar to banks using savings of people to pay off their debts so that when people want their money the banks can't give it anymore (I wonder whether rating agencies threat some countries well so those countries are prepared to take responsibilities to save countries until those banks no longer need the better countries and then drop them too?) I have to say, this crisis is damaging for humanity because everyone learns how to behave in the worst possible way, we all learn the tricks of criminals). As I understand the system, we can have 'clean' Eurobonds. But more importantly, we should have Eurotaxes (and even UN taxes) so the wealthy can no longer flee their responsibilities. Those taxes should then be used to stimulate the economy, investments and competition.
I have to admit I am not a specialist in these matters, certainly not in bonds  and probably what I say is all too simple as I use my gut feelings (but did it not become too complicated recently? Although I think not because it now seems much was pure fraud and well thought off by some until the fraud spiralled out of control).

Eurobonds

I am not against Eurobonds per se, but they should start from zero. Europe and the world should see them as something new; the EU should not start Eurobonds by taking parts of something that is less than worthless. Greece and other countries can keep their bonds and let countries pay back their debts as they were responsible for them. Other countries had debts and tried to reduce them although it can take decades when debts are very huge. Belgium is an example: for decades we tried to improve our country in the hope that more efficiency would reduce our deficit and it did; it is therefore unfortunately that the financial crisis almost completely wiped out all of our efforts. If Eurobonds exist, probably no investor wants bonds anymore from poorer countries (and those countries should appreciate this unless those countries want to borrow and pay extremely high interest rates) (below I discuss briefly how these countries may pay back their debts) while many investors will buy Eurobonds as they will consider them strong because Europe as a whole is still a strong economy; this will then result in low interest rates for Eurobonds. But this is probably only when the Eurobonds start clean. However, when Eurobonds start on the debts of other countries and thus with a disadvantage, investors may consider them already as troublesome and the interests on Eurobonds will be higher (although then other country may still be able to sell some of their bonds).

Eurotaxes

But I believe Eurobonds are worthless without European taxes (Eurotaxes) because bonds cause debts that has to be repaid while taxes are a government's income (although most people hate paying taxes (i.e. taking their responsibility) while they demand the state provides advantages (e.g. cheap and good healthcare, (clean) streets, low crime rates because of good law and order, pension, ...)). In a federal Europe (a necessity if Europe ever wants to survive (and it should not become a centrally governed state (as I fear it may become) with a "strong" leader who only listens to himself/herself and his/her supporters as this will only result in anger)), each level of government should collect its own taxes.

Thus, it should not be as in Belgium where the Federal government collects most of the taxes and then gives a certain amount to each regional state, resulting in frustration with everyone as the regional states always have to beg the Federal government for more money whenever they want to introduce new policies while the Federal government is not happy as it has to give much of the collected taxes to the regional states and thus can't use it for its own policies. As a result, every so often Belgium changes its constitution. Europe is the opposite: the higher level has to beg its member states for money, again frustrating both. And each time members states give money then the EU demands more sacrifices because the budgets are out of control.

Returning to the Eurotaxes: every European citizen will then pay taxes, wherever they are in Europe and thus the EU has money while individual countries can use the money of their own taxes for their own needs such as investments in their local economy (although a small membership fee can still be paid to the EU as the EU will also invest money in member states). Thus, rich people will no longer be able to escape paying taxes in their own poor country by moving to other European countries as is happening at this moment. Indeed, many are fleeing to London and to some extend to other countries in order to prevent paying high taxes in their own poor country. As a result, the least well-off people remain in those poor countries, those who have not enough money to pay sufficient taxes to help their country and as taxes increases for ordinary people, their resentment increases equally (but, now happens in Europe what happened in the past in non-European countries when the "best" people (the educated ones and those with money) escaped to rich countries, resulting in even less educated and poorer countries).

Of course, when Eurotaxes are raised, the wealthy will try to escape to other countries including America to avoid paying Eurotaxes and thus Europe continues to become poorer (although the USA also needs money as it also struggles and thus the USA may not be the best place to go). Or the rich can flee to upcoming markets as they often threaten they may do if governments dare to increase taxes (is that not blackmail?), but how many of those people would like to live in countries where they don't understand the language, where the infrastructure is often not that good and where they probably don't like the habits of the local people? They may soon return and be happy to pay the taxes (although the wealthy stick mostly together in expensive places where everyone speaks English and has table manners and thus the locals may not bother them too much so they can stay until the locals get fed up with them).

Thus, also the UN should have its own taxes which are raised worldwide so everyone, including the rich, pay taxes; the UN can then use the money to help local economies if needed. Indeed, to escape the financial crisis, the whole world needs to work together, including the rich. But I fear that the rich would not mind collecting taxes worldwide from ordinary people while they avoid paying them "of course, via legal ways, specifically designed for the rich".

Eurobonds and Eurotaxes and their use in Europe

The Eurobonds, provided Europe starts with new ones and does not load them with the debts from countries, but certainly the Eurotaxes should provide the EU with the necessary money to help countries in need. Of course, it will still be difficult to solve the problems as the problems are big. But countries that behaved well over the past decades and have reserves and are trusted will loose less money to poorer countries as less help is needed from each individual country towards another because the EU collects its own taxes. Thus there will be less chance other countries too go bankrupt, certainly when their economy (probably) will shrink again and money is needed to help their own economy and people. And ALL people should pay taxes: not only ordinary people as wealthy people demand, but certain the rich as they should give an example so others will follow their good behaviour. But, last weekend news agencies reported that it is estimated that the worlds super-rich are hiding a combined $21 trillion ($21,000 billion) in tax havens, the size of the economies of the USA and Japan together. How can those people have the moral rights to demand that everyone else should pay their taxes while claiming it is only normal that the rich try to avoid paying taxes because taxes are too high? But ones they control countries as they already do in Greece and Italy, they will force everyone to pay all their taxes plus penalties.

Europe should use the money from the Eurobonds and Eurotaxes to help failing economies, not by filling a bottomless pit of debts but by stimulating economies so fewer (no) people loose their jobs and can continue buying food and clothes and live in houses. As a result, people will be able to work and earn money and thus pay the taxes of their country and of the EU (countries that refuse to punish people (rich or poor) who do not pay their taxes should not get any help at all) and thus countries will be able to continue paying their debts although at a slower rate (and if banks do not accept that, bad luck for them, they can always reduce the wages of their highly paid employees if they need money). In the meanwhile, the EU should demand reforms in the countries although at a more human speed.

Furthermore, the workload should be spread (redistributed) over more people so people can keep their job, also important for someones dignity. Of course, this means people will earn less. But, this concerns mainly the high earners because some of them earn that much that, even when some of their money is used to prevent others loosing their job, they could still live comfortable and pay their high bills such as their mortgage (unless of course one goes in overdrive and divide the money over too many people). At this moment, this is already done whereby the powerful ask ordinary people to make sacrifices to save jobs of colleagues and increase profits so the high earners can claim their bonuses should go up because they saved the company. Of course, this is difficult because it is always hard to agree to earn less although that is often not bad; indeed when enough people earn less, prices of products will decrease until they reach acceptable levels (e.g. at this moment, house prices are too high but they can remain that high as long as enough people are willing to pay those high prices (e.g. parents remortgage their house so their children can buy something)). When people see that people on high incomes are making sacrifices, ordinary people will also be prepared to make some sacrifices (the lowest incomes should make the smallest sacrifice). Finally, when more people work, they will be less stressed because the workload is divided over more people, the opposite of what happens now as many companies fire people and burden the remaining employees with the work what can result in burnouts and as a consequence people can loose their jobs. And that is in no-ones interest.

Problem when stimulating economies

However, European money used to help poor countries should not result in unequal competition with companies in richer countries and Europe should, as it did in the past, also stimulate investments in richer countries so they too regard Europe as something positive.

Because of reorganisation of the workload and stimulation of investments there will be almost enough work for people all over Europe although less stressful. Furthermore, as in the past, people will continue to regard the EU as something positive where everyone is treated equally (e.g. everyone pays taxes and most people work). People could continue to work in whatever member state they wish because some taxes they pay will be used in their new country while other parts in other European countries. Then, Europe can be seen as one country with individual member states, a real federal United States of Europe within a larger UN (as Winston Churchill spoke about in Zurich in 1946).

Nevertheless, money in general should not be used to save companies (or countries) that fail because of bad management as this results in unfair competition between companies (and if no punishment then one continues as if the sun still shines); however the money should be used to help promising companies and research. E.g. in 2008, a number of banks should have failed and their managers put in jail while the money used to save those banks should have been used if necessary to pay savers their money so people could go to another bank with good management or use the money to invest. Now banks with incompetent managers are saved with tax money so they can continue misbehaving (due to the incompetence of politicians who did not demand much in return such as the end of bonuses) while good (smaller) banks now struggle because of unfair competition with the (big) badly managed banks. Also, people find it more difficult to get loans from banks and invest in the economy. If banks will now fail, countries will be too weak to guarantee savers money, certainly not when big investors want their money first. Companies and countries that receive money should prove they use the money wise as e.g. the German PM Merkel demands and they should know punishment waits if they misbehave.

We should still invest in companies, even when we are not sure about the return and we should even allow companies to go bankrupt as long as they had a good business model. E.g. many stem cell companies need money even when there is no guarantee for success and there is even a possibility they go bankrupt because their technology is something so completely new that no-one can anticipate whether it will be successful. But due to this financial crisis these companies receive less (no) money and thus the probability is big they will fail and all money invested, including the technique, will be gone. Of course, we can't give a blank cheque to companies but need to know their business model before investing money. Further, it is also the responsibility of the investor to check whether their money is used in a correct way. But, managers should go to jail if they misused the money or knowingly mismanaged their business (one can always make mistake but one should learn from mistakes. Therefore, investors should check what is done with their money as they did not do sufficiently in the past). I don't understand why this was no longer done because it is so logical and therefore we used it in the past.

This system (investing) will not take away the responsibilities from countries to reduce their debts (i.e. money is not used to remove debts of countries but to stimulate promising companies, research (e.g. into renewable energy), keep the government running while reforms should be made to improve the country). On the other hand, rich countries do not become poor by giving away their reserves and can use their money, together with European and UN money, to stimulate their own economies and thus indirectly others economies (e.g. research into renewable energy). This system, as it worked in the past, will stimulate innovation in countries in order to receive investment money while systems could be in place (as they already exist) that actively stimulates collaboration between countries so that more developed countries can help less developed countries. Therefore, it is such a shame that
(1) the selfishness of a few, but a few too many (although many people try to cheat), and
(2) the presence of people in governments that disliked governments (e.g. Margaret Thatcher) so they reduced the role of government in society, i.e. control laws are followed by everyone,
destroyed this whole system and made people turn again to nationalism and hate against other countries and people, even when people now see an opportunity to work abroad, fuelling the hate for foreigners who take the jobs of locals.

Having a look at our climate

Thus, we need investments in research e.g. in new treatments against illnesses because that could save lots of money if people are less ill (while now investments in healthcare are reduced). But we should also invest in renewable energies.  Because it is something new and new things can only grow while old industries can only remain steady or decline. By continuing to destroy our planet, we can wait for the end of times as so many people believe we are approaching and we don't even have to try to save our economy as it will all be in vain.

During the climate summit in Rio de Janeiro (May 2012) almost nothing was decided while more and more signs are showing nature starts to take revenge for how we treated her (large parts of America were burning while there are still fires in Europe causing so much damage that we may not be able to repay the damage; this may cause insurance companies go bankrupt and as a result may cause pension schemes to collapse, ...). Thus, even during a financial crisis should we continue our investments in renewable energy as we also asked poor countries to do before the financial crisis.

Renewable energy is an almost never ending energy source (except one needs materials to built the equipment) that results in a cleaner environment, less climate change while it would result in new jobs making the equipment. At the same time, we should not abandon oil and gas but use it for better things than waist it by burning it. Oil can be used to make shoes (no need any longer to kill animals) and some clothes (although wool is a very good renewable source to make clothes that liberates animals in summer from their hair without harming them), medicines, houses, artwork, furniture, ... . I am not sure how we can use gasses such as butane except for burning them as a less polluting fuel. (I also do not believe in growing crops to burn.) By continuing to burn these limited resources, we continue to increase the likelihood for climate change while there will be less available in future for better use. The future will be renewable energy: is it not exciting to find ways that increase the yield of energy from renewable sources so that each household, skyscraper and company will be able to produce its own energy and we no longer depend on large energy companies. But the latter companies are still needed to make energies for larger projects such as public transport.

But as the summit in Rio de Janeiro showed, during a financial crisis we can see our real intentions to save the future planet: during better time rich countries asked poor countries to make sacrifices by slowing down their development to save the planet from climate change while now, although we are still rich we don't want to invest that much anymore in our future and rely on certainties of the past. At the summit the countries decided to talk again in 2015 after more time will be lost and more land may have burned or flooded. Probably, only when we feel the full power of nature we will change the way we live. But as nature is organic, the Earth may reshape itself until a new steady state is reached and life becomes smooth again. The same is through regarding rethinking the economy, probably only when we are forced to do it we will.

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