Daily Commentary: On the Dutch leaving the euro zone

As I wrote yesterday, in the past, I have offered up a links post on the most important news items of the day. I am replacing this with a more robust offering that also includes my news commentary in addition to the links. I hope this will put those links in context for you and give you a chance to ping me with specific comments about market and economic news issues you are seeing. This product will retail for $2.99 per month. What I intend to do going forward is put up the links post for a couple of days in the new format for free to give you a feel for what the news commentary will initially look like. Then, soon afterwards, I will start the Bronze Membership.

Here goes

Topic du Jour: Dutch missing targets/leaving the euro zone

Everyone is talking about the Dutch Freedom Party these days. My view: they are a complete non-issue, the leaving euro zone part is total media hype and meaningless. I have strong ties to the Netherlands and have been following things there. About two months I caught an article in Newsweek on Geert Wilders, the head of the Freedom Party. He is a bit like Marine Le Pen in terms of his appeal: anti-immigrant, nationalist and right wing. The Newsweek article made the Dutch look like they were making an abrupt shift from the liberal tolerant society they have always been labelled as over the past few decades to an intolerant and right wing dominated place. This is just nonsense. I sent the article around to several friends of mine to see what they had to say. Here are few snippets:

  • "I can assure you that the majority of our country citizens have sane opinions on Islam."
  • "Hi Ed, Having the benefit of being in a neutral country I also see the developments as scary. From the outside he is also regarded as dangerous and extremist. Double standards is what the Swiss hate here and so far they have covered it well."
  • "Geert is a dangerous animal who continues to insult Muslims… he criticized our queen last week for wearing a head scarf while in Abu Dhabi and Oman (while at the same time insisting every “visitor” to the Netherlands adapt to our culture.… It has become very awkward now that his party is part of the Government coalition.  At a minimum this will continue to create tensions in our cabinet while they have bigger fish to fry… but more severe consequences are not unthinkable.  Problem is, he desperately wants to stay in the news and quite a portion of our population quite like his rhetoric"

Bottom line: The Dutch have not changed one iota. There have always been elements of disquiet about the liberal sex and drugs policy and cultural integration of immigrants. For example, some of my friends mentioned that the hash cafes are for foreigners and that they and people they know never really got into any of that. Queen’s Day or Euro and World Cup celebrations yes, but no different than in Germany. The majority of Dutch people reject Wilders. He is a media-seeking extremist and his ideas are not shared by the major parties. That he says the Netherlands should leave the euro zone is meaningless. He has no sway on this issue whatsoever.

Remember, I am a eurosceptic who thinks the euro will eventually break up but I am telling you this Dutch story is a non-issue.

On the other hand, the possibility that the Dutch will violate the Maastricht treaty targets is a very big deal. Marc Chandler and Finance Addict have both written on this, so I won’t rehash their points. But what you should realise is that the Dutch will not want to be seen missing their targets. They will definitely close this gap as best they can. And that means the Dutch government will embark on a deflationary policy, joining the periphery, France, Belgium and Austria in this regard. Really, only Germany, Finland and Luxembourg have any leeway on the fiscal front in the euro zone given the present political economic agenda.

That means Europe is going to continue its deflationary policy response. For countries like Spain, where they are openly flouting the Maastricht Treaty by not even attempting to meet agreed to targets, what they want is an expansionary policy from the likes of the Netherlands. They are not going to get it. The Spanish are on their own in this. They had better hope bond markets don’t push their yields up too high.

Here are the links.

  • Dutch Freedom Party pushes euro exit as €2.4 trillion rescue bill looms – Telegraph
  • Netherlands looking for Euro Exit as Supercomputer prepares for Financial Judgement Day – YouTube
  • Dutch Freedom Party pushes euro exit and return to Guilder – European, Business – Independent.ie

    "The euro is not in the interests of the Dutch people," said Geert Wilders, the leader of the right-wing populist party with a sixth of the seats in the Dutch parliament. "We want to be the master of our own house and our own country, so we say yes to the guilder. Bring it on."

  • City Fines Man For Not Cutting Grass At House He Lost Through Foreclosure – The Consumerist

    When the man went to renew his license last July, he found out the city had issued a handful of outstanding fines and warrants in his name over things like un-cut grass, an old fence and operating an alarm without a permit. "I feel like I’m being punished for something I didn’t do," he tells CBS 11 in Dallas. "It’s really frustrating and costing me a lot of time." He’s currently fighting the city over the allegations, but in the meantime he’s paid $150 so he could renew his license and has also been maintaining the property.

  • Goldman’s conflicts, part 917 | Felix Salmon

    The defendants begrudgingly concede that El Paso’s long- standing financial advisor, Goldman, had a "potential conflict" because: (1) it owned approximately 19%, or $4 billion worth, of Kinder Morgan stock; (2) it controlled two of Kinder Morgan’s board seats; (3) it had placed two senior Goldman principals on the Kinder Morgan board who thus owed Kinder Morgan fiduciary duties; and (4) the lead Goldman banker working for El Paso, Steve Daniel, personally owned approximately $340,000 of Kinder Morgan stock.

  • When the US Government Can Kill You, Explained | Mother Jones

    Speaking to students and faculty at Northwestern University law school, Attorney General Eric Holder laid out in greater detail than ever before the legal theory behind the administration’s belief that it can kill American citizens suspected of terrorism without charge or trial. In the 5,000-word speech, the nation’s top law enforcement official directly confronted critics who allege that the targeted killing of American citizens violates the Constitution.

  • Brazil declares new ‘currency war’ – FT.com

    Brazil has declared a fresh "currency war" on the US and Europe, extending a tax on foreign borrowings and threatening further capital controls in an effort to protect the country’s struggling manufacturers. Guido Mantega, the finance minister who was the first to use the controversial term in 2010, said the government would not "sit by passively" as developed nations continue to pursue expansionary monetary policies at the expense of Brazil. "When the real appreciates, it reduces our competitiveness. Exports are more expensive, imports are cheaper and it creates unfair competition for businesses in Brazil," he said on Thursday after announcing changes to the so-called IOF tax.

  • Android’s Now On Top For Mobile Browsing and Search, But Still A Challenger Elsewhere | TechCrunch

    Android is currently the most popular platform in smartphone sales, and that domination is slowly but surely making itself felt in other aspects of the mobile experience – just as Google would have wanted it to be.

  • Fed Shrugged Off Warnings, Let Banks Pay Shareholders Billions – ProPublica

    In early November 2010, as the Federal Reserve began to weigh whether the nation’s biggest financial firms were healthy enough to return money to their shareholders, a top regulator bluntly warned: Don’t let them.

  • Manager buys Donegal hotel on market for €6m in 2008 for €650k – Commercial Property, Business – Independent.ie

    A FIFTY-FIVE-BEDROOM hotel overlooking the Donegal coastline stole the show at a cut-price property auction yesterday when it went under the hammer for just €650,000. Paul Diver (46), who has managed the Sandhouse Hotel in Rossnowlagh for the last 20 years, jumped for joy when his reserve-price bid was accepted with surprisingly little competition.

  • Social Security, the Financial Crisis & Modern Monetary Theory – US Business News Blog – CNBC

    how will we produce enough to keep our elderly population living a more-or-less dignified life

  • Venizelos Says Debt Swap Is Best, Only Offer for Investors – Bloomberg

    Greece expects bondholders to accept a one-time offer to write off about 100 billion euros ($140 billion) of Greek debt and is ready to force them to participate if necessary, Finance Minister Evangelos Venizelos said.

  • Yelp soars in market debut on Facebook optimism | Reuters

    Consumer review website Yelp Inc made a sparkling market debut on Friday, buoyed by optimism ahead of Facebook’s public listing and hopes for further successful public listings by Internet companies down the road.

  • A million-dollar mortgage goes unpaid for years while couple fights foreclosure – The Washington Post

    The eviction from their million-dollar home could come at any moment. Keith and Janet Ritter have been bracing for it – and battling against it – almost from the moment they moved into the five-bedroom, 4,900-square-foot manse along the Potomac River in Fort Washington. In five years, they have never made a mortgage payment, a fact that amazes even the most seasoned veterans of the foreclosure crisis.

  • Days Are Numbered for Unlimited Mobile Data Plans – NYTimes.com
  • New Apps Seek to Help Phone Users Track Data Use – NYTimes.com

    Cellphone carriers are forcing customers to think about how much data they are slurping up as they watch YouTube and stream music from Pandora. In the United States, customers with unlimited plans who use a lot of data have found themselves forced into a network slow lane.

  • ECB liquidity is not a free lunch | Gavyn Davies | Insight into macroeconomics and the financial markets from the Financial Times – FT.com

    With LTRO II completed last week, over €1tn of liquidity has been injected into the eurozone’s financial system. Private banks were permitted to bid for any amount of liquidity they wanted, the collateral required was defined in the most liberal possible way, and the loans will not fall due for three years. Any bank that might need funds before 2015 should have participated to the hilt, thus eliminating bankruptcy risk fora long time time to come. What can there possibly be not to like about this? A few things.

    1. tobias says

      On the whole I would agree with your analysis, but I think you might want to mentally re-adust your estimates of the size and significance of Geert Wilders’ following. His Freedom party is currently third-largest in parliament, and the spread is narrow. Freedom has frequently been on top of opinion polls, while the two traditional leading parties are at all time lows (and the ruling VVD party has adopted many of Wilders’ ideas _ he is a VVD defector).
      His euro position has the potential to give his party a serious second dimension (apart from anti-immigration), depending on how events play out on the ground.
      Odds are the Cabinet will survive this round of cost-cutting, but IF it doesn’t, the result of new elections is impossible to predict to say the least. Further gains for both Wilders and the far left would be likely.

      1. Edward Harrison says

        The tone of my lead-in makes it seem like I am downplaying the popularity of Wilders. I do realise however that his party has 16% of the seats and so has some sway in parliament. I think his party and Le Pen’s are comparable except that he actually has more mainstream sway since his is an offshoot party. One might compare them to the True Finns.

    2. David Lazarus says

      One thing that needs to be considered is that right wing extremist parties are usually the electorate making a protest at the mainstream parties. This is definitely the case here in the UK. The BNP only ever do well in poor areas and those especially impacted by immigration. In general elections their support evaporates as mainstream parties gain. The problem long term is that the wrong policies are meaning that there will be high unemployment for the rest of the decade and that means extremist parties will flourish in Europe, until there is a change in policy.

    Comments are closed.

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