Deutschland uber alles

I’m not one to play Chicken Little but the situation in Europe appears to be intractable. For 18 months politicians and bureaucrats have been claiming to do something but so far little has been accomplished. To be sure, some holders of Greek bonds voluntarily took a haircut, central banks have acted in concert, and leaders in Greece and Italy are out but the situation just grows worse. Tomorrow marks the eight summit on the crisis this year.

The worst case scenario is a cascading collapse that makes the Great Depression look like Disneyland. Meanwhile net world debt just keeps on rising, up 11 per cent annually for the last decade, fuelled by low interest rates and people at all levels – from consumers to governments – who can’t rein in spending to match income. Barack Obama saved capitalism once; no one seems able to act this time around.

For ordinary Canadians the impact has so far been muted. Anyone with a mortgage is happy with 4 per cent money, but investors are stuck in a rut. Retirement portfolios have gone sideways or down with no likelihood of rising anytime soon. Play it safe with GICs and your return doesn’t match inflation.

The European Community was created so Germany didn’t go to war again with its neighbours. The irony is that the only way out would see Germany run everything. That sounds like victory without a shot being fired. And a lot of collateral damage to the rest of us.