European Revolution du Jour

CNBC is reporting that the European Central Bank wants to do a hyper-caffinated version of Quantitative Easing similar to the U.S. to get their GDP up. In the U.S., Quantitative Easing has dealt a full body blow to labor, and is Europe willing to live with that consequence?

First, let’s call QE what it is – a bank bailout. Even though QE was meant to pump semi-real money (in the form of credit) into the economy, it’s pretty much been stuck in banks, because banks are making more money sitting on it, than loaning it out. Here’s where most of the U.S. QE went:

Excess Reserves11

 

Then there are the European employment issues, which is much more severe than the U.S. Unemployment has been very protracted in Europe, and Europe has a very long – at least a hundred year – history of proletariat revolution. But here’s what QE did to protract U.S. unemployment even more:

avgmed1

So since QE, in the U.S., there is a 50% change that if you lose your job, you will be unemployed between 3 and 8 months. Adding a couple of million part time, low wage jobs per month hasn’t changed that.

And it gets worse. Will Europeans, with their history of proletariat revolutions be able to tolerate competing with each other for low-wage jobs; where the under employed and unemployed are in direct competition with each other, as in the U.S.?

U6U31

John Maynard Keynes was against the Treaty of Versailles after World War I, because war reparations left Germany destitute. Keynes warned that huge unemployment would lead to either a proletariat revolution, or Fascism. He was right on both counts.

Europe’s history demand caution. With the ECB’s reach into many countries, this could turn into a Revolution du Jour. People die in revolutions. The European Central Bank, while looking at how QE has lowered the standard, and (every economist agrees) very inaccurate unemployment measure, deserves to know what it’s about to get in this bill of goods.

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