This is a bit off topic, but it has occured to me today that there is an interesting parrallel between Argentina and China. Argentina, we may recall, had a hard-peg 1:1 with the dollar. At the time the WSJ consensus was wildly enthusiastic. Why was this: because such a peg was deemed to give stability to an unstable financial system.

Fast forward five years, and the same consensus is now in unison that the renminbi should be revalued. But the very same people are often to be found arguing that the Chinese numbers are rigged, that the growth is not real, that the financial system is on the point of collapse. In which case you would have thought that the currency needed the dollar peg, and that the authorities were right to intervene to maintain it……..Or, the growth is real, and with time the renminbi, like the rupee should be allowed to appreciate. Now which is it?

BTW: most responsible economists manage to retain serious doubts about the reliability of the numbers, whilst remaining convinced about the reality of the underlying growth. There are other ways to get a measure like monitoring energy consumption, or taking export numbers, which are much harder to fudge, and extrapolating.

A bit off subject for a discussion about what kind of Europe we want, well not necessarily. What we need, among other things, is a Europe which is capable of responding positively to the changes which are taking place in the world around us, and which does not,when things don’t go our way, only know how to cry ‘foul’.

However, Chinese economic data are widely believed to be overly optimistic, if not fraudulent. China has enormous structural problems (huge deficits, moribund but politically untouchable state-owned enterprises, high rural unemployment) that its gerontocratic bureaucracy is not equipped to handle.

(BTW I should probably mention that my earlier post was meant to be sarcastic… notwithstanding any resemblance between such an attitude and that of Karl Rove, who clearly wants to return the U.S. to the McKinley era.)

Magnus - There is still scope for the triumph of hope over experience in Europe.

There was enough time to rearrange the deckchairs on the unsinkable Titanic before it finally slid beneath the waves, the tzars in Russia were succeeded by a different kind of tzardom for 70 years, a tzardom where the despotism was even less tempered by inefficiency, and women did not get full voting rights until 1928 in Britain, until after WW2 in France and not until 1971 in Switzerland. That was progress of a kind. Even so, the more perceptive of American historians appreciate how much America owes to its legacy from its oppressed, adventurous and enterprising migrants from Europe but perhaps we need now to focus on the fast changes underway in geopolitical factors which tend to be below the horizon of interest of much popular media.

For the last five hundred years world affairs were largely dominated through decisions taken by governments of nation states located either side of the North Atlantic. That is not so now and will not be so for the foreseeable yet popular perceptions of global realities tend to be parochial and largely determined by sheer inertia.

Extrapolating present economic growth rates, China will become the world’s largest economy by GDP within a quarter of a century or so and Japan’s economy, the present second largest in the world, now seems to be reviving after a decade of stagnation. India, the world’s largest democracy, now has an economy that is growing strongly, not as fast as China’s, but certainly faster than its own historic standards. IT companies and buyers in north America and Europe are outsourcing work to India. These changes in the centre of gravity of global fundamentals will probably turn out to be of greater significance for the living standards of the average family in Europe in the longer perspective of history than mongering new constitutions.

This quote from the perennially preceptive Paul Krugman in his: Peddling Prosperity (1994) appears to have a message for us in Europe:

“Yet most people, even including the [US] senators who voted for the [hugely protectionist] Smoot-Hawley [Act of 1929], soon realised that protectionism had gone too far. The US began trying to negotiate tariffs down again as early as 1934, and after WW2 both the political and economic environments were very favourable for trade liberalisation. Once the global trading system had been shattered, however, it was very hard to put back together; trade among industrialised countries did not regain its 1914 level until 1970.” [p. 288]

Or does the global problems crave global governance?

But then again, Europeans do like to distort reality to fit their dreams. They’ve been doing that for quite awhile, and could have succeeded… if not for the American example to throw cold water on that empty dream.

He was replied by Rolf Englund Swedish EU sceptic who stated that,” but every 5 year old knows that its very easy to stop the bike without falling, you just brake and put your foot onto the ground”.
“The same should be applied on the EU”.

Which of them is right?

On the other hand to force this superstate upon the people isn?t democratic either.

So its an dilemma.