Conspiracy Theories

Although I usually encounter the normal bunch of of pictures/comments/likes on facebook, I occasionally find something interesting, such as what I saw yesterday:

"Everything happens for a reason. But sometimes things happen because you are stupid and make bad decisions"

Well, this pretty much sums up my thoughts about Europe at the moment. A few months ago, a Cypriot acquaintance I met on a journey in the UK told me that "It's a conspiracy thing. It doesn't make sense that our banks should face trouble from one moment to the next. It's all because of the (enter nation of choice here. He chose the US)"

Really? It was a foreign officer's fault who told the Bank of Cyprus and the Popular Bank to invest heavily in Greece wasn't it? (and by heavily, I mean that more than 50% of their government bond portfolio was invested in Greek bonds) Or was it some strange conspiracy which drove the current government to continuous budget deficits? How about the fact that roughly 50% of the houses in Cyprus are without title deeds? Well he/she must be one shrewd conspirator!

I was reminded of this after I watched a short movie yesterday. The Greek in the movie was under the notion that in Greece's subsoil, large quantities of mineral (uranium, gold, oil, etc) existed. Thus, the "bad foreigners" wanted to eliminate the Greeks, make them starve, and thus exploit their riches. Yes... Well I guess its the foreigners who made Greece such a Kleptocratic nation and not its politicians and those who elected them! I would assume that the economic meltdown was not due to the extreme amounts of allowances and benefits the public sector received. If a large foreign corporation would like to invest in Greece (to extract minerals??), one should consider it very fortunate as it would reduce unemployment and boost investment and consumption. Oh, and conspiracy theorist, you do not need destroyed nations to set up a business. People actually prefer more stable and peaceful regimes. 

Although I may have stated it before, I believe that conspiracy theories are just a way to say "Well, it's not my/our fault, some supreme power has led me/us to this". This is the same as an ostrich hiding its head in the sand, or hiding behind one's finger. We think that this is saving us, nevertheless, the rest of the world has a different opinion.

Conspiracy Theories and the Eurozone

I do not like conspiracy theories. To be really honest I hate them. I believe that conspiracy theorists are those kinds of people who do not want to take responsibility for their actions (or their government’s actions) and think that this is all part of a massive hidden elaborate plan devised by -insert nation here- to control/take over their homeland’s economy/natural resources or whatever. Thus, anything they will do will be futile; all they can do is blame the one "responsible" for this as they sit around and do nothing. This kind of thinking I truly, honestly hate. 

However, lately I have been thinking about one. I am not proud to say it but I have. It all started when I began thinking about what they could do instead of the large haircut on Greek debt last year. If that haircut had not taken place the only country that would have been in direct danger from Greece would have been Cyprus, due to the explosive growth of its banks there. And even Cyprus wouldn't have been so worried then. Read more here.

What I have been thinking was this: Let's assume that policymakers in Eurozone are not stupid. Let's assume that what they have been doing has some rational reason hidden behind it. What were the consequences of their actions and who would benefit from that?

The first direct consequence would have been the fall of the value of the Euro. The following graph indicates this trend for the EUR/USD pair. (Graph was made by Yahoo!Finance)

As one may observe the value of the Euro versus that of the US dollar has declined dramatically of the past year and a half. Thus, it would mean that European products are now cheaper than they were 1.5years ago. Thus, more exports. This can be seen by the following graph (made by www.tradingeconomics.com)

As we can see exports began to rise after February 2010 and continue to rise to this day. (An examination of most EU countries individually would confirm this but to be honest I am bored to upload and comment on 20 graphs! I am sure you would be bored to read one article like that too.)

Thus the only conclusion we may draw was that the EU policymakers are deliberately keeping the EUR/any other currency rate down so as to export more. Any good news about the Euro economy would have as a result an increase in the rate and thus decrease exports. Thus the conspiracy theory would be that policymakers want to flood the world with EU goods (or maybe just German goods for obvious reasons. Wolfgang are you there?) and make us rich by large trading surplus; however not now but in a few years. It's a merchants world after all!

Or, they just make bad decisions. What do you think?