Gavekal on the coming Eurozone balance of payments crisis

Over the past two years, the euro crisis has morphed from a sovereign crisis in a peripheral country (Greece), to a banking crisis, and back to a sovereign crisis in core countries (Italy, Spain). At every turn a "solution" is devised whose purpose is to "save" the euro but whose actual result is simply to push the crisis into new and more desperate terrain. The latest solution - aggressive easing by the ECB - means that the next phase of the euro disaster will be a balance of payments crisis. Indeed, the ECB's change of operating procedures undeniably "solves" last year's problem of eurozone governments financing themselves. But what kind of solution is it when, as Jacques Rueff put it 50 years ago, the ECB's move amounts to "financing expenditures which have no return with money that does not exist"? The highest-odds scenario is thus that the bloated eurozone public sector, having guaranteed its financing for the next three years, will stop all effort at reform, and that the southern European countries will become even less competitive than they are now. In turn this means that -- barring a collapse in oil prices -- their dollar trade deficits will grow larger and that a classic balance of payments crisis is thus right around the corner.

So far, this crisis has not materialized because of the generosity of the Fed, whose swap lines already total US$100bn. To all intents and purposes, the Fed is now financing not only the US budget deficit but also the southern European trade deficits, while the ECB gets to carry the exchange rate and solvency risks. (This Fed-dependence carries a delicious historical irony: one of the prime goals of the euro architects was to create a powerful alternative to the dollar, ensuring that Eurocrats would never again be subservient to Washington. Yet today, thanks to the euro, Europe must go cap in hand to Washington to stay solvent).

Mark Lilla on Americans' politics

Americans' assumptions about human nature are basically liberal today. We take it for granted that we are born free, that we constitute society, it doesn't constitute us, and that together we legitimately govern ourselves. Most intellectuals who call themselves conservatives today accept as self-evident the truths enumerated in the Declaration of Independence, which no traditional European conservative could. They are go-slow, curb-your-enthusiasm liberals like Tocqueville, not conservatives like Burke or T.S.Eliot or Michael Oakeshott. As for those like Congressman Ron Paul, who promote a minimal state and an unregulated economy, their libertarianism is actually a mutation of liberalism, not conservatism.

Mark Lilla on Fascists

Fascists hated so many aspects of modern society - representative democracy, capitalism, cosmopolitanism, tolerance, bourgeois refinement - that we forget that they were anything but nostalgic for Church and Crown. There was nothing conservative about them.

Mark Lilla on conservatives

What makes conservatives conservative are the implications they have drawn from Burke's view of society. Conservatives have always seen society as a kind of inheritance we receive and are responsible for: we have obligations toward those who came before and to those who will come after, and these obligations take priority over our rights. Conservatives have also been inclined to assume, along with Burke, that this inheritance is best passed on implicitly through slow changes in custom and tradition, not through explicit political action. Conservatives loyal to Burke are not hostile to change, only to doctrines and principles that do violence to pre-existing opinions and institutions, and open the door to despotism. This was the deepest basis of Burke's critique of the French revolution; it was not simply a defense of privilege.