US faces political dysfunction, and Europe has a structural problem that is far from being resolved despite billions and soon trillions thrown to address its symptom, the sovereign debt crisis. The severity of the challenge is in large part reflected in the relative values, rising and falling, of the Euro and the US Dollar. The Euro has lost some value in the last few months with respect to the US Dollar, but is this an accurate reflection of the risk and future of the respective economies? The Myth of US Capitalism? The US economy is more robust, with less unemployment and less structural obstacles as compared to most of the different countries/constituencies that make up the Eurozone.. However, the US had been for too long relying too much on its own rhetoric about the relative openness and labor flexibility while ignoring factors as a bulging wealth gap, shrinking opportunity, troubled home and savings accounts and excesses/abuses in the financial/monetary markets that reflect an increasingly predatory capitalist system perhaps on the verge of mortally undermine the standing of capitalism as a whole. Overcoming Waves of Historical Challengers: The latest challenge is the political dysfunctional in Washington. The demise of the US capitalism and political system though has been heralded before on more than just one occasion. The challenge from Asia did not start from China but Japan three decades earlier, as an example. The US remains dominant though in part because of greater flexibility and the relative openness of society nurturing fresh technology and intellectual products over the last few decades. In my opinion, the US was probably a more welcoming and open country a few decades earlier, but in relative terms it still is the most open of the big economies. The failure of the US Congressional Super-committee signals that the US will face political gridlock until the next elections at the end of 2012, (Read - diplomaticallyincorrect.org/films/blog_post/us-congress-debt-super-committee-fails-to-reach-agreement-by-ambassador-mo/41945), but the good news is that the US will run relatively well even with a rudderless Washington. Is there Methodology for Real Resolution to Eurozone Crisis? The problems in the Eurozone are more structural, deeper and vary in perception and reality in the various EU constituencies. Unlike with the US dysfunctionalism, it is difficult to see either the methodology for resolution or the light at the end of the tunnel – unless you move forward with a partial dissolution of the Eurozone. Favoring Symbolism of Euro Over Substance? The survival of the Eurozone as is has been in my opinion unwisely linked to the future of the whole EU project – more symbolic rather than substantive relationship. That unfortunately limited flexibility for Brussels and the individual member states/constituencies - potential departures and/or second tier Euro have been dismissed for political/appearance considerations. Does ECB have Capacity even if Will Would Exist? Now, German Chancellor Merkel has signaled that the ECB (European Central Bank) may not be capable of dealing with the swell of the potential Eurozone sovereign debt crisis. I’m a little surprised that Chancellor’s Merkel joint news conference with UK PM David Cameron did not gather even more attention, when she rebuffed his suggestion that the ECB become even more directly involved in backing the troubled debt and deploying fully what each inferenced was the Eurozone’s heavy-gun or “bazooka.” The presumption has been that Germany and the ECB was unwilling, but there is also good reason to believe that neither the ECB or full backing of Germany is enough to blow the crisis out of the water. (The new ECB head Mario Draghi certainly appears more willing - READ – “It’s a New Eurozone at G-20” - diplomaticallyincorrect.org/films/blog_post/its-a-new-eurozone-at-g-20-by-ambassador-mo/39498 ). However, could the ECB’s or even Germany’s credit standing as whole be dragged down if it commits as the lender of last resort for all the troubled Eurozone sovereign debt? (Read: “Berlusconi Pimple on Financial Markets” - diplomaticallyincorrect.org/films/blog_post/berlusconi-pimple-on-financial-markets-by-ambassador-mo/41748 ). Extended Period of Malaise and/or Uncertainty? The Eurozone crisis appears likely to meander, but the bleeding could continue with ultimately consequences of driving many if not all member economies into recession. (Greece, Ireland, Portugal, Italy are there and Spain and France on the way – UK, not a Euro but only EU partner, teeters on the precipice). It is both the malaise and the uncertainty that will undermine the relative standing of Eurozone productivity and confidence in the Euro as currency. Anticipating relative valuations/standing, the US Dollar appears with more favorable prospects over the medium term, (although some market participants have referred to this as a beauty contest among “uglies”). Ironically, the one step that could reduce uncertainty and provide structural relief through de-linkage is if some of the current Eurozone members dropped out. The process could be as ugly as divorce under the worst of circumstances, but the prospects would perhaps be viewed as better for all able to pursue their own optimum options after the last year of irreconcilable differences. By Ambassador Muhamed Sacirbey Facebook – Become a Fan at “Diplomatically Incorrect”

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 International Financial Crisis Channel - diplomaticallyincorrect.org/c/international-financial-crisis