
Time to turn out the lights? (photo: Lars Aronsson)
In a column ominously titled, Euro Zone Death Trip, Paul Krugman laments the sad state of Euro nation deliberations over the fate of Greece (and Italy and Spain . . .), the Euro itself and the European economy. But he might as well have been talking about the sad state of US politics, because we’re having parts of the same argument here.
They’ll probably find a way to provide more credit to countries in trouble, which may or may not stave off imminent disaster. But they don’t seem at all ready to acknowledge a crucial fact — namely, that without more expansionary fiscal and monetary policies in Europe’s stronger economies, all of their rescue attempts will fail.
As the New York Times and other media report, the European leaders left the IMF meetings in the US promising to do what was necessary to save the Euro but unable to agree on what that is or how quickly they can implement measures that require every Euro nation to agree. They’re trying to figure out how to leverage the bailout funds they agreed to earlier, because the size of the needed bailout keeps growing. In the meantime, Greece is twisting in the market winds.
Krugman very clearly lays out the origins of the Euro predicament:
The introduction of the euro in 1999 led to a vast boom in lending to Europe’s peripheral economies, because investors believed (wrongly) that the shared currency made Greek or Spanish debt just as safe as German debt. Contrary to what you often hear, this lending boom wasn’t mostly financing profligate government spending — Spain and Ireland actually ran budget surpluses on the eve of the crisis, and had low levels of debt. Instead, the inflows of money mainly fueled huge booms in private spending, especially on housing.
But when the lending boom abruptly ended, the result was both an economic and a fiscal crisis. Savage recessions drove down tax receipts, pushing budgets deep into the red; meanwhile, the cost of bank bailouts led to a sudden increase in public debt. And one result was a collapse of investor confidence in the peripheral nations’ bonds.
The soberest views suggest we’re now confronting the risks of a depression. At a minimum, Greece may now undergo some form of default, “controlled” or otherwise, within or outside the Euro, while the Troika of the Euro core nations, the European Central Bank and the IMF try to “ring fence” Greece and possibly other vulnerable economies to protect the others. But we’ve seen this argument before.
Recall a previous GOP debate in which observers were appalled when audience members seemed to cheer the thought — suggested by Ron Paul [and his questioner] – that someone without health insurance could be allowed to die, because “that’s what freedom is all about.”
And think about the GOP today, threatening to shut down the US Government because the Democrats, so far, are refusing to impose offsetting spending reductions as a condition for funding emergency disaster relief. Or worse, recall the GOP’s successful hostage taking, with apparent White House complicity, during the debt limit debate, in which a foolish Congress and a misguided President agreed to impose drastic austerity measures on the country, and if they didn’t pass them, other drastic measures would kick in as a punishment — not for them, but for the economy.
The anti-growth, anti-worker pain lobby controls US politics just as it controls the European discussion. And the results are the same on both continents: high, continuing unemployment; worsening wealth/income disparity; dismal [or no] economic growth; mass suffering; but no foreseeable recovery. It’s hard to imagine a more convincing proof of a policy failure.
And yet it continues. The elites still demand reparations from the undeserving for the massive failures of the elite’s own system. And whether it’s undeserving Greece or the uninsured, unemployed Americans, the elites have the attitude of “I’ve got mine, Jack, so screw you, and my only concern is that you not infect me.”
The visionaries in revolutionary America, like those in Europe, hoped to create not just a union for coordinated action but an enlightened social compact. We would do this together. We would honor individual freedom and state sovereignty, to be sure, but we’d also create a national union that could function in the broadest national interest.
We would not let any parts just die; we would help each other and together we would pull through adversity, become stronger, more secure. Social Security, Medicare, public schools, a common infrastructure to support us all. That’s the compact, that’s why we’re called the United States and not the Confederacy or the Collected States of America. It’s not just about a common currency, though that’s necessary too.
The condition individual Euro nations and their central bankers are imposing on Greece is that it agree to die, to punish it workers and its people and bleed its economy to the last drop in an effort to pay back the loans that French and German banks made to Greece to allow the Greeks to buy products made in Germany and France. Germany’s prosperity was built partly on Greek borrowing from French and German banks. And now the focus is on how to protect the French and German banks and other nations when Greece finally dies.
Well, that’s not what freedom is about. That’s what looting is about. And we’re doing it too.



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Any truth to the rumor that the elites are considering legislation that would have the bust of Milton Friedman carved into Mount Rushmore?
So, the short version would be that financial institutions got drunk on making tons of money by extending way too many bad loans, then very quickly reversed course, leaving taxpayers in the US and Europe to clean up their mess and US and European workers to pay the price for their bad bets?
Something like that.
and why are these people not in jail,or at LEAST lawyering up?
I am not a Ron Paul fan, but I think the question asking person suggested that the uninsured man should be left to die in a rhetorical question to Ron Paul.
I don’t like Ron Paul’s positions on any issue except that I share his opposition to war. However, let us not put words into the mouths of other people which they did not say.
What I can’t understand about the Euro crisis is why the authorities have adopted austerity as the (failed) solution to their problems. The ideological context is not nearly as pathological as in the United States, where a significant part of the public believe that policies to help the poor only reward shiftlessness, not to mention colored people. The German reticence to tax themselves to pay for the goods they sold to the Greeks is understandable, though hardly commendable. But why any other government should support sabotaging the economy (destroying the village in order to save it, in the time honoured phrase) is beyond me. The only thing I can come up with is that a generation of European academic economists trained in America or the UK has finally succeeded in really screwing the pooch, as could be predicted from UK and American experience.
They have lawyered up, but mainly to protect themselves from civil liability. They’re pretty confident that ObamaLLP will protect them at the federal level and so far there’s only one state talking criminal liability. And Nevada can probably be bought.
Atty Gen Holder doesn’t look the least bit like Sgt. Schultz, but he sure acts like Schultzie.
Boxturtle (“I see nuuuuthing…nutthing” – Sgt. Shultz)
ohhhhhhhhhhhh!
didja see this
http://www.zerohedge.com/news/here-comes-fiattackwatch-bernanke-goes-watergate-prepares-eavesdrop-everything-mentioning-fed
They have the same problem we do: The people donating money to the politicians are the Bankers and their allies. The politicians listen to money.
Boxturtle (America still has the best government money can buy. But France is cheaper)
If you go back and look at the exchange, the question was about a man who had the ability to buy insurance, but decided to take the risk of not buying it to spend that money elsewhere.
At some point, one has to let people be responsible for their decisions. It’s why we continue to let banks and governments drag all this pain out for years, while the taxpayers suffer. The banks haven’t been held responsible for their actions.
Meanwhile JP Morgan holds some $125 trillion in notional derivatives, just waiting to get blown up.
“We would not let any parts just die; we would help each other and together we would pull through adversity, become stronger, more secure. Social Security, Medicare, public schools, a common infrastructure to support us all. That’s the compact, that’s why we’re called the United States and not the Confederacy or the Collected States of America. It’s not just about a common currency, though that’s necessary too.”
Call me polyanna (and many have done so) but Greece could just be, appropriately enough, the new model for an European Spring, having reached the end of the austerity road. The countries of the European Union face a revolution due to their consideration of members as markets rather than social entities. That will change as the bubble has burst. So, new considerations of the kind you outline here, which governments have forgotten or ignored, will be the only ones left to live by. Oh boy, I can hardly wait.
It is already happening as the disparities between real wealth and the phony juggled economies of the super rich become more and more glaringly unbalanced. And preposterous. The stock market gyrations are manifestations of a phony reality more and more separated from the real reasons people need to work cooperatively together in civil unions. Even law has distorted itself, and law is fundamental to society. The market economy system is not the be-all and end-all; to coin a phrase, the market was made for man, not man for the market.
Greece is probably going to be free from the tyranny of the marketplace very soon, having done its best to play by those distorted rules. Then, it won’t die; it will live. Hopefully in a new European Union that will look far different from the one we have now.
imo,they want to buy Greek,Spanish,Italian real estate at a steep discount….like Y’All owes us bankers
So Greece should have gotten free stuff? I don’t think so.
The essential problem is that Govt promises more than it can deliver. It’s true there, and it’s true here.
Well done, Scarecrow. Last night on NPR, I heard the word “default as the best solution” for Greece, Italy and Spain among others.
We need to remember that gold sacks “loaned” Greece $80 billion under the table to get them into the EU.
Go, Iceland! Down with NYBanks’ “fed” reserve notes! Issue U.S. Treasury currency.
karen
Heh.
I have no problem with them knowing what the real world is saying, were I in charge I’d probably do the same thing. In fact, I hearby grant them license to quote me in whatever documents they present.
I run into problems when they use sock puppets to try to change the narrative.
Boxturtle (it would do them good to take the comments said here to heart)
i have lived there for 2 summers,i think they can get along fine without the European Union,they did when i lived there
you are my go-to guy when it comes to clarity Scarecrow !
seems like the Euro was just a scam to let the bankers skim off the top…Spain,Greece and Italy were all self feeding,self educating,self governing entities…in other words self sufficient
Small gap between the visionaries in revolutionary America, and Social Security, Medicare, public schools, and a common infrastructure.
And basically, sadlyyes, do you not think that the Union will realize, once Greece has to follow Iceland’s route, that there are more important matters than the economic ones that should tie a union together? It might take massive reorientation, but what an example it would set to the world at large if they could manage to keep together on a real economy basis rather than stock market driven. I am thinking of the kind of restructuring that gave birth to the United Nations, where the model is idealistic rather than pragmatic, something I don’t believe the EU currently has at its core.
And I take Scarecrow’s point that we need that as well, though in our case it would be a restoration rather than a new path. But it has to happen because really this current one is unsustainable; we all see that. And leaders, if they want to continue to be leaders, have to start recognizing and admitting how far off course the focus on economic ‘wellbeing’ has taken the world. It’s just run amok and will wreck everyone, never mind how many billions you think you have. The money stuff isn’t real any longer; the emperor really, really has no clothes.
But his people have great little farms where they rotate the cattle and the chickens on organically viable native grasslands and even buffalo roam in little hills and valleys, and old ladies grow every green thing so the air will be more pure. Sounds like a dream but it is all right there and people are going back to basic things. Greece might do this and look after its people and be a model for the other states. They have such a proud heritage for democracy; it would be so beautiful a new example if they could do it, sort of like opting out of ‘no child left behind’ or a state putting single payer healthcare into practise and seeing it succeed (which is only going back to the way we used to practise healthcare in the ‘old days.’)
Yep, polyanna me. I won’t live to see all this stuff happen, but it has to, it really does.
I agree that the Euro was ill-conceived. The idea of monetary union without social or at least full political integration was highly risky from the start. The initial apparent success was the result of the casino atmosphere of the last decade. It papered over the weaknesses. Whether the EU members are willing to cede the necessary sovereignty to make the system work is the looming unanswered question.
The 1930′s analogy is apt today. Hitler defaulted on German bonds and used the money to build an army. WWII was not a good idea, but the idea of defaulting and starting over is well established. The usual cry is that filing bankruptcy ruins credit ratings, but generally that’s not the case. Creditors get some comfort in that one must wait six years to file bankruptcy again.
We will never return to prosperity by bailing out banks. We could declare war on sewer systems and install water-less toilets everywhere. We need a huge undertaking, TVA cubed, but most likely we will emulate Hitler and invest in guns.
all those pig countries have wonderful,agriculture and cuisine…they are healthy peeps…keep the bankers away ,they will be fine!just like the USA could be fine!
I agree with your assessment regarding the lack of understanding of the larger requirements of Union but think that an additional problem is that the laudable goal of eliminating crushing poverty,hunger and disease was hijacked into a siren song that appealed to the human weakness for greed. I’m sure you’ll agree that there’s nothing wrong with raising the standard of living of people. As to the virtues of the rural lifestyle, although I love nature and support green energy I have neither the desire nor the necessary talent for farming. Some of us prefer to live in the hustle and bustle of the city.
As Plato points out, and as the people know, there is a difference between a statesman and a politician. A politician like Obama uses idealistic rhetoric as a means to an end; he will never act upon the finesounding rhetoric unless to do so would in some small way further his own private goals, never in wholehearted belief that those ideals are what matter. So, by his fruits we know him. Statesmen are few and far between, but we do sometimes breed such men and women. And by their fruits we know them also.
Obama may have given up on being a statesman, or he may believe it isn’t possible in this day and age. But the people who elected him really wanted the change which ultimately and after a lot of sturm and drang is going to be the only way forward. It’s going to be a rough ride, is all, and no thanks to him is my way of thinking. That’s how we felt about Nixon. No thanks to him and his ilk; let history shove him aside.
Plato’s Academy lasted for a thousand years; that’s mighty impressive!
To each very much his own, gerryphilly. I’m glad to be supporting the quality of your air with my lifestyle! You will be doing good things for me as well; I am sure of that! Philadelphia, foundation of our ideals!
Its Raygun they want up there.
Not enuff rock left or Ronny Reagan would have gone up there. And for that, we can be profoundly thankful.
Folks, the superstructure of capitalism is falling apart.
Just like Rothschilde dreamed of, all the money is in the hands of the few and therefore, powerful. Centuries of conniving and scheming have left the proletariat with NO power except to die quietly…. or bloody rebellion.
I prefer the later, myself, but the populace is too divided or not hungry enough yet to take it even close to that level. By the time we are, we will all be too sick to make it into the streets. I’m pretty sure they figured that one out too.
I decided a while ago, esp after Obama’s election/selection that I take whatever the MOTUS everywhere say, since probably about 2500 years ago turn around 180 degrees and that’s the closest to the truth of the matter.
I’ve playfully called it the “180 Degree Doctrine”.
I’d have some hope we could eventually weather this and come out sadder, but perhaps wiser, if the corporations weren’t destroying the planet at such a rapid clip.
As it is, well, I hope they’re right about Jeebus coming to pick them up in a spaceship in about 80 years. What I don’t get is that most of them will be dead along with the rest of us…so what good is that?
Also, I doubt Jeebus will appear, the only visitations since he died have been his Mother, other than the odd tortilla or cupboard door which shows a generic bearded man’s face, if you’ll notice.
That’s my story and I’m sticking to it.
It ain’t even capitalism anymore, it’s just flat out robbery
righteous post
that’s about the size of it: the wealthy elites churned the world economy and siphoned off the profits until the tank went dry in 2008
since then, it’s all been about the western world’s citizens reimbursing the financial system for the grand thievery of the financial elites
not really that complicated
what is most astounding is that the western democratic governments are right now facilitating and indeed demanding that public and middle class wealth be confiscated to prop us the wrecked world financial system and that these so-called democratic governments — including the u.s. — stand by as the wealthy elites steal the incoming public money and continue to plunder the financial system
why it’s almost as if they’re in on the scam
True. President Osterity and the reich wing are stripping the carcass (us), until there’s nothing left but a Mad Max thunderdome scenario.
The banks will fail in 6-12 months, right when the Wizard of O is up for reelection. Oilbummer is shitcanned, man.
Yeah, but then what? a Perry surrogate? He’s too stupid to live but I think it’s too late for anyone to charge in and save the day for the Republicans, so it’s gotta be Mitt.
But unless we understand and confront this corporate fascism, it’s not going to matter who is president.
They will take everything we have and then tell us to donate our kidneys.
I, personally, think that the only way to show the American hypocrisy that is going on now is to lay down my life for the world to see the lie that America has become.
Explain to me, then, why European banks were so eager to fund the Greeks, and why Goldman-Sachs taught them how to doctor your books. You’re out of your league here, sonny. Go back to your playpen.
The eurozone really wasn’t a very good idea. The economies are just so completely different and even more relevant, the people are just so different. Greeks are nothing at all like Germans. It’s been just over 12 years and already it’s coming apart at the seams.
I’m not sure what the answer is, but we can’t forget that the great German fear of deficit spending is that it always leads to rampant inflation. You can show them a hundred charts showing that inflation isn’t rampant, explain why it isn’t likely to be a serious problem when the economy is in deep recession and unemployment is high. How can unemployed labor demand higher wages, or underutilized producers demand higher prices, except in conditions of market power? But it doesn’t matter what the facts show or Krugman says; the head of the ECB has been adamant about the need for fiscal contraction and the need to maintain very low inflation. We’re driven by people from another century, who never learned its lessons.
It’s a fair point — [see edit]. The clarification came from the questioner, though Paul didn’t make any effort to avoid it; he instead justified the conclusion.
lucid take on the euro-us thing, Scarecrow.
major civilizations would all have attempted to become kleptocracies if they could have and some were more successful than others (e.g., Assyria).
the big difference between earlier empires and the present euro-us thing is that the financial sector is globally networked with high-speed computers.
once the global financial system was wired (late 90s?), it was just a matter of time until the gold sacks cashed in all the chips.
whether or not the us will be able to completely rob the eu during the present Age of the Great Swindle is a sobering matter of certain interest.