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| Lets talk about Europe ... August 4th, Kansas City: Greek bailout and what now? |
| Fine, the bailout for Greece is decided, the money transferred, all is good now? Is it? No, actually, it isn't. The big payer is of course once more Germany. France, the loudest talker of all is a taker nation in the European community since the 1960s. For every Euro, they pay in, they pull about EUR 1.70 out again. And since France elected a socialist government making all the same mistakes the Greeks did for too long, things have got worse there. And of course, while the French want the money, Germany and to a lesser amount, countries like the Netherlands, Belgium and the small Luxembourg pay into the big pot, they also want more independence, more national sovereignty. Being a hypocrite is fun till you run out of other people's money, right? Then we have Italy. Now, Italy is kind of in a permanent government crisis since WWII. They swing from outer left to outer right all two years, it can make one dizzy just to look at it. Italy is also a taker nation. Not because they want to be one, they have to be one. Because they can't produce enough income to be a payer nation. They have poor economic regions still producing olive oil like they did 400 years ago, they have economical ship wrecks like Sicily and criminal cesspools of organized crime all over the place. That is not how economy works. Well, kind of, it does because the mathematics of economics tells us why it fails, but it is not how it works well for the people. And we have Spain, another country in trouble and, if one is honest, a country not entirely blessed by democracy. There is still something to do. But then, till the death of Franco, Spain had actually no experience with Democracy in the first place. The people now running for offices are the first generation of politicians who actually grew up with the idea of democracy ... and of a free economy. Well, and of course, there is Greece. They got their bailout now, they agreed to austerity measures, all sounds fine. Yet, they still spend more than they get in and the austerity measures, as good as they are for the revenue, they will hit the economy hard till everything had time to adapt. Which means, Greece will run out of the bailout money at some point and they will need more. So this isn't over yet. And then there is Germany. The heavy weight. Why is Germany the heavy weight to begin with? Their economy works. But they have debt, like any government. To bail out Greece, they had to make more debt. Of course, they haven't reached the red line yet. Germany is, opposite to many other countries, still creditworthy. But it is not that the German's have money just lying around. They have, like everyone, either to work for it or to borrow it. And there are other nations, nobody likes to talk about. Especially not in France and not in the USA, who uttered some pretty harsh opinions during all of this. I speak about Poland for example, Czechia, Lithuavia. Counties, in which the average income is much lower than in Greece. Still, those were also nations who paid into the big pot to bail Greece out. It's hard for them, still, they did it. And the Netherlands, while having a higher income, they aren't that big, that they could bear the lion share of paying. They do in the EU what they can and then some. But the number of taker nations is just to big. | So, how does that concern us? We are in the US, we have nothing to do with the Euro.
 Since Obama, the US debt/capita is higher than the Greek debt/capitaHere is the rub: Since the price for an Euro in reference to a Dollar is down, European products are now cheaper in comparison to European products. Now, that will not help our ailing export sector. So actually, it is bad news. It is in terms of mathematics always bad news if a currency exchange rates jump up or drop in a short amount of time because either, it means, you are too pricey to sell your products on the international markets or you have to pay an arm and a leg for your imports. But anyway, this is not my main concern. The catch is hidden somewhere else, in the mindset. Like Europe, the US have states that are takers and states that are payers. The numbers here are more blurred because the federal government does more number plays, but the effect is the same and sometimes the reasons for being a taker or payer are a little different, but the effect is still the same. Now, right this minute, Europeans think about creating a kind of extra parliament for Europe (a second instance of it) to deal with monetary politics on a European level. They also discuss some European IRS. And there it is where I scratch my head. See, as I have told often enough, any kind of solely socialist politics leads into ruin. See Greece. See France and see Italy always swinging between socialist and national-socialist governments. Yes, America would be well advised to look to Europe to see what can happen. By all means, we approach $19 trillion of debt now. Obama's administration is right on track to the predictions made in 2010 ($20 trillion when Obama leaves the White House after a second term). So yes, the American citizen can look to Greece to know where it ends. Only, while Greece got a bailout, nobody will bail out the US when this happens. But now, it is time to look from Europe to the US. We have, what they discuss, we have that overhead doing monetary politics. It's exactly that overhead that brought us the biggest debt aver piled up by any form of government in human history. Because what do you get when you install more politicians with the granted right to spend money just a level higher? Right, you get another administrative level of happy spenders additionally to what you have already. Now, that is a bleak outlook, isn't it? I think, the secret is like always to do things in the right order. If you spend and spend for example on welfare programs and then, after you got everyone where you want them to be financially, you can rebuild an economy, you will fail. You can maybe hide the failure for a while, but things will crumble at some point. Pharaoh Ankhenaton did it and Egypt was in deep trouble, King Assurbanipal did it | and Assur was in deep trouble. Hitler, a national-socialist, did it and the only way to hide the failure was to start a war. And the next Presidents of the US will fight with the now still hidden and disguised economical failures of the Obama administration. Amounts of debt like this, they don't disappear over night. It is easy to sell such fairy tales to a bunch of mindless followers, but the numbers don't lie. They never do. There is no quick solution. Even with austerity measures, Greece will need a century to get out of the trouble entirely. The same for the US. Your grand-grand-grand children will still pay for Obama. Nevertheless, what can happen is an improvement of the economical conditions and therefore of the living conditions. Nobody says, all your income has to go for debt repay. There are due dates, there are payment plans, there are a lot of options, a clever government can use. However, it all will take longer than one or two terms. It needs a policy of a thousand little steps. There is no quick brutal history book solution. There never is, but in this case, we can't even afford the attempt to implement one for the theatre thunder of it. The bottom line is simple. People need jobs, people need an education to get jobs that pay for a living. To get those jobs, you need companies making profits. Which means, your keystone for everything is to create working economical conditions again. Then you have revenue, then you can implement a better social net or a stronger military or whatever your ideology tells you to do. But first, you need the economy rolling high again. To do so, you need stable political conditions, tax predictability and a lower tax level. Most of all, you need to stop to demonize everyone who tries to earn money. It makes people so unwilling to create jobs. So, Americans, look to Greece. Tsipras ran on the same promises as Obama did or now Hilary Rodham-Clinton does. But Europeans look also to America and think twice: Do you really need another level of spending happy politicians? - PB - |
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