Danger ahead! The Euro Crisis is leading to Global Depression.
The euro crisis? Nobody is certain what to do about the potential for whole nation bankruptcy. The nations are faltering in their resolve and in the process keep on enlarging the Common Currency (Euro) Bailout Fund. That, of course, greatly increases the amount of money that will be lost when Greece or Spain or Portugal declare bankruptcy. All of those countries have spent money that they do not have, and their banking systems are full of Debt Holes that it is going to take a hell of a lot more money to fill.
Recently, Spain had to be given billions in new monetary, charitable donations to prevent its financial institutions from falling over like dominoes. Each bank that fails only makes the present looming ugly reality more and more difficult to escape from.
More often than not we keep on hearing from the European governments that have been frantically active in trying to stem the flow of collapse that "THEIR ACTIONS ARE MANDATORY!"
Ironically, we heard those exact same words from Fortunate Son Bush (Dubya) and Bernanke way back in 2008 in the United States.
I see visions of myopic bankers without their glasses squinting at each individual problem and the only solution that they can come up with it so throw more money at the failing bank. They have been doing this from bank to bank to bank to bank, and still they have not been able to staunch the flow of debt that is bankrupting their countries and the whole system. It is endemic and pandemic.
As I pointed out months ago, Greece has a "Continuing Debt Growth Problem." They have taken their emergency funds, plugged those monies into the most critically endangered banks, cut government spending (AND JOBS!), and because of that they have seen their Tax Revenues fall. So they increase taxes on the few remaining successful companies and businessmen in order to increase revenue so they can plug more money into the ever increasing debt problem. (Look up the definition of insanity.) This silly solution, of course. causes more and more businesses to go into the red and declare bankruptcy which further endangers the banks that have loans on the failing businesses (and fleeing businessmen who are trying to get to the United States and Canada and Australia in record numbers. Do you blame them?)
Increasing numbers of politicians (WHAT THE HELL DO THEY KNOW?) and economists (THEM, TOO) are predicting that Greece will soon collapse like a falling house of cards into uncontrolled ugly bankruptcy. That is exactly what the whole of Europe has been struggling to avoid for the last two years but they are not making it. Increasingly, they realize that they have wasted Billions on Greece and they need to let it ALL go. Greece is done. It is history. Finished! They will collapse into a Third World country that is totally dependent upon Tourism to bring money into the country. Several of the tourist meccas have considered succession from the "Union" so that they can have the tourist dollars all to themselves. I do not blame them, because the alternative sucks. Succession of states is provided for under international law, but Greece has threatened to use its army to put down any succession talks. (I.e., if you start talking out loud you can be eliminated.)
The €100 billion that Europe has pledged to Spanish banks has failed to stop rising interest rates on the country's sovereign bonds. (Sovereign? That word does not mean what it used to mean.)
Both Madrid and Rome may ultimately have to apply for a generous bailout, which would stretch the ever increasing euro emergency funds to their limits. Is there any other way out of this silly repetitive madness????????
So, what do they do?
Should they let both the troubled banks and the deeply indebted countries to collapse? Those countries and their banks will take down other European banks and the ensuing recession, of course, would be extremely painful, just like the Great Depression. That would be like Roosevelt in 1932 saying, "I'm going to 'Hoover' this thing up and admit that there is nothing we can do. We just have to suffer and die."
Should they strive for the introduction of Nationalized European debt in the form of Euro bonds in addition to a Pan Euro Country banking union? This calls for the already protesting German Bankers who would become the primary backers of European debt to shut up about the danger and fork out their formerly well invested money. Germany is falling into a recession right now, and the German people and the bankers do not want to hear that they are being counted on to stop the collapse of the countries that have such ever increasing debt obligations. I have been writing to my German friends that it will only bankrupt Germany and they will be in just as much trouble as Greece, Spain and Portugal. I have long advocated that Germany withdraw from the Euro and go it alone, or join in a union with the other Germanic countries that are economically sound. Norway, Sweden, Denmark, Germany, Austria and England might make for a sound union. The Southern European nations have long been financially irresponsible, and they will not change. It is in their culture to not deal realistically with their debt, just like it is in the culture of so many of the Latin American countries to have economic crisis after crisis after crisis. In my lifetime I have seen the Mexican peso inflate 10,000 percent. Other Latin American countries have a worse track record.
What we are seeing in Europe is a miasma of historical ignorance and folly.
Sadly for the American taxpayer, we have bought into the bailout (Failout?) of Europe. We, too, might be dragged down by that effort. At the very least, the global collapse will destroy our economy for a season that may look to be never ending, just like the Great Depression.
When everything went to hell in the United States in 1929 - 32, (before Franklin Roosevelt took office) his solution in 1933 was to go it alone (Hell, nobody wanted to help us anyway.They all had their own problems.) and try to create jobs. His thoughtful effort worked in that government spending on individual projects created jobs and gave people hope and we had a temporary resurrection in our economy when things were still faltering elsewhere around the world. WE did not have much of a Service Sector economy way back then, so the limited FDR job creation did not help create many other jobs in the national economy.
Since most of the modern American economy is service sector, the creation of jobs creates more jobs and the economy eventually struggles into high gear, even while the rest of the world is faltering. That is exactly what Obama has been trying to do, though he has been quite conservative in that regard. (Remember, most of the Trillions spent in 2008 and 2009 had been pre-allocated by the horribly corrupt Fortunate Son Bush administration.)
Compared to Obama, Roosevelt would have used a proportional "hell of a lot more money," but not as much as Bush spent. Still, with Obama's constraint we have seen slow and steady progress with the creation of Five Million New Jobs in the past three years.
We are treading water as other nations are drowning right in front of our eyes. Twenty or more are faltering. Far too many for one Lifeguard to save. Far too many for two Lifeguards to save. Germany and the United States can not save everybody, but in the coming Global Depression we can save ourselves and a few others around us. The rest of the world will have to solve their own problems.
Et quod vidit et audivit hoc testatur et testimonium.