Europe is a problem; it is just not THE problem.
Do not believe the “happy news” that periodically is discharged from the Eurocrats. For the Eurozone there is no survival in its current configuration. Until the utter embarrassment of defending this myth becomes overwhelming, the Eurocrats will continue to claim there is a solution. Admitting otherwise is to admit the failure of modern government and the welfare state.
Matters continue to deteriorate even as the politicians ratchet up their “cure” stories. As described by The Economist:
Now an even bigger calamity is looking likelier. The intensifying financial pressure raises the chances of a disorderly default by a government, a run of retail deposits on banks short of cash, or a revolt against austerity that would mark the start of the break-up of the euro zone.
None of these outcomes is good, but good outcomes have been impossible for the last few years. The unwillingness to face the reality that government gone wild is the problem rather than any possible solution has only compounded and exacerbated the problem. Each attempt to not face the music has only made the problem bigger. When reality prevails and the music stops is not knowable, but it most certainly will. It could be this week, next month or perhaps longer. When it occurs, Europe, the US and some of the rest of the world are likely to collapse.
The Economist explains the mechanism that will trigger the implosion:
The prospect that one country might break its ties to the euro, voluntarily or not, would cause widespread bank runs in other weak economies. Depositors would rush to get their savings out of the country to pre-empt a forced conversion to a new, weaker currency. Governments would have to impose limits on bank withdrawals or close banks temporarily. Capital controls and even travel restrictions would be needed to stanch the bleeding of money from the economy. Such restrictions would slow the circulation of money around the economy, deepening the recession.
These problems do not characterize truly free markets. They result from the grandiose schemes of small men who believe they have the wisdom to run the lives of others. Unconstrained government, whatever its form, always attracts men with big power urges. Unconstrained government always results in tragedy, whether it be economic or human. Usually one turns into the other, manifesting in internal and external war.
The US is no different in its ultimate destination. If there is a universal rule for government beyond its incessant craving for ever-expanding power, it is that government creates rather than solves problems. The bigger the government, the bigger the problems it creates.
After almost a century of belief in government, growth in government and increasing control and interventions by government, modern economies are now dysfunctional and bankrupt. The 2oth Century, looked at from afar, will be referred to as “The Myth of Government.” We have begun the period of reassessment and government will be seen to be of value only when limited in use and used for narrowly defined, specific purposes.
Our descendants will wonder how we ever allowed a bunch of punks to establish a criminal enterprise to which we all paid excessive tribute and booty.
BREAKING NEWS
As I post this, apparently some agreement among Central Banks has been reached to address the European financial problems. As a result, the Dow is up 300 in pre-market, Gold is up $30 and Oil about $2. Markets are thrilled, but nothing has changed. The next “Lehman” event has been avoided. Ha!
More extend and pretend at the cost of making the problem worse. Do not think anything other than temporary political relief and possibly financial relief has been achieved. Markets, pols and bankers have been tossed a lifeline with a very short half-life.
This desperation has solved NOTHING!
No comments:
Post a Comment