Greece is going through a debt crises. They have minor civil unrest. I don't know if there is a potential for this to grow or it is just government-dependent people responding to the austerity program of the government. The choice is for Greece to cut spending or have the EU or IMF bail them out. It is not constitutional for the stronger EU nations to bail them out so this would require a reworking of the EU framework to meet this challenge or for Greece to be bailed out,
To deal with this financial situation it is necessary that the EU's powers are strengthened.Yet, at the same time, the lack of a crisis management plan has left the major European economies fumbling for a way to stop the investor panic in Greece and ease the pressure on the euro without violating E.U. laws. 'What will have to come out of this is a combination of stronger integration and rules for crisis management, which were completely missing in the euro zone and which we're now inventing on the spot,' said Jean Pisani-Ferry, director of the Brussels-based think tank Bruegel
The options:
The move to back Greece, European officials say, appears likely to involve direct loans or loan guarantees from Germany and France, and perhaps some of the other financially sound members of the 16-nation euro zone. Another option is to have a consortium of banks, backed by Berlin and Paris, offer to buy Greek debt. European finance ministers, set to meet next week, are expected to fine-tune the strategy, officials said. Many think a deal would need to be hashed out soon to boost confidence in Greece before this spring, when the nation must sell $25 billion in debt or risk default.
The International Monetary Fund will be asked to offer advice to Greece as part of the agreement, though it would not provide financial assistance -- something Greece's larger euro zone partners view as too embarrassing for the European Union. The IMF said Thursday that it welcomed Europe's move, calling it an 'important new step.' Not everyone agreed. 'What they've basically done is say they will help Greece if it meets the terms of the plan to cut its deficit, but if it managed to do that, Greece wouldn't need any help,' said Simon Tilford, chief economist at the Center for European Reform. 'I certainly think they will come up with something more substantial. But today demonstrates that we may need a full-blown crisis in Greece before they are prepared to put money on the table.'
The buying of the Greek debt by Germany, who is slipping back into recession, and France would weaken the economic structure of the EU, see below. Thing generally have to come to a crises before people decide to deal with the fundamental problems. This indicates when the turning point is for such crises are and provides some insight into when America will deal with its debt/fundamental economic problems and make the hard decisions, hopefully the American people won't be so dependent on the government that they will protest like the Greeks; but will instead have the fortitude and knowledge to make tough decisions, yeah right.
Nothing substantial will happen until the end of March, "The European strategy that emerged tonight was one of wait, see and hope. The Greek government does not need to raise any money until the end of March at the earliest."
Germany and France can not constitutionally come to the aid of Greece under the Maastricht Treaty or the Eu constitution. This would require a reworking of the EU framework as mentioned above. I don't know the potential for any major civil unrest in Greece or what effect a default will have to the Euro. As of now the large EU nations Germany and France are trying to get Greece to get their own house in order and make tough budget decisions. The options are that Greece can make spending cuts and possibly face civil unrest, I don't know if this is a major concern or a major threat. I don't know if it Greece will have the incentive to go against its public opinion to cut its spending. If Greece does not get it finance in order, will the larger EU nations run the risk of having the Euro be devalued if they bail out Greece.
A former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday that "he expects Greece will eventually be bailed out by the IMF rather than the European Union". It appears to me that this would be better than being bailed out by the EU, but what about the other EU nations that have debt problems?
It now looks like Greece is calling Germany names possibly lowering the chances of a bailout for Greece. Also in the article is more about the riots and the potential for civil unrest being a factor in making a bailout more likely,
Public and private sector unions joined forces to bring the country to a standstill for 24 hours, halting flights, trains, and shipping, and shutting schools and hospitals.[...]The civil unrest does not appear to be anything major.
Investors fear austerity protests could spread in Europe. Portuguese unions have called a general strike for early March. Spanish unions held marches in Madrid and Barcelona on Tuesday over pensions, but turnout was low. The EU has always found ways to master crises over the last 60 years, and will most likely do so again, but this one feels different to EU veterans. Germany's top court has left doubts about the legality of any bail-out. There is deep resistance in both Germany and Holland to calls for an EU fiscal authority or debt union – a quantum leap in EU integration.[emphases mine] Such a move would imply an open-ended guarantee for over €3trillion in Club Med debt, and a violation of the political contract behind EMU. Bavarian leader Edmund Stoiber once famously derided warnings that the euro would leave German taxpayers on the hook for foreigners as no more likely than "a famine in Bavaria". Pledges come back to haunt.
A bailout of Greece could led to a collapse of the Euro?,
The European single currency is facing an 'inevitable break-up' a leading French bank claimed yesterday. Strategists at Paris-based Société Générale said that any bailout of the stricken Greek economy would only provide 'sticking plasters' to cover the deep- seated flaws in the eurozone bloc.[...] He added: 'Any "help" given to Greece merely delays the inevitable break-up of the eurozone.'[...] He [David Cameron] said: 'The eurozone is facing a fully-fledged crisis. The Greece episode has made it painfully clear how flawed the euro project was from the very beginning.[...] The French bank's warning was echoed by Mats Persson, Director of the Open Europe think-tank, which campaigns for reforms in Brussels. 'Even if Greece receives a one-off bailout it would not solve the real problem, which is the huge differences in competitiveness between the eurozone's richest and poorest members. If these differences are to be evened out, the EU would need a single budget and common taxes so it can redistribute resources. 'One thing is clear, Britain made the right choice in staying out.'And George Soros is stating the same flaw and same solution to the structure of the EU,
Mr Soros, who made more than $1billion by currency speculation when the pound was ejected from the Exchange Rate Mechanism on Black Wednesday in 1992, believes the structure of the euro is 'patently flawed'. He said: 'Makeshift assistance should be enough for Greece, but that leaves Spain, Italy, Portugal and Ireland. 'Together they constitute too large a portion of euroland to be helped in this way.'He believes that unless the European Commission is given sweeping powers over taxation and spending, the single currency will always be vulnerable to financial turbulence in individual states. 'If member countries cannot take the next steps forward, the euro may fall apart,' he added.If seems that there are some inherent flaws in the structure of the EU that would require new 'sweeping powers' in order for it to continue to be a viable international organization. If this problem is true, will the euro fall apart or will the EU grow its powers?
Could this financial crises actually led to a stronger EU as indicated by Soros and the assessment by the think tank that there is fundamental problem of the differences between the richest and poorest countries of the EU that undermine the structure of the EU, and as indicated by the solution to this problem which is the single budget and common taxes so it can redistribute resources? If Greece is bailed out, by the EU or the IMF, this would be postponing the day of reckoning and would be tying the weak or troubled economies to the stronger ones within the EU. The only good option is for the large EU countries to exert pressure on Greece and force Greece to solve their own budget problems. If Greece doesn't get its own economy back on track, then the options are for the EU to bail them out, lower or reduce the budget and economic requirements necessary for EU membership, or for Greece to leave the EU. These options will all lead to a weaker economic foundation for the EU, but at the same time it would led to an EU with more power and authority. If Greece is bailed out or the budget and economic requirements for EU membership are reduced, then this will reduce the incentive for the other EU nations to not run up larger deficits. This would hurt the stronger EU nations and the overall economic structure of the EU, and in order for the larger EU nations to protect themselves they would have to be given greater authority to intervene in the small EU nations. IF the last two options occur, It appears to me that this situation will led to an EU with greater authority, but one with a weaker economic structure. This weak economic structure could led to another financial crisis that would further strengthen the EU. (This is my take.) Greece's debt problem is not the only EU nation with economic problems: Spain, Ireland, and Portugal all have debt problems and Germany is slipping back into recession. I think this situation shows that IO's will continue to grow in power due to the economic structure of the world's economy, and this would be necessary in order for these IOs to be a viable organization and to perform its intended functions. How this plays out/how the EU reacts to this will be an important indicator of how such national debt problems can or will play out in the future, and this could potentially led to a stronger European Union. Or Greece will get its own economy in order and nothing major will come out of these developments. Overall, it will be interesting to see how this plays out.
Great post Jeff!
ReplyDeleteWe are seeing the net long term affects of statism: lack of motivation (because of cradle-to-grave welfare support and indoctrination that preaches against patriotism and other family-motivating structures), powerful government unions, and shockingly low birthrates. Combined altogether they destroy the wealth generating portions of the economy. The lack of wealth-producing young people destroys the Social Security Network Ponzi schemes that have been in affect since WWII. You see it throughout Europe. The current economic downturn forces the problem out into the open.
There's only so much redistribution of wealth that can be done, whether it's the case of Germany-to-Greece, or Texas-to-California. Whether anybody wants it to or not, collapse is inevitable IF trends continue.
Germany will NOT continue to support the basket cases of Southern Europe forever. Just think what will happen here if/when a huge bailout of California occurs!
But, some will rise out of the ashes. Those with drive. It's not the end of the world. Just a major economic turning point. The end of the New Deal era, whether through controlled dismantling or economic catastrophe. Just think, hard core Socialist Obama is helping to usher in the final destruction of Socialism by exacerbating the problem.
I would agree that current developments in the world are not leading to the end of the world, but I think your view about this being the end of the new deal era being over is over optimistic. I the welfare state will continue to grow until we end up with the realization of this world-wide new deal era/socialist dream: a much larger welfare/big government/welfare state. The governments and the dependent people won't let the welfare state end until it completely collapses which will only happen after the welfare state has come into being. That is what all of these bail outs are doing: preventing the welfare state from collapsing. By bailing out failed entities and states/nations, it is only delaying the invevitiable collapse until the government has put its system of control in place when the collapse does come. America and the world is collapse from an economic and cultural point of view. Only after we end up with a near-complete command system will it collapse and then a new free system will emerge. Look at history to see that this is the cycle. Read _The Rise and Fall of the West_ or look at the Roman empire. I don't know if this collapse will occur during my lifetime, but it will have definitly made great progress in the next sixty years.
ReplyDeleteThis economic collapse that is coming sometime in the future will lead to the creation of larger IO's and bigger government.
"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largess from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by dictatorship. The average age of the world's greatest civilizations has been 200 years. These nations have progressed through this sequence: "from bondage to spiritual faith; From spiritual faith to great courage; From courage to liberty; From liberty to abundance; From abundance to selfishness; From selfishness to apathy; From apathy to dependence; From dependence back into bondage."
History repeats itself especially when people are not aware of it and are ignorant of it. America is a freak of nature in the course of human history. Freedom is the exception to the rule of human history. People don't know what made America possible, but are instead taught to espouse the exact opposite principles that made freedom and our economic prosperity possible.
In order for this cycle to come full circle it will take a long time. I agree that it has to crash on itself(which seems like it might already be happening) but that means that my generation is screwed. I will have to be twice as motivated and twice as successful in order to become rich and powerful like I want to be. The hard times of this cycle are still ahead. The government is taking away my competitive edge.
ReplyDeleteFrom what I read and my understanding, eventually the system does have to crash. The social and political and economic structure is flawed and is leading to some turning point. The economy should have been allowed to have a much smaller crash last in fall of 08. By delaying it, it will be much larger. Our generation is in place to be the first generation of Americans that will not have a higher standard of living than the previous generation. Some major changes away from freedom and economic prosperity in America and the world will happen in our lifetime. The nature of globalization and the modern world will make this march towards tyranny a little unique and different than that of the past. I don't want to believe it and I try to find holes in my interperation of what is happening. In the end it is just history playing itself out and not all that uncommon when one looks at history.
ReplyDeleteTaking into account the average person, it does not take a lot of effort to stand out and above the crowd. The private sector is getting smaller while the government sector is growing. One has to live their life but at the same time be aware of current events.
Well ToeJamm, I don't think it'll take a long time. The changes will be made soon with or without a collapse. The election of Brown in Mass is a sign that the changes can be made without collapse.
ReplyDeleteIt will be hard for your generation if the trends don't turn around. But, trends do turn around, and I think it will be better for a person like you then in the recent past and present.
What Jeff portrays for the future is what will happen if nothing changes. If the trends continue in a straight line. But, they don't. And the collapse will end the Statists' time of rule. Guaranteed. This is what we are fighting for and we'll do it.
Jeff is the ghost of Christmas future.
ReplyDeleteI might be pessimistic, but the more I read the more I am persuaded that my outlook is correct. I try to convince myself that things are not all that bad and I don't want to believe what I am saying. It does sound stupid and over exaggerated. How is Brown working out? He voted with the democrats with their jobs bill. He had to politically. Read the first link above, even if America comes out of recession the country will still face a debt-driven crises and read this starting around page 7 http://budgetreform.org/sites/default/files/Red_Ink_Rising.pdf
ReplyDeleteMy main point in the post above is that due to the economic structure, and cultural and political not talked about above, is that events are forcing a system on the world that is not conductive to freedom. This is what globalization and IO's are leading to. The global economic structure is built on a foundation of debt, it must collapse. The collapse is being delayed making the inevitable collapse to be must worse than it would have been. A system of control is being set up as a consequence of the policies being carried out of government intervention.
It looks like health care reform will pass. IF it does it will lead to the collapse of the private sector health care and the rise of government run health care in the future. Once reform is in place it will be politically impossible to do anything about it until we have the government running 1/6 of the economy and our lives before it collapses.
Nothing will be done with social security and medicade until it collapses under its own weight and helps to bankrupt the country.
In order for things to change like you say it will, it will require an entirely new generation that have different values to come along. Read this page to see the prevailing thoughts about America and freedom that is present in the average person and college grad: they are ignorant of American prinicples and believe the opposite of what made America possible. This is only one small aspect of the decay of American culture.
http://www.americancivicliteracy.org/index.html
The true problem is present at the core of the culture of America. Read _The Closing of The American Mind_ to see this cultural rot and what it means.
Read _The Constitution of Liberty_ and then tell me how the current system will change before it completely collapses.
There is very little fundamental differences between the left and right in terms of where their policies are taking us. So Brown and a Reagan the second will not change the path we are on. Read this starting around page nine to get you thinking and questioning.
http://mises.org/journals/lar/pdfs/1_1/1_1_2.pdf
Things will get better in the short term, but things will get worse in the long run before things start to really improve. It is not the end of the world and won't really be all that bad, but rough times are ahead for those that are not mentally prepared and ignorant of what is coming. One needs to know so they can position themselves to prosper in the new world and not be fooled into following leaders that claim to have the answers and solutions to our problems. I think if one catches up on their reading and figures out where things are really leading to, they will have the same outlook as I do. Unless I have actual facts to persuaded me that my view is incorrect I will continue to hold it.
I think the one thing that you do not grasp is that our country has been through worse times than this and always came out on top. We might be at the pinnacle of government growth and something unprecidented might be about to happen but I dont think anyone can predict that. As long as I can fog a mirror I wont let that happen. Just stand by me Jeff. I'll take care of you.
ReplyDeleteI don't if you statement about our country being in worst time is entirely accurate, ww 2 and the Great Depression were worst times in terms of the actual challenges that faced the country; but look at the result of these events: it lead to bigger government. In the long run that is where we are headed, even under Reagan. Things will get better now, but not before some major changes have occurred to our country. Our country has never been in this economic situation that we have been in now with this level of debt. Nor has the world in recent history. Look at what similar economic situation in the past has lead to--the downfall of nations and the rise of new ones. In modern day with globalization it will be a new world order--not the end of the world in my view. If this is wrong, then I would like to be informed.
ReplyDeleteWell, apparently I am not good at communicating. I am not saying that the world will end and that all is done and finished and we are about to face certain death and destruction and a dystopia like in the old movie la or something like that. I am not saying that we are going to be living in bombed out cities with bands of maurading raiders. I am not saying that we will be living in the old soviet union with concentration camps. I am not preparing myself for what I describe above and I am not living in fear of this. It is merely interesting and worth knowing. If this is what you are getting from what I am saying, then I really suck at communicating and need to fix this problem. I am saying that things will get better in the short term, but in the long term there will be a major shift away from freedom and economic prosperity--not what I described above but also not what we have now. But hey, ignorance is bliss. I guess it is better not knowing what is up,, less to think about. Got daily life to get engrossed in and to deal with. It is a good thing for us to stick our heads outside of the confines of their little bubble that is our daily life and see the big picture. And besides, before you hate on or deride or belittle what I am saying you should at least actually read the links above so that you can follow my line of thinking and blow holes in it that way as opposed to just clowning on it through your ignorance. I know, it all sounds stupid and can't happen. O yeah, I will take of you since you are a little clueless. Just, uh, stick with me and follow me and you will be brought up to speed.