Great Depression Online Archive Issue:

Roaring and Raging in Europe

Great Depression Online
Long Beach, CA
May 04, 2010

Inside This Issue You Will Discover…

*** Collapse or Salvation
*** Moron Economists
*** Roaring and Raging in Europe
*** And More

Collapse or Salvation

Seven more banks vanished from the planet on Friday.  But that was nothing.  Greece Inc. nearly vanished too…before the IMF and EU made significant progress towards approving an emergency bailout over the weekend.

“Under the plan,” reported AP, “the other 15 EU countries that use the euro will extend loans to Greece, as will the IMF. Germany will be the largest contributor but has been reluctant to release funds without Athens taking further austerity measures -- a move that Greece took Sunday.”

Germany’s reluctance seems reasonable enough to us.  What’s not to prevent Greece from continuing on with its spendthrift ways?  Why should Germany bailout the Greeks if they’re just throwing good money after bad?

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“We are called on today to make a basic choice,” declared Greek Finance Minister, George Papaconstantinou, amid bites of hummus covered pita.  “The choice is between collapse or salvation.”

Even if Papaconstantinou gets the bailout he hopes for, it’s unlikely the European Union will get salvation.  Like the Athenians following their misadventures into Syracuse in 415 BC, the European Union will get precisely what they’ve got coming…panic, revolt, and dissolution.

Moron Economists

Of course, you can always count on an economist to spout idiotic nonsense…this matter is no different…

‘“They have to assist Greece,’ says James Galbraith, economist,” reported yahoo finance.  ‘“Germany played’ a game of extreme brinkmanship that pushed the euro zone to the edge of panic.’

“While some blame Wall Street speculators and Greece’s massive government spending for the crisis, Galbraith says the situation was made worse by local German politics.”

Apparently, according to Galbraith, regardless of Wall Street’s willingness to extend Greece credit they could never pay back, and Greece’s exuberance to run up their debt, it’s Germany’s fault for not immediately coming in and picking up the tab.  What’s more, proving he’s a moron economist, Galbraith also faults Germany’s export success…

“Germany’s reliance on exports (vs. internal consumption) makes it impossible for less-competitive nations like Greece and Portugal to export their way out of a recession, especially since all EU nations share a common currency and (restrictive) central bank.

‘“There’s a tendency to weaken the [euro zone] economy by imposing deflationary policies.’”

Roaring and Raging in Europe

The point Galbraith misses is that deflation is not a policy at all…like gravity, it’s a natural law.  In particular, deflation is a consequence of pyramiding debt up beyond what an economy can finance.  His solution of spreading the cost across all of Europe will ultimately be more destructive down the road. 

Here’s why…

Giving the Greeks a free pass allows others the opportunity to make the same mistakes.  Now, despite their failings, the Greeks can laze around in the Mediterranean sun at the expense of their hard-working brethren from Germania.

We suspect Spain and Portugal will be lining up with their hands out next.  After them, perhaps, Italy and Ireland will saddle their way up to the trough too.  Why not?  If it worked for the Hellenes, it should also work for the Iberians, Italia, and the Celts…right?

On and on it’ll work just great…until everyone is equally poor.

Such is the consequence of a planned economy, where those who work hard, save their money, and pay their way, are punished for their perseverance, persistence, and prudence.

There is no sense in it whatever.  Sordid politicians, brain dead economists, and self indulgent labor unions are roaring and raging in Europe.  They won’t stop even once they’ve squeezed every last euro from the economy.  For that’s when they’ll hatch their next scheme to ‘fix’ the problems of their own making.

No doubt the people will be all the worse for it.

Sincerely,

M.N. Gordon
Great Depression Online

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