January 13, 2012
As they do with respect to their entire ideology, leftist elites who have created unsustainable “social democracies” in Western Europe and the US regularly spew an ocean of pseudo-intellectual garbage in defense of the supreme rationality of their economic policies.
But the pretentious gobbledygook notwithstanding, the truth about the fundamental basis of their economic “thinking” is captured by changing one word from a few lines of the Barry Gibb song that serves as the title number of the film “Grease.”
“Debt is the word, is the word that you heard
It's got groove, it's got meaning
Debt is the time, is the place, is the motion
Debt is the way we are feeling...
We take the pressure and we throw away conventionality, belongs to yesterday,
There is a chance that we can make it so far
[If] we start believin' now that we can be who we are,
Debt is the word...is the word...is the word...”
Of course, this is not to say debt is the root of all evil; for every sensible person knows that just as there is a time for appreciating groove, paying attention to feelings, trusting oneself, and defying conventionality, there is a time for the kind of carefully calculated, responsible debt assumed, for instance, by people who have found the home of their dreams and entrepreneurs who dream of building or expanding a business.
The point is, therefore, that the currency which to this day continues to fund the indefensible promises made by the coalition comprised of the left’s power loving autocrats and dunderheaded Pollyannas represents not money that was saved or earned but money acquired through treacherously irresponsible debt or, as some may prefer to say, hopey, changey, feely debt devoid of a scintilla of honest reason.
Despite what the aforementioned leftists have argued or wept, simple arithmetic has always told us the end of the madness John Mauldin calls “The Debt Supercycle” was inevitable.
Indeed, that inevitability has now become reality for the euro nations as creditors demand increasingly higher interest before purchasing bonds from the financial wobblies more commonly referred to as the PIIGS.
With respect to the problems caused by this massive debt, only a fool will believe they can be solved if Italy and Spain, for example, simply suck it up and bear the freight of higher interest; for the truth is that when their interest costs hit 7% and remain there for any length of time, both nations face financial disaster.
Furthermore, only fools will argue that considering the magnitude of European debt, slamming the euro printing presses into high gear is an option to set things straight.
Nevertheless, being fools, they will continue to knock their heads against the brick wall of German resistance to the notion despite the fact that over the decades the German people have carefully taught their children how inflation in the early twenties rampaged so quickly and mercilessly that a person fortunate enough to have a literal boatload of paper money may have been able to use all of it to buy a loaf of bead, provided he could run to the bakery fast enough.
The realities, then, for Europe are these.
...Its nations can no longer paper over their economic problems by employing leftist dogmas that call for taxing, spending, printing, borrowing, and more borrowing.
...Moreover, the best honest policies those nations can devise will ultimately require fixing their economies the old-fashioned way, i.e. with plenty of Churchill’s “blood, toil, tears, and sweat” expended until the cost of the lie called the free lunch is paid.
And let’s not forget; the pain of this fix will be imposed upon citizens of nations such as Italy, with its horrendous red tape, chronic lack of growth, and debt burden at 120% of GDP.
Spain, with its housing-bust ravaged banks, restrictive work rules, and unemployment rate of 20% overall, 40% for those 18-35.
France, with its government largesse, bad European-debt bloated banks, and 5% of its population immigrants who have no intention of fully integrating themselves into French society even if France were absent the constraints that block them from having economic opportunity.
And Germany, whose citizens have not yet been asked to bear real burdens to bail out profligate members of a New European Order forced upon them by dangerously elitist power loving dreamers.
So it is that as deleveraging (paying down debt) becomes the word for Europe, the possibility for social conflagrations, the worst stoked by anti-democratic demagogues, increases exponentially.
That assertion, by the way, represents no wild speculation but is proved by the fact that huge numbers of Greeks, including politicians and members of the press, blame their nation’s economic problems not on their own unimaginable stupidity but upon the hard working German people, whom they denounce with “fascist” and “Nazi,” viciously ugly slurs that, no news to us Americans, are favorites of leftists the world over.
Mention of us Americans provides a segue into this piece’s conclusion, which reminds that while our country is not yet one of the PIIGS, its $15 trillion debt (just about 100% of GDP), $1.5 trillion annual deficit (a mad 10% of GDP), runaway healthcare costs, and long term social security problem are fast getting it there.
Regarding the necessity of deleveraging right here at home, it’s true that even our conservative politicians must learn that they need to begin with reforming the tax code and financial industry, eliminating the $100 to $200 billion of duplication in Washington’s bureaucracy, and doing away with hundreds of billions more in Washington waste, wisely identified.
Then, having earned the trust of the people, they can propose smart, innovative reforms to the major entitlements and the healthcare industry in general.
However, common sense about human nature alone warns of a greater problem, specifically, the one posed by those who labor to sell the public the Big Lie that our debt and spending problems can be solved solely by taxing the rich, hiring 15,000 additional IRS agents to enforce the ironic monstrosity that is healthcare controlled by Washington, further expanding the reach of the federal government, and sticking a small bandage on Social Security.
Finally, as if the basic problem isn’t sufficiently frightening in the danger it represents, it is made infinitely more so by this fact:
The most powerful person devoted to peddling its underlying falseness, the disastrous consequences be damned, is none other than Barack Obama, America's current president.
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