Holding Spendthrifts Responsible

“Greece on Friday unleashed a fierce attack on its European Union partners,” reported the Financial Times. The outburst was occasioned by the country’s rapidly deteriorating fiscal situation. In a televised message to his cabinet, Greek Prime Minister George Papandreou accused EU countries of sending “mixed messages about our country… that have created a psychology of looming collapse which could be self-fulfilling.”

This is a strange way of looking at the situation. For one thing, the “looming collapse” is not a psychological phenomenon, as the Greek prime minister tries to imply. It is a cold inescapable reality delineated by hard figures. Running budget deficits of nearly 13 percent GDP and carrying public debt of more than 110 percent, the Greek government has run the country into a fiscal hole.

Having assumed more obligations that it can make good on, Greece is for all practical purposes broke. If it does not get bailed out, the government will have to default and the country will go bankrupt. In other words, utter fiscal recklessness of Greek politicians has brought the nation to the brink. To blame it on others – as Papandreou tries to do – is as disingenuous as it is absurd. This, however, is politicians’ normal modus operandi: to charge others with the messes they make. They do not admit their own guilt even when the issue is as straightforward as overspending by the very government they themselves run.

But it was not only other countries that came in for blame. Papandreou also vented his wrath at the market, the favorite whipping boy of profligate politicians. In his remarks, the Greek prime minister complained that his country had become “a laboratory animal in the battle between Europe and the markets.” It is difficult to ascertain the precise meaning of his remark, but its tenor makes it clear that the markets are the bad guys. The implication cannot be missed: It was the markets that somehow managed to rip the nation off despite the noble efforts of the conscientious Greek government.

Speaking of those evil markets, Spain’s National Intelligence Centre recently began looking into the possibility of “speculative attacks” on Spain’s public debt. The investigation was opened after investors began demanding higher interest on Spanish government bonds in the wake of the Greek crisis. The country’s authorities promptly concluded that there may be a conspiracy afoot to bring down the Spanish government. Public Works Minister Jose Blanco hinted darkly at “somewhat murky maneuvers” on the part of the markets.

It has apparently not occurred to Spanish politicians that the rising bond yields may be somehow related to the fiscal morass they have created. With a soaring budget deficit of 11.4 percent GDP and a mounting public debt, investors demand higher interest to compensate for the risk of default. What Jose Blanco calls “somewhat murky maneuvers” is simply the natural reaction of creditors to the deteriorating balance sheet of the debt-issuing entity. But the Spanish authorities for some reason cannot see this basic axiom of finance at work here. Instead they authorize the country’s intelligence service to investigate the matter for signs of subversion. One would not be surprised if they eventually bring someone up on charges of market manipulation. Such is the instinctive thinking of all ruling elites. If something goes wrong, it is never their fault. The problem must be the work of insidious forces.

Our government is no exception. We have seen this dynamic during the bursting of the real state bubble and the subsequent unfolding of the financial and economic crises. One after another American politicians stood up to denounce the culprits which included the markets, bankers, capitalism, greed, derivatives, lenders, and much else besides. Even the late Ronald Reagan received his share of blame. In short, our politicians blamed everyone and everything except themselves. We should not be surprised if they send the CIA and the FBI to investigate the impending dollar collapse which their out-of-control spending will eventually bring about.

No matter how gross their corruption and mismanagement politicians never admit their wrongdoing. When the inevitable hour of reckoning arrives and the crisis hits, they lash out instead. More dangerously yet, politicians are especially adept at concealing the calamities they are in the process of creating. In the United States, for example, the federal government does not report its astronomical entitlement obligations on the nation’s balance sheet. In the corporate world this kind liability concealment constitutes a crime. In Greece, politicians masked their fiscal excesses with accounting tricks and complex currency transactions involving derivatives. Guess who they are now blaming for that? The bankers who helped them to execute the sales.

Fortunately there are still those who do not fall for this nonsense. Wolfgang Gerke, president of the Bavarian Center of Finance and honorary professor at the European School of Business, had this to say:

“Greece falsified deficit statistics, and that can’t be legal. Greece needs to be kicked out of the EU because otherwise there will be new copycats, and that could lead to the next catastrophe on financial markets.”

It is good to hear a sane voice for a change. Gerke’s approach should be applied rigorously at every level and in every country, be it in Europe or in America. Let us not tolerate the absurd excuses and specious accusations. The prodigal politicians responsible for the public debt crisis that is affecting much of the western world must pay the price. People should keep that in mind when the next election comes around.

  • davarino

    Thank you Vasko, this is exactly what is happening here in the States. The likes of Barney Fwank and his ilke, who forced banks to lend like crazy to any warm body are the ones that are responsible for this latest mess. They did what ever they could to make it possible to lend to people who could not afford to have a house. In case you were about to jump on me for being partisan, I also blame the republicans. I love how they stood by and watched it happen. They should have been shouting from the roof tops that this was going to ruin the country. Thanks a lot guys. How much did Freddie Mac, Fannie Mae, AIG, ….. pay you to shut up and stay on the side lines. This is one of the many reasons I have for not being able to vote republican, even though I am conservative, without by brain going tilt. I am sick and tired of the RINOs playing this game with our country. This job you have is not for you to ingratiate yourselves, it is to serve the interests of this great nation. If you guys want to denigrate the Tea Party and scoff at them and their ideals, fine, but you will be without a job and we will vote in a new set of PATRIOTS that care about this country.

  • USMCSniper

    The Independent Treasury Act of 1920 suspended the de jure (meaning "by right of legal establishment") Treasury Department of the United States government. Our Congress turned the treasury department over to a private corporation, which when seen in its true light, is a fascist monopolistic cartel, the Federal Reserve and their agents. The bulk of the ownership of the Federal Reserve System, a very well kept secret from the American Citizen, is held by these banking interests, and NONE is held by the United States Treasury:

    Rothschild Bank of London
    Rothschild Bank of Berlin
    Warburg Bank of Hamburg
    Warburg Bank of Amsterdam
    Lazard Brothers of Paris
    Israel Moses Seif Banks of Italy
    Chase Manhattan Bank of New York
    Goldman, Sachs of New York
    Lehman Brothers of New York
    Kuhn Loeb Bank of New York

    The Federal Reserve is at the root of most of our present statutory regulations, "laws", in the control and regulation of virtually all aspects of human activity in the United States,

  • http://intensedebate.com/people/johncarens johncarens

    The economic collapse of Greece is the outlier of a larger imminent economic crisis about the hit the entire west, which it is due primarily to… aggressive welfare statism, and the twin pillars of extreme entitlement and abortion culture.

    Greece is a moribund society, with a population growth rate somewhere in the 1.3 child-per-couple ledger statistic, which means it is not replacing its population, and will cease to exist entirely in another two generations. (Spain and Italy are almost as bad). They've been aborting away the next generation for sixty years in western Europe, and now their strands of kinship are dying out. The only thing that will "save" them is by allowing greater influxes of immigrant populations (which is why minarets are popping up in heretofore strange places like Amsterdam — Muslim cultures tend not to have such problems with fecundity).

    Combine this with a entitlement mentality that allows people to retire at age 58, and lavishes cradle-to-grave social welfare programs on the entire population, and you can see that Greece will never be able to pay it obligations. Unlike the United States (which, at present, is barely replacing its population), it has no "Children and Grandchildren" upon whom they can pile their debt obligations.

    This is the end result of modern statist Liberalism.

    Of course, we will eventually do the same thing here–, it will just take three of four generations to do it. We've so crippled our generational confidence, where the large families of the 1950's and 1960's are so freakish today, we make television reality shows about them. We've been trained to look at human birth as a pox on the environment, when it is the only thing that leads to advanced lifestyles, when combined with private property ownership and mercantile capitalism.

    And another thing: Many of the people that could afford a home in the halcyon days of the housing boom could likely still afford them if we hadn't listened to the extreme enviro-marxists, and had instead been aggressively developing our own domestic supplies of energy and crude oil. The "bubble" burst when gasoline hit $4.50 a gallon, and, this was the point at which people could not pay both the mortgage, and fill up the gas tank. If we had all the refined gasoline we needed (which we can easily have for at least the next 100 years with our own supplies and innovations), gasoline would have remained cheap, and the economy would still be humming along. Instead, we listened to the false prophets of environmental doom, and allowed these Lilliputians to hog-tie our economy.

    Modern libertine extreme radical leftism will be the death of the west. But, that's the goal of these monsters since 1919, I guess.