The EU Approaches Critical Mass

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All of it could be coming to a head this week. In simple terms, investors want higher interest rates to underwrite what they perceive as riskier debt. The higher a country’s borrowing costs, the more necessary it becomes to impose greater austerity measures. Austerity measures make it difficult, if not impossible, for a country’s economy to grow. Without growth, paying higher interest rates becomes unsustainable. The possibility of unsustainability, aka default, pushes interest rates even higher, and the cycle becomes self-reinforcing.

Where is it leading? On Sunday, it was announced that France and Germany are attempting to put together a Stability Pact, with a treaty outlining strict deficit rules and control rights for national budgets in the hopes that it will persuade the ECB (which cannot directly finance governments) to increase government bond purchases. If it comes together, it may be implemented at the beginning of next year. In addition, Germany is pushing to change the EU treaty. They want the ability to sue in the European Court of Justice any countries that break EU budget rules. All of this is a follow up to a proposal made by the European Commission last Wednesday. They want the power to approve EU zone national budgets–before they are submitted to the national parliaments.

What does it mean? At the very least it means that economic decisions made by national parliaments will be rendered meaningless. They either get it “right,” or they get sued. It likely means that Angela Merkel, the one politician with the guts to prevent the same currency-debasing quantitative easing that is ruining the dollar, has seemingly lost that battle. It may even mean that a “two-tier EU” will emerge, in which countries either abide by supra-national rules of finance, or they will be on the outside looking in.

That may be the entire point of this latest exercise. Certain nations (read Greece and Italy at the present time) may be faced with a “lesser of two evils” choice: an effective loss of national sovereignty, but the ability to continue borrowing from the ECB, or independence–and national bankruptcy.

No matter how this latest development plays out, one reality remains unalterable: the entire EU is “running out of other people’s money to spend.” And the so-called little people, long used to a level of salaries, benefits, services and entitlements which are mathematically unsustainable, are immersed in the same kind of denial that afflicts the bankers and politicians who engineered the debacle in the first place.

Furthermore, the dirtiest little secret of socialism has been revealed. In short, there are no heroes. At the top of the food chain, there are those suffused with a breathtaking arrogance rooted in the belief that a handful of the “right” people can out-think millions of ordinary Europeans acting in their own best interests, and create a utopian paradise. They further believe that the historically documented wreckage produced by such ideology has only occurred because the “wrong people were in charge.”

At the bottom of the food chain are people who believe they are entitled to a “fair share,” irrespective of their own effort, ambition or talent. They also believe that any economic disparity between them and their fellow man is de facto evidence of injustice, and that economics itself is a zero-sum affair: they are only “down” because someone else is “up.”

All of it is reaching critical mass. Moreover, Americans should pay close attention. What is happening in Europe is a precursor of where America is inexorably headed if the electorate refuses to make the hard choices in 2012.

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  • UCSPanther

    Approximately 10 years ago, Europe was the model of the Left.

    Now 10 years on, it is looking more and more likely that the Eurozone will shatter and the EU will be no more than a bitter memory, and the intrusive nanny-state that went hand-in-hand with the Eurozone will die with it.

    Despite the glamour, the EU is no more than a sinkhole that cost way too much money to run.

    • Herman Caintonette

      What you are seeing is a hostile takeover of Europe.

      • UCSPanther

        What you see is your model society swirling around the drain.

        Kiss Europe goodbye, commie. I know you are lamenting the fact that the world you once knew is dying.

  • Herman Caintonette

    AA: "Austerity measures make it difficult, if not impossible, for a country’s economy to grow."

    This is the economic reality conservatives have to come to grips with.

    • http://imataxpayertoo.wordpress.com kathy

      But isn't that what the average household has to come to grips with? If they overspend…they have to pull back until they can get their house in order. There's no way around it, in my opinion….we will have a time of extreme economical slow down while debt is being chipped away at. And that's only if Congress will stop the spending, which at this point, does not look likely. The markets will be crazy until the 2012 election decides which way our country is going.

      • Herman Caintonette

        In economic circles, it is called the paradox of austerity. Austerity causes a negative feedback loop, as best exemplified by the Great Depression. The solution is to tax the rich (who consume all they want as it is), and invest that money in infrastructure. More jobs means more consumption, which translates into more revenues.

        • Ken

          Typical Progressive thinking. Tax the "rich" to pay for there own follies!!! Tax the "rich" who are the job creators. I am so tired of the nonsense!!

    • NAHALKIDES

      Actually, this was the one thing that Ahlert got wrong, unless by "austerity measures" he meant increased taxation. Taxes and excessive government spending are what impedes economic growth; cutting government spending is GOOD. Hasn't Keynes been proven wrong often enough by experience (not that his idea of spending your way out of recession ever made any sense) so we can finally abandon this nonsense?

      • pagegl

        "Hasn't Keynes been proven wrong often enough by experience…?" No, the folks on the left will always believe that they are smarter than their predecessors and will be able to think of some way to make it work. See Einstein's definition of insanity.

    • stern

      Please ignore. This poster is a vile anti-Semite. By refusing to engage with it, we can deny it the light it craves and finally get its foul odour off these pages.

      On Nov 15, the following comment was posted on these pages by Herman Caintonette:

      “[Palestinians] deserve to have a state on the land that was stolen from them. If killing Jewish kids aids in this endeavor, morally speaking, they are legitimate targets. "By any means necessary," intoned Malcolm X.”

      • tanstaafl

        He was also crowing about a friend who didn't pay taxes and died before the IRS got wise. There is a large amount of moral bankruptcy in his posts.

  • http://imataxpayertoo.wordpress.com kathy

    So is it possible that in steps the Islamic money men with their no-interest loans to save the day? IF Europe will convert to Islam….

  • SHmuelHaLevi

    Just a thought…
    Germany tried several times to take Europe by war…
    Maybe, just maybe now they drove the rest of Europe into bankruptcy and in a while buy out what is left…?

  • Spider

    I am going to enjoy watching Marx-Ism / Socialism collapse in Europe (just like it did in the USSR). Although painful for many this will be a good thing in the long run – just like having a freeloading 40 year old finally kicked out of his Mom and Dads house.

  • StephenD

    Makes you wonder after some of the prophesies in the Book of Revelations regarding the re-emergence of the Roman Empire and along with it the pre-eminent role of Turkey with its influence surrounding Iran, Iraq and Syria. From what I recall there are 4 dominant realms of power in Europe which include England, France, Germany, and Italy. Seems like it is holding true thus far. For me then, I would expect to see Britain, France, Spain, Italy, Germany, Greece, Turkey, Syria, Egypt, Iraq and Iran eventually join together.
    I wonder where that would leave us.

    • tanstaafl

      Up a proverbial creek.

  • affirmative

    Just to inform you: National sovereignity is gone, say hello to the United States of Europe™, which officially exists now.

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