EnduringSense

“The price of apathy towards public affairs is to be ruled by evil men.” Plato

  • Daily Quote:

    "Both free speech rights and property rights belong legally to individuals, but their real function is social, to benefit vast numbers of people who do not themselves exercise these rights."

    Thomas Sowell

  • Enter your email address to subscribe to this blog and receive notifications of new posts by email.

    Join 92 other followers

  • Subscribe

Posts Tagged ‘European Union’

Brexit Vote Explained

Posted by Steve Markowitz on June 28, 2016

Last week’s vote by the British people to extricate themselves from the European Union (Brexit) seems to have left many, including the political ruling class on both sides of the Atlantic, in shock.  It is a wonder that a vote that has two possibilities would create any such consternation when it goes one way or the other.

Governments of all sorts of philosophical directions have proven often throughout history an inability to hear the people.  At the same time, they have created an elite ruling class that has benefited substantially from their positions.

Nigel Farage, a British member of the European Parliament, has been a strong proponent for Britain to leave the EU.  During today’s Parliamentary session, Farage made a speech in which he did a victory lap, taunting other members of the European Parliament, posted below.  While his aggressive approach can be questioned, the logic he lays out helps explain the People’s anger building in the EU, as well as other countries.

Posted in European Union | Tagged: , , , , , , | 2 Comments »

UK Says “Yes” to Brexit

Posted by Steve Markowitz on June 24, 2016

Yesterday the United Kingdom held its referendum as to whether it would stay or exit the European Union.  The vote is in and the British decided to leave the EU.

Today, markets throughout the world have experienced turmoil, seemingly surprised by Brits’ decision.  This reaction is curious given that the various indicators, except the polls, pointed towards a British exit.

The British electorate’s decision to leave the EU is part of a broader worldwide phenomenon.  Governments and bureaucracies in many countries have been growing at increasing rates over the decades.  This has enriched and given additional power to ruling elites.  The masses accepted this until recent years when their standard of living stagnated.  Two changes affected the mentality of the masses:

  • A growing number of middle class in Western Europe and the United States have seen decreasing living standards.
  • Bureaucracies, unelected shadow governments, have exerted more influence through regulations.

Born of dissatisfaction, is a new type of revolution enhanced by social media and the Internet is occurring.  In the United States the phenomena is epitomized by the popularity of Donald Trump and Bernie Sanders.  Their popularity is resounding “no” vote for the status quo, irrespective of the potential consequences of electing untested populists.

Similarly, Britain’s decision to leave the EU is a resounding vote against the status quo.  The British people no longer will allow unelected bureaucrats in Brussels to create laws and regulations for the UK.  They also indicated their desire for stronger border controls.

The European Union was a mismanaged creation of the political class.  The goal was to create a United States of Europe increase economic activity and lessen the likelihood of armed conflicts, as so often happened in Europe.  Unlike the United States with a powerful central bank, European countries still control much of their monetary policies, irrespective of the single currency.  Also unlike the United States where the central government is elected by the people, Europeans have no vote concerning the bureaucracy in Brussels that creates laws and regulations that member states must abide by.  The British say “no more”, irrespective of the consequences of leaving the EU.

Since World War II the world has traveled through two different periods.

  • The Cold War between the United States and the Soviet Union for all practical purposes divided the world into two spheres. This period effectively ended in 1991.
  • Since the end of the Cold War, the political class worked to create a new world order where sovereign borders would be made moot. The beginning of the end of this period started in 2008 with the great financial meltdown.  This meltdown exposed the weakness of this new order that in part was built on flawed policies and excessive debt.

We are in the early stages of the next phase that involves rejection of the political elites’ vision for the world since 1991.  It is likely that the UK’s Brexit vote will be viewed historically as the start of this next phase.  It is difficult to visualize what this new reality actually means, other than significant change.  Progressives overreached in a power grab for themselves and their bureaucracies.  History has shown that this type of action generally leads to overreaction from the other side.

This Blog has repeatedly written of the illogic of the European Union from an economic standpoint.  One posting in October 2013 titled Noble Peace Prize Awarded to European Union reviewed rather incredulously of the European Union being the Nobel Peace Prize.  The turn of events since helps show just how far out of touch the political elites are, including those that award the Nobel Peace Prize.

Posted in European Union | Tagged: , , , , , , | Leave a Comment »

Debt, Conflict and the European Dilemma

Posted by Steve Markowitz on January 28, 2015

Europe has is encountering another canary the mine. The Greeks have voted in a radical Leftist party called Syriza. They won as an opposition to the so-called austerity measures placed on Greece since the 2008 economic meltdown that resulted in it not being able to pay its debt.

The 2008 economic calamity was initially caused by a meltdown in the US mortgage markets. Thhis crisis was not by happenstance or caused by normal market forces. It was inflicted on financial markets worldwide as a result of broad-reaching governmental interventions in the economy. This included bailouts of equity markets and industries when the markets attempted to rebalance supply and demand through normal recessionary action. In addition, central banks, particularly the US Federal Reserve, intervened with artificially low interest rates, again in efforts to forestall the normal corrective market actions through recessions.

As a result of the intervention, not only has the recovery been the weakest since the Great Depression, but at the same time the financial imbalances have not been corrected. Instead, they (the debt) have been moved from the private sector to sovereign debt. The most recent economic manifestations that have now become systemic include the significant turmoil in currency markets. However, a potentially more serious issue has surfaced on the geopolitical front, especially in Europe, where the euro and European Union itself is in jeopardy.

George Friedman of Stratfor.com has published an article titled The New Drivers of Europe’s Geopolitics that offers insight into the current building crisis within Europe that is posted in full below. Friedman’s concludes that “I am focusing on fragmentation partly because it is happening before our eyes” referring to the fragmentation of the European Union. In addition, “The coalition of the Radical Left party, known as Syriza, has scored a major victory in Greece.  ….  It is drawing along other left-wing and right-wing parties that are united only in their resistance to the EU’s insistence that austerity is the solution to the ongoing economic crisis that began in 2008.”

Friedman discusses two views within Europe as why the financial crisis of 2008 continues in the EU.

  1. The German version, and the one that became the conventional view in Europe, is that the sovereign debt crisis is the result of irresponsible social policies in Greece, the country with the greatest debt problem. These troublesome policies included early retirement for government workers, excessive unemployment benefits and so on. Politicians had bought votes by squandering resources on social programs the country couldn’t afford, did not rigorously collect taxes and failed to promote hard work and industriousnes
  1. The other version that is beginning to gain traction, especially in the poorer European countries is: “The loans German banks made to countries such as Greece after 2009 were designed to maintain demand for its exports. The Germans knew the debts could not be repaid, but they wanted to kick the can down the road and avoid dealing with the fact that their export addiction could not be maintained.”

Friedman points out that problems caused by government-imposed austerity in countries like Greece have been amplified by governmental intrusion into their economies. For example, many workers in fields such as medicine and other services are state-controlled with these workers being employed by governments. Therefore the austerity programs have more significantly affected the middle class then would have been the case had the private sector controlled a larger part of the economy.

Greece cannot repay its debt. This is not only because they barrowed too much capability under normal conditions, but also because with unemployment rates exceeding 20% in many industries, their economy generates little revenue to maintain critical social services, let alone repay debt.

What started as an economic problem caused by excessive debt is now morphing into social issues that are rocking European stability. This is a major theme Friedman’s article as he concludes:

  • “Europe’s mainstream political parties supported the European Union and its policies, and they were elected and re-elected. There was a general feeling that economic dysfunction would pass. But it is 2015 now, the situation has not gotten better and there are growing movements in many countries that are opposed to continuing with austerity. The sense that Europe is shifting was visible in the European Central Bank’s decision last week to ease austerity by increasing liquidity in the system. In my view, this is too little too late; although quantitative easing might work for a recession, Southern Europe is in a depression.”
  • “Virtually every European country has developed growing movements that oppose the European Union and its policies. Most of these are on the right of the political spectrum. …. The left has the same grievances as the right, save for the racial overtones. But what is important is this: Greece has been seen as the outlier, but it is in fact the leading edge of the European crisis. It was the first to face default, the first to impose austerity, the first to experience the brutal weight that resulted and now it is the first to elect a government that pledges to end austerity.” 
  • The issue then is not the euro. Instead, the first real issue is the effect of structured or unstructured defaults on the European banking system and how the European Central Bank, committed to not making Germany liable for the debts of other countries, will handle that. The second, and more important, issue is now the future of the free-trade zo 
  • “There are then three drivers in Europe now. One is the desire to control borders — nominally to control Islamist terrorists but truthfully to limit the movement of all labor, Muslims included. Second, there is the empowerment of the nation-states in Europe by the European Central Bank, which is making its quantitative easing program run through national banks, which may only buy their own nation’s debt. Third, there is the political base, which is dissolving under Europe’s feet.”

Friedman is concerned about the specter of war once again raising its ugly head in Europe. Most find this a very improbable. However, the history of Europe has been one where peace has not been the norm. Further, during the Clinton administration there was a war in Yugoslavia and today it is occurring in the Ukraine. Add to this history the toxic mix of economic hardship and what is considered unlikely increases in probability.

Today’s instability of Europe, both economic and geopolitical, has its roots in Progressive activism that created unstable borders and economic rules within the continent. This is similar to what the Europeans created in the Middle East after World War I. The resulting mess in the Middle East has led to decades of violence that continues today. Unraveling the mess the Europeans created within its own borders will be just as complex.

The New Drivers of Europe’s Geopolitics is republished with permission of Stratfor.

The New Drivers of Europe’s Geopolitics, By George Friedman

For the past two weeks, I have focused on the growing fragmentation of Europe. Two weeks ago, the murders in Paris prompted me to write about the fault line between Europe and the Islamic world. Last week, I wrote about the nationalism that is rising in individual European countries after the European Central Bank was forced to allow national banks to participate in quantitative easing so European nations wouldn’t be forced to bear the debt of other nations. I am focusing on fragmentation partly because it is happening before our eyes, partly because Stratfor has been forecasting this for a long time and partly because my new book on the fragmentation of Europe — Flashpoints: The Emerging Crisis in Europe — is being released today. Read the rest of this entry »

Posted in economics, European Union, Greece | Tagged: , , , , , , , , | 1 Comment »

Cypriot Parliament Rejects European Bailout

Posted by Steve Markowitz on March 19, 2013

Yesterday we posted Cyprus Bailout Taxes Bank Deposits that reviewed the proposed bailout of Cypriot banks by the European Union.  The entire banking system in Cyprus is insolvent and requires a bailout from the European Union, which means from Germany.  Germany has a case of bailout fatigue after the bailouts of Ireland, Greece and Portugal.  Prior to agreeing to the proposed Cypriot bailout, the EU placed some unique demands on Cypriot bank depositors in the form of taxing the deposits.

Today the Cypriot Parliament not surprisingly rejected the bailout plan with not one politician voting in favor of it.  Even if taxing bank deposits was reasonable, no politician could survive in a democracy by agreeing to such terms.

The European Union and its Central Bank should have understood the political realities of their proposed Cypriot bailout, but instead with arrogance proposed a plan that could not be approved by the government.  There is a more dangerous aspect to this error than merely bad judgment.  Should depositors in other European banks fear for the safety of their deposits, contagion could result in runs on banks far outside of Cyprus.  Should that type of panic begin it is hard to determine where will end.

It would not be surprising to see upward pressure on the price of gold as a result of the Cypriot bailout fiasco.

Posted in Bailouts, Banks | Tagged: , , , , , , | Leave a Comment »

Hamas on the Wrong Side of World Opinion

Posted by Steve Markowitz on November 18, 2012

For some months the conflict between Israel and Hamas, who controls the Gaza Strip, has been quite.  For reasons only known to Hamas, it has upped the ante in recent weeks firing rockets into southern Israel.  Initially Israel turn the other cheek for the attacks, possibly seeking to have world opinion its side when it did respond.  That response started a few days ago and has been significant.  It has included the killing of Hamas’ military leader Ahmed Jabari, and significant bombing of Hamas’ military capabilities and infrastructure including yesterday’s destruction of its prime ministers headquarters.

In the past Israel has typically been condemned for retaliatory attacks against radical Palestinians.  This time the reaction is different with many world leaders including President Obama indicating that Israel is justified in the response.  Similar reactions from other world leaders include:

European Union – Foreign policy chief Catherine Ashton defended Israel saying: “The rocket attacks by Hamas and other factions in Gaza, which began this current crisis, are totally unacceptable for any government and must stop…Israel has the right to protect its population from these kind of attacks.  I urge Israel to ensure that its response is proportionate … I am deeply concerned at the escalating violence in Israel and the Gaza Strip and deplore the loss of civilian lives on both sides.”

Germany – Chancellor Angela Merkel spokesman Georg Streiter called on Hamas to “to immediately stop shooting rockets from Gaza into Israel,” and stating that it was “responsible for the outbreak of violence.” The spokesman concluded “there is no justification for the shooting of rockets at Israel, which has led to massive suffering of the civilian population.”

United Nations – Even this typically pro-Palestinian organization was unusually noncritical of Israel merely calling upon it to halt the “dangerous escalation” and concluding that Hamas’ rockets must stop “at once.”

Much of the world seems to be in agreement with Israeli’s Prime Minister Netanyahu who said: “no government in the world would allow a situation where its population lives under the constant threat of rockets“.

Hamas has overplayed its hand in this round of its battle with Israel.  Their use of longer-range Fajr 5 rockets from Iran, capable of hitting Jerusalem and Tel Aviv, has not only given Israel an excuse for the aggressive response, but has given them no alternative.  Leaving the terrorists equipped with the longer-range rockets is unacceptable to most Israelis.  It is akin to the Mexican drug cartels not only having the capabilities, but using rockets to hit American cities as far from the border as Chicago, Illinois.

Israel is showing signs of launching a ground war to eliminate Hamas’ offensive military capabilities.  It has called up 75,000 reservists, a significant and costly action that does not seem in line with a bluff.  It is likely that much of the Middle East understands the implications of Israel’s intent and have started a actions towards a negotiated solution.  It is reported that Egypt, Turkey, and Qatar, as well as others, are working on an agreement.

It is likely that the world’s unusual favoring of Israeli in this current round of violence is due to more significant underlying issues than merely Hamas lobbing missiles into Israel.  It is likely that the world is more concerned with strategic issues including Iran’s likely involvement, as well as the ongoing carnage in Syria.

It is likely that even the Progressive politicians in Europe have come realize that the narrative proffered in recent decades that the Middle East would become peaceful if only the Israelis and Palestinians resolved their differences was fallacious.  The actions of Iran since the late 1970s, Iraq in the 1980s and 1990s, worldwide terrorism sponsored by radical Islamists, the violence of the Arab Spring, and the ongoing carnage in Syria, etc. have offered a cold dose of reality.  It is long past the time to end the political correctness that has shrouded Middle Eastern politics for too many years.  Terrorism, no matter what the cause, is unacceptable and must be met with total disdain from the civilized world.  The current worldwide reaction to Hamas’ belligerence is a start in that direction.

Posted in Israel | Tagged: , , , , , , , , , , | Leave a Comment »

Noble Peace Prize Awarded to European Union

Posted by Steve Markowitz on October 12, 2012

The New York Times reported that this year’s Nobel Peace Prize is being awarded to the European Union.  Upon hearing the announcement, British European Parliament member Martin Callanan said: “The Nobel Committee is a little late for an April Fool’s joke.”  Unfortunately the Nobel Committee is dead serious.

The Nobel Peace Prize award to the European Union is rather incredible given the ongoing riots in some European countries including Greece and Spain over the economic calamity caused to a great extent by the creation of the Union’s single currency.  Incredibly, the Nobel committee acknowledged this with its Thorbjorn Jagland stating: “There is a great danger.  We see already now an increase of extremism and nationalistic attitudes.   There is a real danger that Europe will start disintegrating.  Therefore, we should focus again on the fundamental aims of the organization.”  When asked if the Euro would survive, he then said: “That I don’t know.  What I know is that if the euro fails, then the danger is that many other things will disintegrate as well, like the internal market and free borders.  Then you will get nationalistic policies again.  So it may set in motion a process which most Europeans would dislike.”

Jagland’s statement is an incredible admission that the European Union’s creation is in itself a real danger to peace.  In order to blunt this reasonable conclusion, Jagland blames the United States saying: “There are many things to say about the economic crisis — where it originated, for instance.  It started in the United States, and we had to deal with it.”  This claim is revisionism.  The United States did not create the unsustainable entitlement programs of Europe.  The United States did not force Europe to create a single currency without any concern for economic realities.

European Parliament member Martin Callanan correctly concludes: “The E.U.’s policies have exacerbated the fallout of the financial crisis and led to social unrest that we haven’t seen for a generation.  Presumably, this prize is for the peace and harmony on the streets of Athens and Madrid.

This year’s Noble Peace Prize award is as ludicrous as the one given in 2009 to Barack Obama before any of his policies were implemented.  Just another example of political correctness and Progressives gone wild.

Posted in European Union, Noble Peace Prize | Tagged: , , , , , | 1 Comment »

Sarkozy Booted by French Voters

Posted by Steve Markowitz on May 7, 2012

This past weekend French president Nicolas Sarkozy was voted out of office and was replaced by Socialist François Hollande.  While Sarkozy is a center-right politician, his replacement by a socialist was not related to political differences.  The French people, like other Europeans, expressed their frustration with the ongoing economic problems of their country and Europe that have not been resolved after nearly four years of significant governmental interventions and efforts.

Hollande’s victory is the next step in the evolving European sovereign debt crisis that began with the worldwide economic meltdown in 2007.  In short, European countries piled on massive debt during the bubble years that they cannot afford to pay back.  Instead of writing off this debt, a requirement for insolvent companies in the private world, European leaders have attempted to create the illusion that the problem is resolvable with less drastic steps.

Within Europe there or two schools for problem resolution of the sovereign debt issues.  The one that dominated European politics since the beginning of the crisis took the position that through austerity the indebted countries could pay their debt back, although with some debt write-downs.  While politicians like Sarkozy pursued policies of austerity, the steps that they took were tentative and could not eliminate the debt, a requirement for renewed growth.  It has become clear that more drastic steps are required.  However, socialism is not the answer.

With the failure of the “austerity” efforts, Europeans are restless.  The French have elected their first Socialist president in 20 years.  Like Sarkozy before him, Hollande has promised voters that he will reduce the government’s huge budget deficit.  Unlike Sarkozy, Hollande has promised to do so by taxing wealthier French, thereby requiring less austerity.  However, any first-year student of economics understands that both austerity and higher taxes are contractive forces that ultimately reduces tax revenues and increases deficits.

Hollande’s election has ramifications that go beyond France’s borders.  Sarkozy had been an ally to German Chancellor Angela Merkel who promoted austerity to resolve European debt issues.  Hollande, on the other hand, wants to renegotiate European treaties.  This will likely place France on a collision course with Germany’s economic policies.  Germany’s experience with hyper inflation makes it unwilling to print money, part of the resolution suggested by politicians who want to end austerity.

When making his victory speech, Hollande said: “We will bring back Europe on a track for jobs, growth and the future.  We’re no longer doomed to austerity.”  While these words might seem reassuring, the United States has proven that governments cannot spend their way out of a recession that has been created by excess debt.

The problem for France, like other European countries, is their lack of competitiveness versus other European countries, specifically Germany.  While France’s trade deficit exceeded $90 billion for 2011, Germany had a trade surplus of over $120 billion.  If it was not for the European currency, the Euro, France’s competitive position versus Germany would have improved with a devaluation of its own currency.  This reality makes President-elect Hollande’s promise to create job growth a red herring.  Germany will not tolerate policies that increase the likelihood of inflation and it will not give France economic advantage at the expense of German citizens.  This creates a growing potential for conflict between France and Germany, the historic norm between the countries.

While the French election garnered most of the news headlines this past weekend, a similarly important event occurred in Greece.  On Sunday, Greece held its election and handed a humiliating defeat to both major political parties.  Neither received enough votes to govern and various fringe parties on the Right and Left gained significant votes.  Like the French, the Greeks are demanding problem resolution.  Unfortunately, I again that is not possible without the Greek debt be written down near zero and the country returning to its own currency.  However, even these required resolutions will inflict serious pain on Greek citizens, a reality that Europeans have not come to grips with.

The United States is not a mutant from fallout of the happenings in Europe.  President Obama and Nicholas Sarkozy had a close working relationship.  President-elect Hollande has already stated that he will fast-track withdrawal of his country’s troops from Afghanistan, i.e. he will place France’s interest first.

The events in Europe are starting to evolve more quickly.  They point to a fracturing of European politics and heighten the possibility of the breakup of the European Union.  While the problems of Europe surfaced with the worldwide economic meltdown, they were actually created by an ill-conceived union created by Progressive bureaucrats who understood little about national interests and economics.  Ultimately these two items will dictate how the politics and economics solutions in Europe play out.  European countries will individually evolve strategies to protect their national interests, with each country being concerned that others will gain advantage if they do not act quickly.  This has created a volatile situation that will quickly lead to a crescendo and lead to real problem resolution.  However, these forces are ultimately beyond the control of politicians.

Posted in Uncategorized | Tagged: , , , , , , , , | Leave a Comment »

Markets React Manically to European Solution

Posted by Steve Markowitz on December 12, 2011

On Friday, European countries led by France and Germany announced their proposed “solution” to the significant problems affecting Europe that include sovereign debt issues and the solvency of many European banks.  The initial response from the financial markets was positive to be followed today by a very negative response.  This manic behavior is in keeping with the lemming mentality that exists in worldwide financial markets.  Instead of focusing on the long-term economic prospects and how they will impact corporate profits, the markets look to governments to create wealth.  This, coupled with artificially low interest rates invoked by governments, has cajoled investors into making investment decisions without regard to real market fundamentals.  This is a recipe for disaster for the importunate investors.

Europe’s proposed solutions to the economic challenges and merely kicked the can down the road once again.  In the original European Union treaty, member nations were given limits for their debt to GDP (Gross Domestic Product) ratios.  They ignored the limits and ran up huge deficits that were not allowed under the treaty.  The European Union turned a blind eye to this behavior during better economic times.  After the financial meltdown occurred, the strains of the debt became unsustainable for countries including Ireland, Greece, Spain, Portugal, and most recently Italy.

Making a bad situation worse, the deficit ridden European countries forced local commercial banks to purchase their own governmental bonds that are now risky investments.  This has put at risk many of the large European banks who are in danger of being insolvent.  The result is that should the Europeans not be able to get their house in order, the problematic countries and banks would freeze up simultaneously, creating a worldwide credit crisis.  For this reason, wealthier European countries including France, The Netherlands, and most notably Germany are caught in a dilemma with no good solutions.  To keep the European Union together, the wealthier countries are forced to take on debt responsibility of the poor ones.  The alternative is a breakup of the EU which would likely lead to a European-wide depression.

Friday’s proposed European solution in essence puts stronger teeth into the debt limiting provisions for EU member countries.  Should a country’s deficit exceed certain defined limits, the EU would then have the authority to severely sanction it.  The problem with this solution is twofold.  First, it is difficult to objectively define the debt limits as a percentage of GDP.  More significantly, each member nation must change their constitutions to allow the EU additional control over their sovereignty.  This is a best a lengthy process with no guarantee that voters in individual countries, especially the poor ones, will agree to the changes that will severely impact their ability to support expensive social programs.  It is this reality that the market is reacting negatively to today.

Governments worldwide have nearly universally used the same tonic in response to the financial meltdown of 2008.  This includes bailouts and interventions in efforts to keep markets from correcting the imbalances created during the bubble years.  While it is possible that the initial interventions forestalled a worldwide economic calamity, it is evident that succeeding interventions are becoming less effective with ever shortening durations of any benefits.

The European experiment initially created, and since maintained by governmental interventions, is a textbook example of how ineffective governments are in managing markets.  Europe is now approaching their endgame.  The problem of excessive debt cannot be resolved by still more debt.  Deleveraging (paying down debt) is painful and naturally contractive for economy activity.  Ultimately, Europe and other over indebted nations must face this reality.

Posted in Debt, European Union | Tagged: , , , , , , , , | Leave a Comment »

EU Concludes Water can’t Prevent Dehydration

Posted by Steve Markowitz on November 20, 2011

The Daily Telegraph published a truly unbelievable story.  In a ruling that is over the top even for knucklehead bureaucrats, the European Union (EU) has banned bottled water suppliers from claiming that water can prevent dehydration.  Yikes.

Making this story even more outrageous, it took the EU three years for this investigation that included 21 professors to make the ridiculous ruling.  This EU’s finding indicates that should water suppliers claim that water can prevent dehydration, they can face a two-year jail term.

Some European scientists are reacting strongly to this outrageous ruling.  One, Professor Hahn of the Institute for Food Science and Human Nutrition at Hanover Leibniz University, said of the ruling: “The European Commission is wrong; it should have authorised the claim.  That should be more than clear to anyone who has consumed water in the past, and who has not?  We fear there is something wrong in the state of Europe.”  The good professor is adept at understatement.  There is indeed something terribly wrong in Europe.

The outrageous finding by the European Union and its appointed scientists is telling.  These are the same people are sure that their findings on man–made global warming are indisputable.

The European Union is in the midst of a financial crisis that may lead to a nasty recession or depression in Europe and even the breakup of the Union itself.  While real crisis are at work, the EU bureaucrats are ruling that water does not prevent dehydration. Perhaps there’s never been a better example as to why Progressives are our dangerous.

Posted in European Union, Progressives | Tagged: , , , , , , , | 10 Comments »

US Debt Exceeds $15 Trillion

Posted by Steve Markowitz on November 16, 2011

One of the more profound sites on the Internet can be found at http://www.usdebtclock.org/.  With only a one-page chart, this website includes the most important statistics of the United States and should be required viewing for all Americans.  A snapshot of that chart taken this evening is included below.

One of the more significant figures in the chart is in the upper left-hand corner that shows the total published US debt now exceeding g $15 trillion.  This is a staggering number, but there are even more significant figures included.

  • The $15 trillion published US debt is nearly the same as the total annual US Gross Domestic Product (GDP).
  • The published US debt equals about $48,000 per US citizen and more than $133,000 per taxpayer.
  • The total US debt is approximately 6.5 times the total annual federal revenues collected.  This means that if the government stopped all spending, including the interest on the debt, and tax revenues remained flat, it would take over six years to pay back the debt.
  • The two largest expenditures for the federal government are Medicare/Medicaid and Social Security.
  • The unfunded liabilities of the US federal government, including Social Security, Medicare and prescription drugs is estimated to be $116 trillion, is approaching eight times the total listed US federal debt and a whopping $1 million per taxpayer.
  • The total federal state and local governments annual spending is about $7 trillion, now over 46% of GDP.

Clearly, America’s financial house is in poor condition.  Should we continue down this unsustainable path it is likely that America will in face similar challenges now threatening the European Union.  There is no free lunch.  That has to be repaid.

Currently playing out in Washington is the drama of the so-called “Super Committee”.  This panel, set up as part of the last budget deal, includes six each Republican and Democrat senators charged with finding $1.2 trillion in spending cuts over the next 10 years.  Congress must agree to the proposed cuts by the Super Committee no later than December 23 of this year or $1.2 trillion in cuts will be imposed across-the-board, significantly affecting defense spending and entitlements.

The Republicans on the Super Committee are fighting against tax increases while Democrats are opposed to spending cuts, especially relating to entitlements.  Both sides are playing to their constituents.  It is likely that the Committee will come to a last-minute compromise that will be more smoke
and mirrors, kicking the can down the road once again.  For example, it is estimated that even with $1.2 trillion in cuts, the total federal deficit will increase by approximately $9 trillion more during the next 10 years.  Further, $1.2 trillion in cuts is but a drop in the bucket when America’s total debt including unfunded liabilities are taken into account.

The size of America’s deficit is staggering.  Even more troubling is the speed at which this deficit has grown in more recent years.  As the chart indicates, America’s deficit remained relatively flat until the early 1970s.  It is not coincidental that the debt acceleration began at about the same time that President Nixon removed American fiscal restraint by cutting direct convertibility of the US dollar to gold.  The increase in America’s debt has accelerated even more during the past two decades as the federal government spending increased unabated.  In addition, both the federal government and Federal Reserve made significant interventions into the economy, first with low interest rates to avoid economic corrections, and more recently with huge bailouts of industries and banks.  The numbers below indicate that through both Republican and Democrat administrations, the government has failed to manage the Peoples’ finances with any prudence.

To begin putting the United States’ financial house back in order will require sacrifice by all Americans.  The country has been on a spending spree promoted by the Baby Boomers and the bill has come due.  Those that indicate America can grow its way out of this debt hole are not being realistic.  Problem resolution will require revenue increases and significant cuts in spending, especially to entitlement programs.

Political realities will make the required actions for problem resolution impossible to implement without strong leadership from the White House.  Such leadership will not come while Barack Obama is president.  Unfortunately, the current Republican candidates running for their Party’s nomination have also shown limited skills in this area.

Posted in Debt, United States Debt | Tagged: , , , , , , , , , , , , , , | Leave a Comment »