A few thoughts to ponder during the Holiday Season and ideas of the inquiring mind about the current state of affairs. Buckle up and take the ride.
Greece has been much in the news lately because of their debt problems stemming from their very generous welfare state and highly regulated economy. They are in a death spiral at the moment and trying to right the ship, or at least so they say. There are some of us old enough to remember a little history about how they got to this point. After the War most of Europe made substantial progress and improved the economic situation greatly all the way into the ’70’s. Greece, Portugal and Spain were the noticeable laggards. Their economies were third world during the period. The European community was formed and the free trade zone established during this period which ultimately lead to the Eurozone with the Euro currency. Greece wanted in badly in the ’70’s but lots of Europe was skeptical but they did want the whole nine yards and all of Europe to be in the economic union. Greece couldn’t qualify on its own merit so it was granted special subsidies to be a member. (No one ever accused the Greeks of being bad bargainers). It was a great deal for Greece and the rest of Europe hoped it would be a good deal down the road for everyone. Shortly after Portugal and Spain applied for membership having ended the authoritarian reigns of Salazar and Franco.
They were no bargain but again “Europe” wanted everyone in the deal because it would benefit all, at least that was the belief. Guess who raised the most objection to them? You guessed it, the Greeks. They were already running deficits and their economy was still lagging behind everyone else but they thought the Iberians were too much of a load to carry. To induce the Greeks to approve the addition, the rest of Europe again granted special privileges (subsidies) to the Greeks for them to go along with the Iberian additions. With the extra money in their pocket for doing nothing more than saying yes, the Greeks were happy to welcome them in the early ’80’s. We all know how that has worked out. The Eurozone with the Euro came into existence finally in the late ’90’s. The Greeks continued to have a bloated public payroll, low productivity per worker and huge deficits. Others are having to step in and pay off the debts for the Greeks for their profligacy and the Greeks riot in the streets about how unfairly they are being treated! Funny, I was always taught that whoever pays the Piper gets to call the tune.
Speaking of our friends in Europe are you getting as confused as I am about the way they intend to fix their debt problems. We have the EFSF which is the European Financial Stability Fund that was is going to get money from somewhere; they can’t seem to articulate exactly where. Then we now have the ESM, the European Stability Mechanism which is going to add more money to the bailout pot. New ideas seem to emerge every week. Will the ECB (European Central Bank) simply print up new money like our Fed does for its bailouts? There has been talk of some authority, as yet not clearly specified, that will issue bonds and then loan that money out to the needy hands. Maybe I am just not smart enough to understand the thinking of all those European “smartest guys in the room”. I do know it all boils down to the Germans because they are the hardest working ants in the field and the most frugal. Can you blame them for asking what they are getting out of all this?
You all remember the story of Robin Hood. The complaint was tha the local Sheriff of Nottingham was in cahoots with some of the local big wigs and stealing money from the public coffers. Am I the only one who has ever wondered why Robin Hood didn’t just go after the evil Sheriff and leave the others alone. He ended up stealing from anyone he believed was involved in wrongdoing without trial or proof and then gave the money to his preferred special interest group and built a political machine. Had the bad Sheriff merely been replaced with another Sheriff that had another coterie of cohorts after the same bag of money? Was he really a hero or just another wannabe dictator?
I don’t get the Payroll Tax reduction for one year. It will add up to about $80 per average family per month for the next year. It is like the $600 check most of us got back a few years ago and the cut we’ve had this year. That amount spread out over a year just doesn’t motivate lots of renewed spending by consumers. I mean look at the economy for this year. Has that cut of 2% in the payroll tax boosted the economy this year? A year flies by really fast. You reach your own conclusion. I love all lower taxes but cuts need to make sense in a broader picture. We would all love to have that extra 80 bucks a month but that won’t cause us to go buy a pick up truck; maybe we’ll do a couple of trips to Appleby’s with the family.
After all the sound and fury of the last year the fact is that the National Debt is higher still and going up like a rocket. All the talk about cutting hasn’t happened yet and the so-called cuts are merely reducing the amount of the growth of the debt which is currently projected be 44 trillion in ten years. Maybe we are just Greeks writ large. Everyone can’t live on the Federal payroll directly or indirectly forever. Someone has to actually work in the private sector to create real wealth and money. The Government doesn’t create wealth, it takes wealth for allegedly the common good. As it grows the private sector shrinks and soon there won’t be anyone to tax if we keep on the present road.
“I desire what is good; therefore, everyone who does not agree with me is a traitor”. George III www.olcranky.wordpress.com