Tag Archives: European debt crisis

2 Cents Worth On Life Its Ownself

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


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2 Cents Worth On Life Its Ownself

Maybe we should start charging a few sprinkles of gold dust for these pearls of wisdom but for now we’ll hold firm at our bargain prices.

There have been many comments about a couple of the Supreme Court Justices recusing themselves from hearing the ultimate appeal of the Obamacare law because of perceived or real bias about the legislation.  They focus on Thomas and Kagan.  Him because they don’t like his wife being involved in the political debates of the day and her because she was an active member of the Justice department as the law was formulated and debated.  Some have argued that the US code requires them to remove themselves and others say that mere prudence would demand it.  There have even been calls for new legislation that would mandate (that word again) that Justices recuse themselves under defined circumstances and that the matter should be determined by an independent panel of “legal ethicists” ( real  oxymoron if there ever was one) when a motion is filed to remove a Justice from a case.   Those are all well and good but they all overlook one vital consideration–that our three branches of government are separate and equal.  Just as the Supreme Court cannot tell the House or Senate how to run their affairs or pass legislation or demand that the White House institute a certain administrative order or policy, the Legislature cannot tell the Supreme Court how to conduct its business.  The Supreme Court would never recognize any legislation regulating its internal affairs and would indeed find it unconstitutional.   For good or ill we have to live with what we got and that is the Supremes determing their own eligibility to hear cases that come before them.

Is there anything more nostalgic and fun that watching that child or grandchild as they walk up the sidewalk to enter elementary school for the first time?  They are a little tentative and have that huge backpack hanging down almost to their knees and those fresh new clothes mom bought for the occasion.  You stand there wondering how those first 5 or 6 years flew by so quickly.

Just as you have to put up collateral sometimes if you want to borrow more money it appears the Greeks are running into the same demands from its creditors.  You have to pledge your car or offer a second lien on your house and your unsecured creditors don’t like that if they know about it.  Now Finland is demanding that Greece put up collateral in the form of cash or real estate for Finland to fork over its share of the bailout money from the Eurozone countries.  Naturally the other Euro folks are howling.  They think it undermines the overall effort to help Greece or more likely they are simply miffed that they didn’t think to ask for collateral themselves before they handed over the bailout funds.  The next payment is due in September to stay tuned and let’s see how these negotiations work out.

Loneliness is one of the most powerful and depressing of our emotions.  It is one thing to enjoy one’s privacy but quite another to be lonely.  Atheists must be the loneliest people in the world.

The basics of economics always works even in the worst of times.  After WWII in Germany every city of any size was virtually destroyed.  You’ve seen those old newsreels of Berlin and the blocks and square miles of devastation.  Nothing worked for a while.  The bombing and the moving armies of the Allies and the Communists had leveled just about everything.  There was no food in the cities, no water, no electricity and no means of transportation.  Health care was very limited and the rape and pillaging was rampant  in the Soviet areas.  In the rural areas much of the crops for the 1945 harvest were very low because there weren’t enough workers to finish the harvests or the supplies to produce the crops were very limited.   But of course there was food and even an excess in the countryside.  Efforts were made to bring the food stocks into the cities but met initially with very limited success.   The farmers needed to eat too and there were refugees running literally all over the countryside pillaging.  But most important of all was the reluctance of the farmers to bring their harvest to the cities.  After all what would they get in exchange for the crops?  There was only the most crude of working economies and that dependent on the scrip and whim of the conquerors.  Lastly, what was there to buy if they were given some kind of paper money?  Nothing.  Even if you had what passed for “money” in those dark days you really couldn’t exchange it for anything you wanted or needed.  There weren’t any cars, washing machines, radios and cigarettes or alcohol except that pilfered from the conquering armies.   A valuable lesson in both the demand concept and the medium of exchange idea.  

So many people still get confused about how and when we went off the gold standard.  Sometimes you hear it was Roosevelt and others talk about Nixon closing the gold window.  There were two events that get conflated too often.  Roosevelt confiscated the gold coins and outlawed the use of gold to settle debts in the US.  You were required to turn in your gold coins for paper money and couldn’t have contracts requiring gold payment. It was internal to the US and its citizens.  Even Roosevelt couldn’t control the entire world and much of the world continued to use a gold standard in one form or another.  In ’71 Nixon finally said the US would not settle its international accounts with gold.  Before the foreign countries could come here, and they often did, and trade in their dollars they had earned and exchange them for gold which we had to fork over.   Nixon stopped paying in gold and would henceforth make payment only in other dollars or goods.

Some in power now echo the political philosophy of Louis XIV whether they acknowledge it or not.   Louis famously said “It is legal because I wish it”….hmm.  Sound ominously familiar.  www.olcranky.wordpress.com

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