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I may not be an expert on European economics, but I know a slow motion disaster when I see it. And we are seeing a major one coming to a head in the Eurozone right now.
The years of half-measures and misguided austerity have only dragged out the problem and allowed it to fester. Greece is on the verge of default again, and the problem could easily spread to other countries.
The repeated use of failed, too small fixes did accomplish one thing, however. It allowed bailout fatigue to poison the political environment against the bold actions that would be needed to resolve the situation in the least destructive manner. The fate of the Eurozone now probably rests in the hands of Germany’s chancellor Angela Merkel, and given her handling of the situation to date, that is not at all reassuring.
While I don’t know how the situation will be resolved, I’m pretty confident that short-term outcome is not going to be good. Whatever happens will likely cause a marked decrease in short-term economic growth in the region. While the pain will obviously be noticeable in Europe, the US economy will probably feel some reverberation if things stay on their current frightening path in the Eurozone.
Given the poor shape of the American economy, this blow could easily destroy our current anemic growth and exacerbate the unemployment problem. Even if President Obama manages to get his still too small (and likely doomed) American Jobs Act passed, it probably won’t be enough to make up for both our current lack of aggregate demand and the possible shock from Europe.
Obama election hopes all depend on the economy
President Obama’s popularity and election prospects are tied to the state of economic growth in this country. Yet Obama missed his chance to do more to address unemployment when his party was still in control of Congress. Now the state of the economy will likely pivot on things outside of Obama’s ability to control, in that he no longer has the ability to push through legislative actions.
The largest of those factors is probably what happens in the Eurozone. The difference between modest growth and a dip back into recession for the US could largely depend on a bunch of European politicians and bureaucrats, who so far have been abject failures at taking the correct bold action.
At this point it could be Angela Merkel and the European Central Bank that determine Obama’s electoral fate. For people in the White House, that shouldn’t be a reassuring thought.
28 Comments
The NY Times’ lead story in its dead tree version today explores the political dilemma facing Germany’s chancellor Angela Merkle. And in its business section, the top three stories deal with various aspects of the crisis, including an account of the IMF’s chief attempts to “correct” reports of an internal IMF document that states that Europe’s banks are woefully short of capital– something like a quarter trillion dollars worth.
A few months before the whole Greek debt thing exploded, I remember reading an account of flyover photos of rich Greek neighborhoods, and how many unregistered and therefor untaxed swimming pools there were. And how much less money there was in the Greek treasury as a result of the rich avoiding paying their fair share of property taxes. Kinda puts the whole austerity frame of the moral scolds in another light.
I’d love to see a chart that tracks the decline in income taxes of the wealthy with the rise of sovereign debt; and the social unrest that results when the demands of the bond vigilantes take precedent over other means of reducing that debt, like creating jobs for the unemployed.
Your assumption is based on germany as an independent nation and not one that is controlled by the same globalists that control our puppet Obama. In 07 as shown by wikileaks, Hank Paulson told Sarkozy that if the subprime issue blew up that German taxpayers would bail out the banks. How could he know this? Unless of course he knows that Merkel is just a puppet. Also when in 08 Paulson denied he saw the crisis coming and then put the taxpayers on the hook, I think we all know he was following a plan given to him by globalists.
I’m going to go out on a limb here and wager that as Germany’s banking representatives on the ECB look into the abyss they have created, they will draw back and support European bonds by printing money. It’s a bandaid, but better than the alternative. Stark’s replacement seems fairly reasonable by current standards, which are on the whole unreasonable.
We seem to becoming to the end of band aids working.
If Obama’s fate rests on these people, he is toast.
If it rests on the economy picking up, he is toast.
If it rests on progressives taking a new shine to him, he is toast.
If it rests on him getting anything done, he is toast.
If it rests on him raising a big pile of cash from big interests he will later favor, he might have a chance.
Merkel’s popularity along with her Christian Democratic party is taking a nose dive. Over her handling of the Eurozone as well as nuclear issue. Her party has been loosing election after election on those issues and she will probably not weather the storm.
But Merkel comes from East Germany and anything but a staunch conservative stance goes against her principals.
In Europe as in the US, there will be all the money that is necessary to make the banks whole on the reckless loans they made to Greece, et al. They will then foreclose on those countries and loot their water systems, roads, health systems, and cultural treasures just because they can. When the big banks run the central banks, what other outcome can be expected?
Iceland’s people stood up and told the banks to go f**k themselves. That is a precedent that banks cannot allow to be repeated, so all the kabuki in the Eurozone right now is just to confuse people as to the real issues and those that are really responsible for the problem.
FWIW:
China Alone Can’t Save Europe
China sees Europe as ‘too important to fail
Aloha, Jon…! b at MOA did a great job in dissembling that NYT article…
NYT Presents False Choices – Ignores German Supreme Court Decision
Swimming pool story referred to above.
Cregan
So in other words, since the money is behind him he will win.
It does not matter what we think. It does not matter what the American public think. It does not matter what the Tea Baggers think (or not think)
So the money that owns this country have already decided. Oh, you think we live in a democracy? The money that own the electronic voting machines will decide. I was in Ohio 2004, as an Official Re-Count Observer. The Kabuki Theatre of the Absurd will continue. As long as we let it, of course.
Meanwhile Rocky Anderson, former Mayor of Salt Lake City and former Democrat is being drafted to run. Not because he can “win”, he can’t. Please refer to above statement about the Triad, ES&S and Diebold voting machines.
This is a rally point for the resistance.
Why does this Obama/Tea Baggers/Republicans/Democrats Kabuki Theatre crap make in the front page anyway?
Interesting.
Letting the Banks go bankrupt, as did Iceland, would have been the correct solution. Printing money to re-capitalize the banks while trying to keep shareholders whole is the ultimate fantasy.
The correct “bold choice” would be for the EU, ECB, and IMF to quit fucking around and let the banks, and others, take their losses on not only the Greek debt but also the debt of the other PIIGS. If that brings down the whole rotten structure of the EU, so much the better. A lot of the bonds in question are not even currently owned by the original buyers. They were purchased in the last year at substantial discounts by hedge funds and other speculators based on the assumption they would be made whole at the expense of European taxpayers.
I think the euro is doomed to fail. Operating a single international currency while operating that currency as a confederation of countries is doomed to fail while on the other hand the individual countries won’t go along with turning over their individual federal budgets to some centralized euro power. Budgets drive politics and the politicians themselves wouldn’t want to give up control of that, not to mention the people in those countries wouldn’t want their domestic spending priorities to be subjected what some outsider decides they should spend instead.
Thanks Ctut; from the comment on the MOA link:
http://www.youtube.com/watch?v=JiWFjt-FrgU&feature=youtu.be
Too true.
So what does that tell us?
Tax evasion and avoidance is a cottage industry in Greece. Those numbers suggest it dips well below the truly wealthy and into the middle class. And is it about new money or old money spirited down a few generations and kept well hidden?
I think the answer is a lot of the economy there has been driven underground. But why Greece and not, say, Finland? Have Greeks lost respect for their gov’t, their shared society, pretty much all of it? If that’s correct we should be curious as to how that came about.
Okay.
SO who has standing to sue on this basis in the German justice system?
Inquiring minds want to know.
Yes and Merkel is the problem and the EU needs to closed down a failed system but once again taxpayers are being asked to bailout bad investments by the banks. The German citizens have said No to a bailout of any kind and Merkel is in her last days of of trying ronnie ray gunne the German people.
I do notice a pattern here. The president is never responsible for anything. It is Bush, the congress, the professional left, the hurricane, the Europeans …
“It’s not complicated. It’s just unthinkable.”
http://www.ianwelsh.net/how-to-fix-europes-financial-crisis/
Are you thinking I like that money will re-elect him???
I’m saying he is toast in every respect except that he can sell the presidency to high bidders and maybe win that way.
But, it is also possible that even a billion won’t do the trick for him.
Personally, I don’t think anyone–who isn’t paid by him–listens to him anymore.
Gregan
I agree but my point still remains. The elections were stolen in 2000, 2004.
They can be stolen again. By the Obama administration.
“I may not be an expert on European economics, but I know a slow motion disaster when I see it.”
Come on Jon. You also saw Obama’s Health “reform”. What else can you call a bill that will make the middle class hate the Democrats forever while doing nothing to bring down costs or increase care? Or a party that walked into such a “deal” with eyes wide open?
A German nationalist would love to see the current EU project collapse; that project presumed a shackled Germany.
The impetus for an EU won’t die, it would simply be resurrected along the lines of an unshackled, dominant Germany.
This was a constitutional complaint. Everyone can file one of these if s/he thinks that his or her rights as codified in the German constitution is infringed on by a German government entity.
Since the point of contention in this case is the right of the German electorate to influence their taxes through the election of the parliament (Bundestag), every member of the electorate can complain.
In this decision there were two complaints, one by a group of five professors, two of them retired (Hankel/Nölling/Schachtschneider/Spethmann/Starbatty) and one by a retired politician (Gauweiler).
That is fairly typical for such general complains.
With all due respect, can educated people stop using the European Union and the Eurozone interchangeably? They are not the same thing. The the author was clearly referring to European Union but didn’t spend the ten seconds required to add accuracy to the story. I seriously doubt that Euopoean journalists of merit confuse the United States of America with say, NAFTA.
Money and Diebold.