Note from Louis Basenese: With the debt ceiling deadline creeping ever closer, and a deal still MIA, I’m interested in knowing what Bill Bonner, bestselling author and editor of The Daily Reckoning, has to say…
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In Europe or America, the situation is basically the same. The central authorities can rescue anyone they want. They have printing presses. But there are costs to money printing.
America’s conservatives are afraid the nation will be driven to bankruptcy… unless they’re able to get control of the situation now. Or they’re afraid that Obama will be reelected. They don’t know which result they like less.
And this just in: Germany has its own “Tea Party.” These people definitely don’t want to see Germany’s credit besmirched and sullied by the irresponsible politicians in places like Greece.
So yes, politics has caused the problem – spending more than people can afford to pay in taxes. But now politicians seem to be coming out with their hammers and wrenches, offering to fix it.
Will they succeed?
We doubt it. We learned years ago that it really doesn’t matter what anyone says or thinks. History has a mind of her own. She goes whither she will.
Have you noticed how all the major developed nations are more or less in the same boat? Yes, some barks are more seaworthy than others, especially Germany’s sturdy vessel. But all are shipping water… and all are headed in the same direction.
How come? Wouldn’t you expect one country to have radically different ideas from another? Wouldn’t you expect that one country would have capable, intelligent leadership, even if the others were led by morons?
And yet, with the possible exception of those people whose native language is German, we’re all in this together. Higher and higher debt. More and more zombies. No end in sight.
Why? Because History is calling the shots. Not us as individual, thinking, responsible, rational human beings.
Humans, you will recall, are neither good nor bad, but subject to influence. Under the influence of popular democracy, oil driven machinery, and the social welfare nation state, almost every developed nation has made the same choice – to go broke.
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In this, the United States was exceptional, too. Only America had imperial pretensions. Only she not only ruined herself with zombified social welfare spending… but also with zombified spending dressed in khakis. Military bases were kept open and operating only because they were in particular congressional districts. Weapons were ordered only because they made jobs available in others.
And all around the U.S. Capitol Beltway, trillions were spent on consulting, software, manufacturing, and furnishing the biggest, fattest, softest, best supplied, most high tech, and least productive armed forces in history.
Scratch a military man and you’ll often find a zombie. Or you’ll get punched in the mouth.
Dumbbells and Debt
Of all the dumbbells in all the world, Larry Summers is in a category by himself.
The former Treasury Secretary and Harvard President must be a man of action; thought is not his thing.
In last Monday’s Financial Times, he does a fair job of laying out the problem. In short, you can’t continue giving money to governments that have no way of paying it back. Lending at below market rates to these borrowers only makes the eventual restructuring that much more painful.
Okay so far…
Then, the poor man shifts from sharp description to dead-head prescription. Like all meddlers, his meddles are only sensible if you assume the world will stand still for them. It won’t.
“European authorities must restate their commitment to solidarity and recognize that the failure of any European economy is unacceptable.”
Hmm… why? Aren’t there some that deserve to fail?
Then, “there must be a clear commitment that, whatever else happens, no big financial institution in any country will be allowed to fail.”
Holy cow! What kind of advice is this? Just tell the big banks that they won’t be allowed to fail. And don’t forget to tell Greece, too.
Then, try to get the bonus-driven traders to be more careful! And try to get Greek unions to agree to wage cuts… when they know full well they don’t have to do so. You might just as well give the key to your liquor cabinet to your alcoholic brother-in-law and introduce your daughter to Dominique Strauss-Kahn.