Europe Risks Another Global Depression

The entirely pointless G7 meeting this weekend only served to underline the fact that Europe is again entering a serious economic crisis.

At the end of the meeting yesterday, Treasury Secretary Tim Geithner told reporters, “I just want to underscore they made it clear to us, they the European authorities, that they will manage this [the Greek debt crisis] with great care.”

But the Europeans are not being careful – and it’s not just about Greece any more.  Worries about government debt and associated public sector liabilities (e.g., because banking systems are in deep trouble) have spread through the eurozone to Spain and Portugal.  Ireland and Italy are next up for hostile reconsideration by the markets, and the UK may not be far behind. 

What are the stronger European countries, specifically Germany and France, doing to contain the self-fulfilling fear that weaker eurozone countries may not be able to pay their debt – this panic that pushes up interest rates and makes it harder for beleaguered governments to actually pay?

The Europeans with deep-pockets are doing nothing – except insist that all countries under pressure cut their budgets quickly and in ways that are probably politically infeasible.  This kind of precipitate fiscal austerity contributed directly to the onset of the Great Depression in the 1930s.

The International Monetary Fund was created after World War II specifically to prevent such a situation from recurring.  The Fund is supposed to lend to countries in trouble, to cushion the blow of crisis.  The idea is not to prevent necessary adjustments – for example, in the form of budget deficit reduction – but to spread those out over time, to restore confidence, and to serve as an external seal of approval on a government’s credibility.

Dominique Strauss-Khan, the Managing Director of the IMF, said Thursday on French radio that the Fund stands ready to help Greece.  But he knows this is wishful thinking.

  • “Going to the IMF” brings with it a great deal of stigma.  European governments are unwilling to take such a step as it could well be their last.
  • The IMF is supposed to provide only “balance of payments” lending.  That doesn’t fit well when a country is in a currency union such as the euro, which floats freely and does not have a current account issue, and the main problem is just the budget.
  • Greece and the other weak eurozone countries need euro loans, not any other currency.  If the IMF lent euros, that would be distinctly awkward – as this is what the European Central Bank (ECB) is supposed to control. 
  • Sending Greece to the IMF would result in some international “burden sharing,” as it would be IMF resources – from all its member countries around the world – on the line, rather than just European Union funds.  But is the US really willing to burden share through the IMF?  After all, Europe has long refused to confront the trouble in its weaker countries, now known as PIIGS (Portugal, Ireland, Italy, Greece, and Spain)?  How would the Chinese react if such a proposition came to the IMF? 
  • Would the Europeans really want the IMF and its somewhat cumbersome rules to get involved – this would be a huge loss of prestige.  It could also lead to some perverse outcomes – you never know what the IMF and the US Treasury (and Larry Summers) will come up with in terms of needed policies (ask Korea about 1997-98; not a good experience).  The European Union (EU) has handled IMF recent engagement well in eastern Europe (from the EU perspective), but that was seen as the EU’s backyard.  If the eurozone is in trouble, everyone will be paying much more attention – no more sweetheart deals.
  • The IMF gave eastern Europe amazingly good deals over the past 2 years (by IMF standards).  Would this fly with financial markets in the sense of restoring confidence in the PIIGS and their medium-term fiscal futures? 
  • Does the IMF really have enough resources to backstop all the PIIGS?  The IMF’s notional capital was increased substantially last year, but just based on what we see now, the Fund would need even more ready money to tackle the eurozone – all the weaker countries would need at least preventive lending programs and these would need to be large.  If that is where this goes, the EU looks simply awful and has failed at a deep level.
  • The IMF could play a constructive “technical assistance role” alongside the European Commission, but everyone would want to keep this pretty low profile.  Anything that goes to the IMF executive board would result in a lot of cheering and jeering from emerging markets.  This would break the power of Europe on the international stage – perhaps a good thing, but not at all what the European policy elite is looking for.

The IMF cannot help in any meaningful way.  And the stronger EU countries are not willing to help – in part because they want to be tough, but also because they do not have effective mechanisms for providing assistance-with-strings.  Unconditional bailouts are simple – just send a check.  Structuring a rescue package that will garner support among the German electorate – whose current and future taxes will be on the line – is considerably more complicated.

The financial markets know all this and last week sharpened their swords.  As we move into this week, expect more selling pressure across a wide range of European assets. 

As this pressure mounts, we’ll see cracks appear also in the private sector.  Significant banks and large hedge funds have been selling insurance against default by European sovereigns.  As countries lose creditworthiness – and, under sufficient pressure, very few government credit ratings will hold up – these financial institutions will need to come up with cash to post increasing amounts of collateral against their derivative obligations (yes, the same credit default swaps that triggered the collapse last time).

Remember that none of the opaqueness of the credit default swap market has been addressed since the crisis of September 2008.  And generalized counter-party risk – the fear that your insurer will fail and this will bring down all connected banks – raises its ugly head again. 

In such a situation, investors scramble for the safest assets available – “cash”, which actually (and ironically, given our budget woes) means short-term US government securities.  It’s not that the US is in good shape or even has anything approaching a credible medium-term fiscal framework, it’s just that everyone else is in much worse shape.

Another Lehman/AIG-type situation lurks somewhere on the European continent, and again our purported G7 (or even G20) leaders are slow to see the risk.  And this time, given that they already used almost all their fiscal bullets, it will be considerably more difficult for governments to respond effectively when they do wake up.

By Simon Johnson

266 thoughts on “Europe Risks Another Global Depression

  1. At least the relationship between China and America can be characterised in some sense as a rich country making a poor country better off (America’s CAD contributes to China’s total income). You can’t really say that for the EMU. Germany runs consistent trade surpluses with southern member states that cannot be adjusted for because of the mutual peg. By accounting identity those surpluses must be backed with deficits in the government or private sectors in those states. If Germany really want them to reduce their deficits, maybe instead of forcing self defeating austerity measures on them, it should consider reducing its surplus (which contributes to labour underutilisation in these countries), or leaving the EMU and floating its currency.

    The political economy of this is all messed up. Very depressing. The EU leadership is literally trying to make Greece have a worse recession. There is something very wrong with that.

  2. The G20 summit will be held in Canada this June. Last I heard they were deciding between hosting the event in Huntington or Toronto.

    We have a right-wing minority government and our prime minister is a free-market economist and a former Western separatist (as an indication of how quirky Canadian politics can be).

    IIRC, last I heard, the Harper government has decided their top priorities at the upcoming G20 meeting are (1) nuclear non-proliferation and promoting nuclear energy, and (2) aide to Africa.

    Canada as host country, apparently, has weight in determining what is is at the top of the agenda at the G20 meeting this June.

  3. the real problem is the shared currency. in a natural trade relationship, greece’s problems would devalue their currency and lead to less favorable trade terms with germany. germany would decrease exports b/c they would be increasingly expensive.

    but now, one currency… one problem. for non-debtor eurozoners, they need to realize that euro debt is much more shared than they choose to admit.

  4. I find it hard to believe that any of the PIIGS will default. Throughout the last few years, central bankers have consistently demonstrated an inventive willingness to throw caution to the wind. And what’s that they say about a watched pot?

  5. SJ writes: “The entirely pointless G7 meeting this weekend only served to underline the fact that Europe is again entering a serious economic crisis.”

    From the Guardian: “In a decision described by one European official as “crazy”, the Canadian government has chosen the city of Iqaluit, home to 7,000 in an icy landscape 200 miles south of the arctic circle, as the venue for a gathering of G7 finance ministers. With patchy phone coverage and February temperatures dipping to -20C, Iqaluit has only 300 hotel rooms, obliging some visiting officials to sleep in dormitories.

    Canada’s finance minister, Jim Flaherty, said he wanted an opportunity to show off his country’s Arctic wilderness: “I thought there’s a beautiful pristine winter place called Iqaluit where I’ve been in the winter time and it’s absolutely gorgeous and the Inuit people are very welcoming.”

    Ummmm … no need to deal with protesters either. Iqaluit is near the Arctic Circle and very-very cold.

  6. we need an end to kings & heads of finance running our world. so whats gonna happen? europe gonna collapse just like the 20s & another world war is going to ensue?

  7. Perhaps the easiest short-term solution for this would be for the ECB to reverse its decision on only accepting A-rated bonds (?), perhaps delaying the change until late next year or 2012. This would give the Europeans time to address CDFs in the European market as I suspect it would be somewhat easier than manhandling the Greek government into making necessary budget cuts/political suicide.

  8. I think they are right to reject the IMF and it’s draconian policy change requirements. How do you think these countries got into this mess to begin with? The IMF is no friend to anyone except “free marketeers” who rape every society they touch. (A reading of “The Shock Doctrine, The rise of Disaster Capitalism” – Naomi Klein is in order here for clarification) Milton Freidman is dead, may he rot in his grave and his theories of economics soon follow him to the grave and never be seen again.

    All of these capitalist monsters need to fail and the world return to what it once had, individual sovereignty for each country and resources that belong to each country and not multinationals and power-hungry governments (worldwide superpowers).

    It’s the only way that cultures will be able to recover and survive from Uncle Milty’s experiments… And we all need to pay attention to our survival without dictatorial moneymongers suppressing us into permanent abject poverty. There is another way and we’d better start heading in that direction, even if it hurts at first.

  9. Whatever economic system we labor under Capitalist, Oligarchy, Plutocracy, Socialist or Communist there are a few lessons we should to keep in mind. No system can cure stupid, no system can cure venality, and no system is immune to business cycles or bubbles. Enjoy the ride.

  10. The International Monetary Fund was created after World War II specifically to prevent such a situation from recurring. The Fund is supposed to lend to countries in trouble, to cushion the blow of crisis.

    With every single mechanism that was supposed to spread out and lessen risk, from this to CDSs (and as Simon says CDS will be engaged here as well, so it’s really always one bug circle), nobody seems to have understood that it doesn’t work unless you leave free the resilient space such measures are supposed to create. The point is supposed to be to create redundancy, slack.

    But to go with the example of securitization, it doesn’t work if you take the “space” left over by spreading out your risk and use it as the pretext to lobby for lessened reserve requirements, so you can ramp up your leverage. Risk-wise you just end up right back where you started.

    And so it is with the international system. Debt is always ramped up as far as it can go until the system collapses, as we’re experiencing today, and all the alleged risk management precautions built into the system were really only pseudo-precautions.

    The fire brigade set up to deal with one burning building at a time is going to have some trouble when the whole city’s burning down.

    But then the whole growth ideology, in theory and practice, has always denied the very existence of systemic risk, even though that’s precisely what they were erecting. The Tower of Babel is systemic risk incarnate.

    I just said “even though”, but it’s really no mistake. Everything which was claimed to have diminished risk was really a sham, and every such claim a con.

    The criminals who perperated these frauds were simply all operating under the “I’ll be gone” mindset.

    And so we enter the next stage of the Great Unwind…

  11. The die is cast. The world is facing Great Depression II. No one is going to set up.

    Great going, guys.

  12. It would appear that the bailing out of Greece has the same level of moral hazard and systemic risk implications for the financial markets of Lehman and AIG crisis. CDS markets show similar level of risks.
    Bail out Greece to save its banking counterparts and avoid snowball effects in the financial markets, including the famous Credit Default Swap one?

  13. It was ideal in terms of security. Smart move on their part — not many protesters were holding signs outside in the streets. Maybe they’ll hold the next big economic summit on the South Pole.

  14. So your suggestion is to send all the EU into depression because the IMF should not lend to them?
    The USA bails out GM (doesn’t GM represent a private manufacturing corporation?) but still goes around telling everybody else what is right and what is wrong?
    Why doesn’t China reassess the value of the remimbi instead of destroying systematically the nations that gave CHina all its well being jobs money and have been and are victims of systematic persistent industrial espionage????
    It is a global issue not a greek or Portuguese issue. ANd, By the way, calling any of my EU countries PIIGS again and you will show once again how stupid the corporatist world has become. The pigs are sitting comfortably in Wall street or Frankfurt or Shanghai not in the olive groves of the mediterranean. To all of you grand schmers of capital the people say to go to hell.

  15. The real culprit here is Trickle Down Economics having finally destroyed demand for consumer goods in an era of incredible surpluses and the real criminals are people like Ronald Reagan, Donald Reagan,Economist Art Laffer and anyone who was a member of the banking financial industry of the last 30 yrs. championing these deranged Laissez Faire economic policies. Reaganomics (Trick Down) Has been and always be LIE!!! Congrats you finally did it, you destroyed the NEW DEAL. I feel like Charlton Heston at the end of the Planet of the Apes movie pounding his fist into the beach sands in front of what used to be the Statue of Liberty cursing out those who released the massive weapons of (financial) mass destruction.

  16. That is going to take time…and can we do it?
    You are right, Naomi Klein’s book describes exactly what has happened and keep happening, unfortunately as disasters keep unfolding, a few still get filthy rich and the rest of the masses, desintegrate…
    The self destruction of the humane race.

  17. I live in France. The problem is they blame the recession on the United States. It wasn’t the U.S. that forced their banks to invest in subprime paper. Heck, my American banker asked me to invest in them in 2007 – ‘AAA’ – and I told him they were the worst investment anyone could make. If I was smart enough to not invest, they should have been too.

    The problem in Europe is too many people get paid for not working, housing is subsidized and value added taxes are around 20 percent. France only has 35 hour workweeks and employees aren’t prosecuted when they decide to hold their boss hostage or destroy company property! Who would build a factory here??? And they strike even during a recession!!!

    Europe is going to have to hit bottom before it does what Obama suggested by investing in their infrastructures and economies to pull out. Welfare safety nets aren’t cutting it.

  18. This is not about “sending Greece into an even greater recession”. This is about forcing Greece to cut their ridiculous deficit.

    If Germany and France start to publicly bail out Greece, this will be seen as carte blanche to continue with their nonsense. In Greece, there are major tax losses because they are never incurred. Instead, the rich bribe the bureaucracy who would otherwise have to go after them. It’s seriously that retarded. THIS kind of crap needs to be stopped, and stopped stat. We can NOT set a precedent of “must not fail, Germany and France will come to the rescue” in the EU. We need to make sure that each member state of the monetary union is meeting its obligations. Or that they leave the Euro.

    And just to put a few things into perspective: Greece makes out around 2% of the European GNP, and is in trouble. California for example has been teetering on the brink of bankruptcy for over a year now and is in a much worse shape than Greece. How much does California contribute to the US GNP?

  19. The is the second leg of the US financial meltdown that impacted global markets and now is hitting Europe with a second blow!

  20. Liberal Americans used to look longingly towards postwar Europe for “social democratic” role models for better, fairer government. Yet contemporary Europe now looks reactionary compared to American on issues of racial and religious tolerance, and the governments of Europe’s rich nations look predatory and selfish in relation to the poor ones. Maybe Denmark’s still a name to conjure with for American liberals, but Germany and France? I think not.

  21. Dear SJ:

    The Euro has taken the place of the gold standard. The parallel is absolutely clear. The member countries cannot devalue to lower effective real wages (as per Krugman’s story) and to decrease the value of nominal debt (including the nominal value of public transfer payouts) while stimulating AD to facilitate transition costs.

    The smaller players need currency adjustment, but the bigger players don’t want it, which forces the real economy to absorb the nominal gaps. A “bailout” is the equivalent of fiscal transfers (like those between high income states and lower income states via progressive taxation and federal spending), and Germany doesn’t want this either.

    Germany is also correct that any bailout will only delay, because of the failure in PIIGS to address structural problems – Europe needs a “grand bargain”, and it also needs to build more flexibility into the Euro. It conceived the Euro as a challenge to the dollar for currency hegemony; well, they got it. Pity.

    Meanwhile, one of the main reasons the PIIGS can’t address structural problems is precisely because the ECB won’t use monetary stimulus (because it so loves the Euro’s strength)! Indeed, the PIIGS might not be in such bad shape at all but for the massive Euro revaluation. Total trainwreck.

    Fundamentally, the political institutions are failing – failing to coordinate, failing to cooperate, failing to make hard decisions, and failing to fix market failures (because the markets have already failed).

    Obama had a shot, but he blew it.

  22. California? Illinois? Florida? Texas? New York? Budget problems, unemployment problems, unemployment fund problems. Around 44% of US GNP. Around $200 billion in the hole for this year, according to some. Have you given any thought to how these situations might impact the Federal Union? It might be interesting to give some thought to a comparison of the internal reticulation of this aspect of the US crisis with that in Europe.

  23. jeanrenoir wrote: “Yet contemporary Europe now looks reactionary compared to American on issues of racial and religious tolerance, and the governments of Europe’s rich nations look predatory and selfish in relation to the poor ones”.

    One of us is out of his or her mind.

  24. “In such a situation, investors scramble for the safest assets available – “cash”, which actually (and ironically, given our budget woes) means short-term US government securities. It’s not that the US is in good shape or even has anything approaching a credible medium-term fiscal framework, it’s just that everyone else is in much worse shape.”

    Actually, it’s even more screwy than this. People scramble to short term US debt because everyone expects everyone else to scramble to short term US debt – it’s sort of a huge Nash equillibrium. Couple this with the anti-dollar carry trades, and we have ourselves a massive Carry Trade Short Squeeze. The world is going back and forth between waves of currency fear and carry trade greed. But no real solutions.

  25. Not only have they set the course to destroy the world their huge funds stop anyone from stopping them.

  26. What do you expect when NAFTA is instituted and all the manufacturing jobs and other things.. it changed the dynamics .. we are all now competing with slave labor.. very nice corporate move! Now look at what has happened…


  28. Things are getting really exciting! The truth can’t be contained much longer, nor the collapse here and aboard. Thanks to the stupid greedy people who live on this planet.

  29. Our twisted American ideology has infected you in Europe. You’re welcome.
    If there is anything else we can do for you, just let us know.

  30. Actually, I see the problem as this;

    Multinationals want to gain without having to compensate those who actually do the work to produce this gain. France’s socialism is correct, for the people. The problem is that the stinking rich want everything for nothing in return, except slaves to do the producing while living in impoverished conditions.

    Why does the IMF require that any sovereignty that accepts its “help” must privatize their resources AND cut social programs (which better the lives of their people) WHILE casting them into permanent, unrecoverable debt?

  31. Nope. Luckily, this time, there are no Mussolinis, Hilters or Francos in charge of any European countries – although that doesn’t mean you won’t see the rise of nationalist candidates in the coming years and a great deal of localized internal violence. I just can’t see the PIIGS going to war against Germany and France. Or Germany and France choosing to use force of arms against another EU member state because they want the union to continue. Russia isn’t a factor in the equation anymore. Neither is China for that matter. Like Europe, they’ve mostly left militarism behind. You have to have an aggressor nation to have a war.

  32. I retired from the Greece government last year with a 168,000 EURO per year pension. Next year my wife turns 48 so she can also retire from the government…but her pension will only be 96,000 EURO per year. I hope we get some help from Brussels because if we don’t the government may cut our pensions by 2% next year.

  33. M. G. in Progress: “It would appear that the bailing out of Greece has the same level of moral hazard and systemic risk implications for the financial markets of Lehman and AIG crisis.”

    Except that there is a quick fix for the systemic risk. Return Europe to floating national currencies. (I say fix, but there would be turmoil in the short run.) Politically this is not going to happen, at least not any time soon.

    In a federal system, like the U. S., the central government would be paying for counter-cyclical programs throughout the federation. But Europe has a common currency without the federation. There is a place to look for systemic risk.

  34. While I hope donair that a reduction in your and your wife’s pension doesn’t harm your family much, I think your statement stresses part of the European problem as we Americans see it. Your pension, for a government worker is, by American standards, huge. And your wife? Retiring at age 48? Really?? That’s unthinkable here, where in all likelihood our Social Security system will be forced to raise its retirement age over the next couple years. Most of us face work until we’re 70 in order to spend just a few years of retired life, having had our retirement funds decimated by the Lehman collapse and our government pension funds either raided by cash-strapped local governments or frozen by governments that claim they can’t afford to keep putting money into those pensions.

  35. StatsGuy: “The Euro has taken the place of the gold standard. The parallel is absolutely clear.”

    Yes, and one prerequisite for developed countries to come out of the Great Depression was going off the gold standard.

    “Meanwhile, one of the main reasons the PIIGS can’t address structural problems is precisely because the ECB won’t use monetary stimulus (because it so loves the Euro’s strength)! Indeed, the PIIGS might not be in such bad shape at all but for the massive Euro revaluation.”

    Yep. The moral hazard is not just theirs.

    “Fundamentally, the political institutions are failing – failing to coordinate, failing to cooperate, failing to make hard decisions, and failing to fix market failures (because the markets have already failed).

    “Obama had a shot, but he blew it.”

    Oh, last year he had celebrity, but did he have much influence?

  36. France is the 5th wealthiest country on the planet.

    What are you doing there when you could be in Belize?


  37. Chris: “It might be interesting to give some thought to a comparison of the internal reticulation of this aspect of the US crisis with that in Europe.”

    Krugman has addressed that point recently. As I understand it, the main point is freedom of movement between states in the U. S. People can move to where things are better.

  38. A 35-hour work week is a bad thing? At least the French get to spend quality time with their families, as opposed to us Americans who work 60-70 hours a week for no extra pay and have little interaction with our own families. Quality of life? I don’t see how this is a problem.

    Striking, whether during a recession or not, is what keeps companies from taking advantage of their workers. A lot of companies now use the recession (at least in the United States) as an excuse to do just that…pay cuts, even more hours and work, layoffs, firing people just before they can collect their pensions, etc. Meanwhile, the people at the top aren’t cutting their own pay; in fact, it’s business as usual…bonuses and all.

    I’m sorry, but I have to agree with the French. The recession is the fault of the United States. Eight years of greed and unchecked financial risk during the Bush administration is bringing everyone else down with us. All our economies are so intermingled that it would be impossible for what we do here in the U.S. not to have an effect on the rest of the world.

    My apologies to Europe on behalf of the United States. I have been unemployed since July 2008, as the company I worked for went out of business…one of the many.

  39. The UK realized this and chose not to adopt the currency. They were asked to be in charge of finance – they refused. It’s too bad.

  40. “I retired from the Greece government last year with a 168,000 EURO per year pension. Next year my wife turns 48 so she can also retire from the government…but her pension will only be 96,000 EURO per year. I hope we get some help from Brussels because if we don’t the government may cut our pensions by 2% next year.”

    @donnair: wanna make me feel sorry for you?? 168K is 3.5x the normal sallery i make at 44y of age! Pension at 48y?! WTF! You both fail!

    Go do your whining somewhere else or start paying of some Greek debt with your UBERpension!

    Jebuz Hyst, i can’t believe the arrogance!

  41. I just got off the phone with our American daughter who lives in Paris. It’s very tough for her. Then, I opened the Huffington Post to see the snowy photo of the Eiffel Tower. Your comments were very valid as to how I understand the situation. Having said that, our daughter is happier in Paris and things are coming together for her there and it’s safer than many American cities, and education and health care are excellent and affordable and the food is better.

    It may just be that thanks to Goldman Sachs and AIG, the Depression is global. In a world where there’s really nowhere to turn, Paris is a nice place to sit and wait out this apocalypse.

  42. deregulation = depression

    Read up on coolidge/hoover. Extremely low taxes and no regulation produced a boom and then a tremendous bust. Coolidge was a union buster, states-rights man…and created the conservatives dream scenario in the 20’s.

    Unfortunately, the non-regulation of Wall Street let bankers take long odds on financial bets. Borrowed money was used as collateral to borrow yet again, to make risky plays in the stock market. Its precisely the same thing that happened under W in 2000-2008.

    Also, let us not forget the famous quote from dick cheney “Reagan proved deficits don’t matter”.

    Its time the republicans own up to their massive world-wide failure and change course.

  43. What? America is the most free, most prosperous country on earth. Please do not go about downing the USA when its down and suffering like it is today.

    I do not see any nations running to the rescue of the United States in its economic depression, however, don’t forget how often the USA has helped many if not nearly all nations with food, and military help in times of need throughout its history. In WWII, Germany needed food and supplies and it was said that no one could supply enough food for the people there, but America came to the rescue and with constant airp flights of food, the people were well fed with 13000 tons of food each day to Berlin until the soviets lifted the blockade.

    Americans are not the enemy of the world. It is authoritarians, dictators, communists, and radical socialists who seek to conquer their own people while attacking their neighbors who are a threat to the future of mankind. Americans love liberty and they hate to see other oppressed by low life thugs like Hitler, Saddam, and all the thugs we hear about these days. Americans stand on the side of freedom. It is the lying creeps who insist that authoritarian government is better than liberty who are a threat to Europe.

  44. Credit Default Swaps…a little over a year ago we never heard of these now suddenly the entire world is measured by them. I really get the feeling that banks have done this insure the legitimacy of these WAGERS! They want to make sure that we all know they are there and that they are credible. They want us to know that they are debts that must be paid. The Greek banks default because of CDS, they still MUST be paid. The generations of Greek children will become the slaves of the banks that demand their CDS money.

    Greek collapse leads to other collapses and suddenly the world is on the hook to ‘Somebody’ to the tune of $700 BILLION dollars for the CDS obligations…that must be paid to ‘Somebody’. Then we all are slaves.

  45. “You have to have an aggression nation to have a war.”
    You forgetting about US and there militarysm. I not talking about Obama, there are others in US that looking for WWIII, either for religious reason or finantial. US Citizens rights are suspended (Patriot act) in name of national security. Peole can be arrested (even under false pretence) and holded (even torture) with out charges (that Soviet and Natzi style approach). Main stream media become compliance to govermet (propaganda) and big business. US slowly becoming new fashist state where business is in charge not the people. The financial implicatipn are enormous, and chest board (US military bases aroun the world) have the figures (troops) already pre position. China olso prepare them self. It might be ugly.

  46. Feb 7th 2010 – The Economist

    ” Tax-collectors and customs officers in Greece have already walked out in protest against planned austerity measures by the government. On Wednesday February 10th it will be the turn of civil servants, doctors and other state workers. A much bigger strike is expected later in the month and past experience suggests that protests could turn nasty. Yet unless Greece gets a grip on its public finances, the government will struggle to finance its loans. Similar anxieties are emerging elsewhere in Europe.”

    Sounds like more than just a few dishes will be broken. Oopa!

  47. A totaly worthless article. A journalist that starts his article pointing to a global depression (in Europe?) in the making, then goes on about the risks of sovereign debt default in Europe. These are totally different things mashed together for dramatic affect.

    As a matter of fact Europe is showing growth again. That does not role out sovereign debt default or vice versa.

    The article is full of suggestions that do not have basis in fact or sources. ‘The Europeans are not being careful’ what is he talking about, exactly? The author even knows the inner workings of the mind of Dominique Strauss-Khan ‘…he knows this is wishful thinking…’, where does he base this on?

    Europe is facing very serious challenges but you’ll gain no insight in the matter by reading this piece of nonsense that mixes facts with wild speculation.

  48. I only wish you could say that the New Deal had been destroyed. Since its inception, the country has been in a downward spiral of perpetual government programs to aid and equalize everything in this country. It seems people have gained this idea that everyone deserves to have equal prosperity and this can be accomplished through government. The government needs to release its strangle hold on a free market economy and let it breath. But that’s not enough on its own. The current generation of Americans are all under this impression that they are entitled to everything. They blindly accept how things are and take no time to perform their duties in upholding a capitalist economy. An economy kept in check by the people needs the people to use the primary tool of a capitalist society: Boycotts. If companies, banks, etc. are getting out of hand or corrupt, don’t buy from them. This is the problem with health insurance. If people would refuse to buy insurance for things they don’t need then companies would be forced to adapt. People just seem to have this new idea that health care is a fundamental right when it is not. The founding fathers would cringe at such an idea…

  49. Greece has no business being in the Euro. It was shoved into the currency as some kind of geo-strategic and historical sop. Europe wants a long historical legacy and Greece provides them that. It also wards off Turkish influence in the southern flank of Europe.

  50. Is this a joke?? Your numbers dont add up. I know a few people who retired from the “Greece government” but are only receiving about 10 percent of what you stated above.

  51. I say, let the Greek economy collapse. The Greeks may have had an illustrious history thousands of years ago, but have you dealt with any Greeks lately? Some of the most vulgar, amoral and money-obsessed people I have ever met.

  52. I wholeheartedly agree. Frankly, i am tired of having the bureaucrats in Brussels dictating what my life balance should be. If Greece had kept the drachma, it wouldn’t be in such a mess. The markets would have imposed their own corrective years ago.

  53. It is the lying creeps who insist that authoritarian government is better than liberty who are a threat to Europe.

    …and that would be the U.S. of A.

  54. Obama should be driving this point every time he opens his mouth. Unfortunately, he is playing the political game. He has proven to be on the side of Goldman-Sachs. Some change! To my great dissapointment, he is on his way to one-term failure.
    I keep thinking that maybe a Palin victory in 2012 accompanied by republican majorities in congress is the best thing for us. When she continues the failed conservative policies, and crashes our ecomony once again, maybe we will finally learn our lesson.

  55. You are correct. As for the guy just above, the subprime paper was packaged by Wall Street and rated by S&P, which S&P admitted in an interview that they rated them AAA because of their relaionship with Wall Street.

  56. Amazing how ill informed you are. Contrary to the comments by big banks, the Fed, and Wall St, high priced oil caused lots of Americans to find themselves unable to afford their homes, and even the basics of life. When you have to decide whether you’re going to eat and put fuel in the tank of your car so you can go to work and take the kids to school, vs. pay the mortgage that you could afford before the price of food and fuel and electricity when thrugh the roof, you choose to eat and go to work.
    Use your head. Dont believe everything the government / media complex tells you

    Americans did not suddenly default on their home loans! Wh asoline and crude oil that caused the current meltdown in America.

    When Americans couldn’t pay their home loans because all aspects of life suddenly became very expensive due to the price of fuel, the banks took a major hit.
    And, the

  57. OMG! Palin does not belong in a conversation of any kind except entering the next beauty contest. Too bad they don’t judge from the inside.

  58. “In a federal system, like the U. S., the central government would be paying for counter-cyclical programs throughout the federation.”

    That explains why places like California are bankrupt, defaulting on their debts and obligations.

  59. I will recomed that you live that glass house some time to the real word and think before you put some ridiculous stament. So you will do if you have 5 yeas old kid that brake his leg and you go with him to emergency room and the doctor telling you that he will help you but you have to first pay $2000. You willreply that you are pure and that you have only $5. He will reply that he can’t do anything for your kid because you can’t pay. He will jut evidence you that with out help the kid will die with in one week due to infection.

  60. Communism is an economic system? Look, there are only two kinds of people in the world: Those who want more government, and those who want much less.

    Under our limited governmental system in the USA, for a very long time, free market capitalism has worked very well. In fact, it has worked so well, the USA is the leader of the world. The US GDP is over 14.4 Trillion dollars. The closest competitor is Japan with a GDP of 4.9 and China with 4.3 Trillion. Looking at those figures, its hard to tell what system is best, isn’t it?

    All big government defenders should move to Russia. Putin is looking for help.

  61. running chicken no head: “While I hope donair that a reduction in your and your wife’s pension doesn’t harm your family much, I think your statement stresses part of the European problem as we Americans see it. Your pension, for a government worker is, by American standards, huge. And your wife? Retiring at age 48? Really??”

    No, not really. Can’t you tell a fake note? ;)

  62. JFV: “Go do your whining somewhere else or start paying of some Greek debt with your UBERpension!
    “Jebuz Hyst, i can’t believe the arrogance!”

    The arrogance is in thinking that people would believe his note.

    Stemos: “Is this a joke??”

    No, it’s a hoax.

  63. Donna-Phoenix: “Welcome to Pluto into Capricorn”

    Haven’t you heard? Pluto is not a planet anymore.

    The real problem is Republican Retrograde.

  64. I say let the Europeans eat cake. If they are going to side with the radical muslims who call America the enemy, then don’t worry about US policy or what the current administration is doing. Fix your own economy.

  65. Work whatever amount of hours you want! There does not need to be a federal policy regarding hours you work. But, if you can’t live without having to go to the public for welfare handouts, then you are working too little. Increase your hours so that you can support yourself and your family.
    Asking your neighbors to support you because you only want to work 35 hours a week is rather lazy, don’t you think?

  66. More government, more taxes, and more regulations makes life better? Since when? If that were the case, Europeans wouldn’t be worried today about a pending crash.
    Less government = more freedom.
    Less government = more liberty.
    Less government = more independence.
    Less government = more of your money stays in your pocket

  67. Itolfyouso, I couldn’t agree more with your statement. Reagan also failed us by stopping R&D in alternative energy in it’s tracks.

  68. Ironic, isn’t it? The thieves on Wall Street and in London (same) have stolen SO much of the People’s money in their maniacal Saching [spelling mine] under the Reagan/Summer framework, that they have brought us to a collapse which will not only render all their pillaged wealth worthless and no longer theirs, but will most likely take their very lives in the chaos that ensues.

    We knew greed could lead to new, well endowed friends named Bubba behind bars (ask Bernie Madoff about stitches in private places), but who would have thought that greed could go on to such an UN-GOVERNED extent that it would cause death?

  69. I keep trying to evaluate the Greek Debt Crisis from the perspective of protecting my family wealth. I see uninformed panic beginning to percolate as it did in 2007-2008. Just what are the underlying real world political facts in Greece? Civil servants are striking for their own protection as they see it. The state deficit exceeds 11 % of GDP. Will a general strike mindset begin to form and bring the government down? Well, the Greek debt must continue to expand and roll over for financial matters to continue as they have in the past. That or Greece repudiates it’s debt at some near term point. Just like Russia.

    Mistakes or past events do not really matter. What matters is what choices are made in the very near future.

    Just what is the Greek political system likely to force the government to do in the next few weeks and months?

    Factions inside Greece must prevail or fail and then come to a political consensus as to what Greece must do for Greece and only Greece. That consensus may well be that Greece does what it pleases by external repudiation. Certainly, Greece could go back to it’s own currency on any basis it chooses. It is a question of courageous compelled acts. Is Greece at such an inflection point?

  70. Man, I had to read through all the above stuff to finally read a comment that rightly challenges the veracity of this article. I knew when I read the catastrophic headline that it was baloney.

    I’m an American living in France. There’s work here. All my friends are employed, or if they’re self employed they have contracts. There are cranes in the skyline, so there’s building going on. The bars and restaurants have fewer patrons because they made it illegal to smoke inside public buildings…not because people are jobless or penniless. My MBA students are getting jobs and internships. I don’t read stories about 7 banks closing here in one day, which I read regularly in the press back home.

    In America, my brother’s construction company has a two-year backlog but can’t get any financing for new jobs. My home sits empty and unsold and probably will sit there another year before I can unload it. Half of my friends are unemployed and others have taken pay cuts and demotions or are just waiting for the axe to fall. Stores are closing and mini-malls are half empty. The middle school in my hometown is closing, so all the kids have got to drive or be bussed 50 minutes away.

    Things aren’t perfect here in Paris, nor is the government perfect, but I agree with the commenter way up top whose daughter is here – Paris is a great place to wait out the deluge.

  71. Actually, Sarah Palin represents the views of the vast majority of Americans who cannot stand Obama and his big government methods.
    Unfortunately, Sarah is female, and as such, should not be in a position to lead men. God made women as helpers, but not leaders of men, however, Sarah is a wonderful person and she is in this position not because she is female, but because the men of America have failed drastically to fulfill their role in life.
    If men were doing what they should, Sarah Palin wouldn’t be found on the political scene. She would be taking care of her fine family. But, American men like so many men in Europe, have decided to sit back and let everything fall to the floor. Few men are willing to stand up and be counted as Conservatives, so a fine woman who is very feminine and mother-like has risen to the top of the US world of politics because she is the only person who is indeed a REAL Conservative, not a liberal socialist democrat in Republican clothing.

  72. Donair’s numbers are not that different from what a California Policeman, fireman, or veteran high school coach and teacher might receive after 30 years of service. 6 figure pensions are not uncommon there. After 30 years of service, you retire at 90% of your last year’s pay, so you can really boost your pension by stacking overtime in public safety or taking on extra paid duty in the school system for that one year. Then with annual COLA added to that rich base, you can really make out over time. The Cal State legislature and the governator think the rest of the country should bail them out rather than cut cushy deals like this.

  73. What? I was part of the Reagan R&D. It was the hate filled radical democrats in the US House and Senate who hated Reagan that defunded his projects and yet funded the revolutionary communists in central american nations.
    Reagan was all about the growth of every field of science which was well represented by his support of Star Wars aka the Strategic Defense Initiative.

    The America hating left in America still hates Ronald Reagan today, but they will kiss the ring of their new Marxist in office and proclaim him King.

  74. I think Greece has three options: 1) leave the eurozone, 2) leave the eurozone and 3) leave the eurozone. Everything else comes down to choosing between a rock & a hard place. Why should Grecians not hang on to their living standards? Forcing austerity on them instead of helping them to raise their living standards, is sheer ideological mania (imo: worse than 20th century -isms combined). Best they can do is to leave the insanity behind.

  75. purple wrote:

    “Greece has no business being in the Euro. It was shoved into the currency as some kind of geo-strategic and historical sop.”

    I agree.

    Mark Twain wrote:

    “History doesn’t repeat itself – at best it sometimes rhymes”.

    It does not change how things will be played out in the end. My 2-cents.

  76. This article is spot on the IMF and ECB need to extend credit to troubled countries.

    It is not just Greece, there is dozens of countries with Sovereign debt problems. Greece’s CDS premium is only 350 basis points (3.5%) Argentina, Pakistan, Venezuela and Ukraine are all about 3 times that.

    We may are facing a tsunami of sovereign debt default, which will suck trillions in credit out of the system.

    China’s real estate bubble looks to be popping, too, which is another massive credit crisis.

    Prepare for a rocky 2010. The recent sell-off in the stock market was accompanied by a sell-off in precious metals, indicating a liquidity squeeze, not a flight to safety. If we the central banks can’t provide lqiuidity and regulate risk, then what is the point of a fiat currency banking system?

  77. Assuming that you actually HAVE a job or can GET a job….

    How about we who went to college to “upgrade” ourselves and are now saddled with debt for the rest of our lives and no prospects for life anywhere NEAR, never mind above, the poverty line? Some of us are now cleaning motel rooms and flipping burgers to pay the rent in shared housing while our graduate degrees gather dust. Without the government protecting us from the robber barons, there will be no such thing as the democracy you perceive. After all, that’s what we supposedly PAY our TAXES for, representatives to see to it that there is equality and fair exchange through regulation.

    By allowing ourselves to be distracted by technology and for sake of “convenience” – for whom I can’t be sure – we have turned our attention away from the components of life that matter, including our environment that actually sustains us and has nothing to do with money. By allowing ourselves to be reduced to “consumers” we have also allowed ourselves to be enslaved by the corporatocracy” that neither concerns itself with equality nor the well-being of anything except their profit margin.

    Ultimately it will not be a matter of who has money, it will be a matter of who can survive beyond technological crap that not only keeps us distracted but destroys the natural realm that is what sustains all life as well as any hope of equality that we might have had.

  78. Howard Beale wrote:

    “Ironic, isn’t it? The thieves on Wall Street and in London (same) have stolen SO much of the People’s money

    The Thieves Guild is an ancient profession.

  79. Bart wrote:

    “We may are facing a tsunami of sovereign debt default, which will suck trillions in credit out of the system. China’s real estate bubble looks to be popping, too, which is another massive credit crisis. If we the central banks can’t provide liquidity and regulate risk, then what is the point of a fiat currency banking system?”

    You’ll find out shortly. Before the Tsunamis hits, the water recedes.

  80. Perhaps if all defaulted and the people refused to acknowledge the banks and learned to fend for themselves the world would become a better place. If the profiteers lose their behinds, they also lose their power over the rest of humankind which could allow for humankind to recover from this madness.

  81. As an American it is embarrassing to see views such as that of Tracey1212 expressed so vividly for all to see. It is precisely this kind of simple-minded nationalistic pro-corporate and parochial jingoism that has created many of the economic problems that now haunt the planet. You would think the novel “the Ugly American” had never been written.

    If only more Americans would read, learn about how others look at things, and think before they speak, the world would be a better place. Its ironic and a distinctively and now widely fashion American reflex to criticize Obama for attempting to redress the folly of this kind of thinking. At least now its reassuring that with the recent Supreme Court decision, foreigners via their US corporate subsidiaries can become directly involved in US electoral politics. The flip side of course is that with budgets already straining putting a greater and greater proportion of one’s wealth into influencing a fickle and remarkably uniformed US electorate is likely to bankrupt us all.

  82. Yeah — plus the French protect their farmers so they can remain able to feed themselves — and they keep a lot of the American-style corporate poison out of their food.

  83. As billy clinton said, “I feel your pain.”
    Stop waiting for equality and get off your rump and make a business of your own if you can’t find a job.
    Yes, life is hard now, and government is to blame, not the solution you long for. You sound like a socialist hoping that Marxist policy will fill your food shelves. It won’t and it never has. Your only solution is to rely on yourself, friends and family. Use your degree to start a business, not work for one that isn’t hiring anyway.

  84. 2nafish wrote”

    “Perhaps if all defaulted and the people refused to acknowledge the banks and learned to fend for themselves the world would become a better place. If the profiteers lose their behinds, they also lose their power over the rest of humankind which could allow for humankind to recover from this madness.”

    “Sanity is a madness put to good use”

    George Santayana (1863 – 1952)

  85. “In WWII, Germany needed food and supplies and it was said that no one could supply enough food for the people there, but America came to the rescue and with constant airp flights of food, the people were well fed with 13000 tons of food each day to Berlin until the soviets lifted the blockade.”

    In WW2? Really. Your grasp of history is astounding. I think the ink on your hand smudged.

  86. You use words like “socialist”, “marxist” and “communist” but you have no idea what they mean.

  87. The situation you describe is the exact same situation that happens in a large nation internally. Different economic policies of individual states can have a sever detriment on the nation as a whole. The answer is to have a more unified total economic plan.

  88. Ya liberal economic policy are to blame for the economic problems for these European nations…. O wait the nations with the most liberal socialistic economies are the ones with the strongest economies in Europe…

  89. Maybe the multi-trillion dollar question comes back to how to deleverage (flush out the toxic debt) without triggering a massive collapse of the global economy.

  90. CDSs are illegal void ab initeo. All insurance contracts insist on an insurable interest and uberrime fidei. It will take only one major player to repudiate and the whole house of cards will fall. This is so terrifying to the financial world they will do anything to prevent it.

  91. You mean that the mediterranean scoundrels have an inherent right to spend german money?

  92. The main problem going forward will be the existence of Credit Default Swap coverages purchased to insure sovereign debts of defaulting nations. By now, contracts must be in place to cover any losses on default. These coverages may be multiple in nature and certainly a major portion may have been purchased some time ago. Indeed, much coverage may be nearing term. Now would be the time for these holders to trigger a crisis if they are able to do so. Certainly, any default of European sovereign debt is wholly covering European holders of Euro based soverirn debt.
    Greek Soverign debt default, as an example, almost surely is covered by someone. AIG ? AIG must be a big part of the coverages of any CDS coverages sold before 2008.

    Might half or more of any PIIGS sovereign debt CDS coverage losses be claims against American sellers of coverage?

    The losers will not be the sovereign debt holders here in a partial loss but the insurers. How many insureds are holding naked insurance and must buy the product to settle up for a loss?

    One of the more cogent items in Greg Zuckerman’s book about John Paulson’s Great Trade was the realization by Paulson and others that the big banks were selling and not laying off CDS protection.

    Does Professor Johnson have access to just who has the exposure here?

  93. One of the problems is the over the counter market. Congress failed to regulate derivatives in 2000 or to force them onto exchanges so we would have transparency. Unless this is done very soon we will have financial armaggedon

  94. If Gordon Brown could “save the world” last time out, is there any hope for an even-more-emfeebled Brown to save Greece and, by proxy, Europe?

  95. Let’s not forget!
    Since WW2 the world financial system was controlled by the US/british parasites. They were able to plunder huge amounts of wealth from the world. And now the game has changed, because of China and the rest of Asia. So these “moneychangers” react by making a plan: This so called “financial crisis” is therefore another gigantic heist, one of the biggest history has seen. Only a complete idiot can believe the propaganda that this was some kind of accident – lol. It a will end with war and huge suffering. So, nothing new under the sun.

  96. February 7, 2010 at 5:07 pm, monkeywatcher wrote:

    “Let’s be honest!

    The hole mediterranean culture is one of corruption and irresponsibility. Northern europeans should disconnect themselves from these people, unless they want to pay perpetual tribute to the mafia.”

    An unfortunate choice of words. I don’t think any society has a particular monopoly on corruption.

  97. I don’t understand. What is wrong with you brain acrobats?

    Again. let’s make this absolutly clear:
    It’s not the fault of the Euro, ECB or Germany. All these corrupt mediterrarean scoundrels, who were so eager to join the EMU in the first place, broke the treaty. And I am sure not only Greece outright betrayed on a massive scale. Because that’s who they are!

  98. Sorry, we are far beyond mincing words. The truth has to be told. And the truth is that each German at least will have to give a huge part of his hard earned wealth to these people – for nothing!

  99. monkeywatcher wrote February 7, 2010 at 5:35 pm:

    “Sorry, we are far beyond mincing words. The truth has to be told…..”

    Vladimir Lenin (1870 – 1924) wrote:

    “A lie told often enough becomes the truth.”

  100. The major problem of a sovereign default covered by a Credit Default Swap is the extent that a standardized cash settlement option CDS contract was used. This , from sheer practicality, must be the more used contract since 2005. Thus, a seeker of coverage need not own the security insured. They are paid the loss percentage after a loss trigger in cash.

    One of the facts I am trying to get a handle on is just what is the extent of cash option CDS settlements? Obviously, cash option settlements are mixed in with property settled contracts where the insured turns over the property in return for a total cash payout. Early on, people like Paulson found out that property settlement CDS contracts forced short covering in effect and drove the price of the bond up. His burn was where a 50 bond was forced up to 90 by short covering. So he went into cash settlement options.

    Who get’s burned on a Greek sovereign debt failure and who wins?

    It is now 2010, hence most contracts entered into in 2005 are nearing termination. Is there a two year window for the really big gamblers to secure a payoff? Contracts entered into in 2006 and 2007.

    So, the Greeks default but the cost lands anywhere else but Greece?

  101. “This is the problem with health insurance. If people would refuse to buy insurance for things they don’t need then companies would be forced to adapt.”

    Yeah, my friend with the severely brain damaged kid has LOTS of choices here…

  102. Either you are completely ignorant or you are just here to get folks riled up.

    You lecture on getting a job or else starting your own business… When I stop laughing at your cavalier lack of knowledge I’ll see if taking you seriously is worth the effort.

    Just where do you suppose the start-up funds are going to come from and just where do you suppose any clientele will have any funds available to spend on this proposed business?

    I wonder when you might be graduating from jr. high school, any time soon? Maybe then will find that having to fend for yourself in the real world is a lot harder than living in your daddy’s house. Which bailed out bank does he work for? I only say this because it is obvious that you do not support your own lifestyle with your own earnings.

  103. There are two kinds of people in the world, those that say there are two kinds of people in the world, and those that don’t.

    Incidentally, does your stereo volume have two settings, “one” and “eleven”?

  104. “Take an Econ Class” might to well to take a class in Economic History. The post New Deal economy of the and the postwar 1950’s and 1960’s saw the US economy emerge as the the premier economy bar none. It stumbled during the Regan years, although to hear the Wall Street owners of mass media tell and retell the story, those were the “good old days”, ignoring that the greatest surpluses and economic activity occurred in the Clinton presidency.

    With the subsequent rise of republicanism, the sale of the US government to corporate interests (both foreign and domestic) as part of the “great myth of privatization and smaller government” and the onset of “free trade”, which disguised the off-shoring and dismantling of the US manufacturing base, the primary infrastructure underpinning the US economy and its regulatory and educational systems the US has now hollowed out its economy to the point it can no longer sustain the form of corporate welfare-state government it now relies upon.

    While one might love to “punish” unregulated fully monopolistic insurance companies by never getting sick or never buying a home, is a ridiculous argument. To suggest that the problem with the American health care system is too many people buying health insurance or that somehow they are buyingn too much is absurd. Just try to get a reimbursement on some of that coverage “you thought you had paid for”. The notion that people can “punish” the insurance industry by not buying from insurance companies is laughable. With the average American nearly always buying a house with a mortgage, one is required BY LAW to support the insurance companies. Just try and get a mortgage without insurance. Insurance companies are so thoroughly intertwined monopolies you have no choice but to buy from them, whether you like it or not. Insurance companies like all businesses sell their wares at the highest plrice the market will bear and if you can’t afford it tough luck. You can happily live at the curbside as far as they are concerned. Despite all the talk of reform major California insurers are raising their health care premiums next year by up to 30%. A major insurer has just informed Floridians that they will no longer cover them for wind damage, even if they wanted to buy it. I personally think our founding fathers would cringe at just how remarkably unaware the American public has become.

  105. The problem is Greece is filled with actual humans, subsequently that makes them unsuitable for bailout. Now if they were money grubbing pond scum like Goldman Sachs, well they would be bailed out in a second.

  106. The “me generation” on steroids. There is a middle ground here somewhere between your libertarian zeitgeist and Marxism.

    The “Greatest Generation” has been replaced by the “Most Selfish Generation”.

    What happened to the “common good”? How about at minimum just “Noblesse Oblige”? Throw the poor bastards a bone at least.

    Jesus would be rolling in his grave if he wasn’t resurrected.

  107. Ronald Reagan’s idea of a solar panel was one that could be used to shoot down enemy missiles.

    Its obvious that Tracy1212 is bitter because a democrat had the wisdom of cutting the corporate welfare state and its $1,000 toilet seats that proliferated as part of the “great Reagan strategic defense initiative”, which still today still doesn’t work for exactly all the reasons the physicists have been saying all along, its virtually impossible to design a projectile capable of intercepting another projectile traveling at very great speeds.

    Lets face it Reagan funded his initiatives and his favors for the wealthy by plundering the environment and killing hundreds of thousands of poor people in Central and South America and elsewhere to keep his corporate benefactors happy.

  108. “Oh, last year he had celebrity, but did he have much influence?”

    I would let him off with that, but I didn’t see him much try. I mean, I never saw him really put himself on the line for this.

    Really it’s just a matter of the end of civilization as we know it, but he couldn’t raise his hackles for more than a few sound bites.

    He’s better than the alternative, but he seems to have a pathological need for everyone to like him. That is exactly what we DO NOT need right now. We need some extremely tough talk, talk that doesn’t just give up at the loss of a single Senatorial seat.

  109. Actually it wasn’t freedom of movement, it was the fact that we had a strong federal government that would act to bail out failing states. As seen here, no such thing exists for the EU. They don’t have an effective federal apparatus to provide assistance across countries.

    In short they have the worst of both worlds – they cannot adjust their currency to compensate as it is “common” to the EU, but unlike the US, the EU won’t provide support to countries when they are in trouble (if I understand correctly, they lack the paradigm).

    In the EU, like the US, you can work anywhere, so it is not a problem of mobility.

  110. You seem to forget that much of the 14.4 Trillion is actually foreign money that serves only to prop up multinational interests in the US. The days when the American consumer drove the US economy are now gone. Watch just how fast it will disappear when US policies are no longer aligned with those of foreign bond-holders.

    It is curious that those would seem to want less government also seem to want the strongest military, as if armies somehow pay for themselves.

  111. Well, certainly the bit about head-scarfs and minarets (which is a non-EU state action – Switzerland) is a bit reactionary. However to note, they have a huge amount of Muslim immigration going on, so it is significantly more “in their face”. That’s not to say it’s acceptable, just to say it’s “easy for us to say”. Certainly we are hardly a bastion of tolerance and last I checked they didn’t happily support torturing Muslims (I think I’d give up my head-scarf first if I was a Muslim).

    So, yes, I think I agree with “One of us is out of his or her mind.”

  112. “So, the Greeks default but the cost lands anywhere else but Greece?”
    Germans will have to pay a big part. Probably more than 500 billion all in all for all the mediterranean scoundrels. Insuing Inflation not included.

  113. I worry that such a outcome with a Palin or some other republican is quite likely, but this time they will out of desperation, when foreign bond-holders begin not to like what they see, start another war, perhaps similar to the last two, which they couldn’t win.

    Depending on where that war is, things could get badly out of hand rather quickly. Lets face it most republicans have a distaste for the science of biology and consequently, little knowledge of how the natural world actually works. They have no conception of just what a catastrophe a nuclear winter would be like. Ironically, they would then no doubt be calling out for that big government idea of a better funded military to save them.

  114. Tracey1212 seems to be suggesting that a perfect utopia is a world without government the dream world of total anarchy, all the “liberty”, “independence”, and “freedom” you want until someone comes a long and kills you for your money or their idea of “freedom”, “liberty” and “independence” from regulation of any kind.

    No wonder Tracey1212 only offers slogans just like the Taliban, who only ofter suicide bombers. No solutions, just a descent into anarchy. Ironic how the Christian right has discarded the teachings of Jesus and the notions of looking out for ones’s fellow man in the headlong pursuit of “lower taxes”.

  115. Turkey, the more comments you make, the more left wing you appear. Keep it up because soon, you’re going to slip up and openly endorse Comrade Karl Marx.

  116. Anybody know . . what is the $-and-drug economic flow in Eurozone, ie is it somehow equivalent to how it works between USA and Mexico? (I think of Mafia, and impoverished south/rich north.)

    I read somewhere that the drug economics in North America is just about as large as the automobile economics — in other words, economically quite significant. So imagine if Canada, USA and Mexico had unified their currency — wouldn’t a large north-south exchange of cash for drugs affect the stability of the whole system? Does that happen in Eurozone? In any system, what does a huge amount of hidden cash flow do to the balance of the books? ( I remember reading about the “missing money” a couple of decades ago.) Do any economists integrate these things into the picture?

  117. Lets face it the natural world that has supported humanity for millennia is collapsing, particularly now that billions of Chinese and Indians, and South Americans beginning to become consumers, not to mention millions of new people in virtually every other country and the seemingly endless voracity of the US consumer.

    Consequently, the only business schemes that “work” in the short term are a variety of versions of the what in the US is called a Ponzi scheme. Like radical right-wing politics ponzi-economics has moved into the mainstream of corporate capitalistic finance.
    All that is left is to find the gullible to buy the mistakes of others. This explains the proselytizing non-reality of the American hyper-capitalists as espoused by the Tracy1212’s of the world.

    The situation won’t improve until governments of the world begin to restructure economies on ecologically sustainable approaches. Neither Obama or a long list of other world politicians are going to be able to get around this reality, and more than likely, with significant additional ecological instability ahead hundreds of millions must die, whether they be Greeks, Americans, or others before a more realistic carrying capacity can be again achieved. Sure the wealthy can insulate themselves, but only to a degree. What you are seeing in the “economic” sphere is but a reflection of this larger reality.

  118. I’ve spent quite a few years in and around Paris. First, it’s not very safe. There’s a very high rate of petty crime, people are mugged all the time — I see or hear of it every month. The streets are quite tough and they are getting tougher as unemployment rises.

    Secondly, Paris is only a nice place to sit and wait if you have a bundle of money in your pocket. Average salaries are very low — around 1500-1800 euros per month. The average apartment is very small and very expensive — probably 900-1200 euros per month for 30-40 sq meters, if you’re lucky. Most are more expensive. And landlords require that you prove that you earn 300% the amount of the monthly rent if you want a place to rent. This means that the average person cannot qualify for the average apartments.

    Further, in France Paris is the place to go for work. This means competition for jobs is high. It’s also hard and expensive to fire people, consequently young people are increasingly employed via short term contracts and/or are abused via the internship programs. Unemployment in the 18-25 year olds is frighteningly high.

    Average life in Paris is tough. Yes there’s health care. But beyond that only the wealthy live comfortably here.

  119. Mostly nearby Western states, however, as in the days of the dust bowl when it was Oklahomans in transit, one doesn’t always find things greener on the other side of the fence.

  120. Brian, to find a Socialist, Marxist, or Communist, all one has to do is listen to the ministers of Europe preach about equality, or watch American TV to see Obama and friends doing all they can to impose a Euro styled medical system on Americans who hate the idea.
    I wonder how long Europe would last if America removed its short range nuclear missiles from the theater? Would the Soviets notice? Would Mr. Putin come down to see you? How long until you would have to learn Russian? Yes, American nuclear subs are just a few miles away, but their missiles can be easily seen in boost phase. Those sneaky short range semi-tactical nukes with the US flag on their sides are sure hard to see since their flight times are very reduced. The next thing you know, you have two suns above your head, and one is only a mile away at 100,000,000 degrees F. Makes for a very bad day. So Mr. Putin’s tanks haven’t rolled yet. He’s using his oil money to rebuild. Better keep those mean ol American missiles in place, for now. He’s the communist you don’t want to see. Did someone say that America now has a tiny drone like those in Iraq and Afghanistan that carries an atomic bomb, flies way below radar very slowly until bang! it hits the target? Nah, we would never ever think of something like that. That’s too sneaky. Sleep well my European friends. America is guarding you tonight.

  121. With degradation of arid regions becoming more acute, Europeans have had more than their expected share of economic refugees. This is unlikely to change, although the fate of such refugees will in general become more dire. One hope might be European investment in North African solar projects on a massive scale so as to redirect resources to where they are needed.

  122. Quite possible, I would venture that it is the Chinese who are most likely to be far-sighted enough to implement such a strategy. They are moving the fastest to benefit from the input of solar power, although the Germans are certainly doing their best to try. America doesn’t appear to be able to get away from the grip of oil-based economic forces to become a players soon enough to give them a chance to succeed, particularly since they usually want to superimpose their culture on others in the process.

  123. “6 figure pensions are not uncommon there”?

    Spoken like someone who gets there facts from FOX news.

    Yes, there are politicians who receive such benefits, but they are hardly common. You do have a point, but its hardly the source of California’s problems. If you want to know about some of California’s budget deficit issues you need to look only at the results of their Proposition 13, passed many years back that disconnected real estate and other methods of taxation from reality. You could of course, also include the effects of Bush era energy degregulation and the recent mortgage meltdown associated with CDS’s and other UNREGULATED lending practices that allowed the unscrupulous to essentially get away with fraud.

  124. Seriously? Are conservatives still saying that
    ..the country that trashes its own Constitution in the quest for security (theater) is the “most free” country on Earth?
    …the country which had most of its “wealth” (conjured out of thin air in a bubble) disappear in a sudden pop is somehow prosperous?
    …20% under/unemployment is somehow good?
    …a healthcare system where such a “wealthy” country is can’t even be USED by the part of the population that actually has insurance because the ones that don’t have insurance have drained the money out and the rich have driven up the cost?
    …the disappearance of the middle class is fine so long as we all have a miniscule chance to hit the lottery and become part of the rich?

    Is this nationalist chest beating (backed by theocracy and fascism, typically) all that conservatives can muster still?

    When this whole country crashes in to the ground, you blinkered ignorant fools will be the ONLY ones surprised, because you bought ALL the BS the oligarchy fed you. You never even QUESTIONED any of it.

  125. What is even quirkier about Canada is that Prime Minister Harper goes around the world bragging about how Canada is well off because of the strength of its banks but totally neglects to admit that he has made a $75 billion gift to Canadian banks by letting them dump their toxic assets on to Canada Central Mortgage which is an arm of the Canadian Government (Sort of a Canadian Freddie or Fannie). This is why the Canadian deficit has gone from $0 to $60 billion in one year. The Canadian tax payers are the ones footing the bill. All of this was done 4 days before the last federal elections, in October 2008, and what is even more worrisome is that the opposition parties did not say a word.

  126. I know normally the conversation here is quite civil, but honestly? Every single comment you make it rhetorical conservative drivel, vomited straight from the mouth of every pundit on Faux News in to YOUR mouth. And you just swallow, then vomit the same crap to us.

    Please shut your ignorant mouth and read. Absorb information. Stop spreading this crap.

  127. Turkey, Jesus never said that you should sit on your rump with your hand out expecting everyone else to take care of you. The apostle Paul had this to say about work…surely he was thinking about today’s socialist mentality:

    2 Thessalonians 3
    6-9 Our orders—backed up by the Master, Jesus—are to refuse to have anything to do with those among you who are lazy and refuse to work the way we taught you. Don’t permit them to freeload on the rest. We showed you how to pull your weight when we were with you, so get on with it. We didn’t sit around on our hands expecting others to take care of us. In fact, we worked our fingers to the bone, up half the night moonlighting so you wouldn’t be burdened with taking care of us. And it wasn’t because we didn’t have a right to your support; we did. We simply wanted to provide an example of diligence, hoping it would prove contagious.

    10-13 Don’t you remember the rule we had when we lived with you? “If you don’t work, you don’t eat.” And now we’re getting reports that a bunch of lazy good-for-nothings are taking advantage of you. This must not be tolerated. We command them to get to work immediately—no excuses, no arguments—and earn their own keep. Friends, don’t slack off in doing your duty.

    14-15 If anyone refuses to obey our clear command written in this letter, don’t let him get by with it. Point out such a person and refuse to subsidize his freeloading. Maybe then he’ll think twice. But don’t treat him as an enemy. Sit him down and talk about the problem as someone who cares.

  128. The losses on a Greek default to owners of Greek sovereign debt will likely fall mostly on non holder’s of the debt , those that insured the debt for a quick killing. The Greek government would not be able to borrow much to finance new expenditures above taxes taken in unless Greeks themselves loan the money to the government. Will Greeks not receiving state funds like to see their loaned money funding the buraucracy? With all the Anarchist frenzies and such in the past couple of years, I wonder.

    It could well be that German banks that own a chunk of Greek sovereigns get paid off by say some big US banks as an example. I am trying to figure out who is on the hook. Identifying the big sellers of protection to sovereign owners are what I am interested in.

    What is the multiple of notional CDS coverage of Greek and other PIIGS group sovereign debt? Since total CDS coverage has long been touted as multiple total of incurred debt, the number must be well over 100 %. Would a $10 billion Greek debt loss trigger payouts of say $50 billion to make it interesting? This kind of payout is going to knock over some of the sellers of protection. Lets say German Bank X owns that $10 bn and bought $20bn of protection. Greece repudiates and coverage is triggered. German Bank X settles for a 95 payout and retains the debt. They get $19 bn and keep the $10 bn of Greek debt. They carry it at zero and reschedule the debt very long term. Greece loves them and they make $9 bn after writing off the Greek debt.

    Some people got stuck for $19 bn . If these people go broke, then we do have a zoo of a problem. Maybe the ECB buys the debt for say $5 bn and puts it on their books like the Federal Reserve Bank of NY did in late 2008. All so nice and tied together too. What old timers in accounting used to call a ” Tickee Footee Blow Off”. These are just examples.

  129. The managers of the world economy, whose management of the crisis has gotten us into the crisis, now call for more management of the world economy, under their expert guidance.

    These guys are seriously deluded. Let’s return to a gold standard and try honest banking for a change—no fiat, debt-based money managed by fractional-reserve bankers. Let every dollar be backed up by a fixed weight of gold and let loans be made only from saved capital at interest rates determined in a free capital market.

    This would be our salvation, and a true boon to liberty-lovers everywhere, but of course they couldn’t allow that state of affairs.They would have to give up the outrageous privilege of issuing money on their terms.

    The fraudulent nature of the world’s banking system has infltrated every aspect of our lives. Couple that with the natural venality of politicians who scratch the backs of the bankers who are scratching the politicians’ backs, and you have all the information you need to know to understand how the citizens of the world have been made indentured servants.

    And we haven’t even thrown the military-industrial complex into the foul brew…

    We’re screwed by these bastards. I suggest people unplug from the banking system and go to one of the private gold money exchanges to do their transactions.

  130. You give these folks way too much credit. There are many ways to fail, but only a few to succeed.

    What is amazing, however, is that despite the crisis they have been able to stay in power long enough to engineer a major giveaway to themselves. Goes to show how deep a bench the corporatists have and the power of media corporations to steer the unwise with a remarkable ensemble of diversions.

  131. February 7, 2010 at 9:15 pm

    tippygolden wrote:

    “I guess that’s called high stakes bank casino gambling. So whose money are they playing with?”


  132. scathew,

    Jesus would be rolling in his grave if he wasn’t resurrected

    That’s a good one!

  133. This comment is devoid of any critical analysis and faculty with history. Unlike the other comments on here that may add nothing, this comment portrays a barren understanding of only one principle upon which a great American nation was founded. Maybe I am a fool to ask, but why do people make comments that have nothing to do with the source material? Is it because they don’t understand it?

  134. While the comment you were responding to which blamed American ideology for Europe’s problems was patently false, simply portraying us in equally black and white terms as the liberty loving heroes of the world is not much better.

    Like any country we have done our share of good and bad. As as a the richest and most militarily powerful nation in the world, the impact of our actions (good or bad) is that much greater.

    Yes, we liberated Europe from the Nazis, and more than likely protected them from Soviet conquest as well, and we rebuilt Germany and Japan after WWII even after a bitter and brutal war. We’ve also disposed Democratically elected governments in Latin America because they had different economic philosophies (not all socialists are radical authoritarians, there is also democratic, mixed economy socialism such as Canada), invaded countries for as of yet unknown reasons (Iraq), we assisinate people (and those near them) with robot planes even in countries where we are not at war, detain people indefinitely without due process, etc. We’re not all evil, far from it, indeed most others wouldn’t have committed far more abuse with our power, but to live up to our promise as a nation we must admit our mistakes as well as our good deeds.

  135. The sellers of protection are taking in money from the buyer’s of protection. John Paulson was buying coverage for 100 basis points per year on notional coverage or less on a five year contract.
    The sellers never expected to have to be required to pay off on anything but an ad hoc loss here and there. The assumption was that housing prices never decline and thus impaired borrowers could refinance against increased value. As for the buyers, the cost on an annual basis amounted to chump change. What is key is that buyers of protection did not need to hold the asset being protected or even buy it to cover delivery to the seller of protection. They could do so for some transactions if they chose to. Such a case would be buying protection on BBB tranches of mortgages after realizing they were a loser. Then, oh well, let’s buy another 100 % to make a profit anyway.

    John Paulson finally realized that the sellers of protection were keeping most of the action.

    What is interesting is that according to Comptroller of The Currency data, the banks have always bought more protection than they sold. Taken as a whole. The data lists the top 25 banks individually and totals. There are always a lot of interesting things buried inside total numbers.

    Anyway, a sovereign default loss now could land in very unusual places and I bet few in government really know where.

    We find out whose money was played with when the loss must be paid out. On a net basis, of course.

  136. Progressive, I am not politically correct. I don’t care in the least if someone is offended by my flag waving. America is regularly put down by some Europeans, Canadians, etc. yet when the chips are down, the phone rings in America and our planes and ships are on the way with aid or force.
    America is the shinning city on the hill, and there is no need for American’s to apologize and grovel before the world. Get off your knees.

  137. I cannot fathom the reason a country like Spain and Portugal,can perfectly feed themselves with what they produce within their own borders, while England, Germany and France cannot, in relation to the size of their population. What is wrong with this picture? Could it be that these three countries, still after two world wars, have access to an undisclosed and outrageous rich treasure chest, holding enough riches extracted from their ex colonies, and still using it to balance the world destiny to their favor? Who are the responsible individuals in very private institutions that hold this amazing treasure chest and where?

  138. “Κύριοι, δυστυχώς χρεωκοπήσαμε.”

    (Gentlemen, unfortunately we have gone bankrupt)

    – Prime Minister Charilaos Trikoupis of Greece, describing the state of the nation’s finances to the Assembly in November of 1893

  139. oh, yeah, you mean just like the New York and London bankers who financed the Russian communist revolution in 1917. Or like when Prescott Bush financed the Germans in WWII. Yeah just like that.

    This name calling is all part of the plan, the theater of modern domestic politics in the US:

    “The argument that the two parties should represent opposed ideals and policies, one, perhaps, of the Right and the other of the Left, is a foolish idea acceptable only to doctrinaire and academic thinkers. Instead, the two parties should be almost identical, so that the American people can throw the rascals out at any election without leading to any profound or extensive shifts in policy. Then it should be possible to replace it, every four years if necessary, by the other party, which will be none of these things but will still pursue, with new vigor, approximately the same basic policies.” — Carroll Quigley

  140. There is nothing wrong with America that a dose of freedom can’t cure. Unfortunately, many Europeans actively seek the enslavement of the US to an ignoramus elite, with Obama in the van. Stay tuned, but it is likely that our present leftist fiasco will set the cause of statist enslavement (aka socialism) back here, for at least 20 years. Who could have imagined a greater disaster than Jimmy Carter, as president.

  141. It would appear that the bailing out of Greece has the same level of moral hazard and systemic risk implications for the financial markets of Lehman and AIG crisis.

    Is history repeating itself as the financial crisis is not over and deleveraging is still ongoing and ponzi schemes unwinding?

    The bail out of Greece (and other PIGS) is necessary, but probably not sufficient, to save its banking counterparts and avoid snowball effects in the financial markets, including the famous Credit Default Swap one.

    I still contend that the roll over of sovereign and public debt is a kind of Ponzi scheme not simple “debt hysteria” as James Kwak and also Krugman wrote few weeks ago.
    Of course there might be some big speculators behind sovereign defaults but that does not change the features of governments Ponzi schemes particularly in the case of Greece. An we are again in a market for lemons, this time of sovereign debt.

  142. What’s so hard to understand? A small population combined with a favorable climate – England, Germany, and France don’t have the same climate as the Iberian Peninsula. They also don’t have the same political climate; those northern countries’ electorates won’t fall for unsustainable deficit spending. Perhaps the people of Spain and Portugal believe money grows on trees – trees tended by Germans and Frenchmen.

  143. Marbou, I totally agree. The only party more inept than our governing Conservatives are the plodding and emasculated Liberals… Last year John McCallum (Liberal Fiance Critic) said it’s not “the Government role to ration housing” (or something similar) when questions arose in Canada’s media about the role of CMHC in inflating Canada’s housing bubble…. incredible!

  144. Soulless, self-worshiping cogs on the east and west coasts have no problem voting for the politicians that keep taxes high.

  145. The real problem is government that fund public pension and extensive social welfare programs. To have that sort of distortionary effect on an economy, without monetary controls to enact the most basic central planning, impossible. But even with unified fiscal/social policy, europe and as may yet be seen in the US, cannot use the money supply to fund unsustainable programs.

    High growth rates, and inflationary redistribution can ‘cover’ certain expenses. But that will collapse eventually.

  146. If certain – apparently racist? – central europeans like an expanded free market for their exports, complete with imbalanced trade terms they control, they cannot complain when their machinations turn on them. Keep leveling economies with less resources and negotiating capital by sucking them dry, let’s see how that works out for everybody. I’d like to see who you’ll sell to then, and how strong your mighty economy will be.

  147. Please Tracey, you have caused your fellow Americans enough damage and embarrassment already.
    As much as Americans like to see them selves as the saviors of this God forsaken world, we do not know what this world would be like without this narcissistic behemoth of a country. For all I know it could be a world with regimes not armed to their teeth with American war-technology and maybe less fat-assed consumption frenzy. Actually it could be a much better world, but the thing is that we don’t know. America is in all ours asses all of the time. We just got used to it.

  148. For nothing? Hardly. Countries like Greece Spain and Portugal were admitted into the monetary union so that Germany could increase its exports to them. MU decreases financial costs of transactions easing trade among the participants. In the case of Europe this trade was one sided – Germany sold and southern Europe bought. Cheap credit due to monetary stability only fueled more buying, further increasing those countries’ trade deficit. So Germany accepted them into the EMU because it wanted to expand it’s market not because it liked them. The “truth” is nowhere near as simple as you describe and Germany certainly got a lot out of this.

  149. Tim Geithner should knowit is Dante or Ponzi by now!

    This is about to become a EUROpean tragedy; while failing Greek debts will be a problem for Euroland it will ignite a global disaster latest when Spain and/or Portugal, Ireland, Belgium, not to forget Berlusconi’s Kingdom have to reveal similar trouble; they all are in trouble, of course, now, but so far the lesser-in-trouble are obviously covering the more-in-trouble. The interdependency of international banks buying national bonds preferable those that pay top interest issued by countries that in the worst case will have to be bailed out by the same national banks that provide inexpensive liquidity to the international banks that in return – you guessed it – buy national bonds is a classic circulus vitiosus or, from a legal perspective, must be addressed as the most advanced Ponzi scheme ever. Let’s refrain from discussing the level of truth, fantasy or criminell energy various countries, not only Greece, have put into providing the basic figures in the first place.

    Tim Geithner: this is a “no chance”!


  150. You know that’s always been MY question. Why do they continuously push and push their greedy goals, even though it will result in their ill-gotten gains becoming utterly worthless when the end game plays out? It really doesn’t make ANY sense. If these guys are our best and brightest, how come they can’t see that they’re shooting themselves in the foot with an express rifle?

  151. If I were a cynical man (and I am), I’d have to say that even if there IS a way to do it, every “civilized” human society on this planet is too damned stupid and stubborn to take it. Complete and total collapse is the ONLY way we’ll wipe the slate, I think.

  152. So you’re saying it worked exactly the way things between China and the US did when they largely pegged the yuan to the dollar, then began selling and selling while we bought and bought on credit because our wages were stagnant. I think I know how this game ends!

  153. Greece is small-fry. Italy is a G7 country for heaven’s sake! At some point, the budget games going on in Rome are going to come to a head (although they haven’t yet, probably through voodoo), and the entire country will crash. The Euro won’t survive that…

  154. The hole mediterrenean culture is one of corruption and irresponsibility. Northern europeans should diconnect themselfs from these people, unless they want to pay perpetual tribute to the mafia. Let them find their place in the world alone. I think they will eventually have the same living standard their neighbors across the mediterranean see are able to “enjoy”.

    That’s funny, because on another thread I said the exact opposite.

    I wondered why the Mediterranean peoples, who on the whole seem to have a far more human view of life, wanted to economically rope themselves to the grim termites of the North, instead of protect themselves from them.

    That’s the real war we face everywhere: humanity vs. those who want an insect society.

  155. I write from Australia who is the recipient of rivers of freshly printed crisp US dollars delivered from the USA via China.

    Did you ever wonder where the money went?

    We watch in amusement at America and the Eurozone meltdown knowing the the Globalist New World order crowd have designated the land down under and New Zealand as their personal physical and economic safe havens.

    To the rest of the world we say, ha, ha, ha, ha. The criminals are going to hide in comfort amongst a miniscule population of 20 million whites amongst a sea of hard working industrious Asians, who want Australia’s massive resources, on their march to first world lifestyles.

    The smart Greeks, Italians and Irish immigrated to Australia after last time the world went made – post WW11.

    Greeks in Greece should be making emigration plans for family re-unions. This is going to get ugly.

  156. The modern Greek state has been challenged with overcoming difficulties which are orders of magnitude above what most countries in mention have had to deal with : the 2 world wars were both followed by catastrophic civil conflict, and subsequent political turmoil lead right up to a decade-long military Junta in the 60s & 70s. Not to mention the 400 years of Ottoman rule prior to any of that.. Still, the Greek economy and polity was able to meet the criteria for entry into the original EU mere years after said junta – and has been able to keep hitting marks leading up to its entry into the EMU etc. today. All of which is a testament to their sheer will, hard work and tenacity. As for the behavior of certain Greeks you describe, I won’t deny it can be found in Greek society, if in a fading minority : it is simply the result of a perfect storm where a generation reared in the (largely necessary) survival-at-all-costs mentality of the recent past suddenly found itself presented with, well, western capitalism. Make that unregulated western capitalism. That generation’s materialism is akin to the alcoholism or the susceptibility to imported disease of Native Americans : there were simply no antibodies in place to protect against it. And yet even so, compared to other countries where similar scenarios played out, the results have not been the same : levels of personal debt has remained negligible and declining, never having gone above 30% of income per capita – nowhere near the American 135% or the German 107% for certain – while per capita GDP ranks 27th highest in the world, and per capita spending power remains 33rd highest – even amidst a global and national financial crisis. In literacy and scientific literacy it ranks around 25th or 27th, depending who you believe, but whatever the number is, it is also misleading : a robust public education system underpinned by a supplementary private infrastructure has enabled a vastly higher percentage of young Greeks to attain quality higher education. If I were you I wouldn’t be worried about Greeks in their 40s 50s and 60s. Uncouth or not, they were mostly harmless. I would look to the dynamic and clear-eyed wave of Greeks ready to introduce you to the 21st century.

  157. hey — lets cool down. all the sothern tier contries need to do is go back to their old money and devalue or let germans have villas on the sunny med.

  158. “Politically this is not going to happen, at least not any time soon.”

    You’d be surprised how ripe that fruit might be, politically, across Europe. Policy-wise, on the other hand, it is indeed not happening.

  159. The 35 hours is there to define full-time employment, separate it from overtime and protect the workforce from exploitation. For all that, it never actually applies, I assure you – not anywhere. First off, your living in the US precludes you from imagining how employment may not be available. Secondly, let me remind you that in the US the work week is defined from state to state between 32-40 hours per week. So bugger off.

  160. I completely agree. And don’t forget the unelected pan-european fiduciary instruments & commissions – answerable only to the rich member-nations’ business interests – that are openly operating as an oligarchy with no respect for ( or even understanding of ) sociopolitical reality.

  161. …Because they were very happy to lend that money to mediterannean “scoundrels” so that they could buy german cars.

  162. “In the EU, like the US, you can work anywhere, so it is not a problem of mobility.”

    What? You seem to forget the language barrier.

    Quite a lot of EU countries/regions have absolutely disastrous educational achievements re foreign languages. On paper, the policies may look formidable, but in reality, you have hard time communicating English in, say, the southern half of Italy (mezzogiorno) or quite a big part of Greece (outside the tourist areas). And these are the places plagued by endemic economical problems.

    No, it is not that easy for a lot of Euros to just go working somewhere else.

  163. Tracy1212, you really hit a liberal (leftist, progressive, socialist, statist, communist, Democrat, take your pick) nerve. They hate America and will not sleep until it is dead.

  164. As soon as you encounter the reality of dealing with Greek bureaucracy head-on, you will see that “humanity” of Mediterranean life, so enjoyable in tavernas, does not extend to the state service.

    And you will long for the grim termites of the north, who are able to produce a driver’s licence in a few days instead of months, and without a bribe handed to them.

    The fact that Mediterranean culture is enjoyable does not change another fact, namely, that there is an overswollen, doing-nothing parasitic bureaucratic layer down there, leeching off the productive people underneath them, while not even able to provide basic clerical support – documents etc.

  165. “This kind of precipitate fiscal austerity contributed directly to the onset of the Great Depression in the 1930s.”

    This is absolute nonsense. A myth. Hoover was known as “The Great Engineer” and in 1929 he had all sorts of spending programs waiting in the wings for triggering immediately upon the stock market crash. Vast sums of money were spent all sorts of programs from bailing out farmers, to bailing out main street. Ever hear of the Hoover dam.

    It was the 1920s depression (worse in terms of initial conditions) where nothing was done, the government cut back spending, and we where out of the mess in 18 months. Guess what government agency was founded in 1915 and inflated the currency to the point where we got two bubbles in two decades. The Fed.

    We should have let the bubble collapse, banks fail, and same with other bailout recipients. Housing would have dropped and speculators lost their shirts along with those who loaned to them. This would have been over already.

    The only thing the government should have done was to meet obligations on FDIC insurance, and do the same for 401k money markets. That is back the people who made safe bets and were tricked by the banking system. This would have inflated the money supply and put all the new cash in the hands of depositors instead of crooked banks.

  166. Yes it is and Tim Geitner will be right there when their Economy fails.

    The Rothchilds and their Bank of England and the Federal Reserve will and are destroying the Worlds Economy.

    In the 1930’s the Rich Crooks were called the Money trusts. People wanted them gone.
    The Rothchilds, Rockefelers and several others created the Federal Reserve and had it put in to law by several Corrupt U.S. Senators.

    Now it is a CORRUP Banking Cartel and is being controled from Europe through the bank of England.

    March on the Rothchild and Rockefeller Mansions around the World.

    Let them know, we kow and are coming for them.

  167. Do you even know what socialism is? Look it up in the dictionary before you spout this Palinesque Teabagger nonsense

  168. And what, exactly, were the enforcement mechanisms in place to keep the treaty intact? Moral suasion? It’s not like no one saw this coming. EVERYONE saw this coming. The Euro was an exercise in tragedy of the commons + moral hazard.

  169. Alas, American republican pseudo-ideology ( and smear tactics, and message-board cowardice ) reaches europe. Shame on you, and shame on your usurer nation, by the way. ( For those at the back : this post by donair is completely made up!! )

  170. Spoken like someone who neither lives in CA nor knows much about its pension systems. Not “politicians,” but thousands of public employees and workers in education (2 separate pensions systems) get incredibly generous pensions ($100-250K). Overall, the benefits wildly exceed available resources. And, however foolish turkeyfish finds Prop 13 (that democratically-passed initiative to rein in skyrocketing property taxes), it remains the case that dysfunctional legislatures, Democratic and Republican, passed out all those pensions with no thought about how to fund them. Blaming Prop 13 is like blaming the credit card company for your own inability to pay your bills.

    And, just in passing, CA’s supposed energy “deregulation” was just a name—little actual deregulation was involved. No surprise that it tanked. As for the mortgage mess, unregulated credit default swaps surely played a role, as did Barney Frank and others in Congress using Fannie and Freddie as free-for-all bazaars to hand out mortgages to people (their beloved constituents) who never ought to have been granted one. Another big surprise.

  171. Ok, this post sealed it for me. Tracy2121 is a POE, she’s confirming that there is no way to distinguish a tea-party extremist from satire.

    Troll/POE. Gotta be.

  172. russ on feb. 7 at 10:29 answers that correctly, “The criminals who perperated these frauds were simply all operating under the “I’ll be gone” mindset.”

  173. You are living in lala-land!

    2007: Greece had an import of 7.8 billion Euro from Germany (0.8 percent of german exports). Germany paid 10 billion aid to european Countries through brussels budget. Greece got 6.2 billion Euros from that european aide – biggest recipient. Germany needs Greece like a bad flu.

  174. John, what are you talking about? Greece is far more socialist than Germany, which is a tad more socialist than Denmark. None of the above are exactly booming. It’s exactly the opposite from what you said.

    Far stronger economies are the Asian Tigers, which are far less socialist. Some, such as Singapore, are already beyond most of Europe on living standards. Their health care quaietly surpassed them over the past decade, too.

  175. Yes RDG and Tracy1212, some of us who disagree with you hate the USA soooo much that we have the DD-214’s to prove the depth of our derision.

  176. take an econ class:

    Part of the problem is that the study of economics has a fundamental flaw regarding money, as explained by Dr. Keen (above link).

    Somalia has freed itself from the burden of government, and the free market is prospering. Slavery is inevitable in a free and unregulated market. Be careful what you wish for.

  177. There’s more than her. Just like cockroaches, there’s always more than the one you see…

    Italian flavor fascism is now the status quo here in the US of A.

  178. It remains to be seen whether the USA has “a strong federal government that would act to bail out failing states.” Politically there will not be much appetite for fiscally sound states to bail out profligate spenders like California. Most states’ constitutions require balanced budgets, and even though we are seeing more “smoke and mirrors” balancing lately, those requirements have so far avoided the kind of chronic state budget deficits that are leading to the crisis that this article discusses.

    Public employee pay and benefit programs in the teetering US states are analogous to the looming deficit-driven failures in Europe, and both will have to be cut back to avoid collapse. I doubt that relatively poorer, fiscally conservative states will tolerate increased federal taxes to pay off public employee compensation obligations in California, New York, and Illinois.

  179. Let’t be honest!
    2007: Greece had an import of 7.8 billion Euro from Germany (0.8 percent of german exports). Germany paid 10 billion aid to european Countries through brussels budget. Greece got 6.2 billion Euros from that european aide – biggest recipient. Germany and the rest of europe needs Greece like a bad flu.

  180. Tracey – here are some words and images sure to warm you heart:

    “…For the overcoming of the economic catastrophe three things are necessary:

    1.Absolutely authoritative leadership in internal affairs, in order to create confidence in the stability of conditions.

    2.The securing of peace by the great nations for a long time to come, with a view to restoring the confidence of the nations in each other.

    3.The final victory of the principles of common sense in the organization and conduct of business, and also a general release from reparations and impossible liabilities for debts and interest…

    …Great are the tasks of the national Government in the sphere of economic life.

    Here all action must be governed by one law: the people does not live for business, and business does not exist for capital; but capital serves business, and business serves the people. In principle, the Government will not protect the economic interests of the German people by the circuitous method of an economic bureaucracy to be organized by the State, but by the utmost furtherance of private initiative and by the recognition of the rights of property….”

    —Adolf Hitler, speech to the Reichstag, March 23, 1933

  181. Please, get over yourself. A liberal being civil, yeah right.

    You fill your mouth and brain with the ididocy of the “frankfort school” as disseminated by MSNBC, CBS etc.

    Keep your own mouth shut. I have put up with your kind stealing from me for decades. You will be repaid with “precious meteal” soon for your efforts.

  182. Since when did investment bankers get to decide high-stakes gambling with other people’s money is business as usual. As in buying 200% insurance on a defective financial product sold to some naive and dazzled sheep.

  183. The Money and Investing section lead story in today’s Wall Street Journal is titled ” Is Greek Tragedy Too Much Drama”

    Food for thought?

    Hype makes movement. Movement makes money.

  184. Attention Reality Check!
    Greace has to raise at least 40 billion Euros in the capital market until may – NO CHANCE! The consequence: The PIIGS have to restructure their 2 trillion in sovereign debt, because, after a default of Greece, the capital market wont give them cheap money any more. And restructuring is another word for default of at least 25 percent of that sum. In comparison, with the Lehman default, there were 600 billion Dollars on the line.

  185. 6.2 billion in european aid? Wow! that’s 0,02% of Greece’s GDP. I won’t be bothered to do the math but with a GDP of 3,75 trillion the percentage of German GDP going to Greece is something with 6 or 7 zeroes in front of it. Really, Greece is going to bankrupt you poor Germans.

    Germany is Greece’s number one import partner, providing more than 13% of the country’s imports.

    Those scoundrels that you believe deserve to lose their jobs and houses btw are the worlds second hardest working people according to OECD, above the US.

    Germany needs bigots like you like a bad flu.

  186. The problem is not only of the EMU, it is also because in some countries the people are not educated. Education builds the future. As in America the people on all industries enjoy when a new house is built (because a house needs then everything inside it, furniture, electronics, maintenance, plumbing, fabrics, wood, roads, electricity, gas, and so on), it seems that in Europe it is difficult to build something new and competitive from scratch. Because of EMU, when a country as is Germany “attracts” from poorer European countries currency through exports, the hole created cannot be easily filled (remember the rich north and poor south of Italy ?). All financial processes in which in a poor country the workforce becomes cheaper and thus more attractive, are too slow when a crisis appears in these States. The capital reverts back in a poor country much slower than it would be necessary, thus there is a permanent funnel that send money outside of that country. And, of course, in countries that have no industry, but only entertainment, the crisis hit harder. Wherever a country cannot provide supplies for its citizens in most areas, the situation becomes very ugly. It is a word of mouth saying that “if you stay with your head in an oven and your legs in a fridge, statistically you’re doing well”. The problem is that if a country cannot have an oven and a fridge inside of its borders in the same time there is very difficult for its citizens to not get cooked / or cold. Countries that can contain the problems they have (see China here), can easily subsidize the weak sectors. However, most often, big countries don’t want to subsidize the small countries (the oven and the fridge are too far one of the other) even if that would be needed for the sake of a common goal or of an European dream. What is then left for us ? “In God to trust”, too.

  187. thank you, NPB. How can the bible belt spend east and west coast money when the east and west coast has already spent theirs and everybody elses money?

  188. YOUR master, perhaps, but not mine. This is a secular board – n.b. Matthew 22:21 – God has nothing to do with this mess, one way or the other.

  189. Well said. Resources are finite, and sustainability should be the target for economies at all scales.

  190. Having a house underwater makes moving to greener pastures a bit more complicated, but people are becoming less reluctant to default.

  191. Each great empire has devolved into welfare state of one kind or another before its inevitable collapse – gratuity to the rich is no less debilitating than alms for the poor. And slavery is no less degrading for the slave-master than it is for the slave. All one-sided transactions are transactions of decline.

    Nothing is more tragic than squandered patrimony, and I can’t but think of the Enlightenment and not suppress a sigh. If one were to plot the fortunes of Western civilization (the nations that formerly were thusly known)side-by-side with that of its contemporaries throughout the years, have we not fallen far from the horizons of our possibilities.

  192. “I can’t but think of the Enlightenment and not suppress a sigh.”

    Oh sure. We could be worshiping the goddess of Nature and dancing around the guillotine.

  193. Totally false. China must rob its citizens of purchasing power and export it overseas. America in return exports back inflation.

    Its better France and Germany do nothing. Allow the markets to work and punish debt heavy states. This will send a CLEAR CUT message to everyone.

  194. ‘Tracy 1212’. Individual Americans may not be the enemy of the world but your government, the military and all of its security apparatus sure as hell are!
    Having read this post of yours and all after it your self-righteous myopic outlook and understanding of history and the world only confirms for me why it is the world detests America in its entirety.
    ‘progressivelibertarian’ below this post stated the truth of it all and yet you still denyingly chastise the reality.
    I for one am Canadian and proud of it. There is a reason why an ever increasing number of us want absolutely nothing to do with your country.
    We have been lied to, openly threatened, covertly undermined and so to bullied and coerced into doing all things against our will by your government long enough.
    You, “America” did not liberate Europe alone as you are not fighting those “radical muslims” alone.
    A vast allegience of allied countries with similar values as well fought, won back and liberated Europe and many other troubled contries before and after WW11 so keep your self-aggrandizement and fairytale history lessons to yourself please. Or learn to fend for your countries self-interest on your own on the world stage then and see how well you fare and how much you like the total isolation and disaster it brings you.

  195. Corrections cause it was very late when I wrote the above and I don’t like pulling numbers out of my b**t like you:

    Greek GDP is 243 bn euro so 6.3 is 2.6%
    German GDP is 2448 bn euro so 10 is 0.4%, only a part of which goes to Greece of course.

    Still low and you’re still a racist.

  196. ‘Greek scoundrels’? They had a fraction of the manufacturing capacity that Germany had. The game was rigged against the Greeks from day 1.

  197. Joe T: I find it interesting to call Greeks a vulgar and amoral people when they, unlike Germany, England, the US etc have not invaded another country in half a millenium. Is accepting a bailout so as to not devolve into a 3rd world nation less moral than, say, invading Afghanistan/Iraq? Or colonising India/Africa? Or exterminating a few million russians on their own land for a little more “living space” for germans?

    Germany knew (or should have known) that the only way to preserve a union of vastly mismatched states was either through rich to poor state subsidisation, or an outsourcing of productive capacity so as to create a homogenous union.

    Based on that idea, it would therefore be fair to say that Germany acted immorally in not sharing its productive capacity with Greece.

    (put that in your pipe and smoke it :) )

  198. I wouldn’t go that lyrical. Let’s tell the truth:
    The western civilization has transformed into breeding crooks, parasites, monkeys and massive pollution instead of honest work and intelligence. I say, let the asians take over.

  199. “Guess what government agency was founded in 1915 and inflated the currency to the point where we got two bubbles in two decades. The Fed.”

    That, I think, is the point – the Fed responded aggressively in the early/mid 20s, and chose not to respond in the early 30s. So the fact that the 1920s depression was so brief is actually a counter-example. Read Lords of Finance.

    “The only thing the government should have done was to meet obligations on FDIC insurance, and do the same for 401k money markets.”

    Well, that would have covered me… But the real wealth sloshing around in fear searching for safety was not covered under FDIC caps or 401Ks. What you are talking about would have amounted to a massive transfer of wealth away from the rich. Do you really think that would have passed political muster? I’m curious why you think this would have inflated the money supply, unless you are thinking that the Fed would have _directly_ covered these accounts via its own balance sheet.

  200. EU officials find out that Greece had cooked his books by BILLIONS of Euros for decades. (latest revelation 40 billion of hidden (!!!) debt). On the basis of real numbers, Greece did never qualify for the Euro. Greek society is traditionally functioning by widespread corruption. In fact greek state is unable to keep an honest accounting of it’s finance (typical balkan/mediterrenean). So dead people receive pensions and money is paid to family members and “friends” for nothing. The hole greek society is boardering on anarchy. This parasitic cesspool has been functioning only on european subsidies (at least 50 billion Euros in the last decade) and making a huge debt pile of at least 300 billion (probably more, when all is revealed). Today the hoodlum of greek premier had the nerve to say this: Greece made tragic mistace – LOL!!!
    The other mediterranean scoundrels did more or less the same. (Better not think about the numbers involved)
    And now Germany and the other civilized parts of europe have to pay the bill?
    I say NO! Let them pay back every cent – even it takes hundred years.

  201. I forgot:
    … and kick them out of the european union immediately for breaking every bit of treaty. Let them join Turkey, Libya or Ägypt. That’s were they belong

  202. Yep … and just before the housing bubble broke in America the Harper government was opening our housing market to 40 year 0% down mortgages backstopped by the CMHC … or whatever … as a new horizon for economic growth and future prosperity

  203. Tracey1212: You make some interesting facts,and Yes,we were always taught that the USA was the best country in the world.but a lot has changed since then,and no,that is not the fault of the American people.You need to balance all of that nationalistic pride with some hard cold facts about what the current american gov`t is doing and will continue to do.It has gone way beyond a joke now.Yes,America did help many many many countries around the world,but they have also helped to colonize a lot of them along the way.Balance out all the rhetoric.

  204. I am a little slow, but I cannot believe that you are suggesting America is more racially and religiously tolerant than Europe? Please tell me I misunderstood…

  205. When people of a country spends on all kind of unlawful leisure.. you cannot expect them to flourish for life. Someday somewhere down the line.. God holds you accountable. Bailout is not the option… the best option is to love all and be united and spend on necessary things and most importantly stay away from Sins… as defined by God. May God help us all.

  206. Having lived in the US and various parts of Europe: yes, especially as regards race.

    The racial attitudes of the average Belgian or French person would horrify many members of the KKK.

    When I lived in DC, I made the acquaintance of a young French citizen. He told me that now that he had seen the US, it was his dream to emigrate.

    “Why, I asked? I thought life in France was pretty decent.”

    “You don’t get it, he replied. My passport says “Republic of France” but by origin I am half-Jewish, half-Arab. You don’t notice these things and to you, they don’t mean anything. In France, they do. I like it here.”

    As oon as I heard the words “France,” “Jewish” and “Arab” the light went on in my head. “Welcome home, brother!”

  207. In America, there’s no such thing as a third generation Turkish-American, fair skin, who speaks perfect English, & who isn’t assimilated into the American mainstream, able to work in the Fortune 1000 w/o active discrimination.

    In Germany, these German-Turks are outsiders, even generations later. How do you account for that? That’s European racism.

  208. “God made women as helpers, but not leaders of men, however, Sarah is a wonderful person and she is in this position not because she is female”

    Ok, try to separate your 1950s archetypes from the modern body of politics.

    Margaret Thatcher was one heck of a lady and ran a nation, just fine. Even your buddy, Prez Reagan was her ardent supporter.

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