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Jim Cook



Every once in a while I switch the TV channel from Fox to CNBC to see what the liberals are saying.  After listening awhile I get a deep sense of hopelessness and foreboding for our country.  The most important thing for the left is giving money to people.  They are happy to see the growth of food stamps, disability payments, housing subsidies, free healthcare and all the other welfare benefits.  They utterly fail to see the damage it is doing to the recipients.  Whole cities that once flourished have deteriorated into rotting eyesores populated with shambling hulks of chemically dependent drones.  These people are no longer employable.  They have become incompetent and helpless and the liberals can’t see that it’s their doing.

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The Best of Jim Cook Archive

Best of Andy Sutton
December 7, 2011
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One of the most important issues of all with regard to the Eurozone and its systemic crisis is the prognosis for economic growth.  One might wonder why that even matters at this point since the Euro is on the ropes, banks from Paris to Rome to Budapest are in trouble, and nobody seems to have answers.  Make no mistake about this – the Eurozone cannot be bailed out; at least not without causing a dislocation of equal magnitude somewhere else.  There have been several mainstream economists making the TV circuit asserting that the U.S. could bailout Europe.  Really?  Many of these people will use the IMF/World Bank model to make the case for the bailout of the EU.  Not going to happen.  Not without dislocations.  What did take place is that the U.S. Fed (among others)e stepped in and said it would provide what are essentially unlimited ‘loans’ to European banks to stave off the crisis.

Now we’re back to the coup situation I discussed last time.  Is it becoming more clear how this all works?  By virtually ignoring the prospects for economic growth in the Eurozone, the central bankers are going to foist a tab on the people of those countries that they will be hard pressed to get out from under for generations – if ever.  Economic growth is the one way that a country can pay off its debts.  Growth, coupled with sound fiscal behavior, creates surpluses and those surpluses can be used to pay down debt.  No economic growth means no paying down debt.  The IMF is forecasting that the Eurozone will re-enter recession in 2012.  I will assert here that the EU never left the recession that started back in late 2007.  I’ve showed the data for the U.S.; and the EU has clearly followed suit.

Much of the way the crisis is being handled in Europe is along the same lines as what was done here in American back in 2008.  Focus was placed largely on saving banks whose bets had gone terribly wrong.  Only cursory attention was given to the macroeconomic picture and you can easily see what happened here.  We now have fat banks, bursting with ‘profits’ thanks to bailouts and accounting rule changes (FASB Rule 157, etc.) while we have an economy that is still churning out foreclosed homes faster than a broken widget machine.  Trading revenue is up at the big wire houses while our kids are paying over 10% on student loans and Mr. and Mrs. America are shelling out an average of 14% on credit card debt.  This is precisely what is going to happen in Europe.  And to make matters worse, the people of those countries are going to be on the hook for the bill, much in the same way we are on the hook for 2008.

And oddly enough, the same pledges were made back on September 16 of this year.  Quoting a Bloomberg News article:

“The Bank of England joined the U.S. Federal reserve, the European Central Bank, the Swiss National Bank and the Bank of Japan on Thursday to announce that they would flood money markets with dollars over the coming months.

“The move, on the third anniversary of the collapse of the U.S. investment bank Lehman Brothers, sent shares soaring in banks heavily exposed to debt default by Greece and the other struggling members of the 17-nation Eurozone.  The euro, which had been falling in recent days, rebounded, rising roughly 1% in European trading on Thursday.
“Speaking in Washington, Christine Lagarde, the president of the International Monetary Fund, said: “They are getting together and acting together.  To me, that is the most important message.”

Perhaps the biggest untold byline of yesterday’s aberrant policy decision by central bankers was to point out that first it was illegal for our fed to do what it did.  It has two mandates: price stability and maximum employment.  Printing untold trillions to bail out banks in the Eurozone hardly seems like a recipe to ensure price stability to me.  And they haven’t exactly done a banner job on the employment side either.  So when government figures and policy analysts say that no taxpayer monies are being used, they are only partially correct.  In fact it is much worse than if they had simply given over a year’s tax receipts to the ECB for the purposes of stemming the tide.

It is not so much your money that has been pledged to this completely unworthy endeavor, rather it is your future labor.  You will work harder, longer, andenjoy less fruits of that labor all in the name of preserving the status quo of a financial system that will only be back for another round of feeding once the shock from these events has worn off.