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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 Bill Buckler
September 26, 2011
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Today, Europe is staring at a debt inundation as the promises to pay off more and more governments are rejected in the markets. European governments must be able to borrow because the “value” of the paper which states what they have already borrowed is the foundation for the banking system. Of course, this is the situation everywhere in the world, but the viability of government debt paper is not being called into question everywhere in the world. It IS being called into question in Europe.

Germany is being held up as the nation which can “cure” the death throes of the global paper-money based- on-promises-to-pay system by putting its people in hock to the spending of governments over which they have no influence whatsoever. Angela Merkel, the German Chancellor, is expected to show the “leadership” required to shore up European government debt paper and save the European currency, the Euro. US Treasury Secretary Geithner is heading for Europe on September 15 when he will tell Ms Merkel precisely that. Once again, Germany must do what the rest of the world is doing - or else ...?

Those who are caught up in the middle of a farce are the last to know that such a farce is taking place. They are also the last to catch even the faintest glimmer of the nature of the farce. Observers of the budget circus from outside the US - Europeans and everyone else - have been shaking their heads in bemused incredulity for some time now. To a far greater extent than Americans (in large part because they are not directly affected - even though they are indirectly affected), Europeans are aware of what is going on. They know that the fact that while the debt traumas affecting Greece and the other peripheral European nations are real enough - they differ in nothing but minor degree from those latently awaiting the US. They know that every time the US debt crisis starts to be reflected in US financial markets, another round of European sovereign debt crisis is ramped up. They know that the US government has no more prospect of repaying its debt than does the Greek government - or for that matter the German government. They know all this because they have seen the same farce repeatedly in their own history.
The Germans in particular have seen it in all its gruesome glory - more than once in living memory.

Protests are escalating all across Europe, especially in the “solvent” nations whose taxpayers are being targeted to pay for it all. The hope the Europeans have is that their counterparts in the US might start to wake up. The first signs may have arrived. The majority of Americans polled have rejected Mr. Obama’s assertion that his “jobs program” will actually create jobs. And Rick Perry’s claim (cribbed from Ron Paul) that Social Security is a “Ponzi scheme” has NOT fallen on deliberately deaf ears. . .

The myriads of US media reporting leading up to Mr. Geithner’s visit to Poland claimed repeatedly that he was going there to “explain” to his European peers what the US did to “solve” their own 2008 debt crisis. This is an incredibly fatuous claim. The European finance ministers - indeed the entire financial and political establishment of Europe, know precisely what the US did in the lead up to 2008 and has done in the aftermath of 2008. US politicians - and bankers (central and otherwise) - have clung to their decades long claim that the US Dollar might be “their” currency but it is the rest of the world’s problem. The tragedy of Europe - and the rest of the world - is that they have gone along with that ever since the US abandoned Gold for debt as the backing of the system more than 40 years ago.

Mr Geithner was given very short shrift indeed in Europe. “I found it peculiar that, even though the Americans have significantly worse fundamental data than the Euro zone, that they tell us what we should do.” So said Austrian finance minister Maria Fekter. “We don’t think that real economic and social problems can be solved by means of monetary policies.” So said German Finance Minister WolfgangSchaeuble. “We can always discuss with our American colleagues. I’d like to hear how the United States will reduce its deficits and its debts.” So said Belgian Finance Minister Didier Reynders. “We haveslightly different views from time to time with our US colleagues. “We don’t see any room for manoeuvre in the Euro area which could allow us to launch new fiscal stimulus packages. That will not be possible.” So said the Prime Minister of Luxembourg, Jean-Claude Juncker.

It is true, all this is just words. But these words do point up the FUNDAMENTAL split between the US and Europe on the core issue of using new debt to “relieve” the problems of old debt. From there, it is a very small step to looking at the REAL core issue - the impossibility of basing money on promises to pay.

Mr Geithner wants his European counterparts to help him maintain the facade that “liquidity” equals creating “money” out of thin air through the issuance of new debt paper and that the financial markets can be kept happy by covering their bets. The financial markets have literally bet the house on the promise that what they are “investing” in is too big to fail - or even go down in price on a long-term basis. The banks want to maintain the facade that they are doing their “jobs” as long as they keep accepting “free” money from their central banks and churning it through those same too big to fail investments. And the central banks, notably the Fed, want to maintain the fiction that “monetary policy” is a permanent road to real wealth. Mr Geithner’s European counterparts are balking at ALL this.

True, thus far they are doing it only in words and talk is notoriously cheap. But there is still no direct equivalent of a TARP program in Europe. There is no equivalent of an all encompassing debt instrument (like a US Treasury) coming out of Europe either. And unlike the US, Europe HAS put the brakes on their deficit spending rather than merely talk about it. The US is concerned that Europe is going into recession.  If the US were to follow suit, the result would be identical. European spending is a pale shadow of US spending. ECB President Jean-Claude Trichet has stated that taking the Euro area as a whole, budget deficits are averaging 4.5 percent of GDP - less than half the US situation. No one has denied it.

As long as this disagreement lasts, there is some prospect of the debate reaching its fundamentals. Those fundamentals begin with the proposition that money and debt do NOT mix. The disastrous and decades long attempt to pretend that they do is now unravelling on BOTH sides of the Atlantic. But only the Europeans are even making the right noises about getting to the heart of this matter. ACTION to fix the system will be prohibitively expensive, but there is no alternative. If there were, then Weimar Germany and modern Zimbabwe would be paragons of financial rectitude and REAL wealth.


.Ó 2009 – The Privateer

(reproduced with permission)


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