Oderint Dum Metuant
("Let them hate so long as they fear")
Favorite saying of Caligula, Roman Emperor 37-41 A.D.
A fitting motto for our corrupt EU
Favorite saying of Caligula, Roman Emperor 37-41 A.D.
A fitting motto for our corrupt EU
Ouija Board Economics:
Obama Trauma vs. EU Drama
It appears that the USA is subject to the trauma of the greatest spendthrift in history since the Roman Emperor Nero or the American Emperor GW Bush. What started as a large bailout of failed bankers under the Bush administration has escalated into a gargantuan bailout of any number of financially defunct institutions. A few billion here, a trillion there, and viola, everything is going to be all right! If that were the case, then why is the USA still hemorrhaging jobs after so many years of economic downturn? Why are the American states clamoring for more federal bailouts? Why does the US Government fear halting the economic stimulus efforts? Even the IMF warns that debt problems loom for the USA if the country remains on its present path.
US Labor Department figures showed initial claims for benefits decreased by twenty-one thousand in the week ended July 3 to four-hundred and fifty-four thousand. Wow! That would be great except for one thing. These ‘initial’ claims for unemployment benefits are yet more jobs just newly lost! Add them up week after week and you get around an additional two-million newly jobless people in the USA every month for the last several years. Even if ‘initial’ weekly jobless claims were to drop below four-hundred thousand via faking some statistics, these are still newly lost jobs; and few actual new jobs, aside from the military, are being created by the great ‘planner’ Obama. The Obama “Solution” appears to be one of ‘printing’ some more money and throwing it at the myriad of problems that just will not fade. Such a policy has punished savers with low interest rates while greatly magnifying government debt levels. Savers lose while the banks cruise. However, should the USA heed IMF warnings, it is foreseeable that US interest rates will climb in the medium to long-term thus temporarily strengthening the US dollar in a bizarre twist of official currency manipulation that could arrest a hyper-inflationary spiral a la Paul Volcker style. Yet, such an interest rate move may stifle economic recovery. Higher interest rates also increase the servicing costs of the US debt load. The USA is in a difficult situation.
On another note, it is amusing that the US Chamber of Commerce tells Ireland that the same US corporations that have been discharging around a half-million Americans per week for some years will now ‘create’ around two-thousand jobs in Ireland. However, will all of these alleged ‘jobs’ go to actual Irish people? Doubtful. Given the current state of affairs in Ireland, foreigners may receive many of these alleged ‘jobs’ if they ever are created. Additionally, the US Chamber of Commerce has not exactly produced extraordinary employment creation back home in their beleaguered USA. That is, unless you count the growth in military recruitment, which has actually been counted in US employment statistics since the Reagan era.
On a similar note, profits shipped out of Ireland by foreign multinational corporations are included in Irish GDP figures but do not help the actual Irish economy. Why? Increases in insurance premiums, and so forth, can actually boost GDP. Profits ‘shipped out’ of Ireland are not recycled into the Irish economy. This is similar to what happened during the Great Famine. More specifically, ample harvests of grains, and so forth, exported to England during the famine yielded no benefit to starving Irish. This Government-sanctioned ‘absentee landlord’ mindset still prevails in Ireland.
Meanwhile, over in the core of the EU, the European Central Bank (ECB) was dramatically buying up
loads of junky government bonds in order to prop up the faltering euro zone. This process has eased a bit recently. How may we read this situation? Let us consider the possibility of a decrease in demand from the United States should the economic recovery in the USA falter. Asia, and elsewhere, may help a little; but like it or not, the USA is still the well-established ‘dumping ground’ for the goods of the world. Add to that the fact that if the millions of Americans who are now termed “99 weekers” (i.e., their 99 weeks of unemployment payments have terminated) no longer receive their unemployment benefit payments, there will be a larger drop-off in demand than many mainstream economists have considered. Suddenly, many millions of angry people will have no money to spend. Small wonder Obama is frantically trying to gain another extension in benefits as such a sudden drop could open the floodgate to a double-dip recession.
Please hearken back a few years to the vain words of various EU leaders who assured their respective nations that the recession contagion from the USA would not spread to the EU. Those so-called leaders were either total idiots or complete liars. In an era of globalization, all contagions spread! Be they viral, bacterial, terror or economic.
A decrease in demand for EU goods and services beyond what is now the ‘new normal’ could very well lead to a much slower recovery in the EU than economists predict. Americans, and many others, will opt to buy less expensive non-European goods as the euro exchange rate quashes a vigorous EU recovery. This translates into continuing unemployment and debt questions.
Although some EU debt concerns have abated for the time being, many of the issues that started the sovereign debt ball rolling are still lurking around. Hence, Germany is attempting to formulate mechanisms to avert a potential 21st Century Weimar Republic scenario. Perhaps efficient German planning will increase control upon fiscally irresponsible euro zone states by bringing them under the watchful eye (or heel) of both the EU and Germany? Debtors beware.
“The man of wealth has rule over the poor, and he who gets into debt is a servant to his creditor.”
-Proverbs 22:7
P.S. Next time – a quick look at the manipulation of economic reality.
References:
Recession Continues to Batter State Budgets; State Responses Could Slow Recovery
http://www.cbpp.org/cms/?fa=view&id=711
No Jobs Yet: CFOs Say Hiring May Not Revive Until 2011 or 2012
http://www.dailyfinance.com/story/credit/no-jobs-cfos-hiring-2011-2012/19552718/
US Department of Labor
http://www.dol.gov/opa/media/press/eta/ui/eta20100936.htm
Euro-Zone:
Club Dread vs. Club Med
Club Dread vs. Club Med
Germany, being what I shall term a ‘Club Dread’ country, is in ‘dread’ of what new ‘fiscal landmines’ lurk in the euro zone. Greece, Spain, Portugal and the other ‘Club Med’ countries seem to be providing a never-ending story of debt bombs and related woes. Club Med members of the euro zone such as Greece appear to be increasingly reliant upon the beneficence of the ‘Club Dread’ countries such as Germany and other benefactors.
One ‘Club Med’ country, Portugal, presently has around 75,000 Portuguese working in Angola. These Portuguese people, forced by failed EU policies into migrating to Angola, and elsewhere for work, can expect no help from the pompous, overpaid bureaucrats in Brussels who spend the greater part of their time ‘feathering their own nests’. The President of the European Commission, Jose Manuel Barroso, also Portuguese, can offer little comfort to his compatriots in Portugal, or the greater EU, since there is really nothing of substance for the crumbling EU to offer its citizens except for more taxes and delusional promises of a brighter tomorrow.
So, is Ireland a member of Club Med or Club Dread?
Ireland’s leader, Brian Cowen, insists that Ireland’s prospects are good. However, Mr Cowen had previously touted Ireland’s property bubble as soundly based upon prudent financial principles even after warnings from the IMF to the contrary. The bubble went bust. Next, Irish Finance Minister Brian Lenihan states that Ireland has ‘turned a corner ’ in its economic outlook. However, reality is somewhat different from the official party line. Surely, borrowing at least 400 million euros per week, for many years, is not a sustainable way to ‘turn the corner’ by anyone’s estimation. Even the Government’s NAMA (National Asset Management Agency), a publicly-funded program meant to bailout Irish banks and increase liquidity, is of dubious benefit. Indeed, Steven Seelig, a senior advisor for monetary issues with the International Monetary Fund (IMF), told Lenihan and Cowen on 29/04/2009 that the IMF in his words “do not believe that NAMA will result in a significant increase in bank lending in Ireland.” So much for Cowen’s and Lenihan’s ‘Celtic Ostrich ’ economic predictions.
Trillions of euros are owed by the ‘Club Med’ countries. The mountain of debt is creating a bubble that could implode, thus dragging down the ‘Club Dread’ economies into turmoil.
Perhaps Germany is longingly looking back to its more bountiful past with its previous, and proven, currency - the Mark. The euro seems to be shaping up into a bust unless Germany drains its people to maintain the teetering currency or unless the rest of the world comes to the rescue of the ill-fated euro.
In sum, it seems that grandiose EU promises are becoming the new opiate of the masses. So much for the emergence of the great economic juggernaut that the pushers of the Lisbon Treaty claimed would occur. Instead, an EU wasteland of unsustainable debt and excessive regulation is emerging.
One ‘Club Med’ country, Portugal, presently has around 75,000 Portuguese working in Angola. These Portuguese people, forced by failed EU policies into migrating to Angola, and elsewhere for work, can expect no help from the pompous, overpaid bureaucrats in Brussels who spend the greater part of their time ‘feathering their own nests’. The President of the European Commission, Jose Manuel Barroso, also Portuguese, can offer little comfort to his compatriots in Portugal, or the greater EU, since there is really nothing of substance for the crumbling EU to offer its citizens except for more taxes and delusional promises of a brighter tomorrow.
So, is Ireland a member of Club Med or Club Dread?
Ireland’s leader, Brian Cowen, insists that Ireland’s prospects are good. However, Mr Cowen had previously touted Ireland’s property bubble as soundly based upon prudent financial principles even after warnings from the IMF to the contrary. The bubble went bust. Next, Irish Finance Minister Brian Lenihan states that Ireland has ‘turned a corner ’ in its economic outlook. However, reality is somewhat different from the official party line. Surely, borrowing at least 400 million euros per week, for many years, is not a sustainable way to ‘turn the corner’ by anyone’s estimation. Even the Government’s NAMA (National Asset Management Agency), a publicly-funded program meant to bailout Irish banks and increase liquidity, is of dubious benefit. Indeed, Steven Seelig, a senior advisor for monetary issues with the International Monetary Fund (IMF), told Lenihan and Cowen on 29/04/2009 that the IMF in his words “do not believe that NAMA will result in a significant increase in bank lending in Ireland.” So much for Cowen’s and Lenihan’s ‘Celtic Ostrich ’ economic predictions.
Trillions of euros are owed by the ‘Club Med’ countries. The mountain of debt is creating a bubble that could implode, thus dragging down the ‘Club Dread’ economies into turmoil.
Perhaps Germany is longingly looking back to its more bountiful past with its previous, and proven, currency - the Mark. The euro seems to be shaping up into a bust unless Germany drains its people to maintain the teetering currency or unless the rest of the world comes to the rescue of the ill-fated euro.
In sum, it seems that grandiose EU promises are becoming the new opiate of the masses. So much for the emergence of the great economic juggernaut that the pushers of the Lisbon Treaty claimed would occur. Instead, an EU wasteland of unsustainable debt and excessive regulation is emerging.
