PIGS: Only the Ruins Remain

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As I write this, I am in Rome. From this city, an empire once ruled a large part of the world. During its intellectually better days, Rome, building on the achievements of Greece, provided a way of perceiving the universe that distinguished human beings from animals and raised them from barbaric life to civilization. Greece and Rome showed humanity a way to reason and to understand causality.

Greece and Rome started an approach that could release humanity from quivering before the unknown, mysterious, and unpredictable forces of nature and the priest. In the late middle ages, Italy contributed enormously to the Renaissance and thus to the succeeding eras of massive, unprecedented material progress in the history of humanity. Geniuses such as Leonardo and Michelangelo lived here.

Decades of easy life and freebies have hardwired many people in PIGS countries to expect free stuff as their right.

In today’s world, a common narrative is that Portugal, Italy, Greece, and Spain — acronymically known as the PIGS — are freewheeling societies that provide a lot of personal freedom. They may not be rolling in money, but according to the narrative, their people seem actually to enjoy their lives, as compared with the workaholic North Americans. Their fashions attract people from around the world. Their public squares attract crowds of young people early in the evenings, arriving after their siestas and still partying in the mornings. PIGS countries are known for their deep social cohesion and close-knit families. It is believed that people there are social, and care for one another.

Scratch the surface, and the reality is very different.

Greece just voted “no” to reducing its dependence on free stuff. Decades of easy life and freebies have hardwired many people in PIGS countries to expect free stuff as their right. After many talks with people over the month since my arrival in Italy, I am struggling to recall anyone who may have suggested that it was not his right to expect Germans to keep on paying his bills.

PIGS are third-world countries in many ways and would be considered so, were they not proximal to northern Europe. Graffiti is everywhere. Public spaces are extremely dirty. There are always long line-ups at train stations and banks to get service, which is usually impolite and unhelpful. If you annoy an Italian auntie — who somehow assumes a superior position — every issue will be blown out of proportion. Even non-issues will crop up and then blow up.

A situation that is created by emotions cannot be undone by reason. You must know how to de-escalate, emotionally.

When I arrived late at night to the sprawling airport of Milan, there was no one at the information counters. In fact there was no one of any kind to answer questions. With 41% unemployment among young people, something just didn’t add up. Why weren’t they manning service counters? There was no ATM machine available — all were locked behind walls for the night.

Two millennia after the construction of the Coliseum, it gets far more visitors every day than it did when it was built. Cities are packed with tourists of all kinds, from museum visitors to northern Europeans on beach vacations. Museums, heritage sites, and so forth collect huge amounts of money. But what I experienced when I arrived at Milan airport — with no one to help — stood true even during daytime visits to historical sites. I usually saw no one monitoring the safety of historically precious things at the Roman Forum, the Coliseum, and the museums I visited. People who were supposed to act as guards mostly stood outside the buildings, smoking and chatting away.

There was no one of any kind to answer questions. With 41% unemployment among young people, something just didn’t add up.

People in PIGS countries suffer from a massive victim mentality, which by itself is enough of a vice to undo any civilization. On Bloomberg they seem to blame their plight on Germany, but if you encounter them in the street, they — not unlike Shias and Sunnis — blame all their problems on their nearest neighbor; Germany is too far away. Italians express displeasure about all things Spanish and Greek, Greeks about all things Turkish, Turks about things Armenian, and vice versa. The individual here is never wrong. Even questions about who created which kind of art, who invented the alcoholic drink Anis or the Greek-Turkish desserts can lead to disturbing confrontations and embarrassed faces among people who look well educated. An outsider shudders at their small-minded nationalism.

Pickpocketing is rampant in PIGS countries. Two weeks ago, my passport, money, camera, etc. were stolen from my bag while I watched the allocation of the platform of my train, right under CCTV cameras. Within minutes I was at the police station to complain. The people there all kept their seats, made me fill out a form, and waved me off. They had no interest in wasting time by going through the CCTV recording. Of course I missed my train, and the officials to whom I showed my ticket and the police report had no interest in helping me take the next one, despite knowing full well that all my money was gone.

In my subsequent conversations with people, they always assumed that the thieves were gypsies. If you are an African, a gypsy, or a Muslim you should not expect to get a job in these places. I have absolutely no sympathy for people who, having been given a better chance, should have exploited it, but did not. Where these particular people came from was far worse than the PIGS countries are. They should have been more grateful. Still, I find it strange that these groups cannot be granted opportunities and must always be looked down upon. Most people who would have been assimilated in North America remain outsiders and get blamed by those with a victim mentality. In my case, the thieves were likely white, Italian males; I saw one of them, and that was what he was.

If you encounter them in the street, they — not unlike Shias and Sunnis — blame all their problems on their nearest neighbor.

Compared with people in the US and Canada, people in Latin countries tend to be more apathetic toward their work (and more keen on partying), to spend more of what they have (and hence be more prone to indebtedness), and to be more tribal (and hence not really to care much about others, outside the tribe). Utter lack of respect for basic rules (as in driving, for example) does not necessarily translate into more freedom in society.

I am not sure how close PIGS families are, but how they do their jobs and how they look after their public spaces demonstrates a total lack of social cohesion. Rampant smoking and dislike for work does not show much about happy lives. It must be hard to spend your waking hours doing what you hate. Often pleasure-centeredness and neverending partying are nothing but an escape from what is regarded as the drudgery of normal existence.

So I am not sure whether the people of PIGS are as happy as the common narrative indicates. On the contrary, I believe that those who think the problems of the PIGS are merely about their debt look only at the surface. The problem of PIGS is the problem of their culture. They have lost reason. Leonardo da Vinci and the great Greco-Roman philosophers would feel completely out of place in their homelands today.




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The Greek Deceit

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It’s remarkable to me, the degree to which reporting on the continuing Greek crisis is sympathetic to the Greek government, whose intention is to continue stiffing its creditors, and hostile to the “hardline” states (such oppressors as Germany, Finland, Slovakia, and Slovenia), who want to obtain some assurances that if they increase their subsidies to spendthrift Greece, the Greek government won’t continue to lie to them.

The extent of the lying is indicated by a stray passage of pro-Greek rhetoric appearing in the Washington Post on Sunday:

Some [creditors’] requirements encompass such dramatic social and political reforms — such as ending government cronyism and safeguarding the integrity of economic statistics — that it’s unclear when or even if they could ever be achieved.

“We don’t agree on many points,” a member of the Greek delegation said as negotiations dragged on. “It’s problematic.”

Interesting. It’s dramatic to want accurate economic statistics. How could this ever be achieved? And notice the Orwellian synonym for ending deceit: “safeguarding the integrity of economic statistics.”

In the same report, we learn that Greece is experiencing “the deepest recession of any developed nation since World War II.” I guess the total wipeout of the central European economies in the late 1940s didn’t hold a candle to the torture now experienced by bankrupt Greece. I guess that communist Europe was doing swell, compared with contemporary Greece. I guess that Franco’s Spain was sitting pretty, compared with poor little Greece.

Is there anyone who believes this stuff? I don’t know. “It’s problematic.”




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The Greek Mystique

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I’m not an economist. I may have gotten my figures wrong. I may have gotten my economic history wrong. But it seems to me that Greece, population 11 million, has defaulted on about $100 billion worth of emergency loans that were made to cover its inability to pay off even larger loans. It also seems to me that the money that was loaned went to sustain a pension system that enabled people — almost half of them government employees — to retire at an absurdly early age, and at a still more absurd age if they worked at hundreds of “hazardous” occupations, such as beautician and radio announcer. And it now appears that while taking emergency loans to enable it to get through a “tough” period of “austerity” mandated by its fiendish creditors, Greece actually added 70,000 workers to the government payroll.

In response to the awful suffering imposed on them from beyond, Greeks went to the polls on Sunday and passed a referendum encouraging their government to demand yet more money from their creditors, with the stipulation that Greeks themselves would do nothing “further” to economize. The referendum won by a landslide. The human pebbles who slid down the electoral hill apparently believed that the people who loaned them money were exploiting them by expecting them to honor some part of their agreements.

The Greek government will now demand that a large portion of its debt be “written down”; in other words, that Greece be licensed simply to keep the money it was loaned and now refuses to pay back. In support of this idealistic notion, many of the pebbles took to the streets, indignantly proclaiming that “Greeks are not beggars!” They are right; there are other words for what they are — or, more properly, for how they’re acting. It’s a fine illustration of the way in which normal, decent people turn into ne’er-do-wells and conmen at the polls. The first victims of the conmen are themselves. They convince themselves that they are acting decently — indeed, that they are impelled by a righteous cause.

hile taking emergency loans to enable it to get through a “tough” period of “austerity” mandated by its fiendish creditors, Greece actually added 70,000 workers to the government payroll.

We’ll see whether Greece will continue to find European financial agencies that are silly enough to provide more money, on the Greeks’ own terms. Maybe it will. In Europe, there are two suckers born every minute.

Others besides me have commented on these matters, and I’ve read a lot of their comments. But so far I haven’t encountered a certain kind of comment. It seems to me an obvious one to make, but it isn’t being made. So I’ll make it.

When we talk about “European” loans to “Greece,” we must remember that we are talking about money that governments and government-sponsored banks have arranged to cover the debts of Greek official institutions. No private individual would make loans like this, unless he was figuring on some government covering his ass. In Greece itself, no private individual would do that.It’s like the California “bullet train”: it’s supposed to be a wonderful investment, but somehow, not a penny of private money has ever been invested in it.

If there is a better argument against centralized economic decisions, I can’t think of one. Here we have enormously ridiculous, enormously expensive losses, engendered by a class of government-sponsored experts who thought they knew better than every other individual on the planet. And by the way, these experts were working with other people’s money, with money that is taken, not requested. That kind of money is always easy to spend. And here is the financial system that is supposed to give the world security.

No private individual would make loans like this, unless he was figuring on some government covering his ass.

The Greeks aren’t the only people who think that “investment” means extracting money from productive individuals and giving it to the government to spend on projects that can’t possibly turn a profit. That’s the modern system of political economy. As for the ability of the United States, or the now-sainted China, to stimulate its economy by increasing its debts, the comment of Ray Gaines in Monday’s Wall Street Journal says it all: the system is not working. Meanwhile, the culture of entitlement that is inseparably linked to borrowing without repaying spreads inexorably from the seminar room to the legislative chamber to the chamber of commerce and the welfare mob. Too confused to argue, it asserts its positions; too proud to beg, it demands.




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The Clichés Come Home to Roost in Cyprus

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The clichés are frequent, abundant, and apt: have your cake and eat it too; kick the can down the road; squeeze the tube of toothpaste; see the chickens come home to roost — in that order. They are being used these days to describe financial crises and political responses to financial crises. A couple of years ago, writing about the role of Greece in the ongoing euro monetary-financial crisis, I said that the “contradiction is between the love of state largesse and the limits of governments’ ability to raise revenue,” and I suggested (unoriginally) that Greece might be a domino to tip other dominos (more clichés).

Now Cyprus. It’s the latest hotspot in the euro crisis. If you read or listen to news supplied by the mass media here in the US, you know that Cypriot banks are on the ropes. You know that they have a lot of euro-denominated deposits, including somefrom tax-dodging or money-laundering Russians. And you know that a bailout is in the works. However, unless you think or read more deeply, you don’t know how the situation in Cyprus fits into the bigger picture of euro zone troubles.

Even if you read The Economist, as I do, you only get a hint. In its March 30, 2013 issue, it got through two articles on the Cyprus bailout while barely mentioning how that was precipitated by Greece. I’m not saying there is a media conspiracy to obscure the facts, but there is a tendency to avoid speaking of and maybe even to avoid thinking of the complex and unsettling cause and effect relationships among the various financial unbalances in European banks, treasuries, and currencies. (Yes, I know there is supposed to be only one euro, but more on that below.)

Why would those rich Russians trust banks in miniscule Cyprus? Because the deposits were in Europe, in the euro zone, denominated in euros, and implicitly guaranteed by Europe.

The Economist said, “The troubles of the two banks were caused, some believe, by a decision to buy Greek government bonds that were then restructured.” It said thisonly in the context of an article mentioning that Cypriots feel like victims, in this case of the “restructuring.”

That sentence from The Economist does everything wrong. It directs us away from the truth that the euro mess is a great tangle of interrelationships with “moral hazard” at every knot. And it downplays important circumstances, employing euphemisms. “Troubles” should be “failures”; “some believe” should be deleted; “a decision” should be followed by a statement of the reasons and motivations for the decision; and “restructured” means “defaulted.”

As a corrective, I’ll tell you what I think is going on, preferring clichés to euphemisms.

How does a miniscule country get pumped up on foreign deposits? Why would those rich Russians trust banks in Cyprus? Because the deposits were in Europe, in the euro zone, denominated in euros, and implicitly guaranteed by Europe. That’s an example of having your cake and eating it too. The “cake” is having a hard currency that does not fluctuate against any other currency in the euro zone and can be freely transferred among all euro-zone countries, since it’s supposed to be the same currency. “Eating it too” is failing, as a nation, to have the reforms, institutions, sovereign finances, and controls in place that would justify the currency’s value and stability.

The deposits in Cypriot banks, like all deposits, are loans. The banks had to invest the money. They bought Greek government bonds — more cake being had and eaten. The Greek bonds were paying better interest than, say, German bonds. That should tell you something, but they were supposed to be risk-free, again because of the implicit guarantee of Europe.

The Greek crisis, going back at least to 2004, is now nearly a decade-long process of kicking the can down the road. The can is, of course, severe economic pain that may take the form of extreme austerity, high inflation, and currency devaluation (which would require exit from the euro and, in the case of Greece, the dreaded “Grexit”). The bits of pain that were inflicted along the way — on bondholders, employees, and taxpayers — have always and ever been insufficient to constitute really doing something with the can other than kicking it.

The crisis in Cyprus demonstrates that Europe’s restructuring of Greek debt and bailouts of the Greek treasury were also largely examples of squeezing the tube of toothpaste. One pinches the problem here, and it bulges out over there. One collapse delayed begets another threat of collapse that demands immediate attention.

Cyprus may remain in the euro in name only. A euro that cannot leave Cyprus has a value different from and lesser than a euro that can travel freely.

Now, one or two birds at a time, the big flock of chickens is beginning to come home to roost. In the Cypriot bank bailout deal, bank shareholders are wiped out. They get nothing. Some bondholders are wiped out. Depositors are restricted from getting their money; there are daily withdrawal limits; and currency controls are in place. Some depositors, the uninsured with balances above 100,000, will not get all their money back; they will see their deposits converted to bank shares, probably worthless. In theory, smaller deposits are secure, and Cyprus keeps the euro.

The tough conditions for the bailout, ostensibly required by a commission composed of the European Central Bank, the European Commission, and the IMF, but in substance required by Germany, are the price for Cyprus “staying in the euro,” and that is the main goal of the bailout. But it is not clear that Cypriot euros are still the same as other euros. In other words, Cyprus may remain in the euro in name only. A euro that cannot leave Cyprus has a value different from and lesser than a euro that can travel freely. Such a euro sits in Cypriot banks, from which it can’t be freely withdrawn. The bailout may fail to render the banks solvent. The risk of insolvency, the restrictions on withdrawal, and the currency controls all undermine the value of the deposits.

Enter Gresham’s law: bad money drives out good — if the exchange rate is fixed by the state. In this case the bad money, Cypriot euros, drives out the good money, other euros, other currencies, precious metals, and other stores of value, because the exchange rate is fixed by law and by definition: euros are supposed to be euros. That’s what monetary union was supposed to mean. The troika cannot let the Cypriot euro float; that would be an immediate, rather than slow, failure of the bailout plan; therefore, the official exchange rate between the Cypriot euro and the real euro will be 1:1. Cypriots will withdraw their bad money as fast as they can. They will hoard good money. They will seek opportunities to spend or exchange their bad money at the official rate. Goods will leave the country to be sold for good money to be held abroad. Scarcity will reign. Cyprus will impose export controls (a usual next step after the imposition of currency controls), turning many of its people into criminals. In the 1980s, I saw this in Bénin, where after a period of currency controls, the markets were utterly bare and smugglers were being shot on sight. Next door in Togo, the markets overflowed with goods, including, I suppose, goods from Bénin.

There is much more to be said, about the near-certain collapse of the Cypriot economy, about “contagion” — the fear that similar blows will strike depositors in other weak euro zone countries, and the resultant capital flight — about many more chickens coming home to roost, about the suffering of men, women, and children, and about whose fault it is.

But the topic is depressing. I begin to feel sympathy for the journalists and reporters who do not dwell on these things. I’ll kick this can down the road.

How does a miniscule country get pumped up on foreign deposits? Why would those rich Russians trust banks in Cyprus? Because the deposits were in Europe, in the euro zone, denominated in euros, and implicitly guaranteed by Europe. That




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Who are the Real PIGS?

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As Europe continues to flounder, and as people continue to wonder whether (or more likely, when) Greece is going to default on its sovereign debt, various commentators have bandied the epithet “PIGS” (or “PIIGS”, depending on which nations a commentator wants to include).

By this acronym they refer to a group of countries — Portugal, Ireland, (Italy), Greece, and Spain — that have borrowed profligately, unlike such disciplined places as France, Germany, and the United States. What the miserable PIIGS need to do is start getting their snouts out of the troughlearn to manage their economies efficiently, as their betters do.

It’s obvious that the PIIGS need to liberalize their economies and better manage their fiscal houses. But the morally supercilious tone of the commentary annoys me. I don’t think the US or the major European states are in any position to be giving lectures. Their own levels of debt are outrageous, too.

A recent report brings the point home. If you don’t look at sovereign debt by sheer amount, but look instead at per capita debt — that is, take the aggregate national debt and divide it by the number of citizens in a country — you will see that the PIIGS aren’t as piggish as we are.

Spain’s per capita debt is $18,395. Portugal’s is slightly more, at $19,989. But France’s per capita debt exceeds these two by a wide margin. It’s $33,491.

Again, Greece is outrageous at $38,937, Italy at an amazing $40,475, and Ireland — Erin go Bragh!—at a staggering $43,887.

But the US, the paragon of fiscal rectitude, already stands at $44,215 per capita — more porcine than any of the PIIGS. And under Obama’s latest budget plan, that debt will reach $75,000 per capita (in current dollars) within a decade.

Americans can truly join the PIIGS as they squeal “Oink! Oink!”




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Europe: The Problem and the Prospects

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The flow of history sometimes looks so obvious in hindsight.

In 2004 the European Commission issued a formal warning to Greece, having found that it had falsified budget deficit data in advance of joining the Eurozone. That’s right, Greece had not just failed to meet the budget requirements for joining the new currency — lots of countries did that — but it had lied about it for the privilege of swapping drachmae for euros.

Over the next few years the Greek government's modest attempts to reform the coddled Greek labor market, particularly the obese public sector, met with massive protests, many of them violent.

In the late spring of 2009 I sat across from an old law school friend, drinking wine on the terrace of a Parisian bistro near the Bastille. It was a mild early evening with hours of sunlight left, yet as usual my friend was already in his cups. But then, this guy (call him “Jay”), was smarter drunk than I am sober.

As I drained my glass of Beaujolais Cru, just a few years after Greece had joined the Euro, the Greek debt crisis was in full cry. Bailout negotiations between the EU and Greece had begun. Jay is a prominent international finance lawyer, and he represented the EU on the legal side of the negotiations. So I ordered another drink and got an inside view of the proceedings.

Jay and I debated the virtues, vices, and prospects of a bailout. It was all very speculative and academic, reminding me of so many college rap sessions in which my friends and I handily remade the world to no good (or ill) effect. The curious difference here, decades later, was that Jay really was involved in remaking the world.

As an aside, think of Professor Obama noodling over, say, the constitutionality of a federal mandate that everyone buy health insurance, the kind of seemingly harmless brain game that is played all day, every day in our universities and law schools. Most of the highly accomplished students who, like Obama, attended the top schools become convinced that they know what’s good for you. And some of them attain the power to give it to you. A student’s collectivist or paternalist nonsense is harmless. But with the stroke of a pen wielded by the nerd who used to sit next to you in Social Studies, governments convulse huge sectors of the economy. The difference is that the harmless nerd, the student Obama, for example, has become the hand of power.

At that early stage of the Greek debt crisis (which became the Italian, Irish, and Portuguese debt crisis, which became the euro crisis, which became the Europe crisis, which is becoming the second dip of the Great Recession, and which may doom the European Union to diminishment or dissolution and trash the feeble recovery in the US), it was hard for me to see the historical context of the problem. Jay went straight to it, talking about the German fear of inflation and profligacy, at odds with the German fear of the consequences of a divided Europe.

With the stroke of a pen wielded by the nerd who used to sit next to you in Social Studies, governments convulse huge sectors of the economy.

I know this is remedial history, but just in case: Germany suffered three great traumas in the 20th century, and two great boons. The three traumas were the first war of Europe divided, WWI; the second war of Europe divided, WWII; and between them the hyperinflation of the Weimar Republic, which probably resulted in German National Socialism. The two boons were first, Germany’s long, vigorous period of growth and prosperity, which persisted and accelerated in conjunction with the economic, monetary, and political integration of Europe; and second, German reunification, which came with the collapse of Soviet communism.

France, the other dominant player in the current crisis, has learned much different lessons from history. Of course it fears Germany as Germany fears itself, but it trusts government in a way that Germany does not. The French ruling class favors European unity, not just because it wants to restrain Germany but also because it thinks it can harness the Germans. This has made France the serial instigator of Euro-government activism.

At the center of France’s vision of European peace and unity is an organ grinder with an elephant instead of a monkey, but the elephant does not collect peanuts and coins; it distributes them. France is the organ grinder. Germany is the elephant. The rest of Europe stands around applauding, and collecting peanuts and coins.

Later in 2009, Greece lost its credit rating. Much bad news, “reforms,” and bailouts followed in a parade of horrors that continues now more than 2.5 years later, like shit hitting a fan in super slow motion. Greece, the EU, France, and Germany made and broke a series of promises about Greek debt. Greece was solvent. There would be no second (or third) bailout. Greece would never default. Greece would reform. Etc.

More of the same, until something really breaks, is a good prediction. Sarkozy the organ grinder will play furiously. Like an Indian mahout, he will even bring out the “ankus,” the goad. At the sharp end of the ankus are reminders of Germany’s behavior in World War II. The elephant will give out more coins and peanuts in greater quantities but with greater reluctance, and greater resentment for the crowd of client states that surround the center of Europe. In exchange, the crowd, and even France, will give up freedom, sovereignty, and independence. France does not like loss of sovereignty but believes it will always call the tune. The UK will congratulate itself for staying out of the euro and will refuse to sacrifice its own sovereignty to save the newish currency.

By helping us see how people in nation states see themselves, history helps us guess what they will do. But it does not tell us the results of their choices, which they themselves always fail to predict. After all, none of the EU, France, Germany, or Greece intended the Greek crisis or predicted it early enough to do anything to avoid it. How did that happen?

Descriptions of economic crises past reveal the historian’s perspective, bias, and even philosophy. The Great Depression makes a good example, over which commentators continue to fight. Was it caused or worsened by too much trade protection, too little Keynesian stimulus, a shrinking money supply, the bursting of the credit bubble that preceded it?

Soon there will be as many descriptions of the euro crisis.

I see that crisis and America’s subprime mortgage debacle as symptoms of the same contradiction, one that has strained most of the developed economies for decades and seems to be reaching some kind of limit now. The contradiction is between the love of state largesse and the limits of governments’ ability to raise revenue. That is not a very original observation, but in diverse countries and regions, the fallout from this strain takes surprisingly diverse and original forms.

The form of the fallout seems to depend on the particular weaknesses of a country’s institutions. In Greece, they overborrowed, overspent, cheated, lied to their creditors, and chronically failed to collect taxes due. In Germany they turned a blind eye, because European profligacy spurred Germany’s exports, and exporters had the ear of the German government.

More of the same, until something really breaks, is a good prediction.

In the United States we accepted war as an excuse for big deficits, and when the electorate showed resistance to faster growth of the welfare state, Congress contrived to finance it “off balance sheet” through Freddie Mac and Fannie Mae. And now the Great Recession gives us a reason to bail out financial institutions and automobile manufacturers and to print money (“monetary easing”).

In all these cases, the severity of the crises will partly depend on how and how thoroughly a state and its people fool themselves. The exact nature and severity of the crises are hard to predict. There may be cause for real fear.

I am afraid. For the first time in years, I feel financially insecure. I thought that, through work, good fortune, and saving, I had acquired financial security. Now I don’t know. Will quantitative easing cause high inflation? Will the markets where I store my wealth behave bearishly for long enough to beggar me before I die? Will the European crisis grow so deep and severe as to badly infect the world economy? Is Greece in effect a domino? I don’t know, but it’s falling. There will be no soft landing.




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Is Europe Liberal?

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The EC became the EU in 1992. I lived there at the time, and I wondered if, in socialist Europe, the EU would have a liberal or an illiberal influence. Trade liberalization was an important part of the EC from the beginning, and its successor is still mostly liberal on trade. But then there's everything else, mostly illiberal. And as the EU's powers expand, so does its illiberalism. Although on trade the EU is more liberal than its members, its many new powers are exercised in the interest of the state and its dependents, not in the interest of individual freedoms.

So where does the EU stand on balance? For a long time I wasn't sure. Now I am.

The March 19, 2011 issue of The Economist says that the Euro-zone countries are increasing their bailout of the Euro-basketcase countries, including Ireland and Greece. They lowered the interest rate that they charge to Greece, the country that is most deeply sunk in the basket. But Ireland "received no such concession because it insisted on keeping its low corporate-tax rate." That's right. We are not just a trade union, we are a monetary union; so raise your taxes or suffer the consequences.

On balance, the EU now has an illiberal, anti-libertarian, statist influence on its member states. Taxation and monetary policy are only two examples. There are many more. That little squib in The Economist tipped the scales for me.




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