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Euro Bailouts, Hopes and Dreams

admin on 05 21, 2010

The European bailout is merely a very large number that was thrown out there in the hopes it would add some credibility and assurance for investors.  Not one of those countries can afford to put up what they offered.  The countries that need the money and are already cutting budgets and are saying that they will put up several Billion.  This is just plain ole stupidity at work.

The general public is finally starting to see the light that our world governments have been pulling the wool over our eyes for years.  They have borrowed with no consequences and expanded government on every level.  In elections this week we saw the common theme of  “taking back government.”  The Tea Party is trying to stir things up with their grass roots movements in what they believe is the right thing to do for our government.

The basic facts are pretty clear, the government has gotten to big.  The government was created to serve us and we have gotten to point where we are needed to service the government.  This is because we have spent beyond our means.  We have created money out of thin air and we have allowed our government to continue to do this without any restraint. Every country in the history of the world with a fiat currency has failed and if we do not do something soon, ours will as well.

Societies cannot function with huge entitlement burdens.  Our country became a great nation because of no taxes and no entitlements.  We have turned into a nation where people expect their share whether they earned it or not.  People who leech off of the work of others without contributing to the overall good are worthless to society.  They only produce further burdens with offspring that the collective whole has to cover.  This is a bad cycle and one that we have been in for a while.  We can no longer afford the non contributing population.   These are people that take something from the collective without giving anything in return.  For us in the US, it is people that have retired and are taking social security, medicaid, medicare.  It is our welfare system, our unemployment system.  As of right now, the unfunded liabilities of social security, medicare and medicaid are going to cost us over $110Trillion (www.usdebtclock.org).

It is for this reason that countries with incredible austerity programs can function for a while, but eventually reality will have to catch up with them.  These programs have to be paid for.   Here in the US we have just created Dollars out of thin air to expand our economy over time.  Now that we have been on the brink of a depression and other countries are facing similar problems, our austerity programs and debts are coming into clear view.  We have been able to hide them for a long time.  We started to burn through 3 times as much on a yearly budget last year and again this year we are projected to be close to $1.5 Trillion.  These numbers are just not sustainable.  In fact spending cuts alone will not offset our debt and entitlements payments that are coming.  So the only way to offset our future obligations is to cut benefits of the entitlements or raise taxes.  Paying for this spending solely through federal income tax increases would require more than doubling current tax rates, even for the lowest tax bracket.

Some countries in Europe will default in the future.  Once the Wolfpack is done pounding away at these countries like Spain, Portugal and Ireland they will focus their attention on the bigger targets like the UK and US.   If this happens then we will have the interest rate spike like Greece and Portugal have already had.  This spike will be the death of the US economy.  Interests rates drive the housing industry and our debt.  If the rates rise uncontrollably then our economy will come to a halt.  This is basically what happened in Greece and will spread through Europe.

We do have the ability to reverse course but it would have to be an extreme reversal and one that we could not pass.  So we are doomed to pay for living beyond our means even though the majority of people haven’t done so.  We are stuck paying into a broken system and dealing with a government that is to big.  November election will be too late.  Hopefully the elections will bring change of fiscal responsibility.  We have not seen any party step up the challenge yet.