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Paying Heed to Europe’s Woes

March 25, 2011


Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.

Paul Krugman, March 24, 2011

I reported on the problems in Portugal yesterday. Not many views on that post, but it would do Americans well to pay attention to the austerity imposed on Europeans as their member nations of the EU falters. I remind Americans that it was 1933, four years after the 1929 crash, when the worst of the worst hit our country. 2012 will likely be our 1933. For one thing, there is something called “unwinding” of bad mortgage assets still happening. You are seeing it in the continual downward spiral of home values and foreclosures (estimated to be around one million this year). When that stops and investment starts, then we will begin to see job creation which will then spur real estate purchases. Seems simple enough, but there are powerful forces interfering with what would seem the next step to recovery.

In economist Paul Krugman’s article today in the NY Times, The Austerity Delusion, he described the wrongheaded approach being taken by the EU and why it is not working AND WORSE, the dangers of continuing such action.

Slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.

Indeed they were wrong, for what we have now is not a crisis in our own personal confidence (most of us are ready, willing and able to work), but a crisis of confidence in our American businesses AND in our fearless and ineffective leaders who are not leading, but clinging to some neo-con ideology rather than getting to the business of creating jobs. I have to throw this in. The same elected officials who peddle the BS that we cannot trust our government and all that hoo-doo, seem to not realize they work in the Federal government they so disdain. So are we not to trust them as well as part of this vilification? This is so typical of people who sound logical, but are not rational in their argument. That is a clear indicator that these folks are manipulating their message for effect. It is pure rhetoric laced with all kinds of unproven accusations but done so with a clear objective. This type of argument in my book I mention specifically as ‘phantom arguments’ — meaning they have no basis. They are proferred to gain something they could not otherwise get in a straightforward effort. Catch Krugman’s drift here as he continues….

So jobs now, deficits later, was and is the right strategy. Unfortunately, it’s a strategy that has been abandoned in the face of phantom risks and delusional hopes. On one side, we’re constantly told that if we don’t slash spending immediately we’ll end up just like Greece, unable to borrow except at exorbitant interest rates. On the other, we’re told not to worry about the impact of spending cuts on jobs because fiscal austerity will actually create jobs by raising confidence.

Confidence Excuse is a Ploy
Clearly, job creation requires investment not confidence, and with U.S. owned corporations sitting on close to $3 trillion, all we need to see is the loosening of the purse strings to get a real recovery going. Jobs are not created as a result of cost cutting of expenditures. Quite the opposite. The goal of cost cutting is to improve the bottom line. Companies expand their businesses through capital investment.

So what is happening and why? Lack of confidence by corporations to make investments to spur jobs is a ploy — a ploy to gain time, it is a stalling tactic. The games being played right now by many large corporations are ones where they are leveraging their position (holding all that cash) for all its worth. The Democrats are saying, what will it take to get you to let loose of that cash, invest and hire people? The Republicans, who are largely representing these corporations, are essentially saying no deal on jobs until certain things happen. Thus, everyday Americans are being held hostage by this leveraging game.

What the corporations want and are having their lapdogs in Washington lobby for is less financial and environmental regulation. Those are the two big ones. They want to do what they want with little interference or oversight from the government – meaning weakening the EPA (affecting pollution and nuclear issues), FCC (affecting net neutrality and carrier issues – think At&T and Verizon), and Health and Human Services (affecting healthcare reform). They want to pay as little corporate taxes as possible. They want to pay less for their employees healthcare and pay less in compensation overall. This corporate and privatization agenda has infected state governments who are trying to do away with unions and collective bargaining. This is a full court press as I continue to state over and over. The corporatization of our country is underway and it is a freight train without brakes.

To be sure, our government over the years has held sway over corporations and rightfully so. It was corporations who were banned during the French revolution as they had infected the French monarchy. Essentially France was an oligarchy, a claim now leveled at the United States by many well known economists including Simon Johnson, former Chief Economist of the IMF. The players in this drama are the banks, large corporations, conservative Republicans and Libertarians, meaning Tea Party backers (Koch Brothers). The everyday American who claims he or she is a Republican or Tea Partyist needs to further examine who runs these organizations and examine their actions. This does not give the Democrats a pass, by no means, but I think once we compare historical data we see Democrats defend the common everyday American on workers rights, civil rights, healthcare, Social Security, Medicare, public education, and environmental protection. All of these are under attack right now by Republicans and the Tea Party. While we have seen some protests here, the strains are such in Europe with similar issues at hand that the EU is in danger of dissolving. Belgium, home of the EU, may split. There is contentious relations between Ireland and Germany.

Parallel Trends
What we see in Europe is seizing of private pensions. In January 2011, the Christian Science Monitor reported: “Hungary, Poland, and three other nations take over citizens’ pension money to make up government budget shortfalls.”

There you have it. Europeans governments have their eyes set on private individuals pensions just like here in the U.S. where state governments are eyeing public employee pensions, and at the Federal level, Republicans have their eyes on Social Security to service the demons of debt and deficit. I hope people realize this is not some theory, but reality. My own take on all of this is it will take legal action, concerted public pressure, and strong Democratic solidarity to fight these trends.

Related: I am reminded of the story of the King Philip IV, commonly referred to as Philip the Fair (le Bel) of France (1235-1314). The King had accumulated a great deal of debt. He was in fact beholding to the Knights Templar, an order of Knights who held vast sums of wealth. The King was a scheming man whose ambition exceeded his means. Thus, he plotted to seize the wealth of the Templars.

Philip’s persecution of the Templars in his quest for money was not his first attempt to destroy a people. He first went after the Jews and the Italian bankers (Lombards) He expelled Jews from France after taking their properties.

Philip in his quest for more and more money, recalled all the coinage and melted it down for his usage. He then replaced it all with coins minted of lesser value. This in a round about way, is probably the first recorded case of devaluing currency. It was when Philip so devalued the French currency that he was forced to seek refuge from his people in a Templar shelter. Here in the Paris temple, Philip became aware, perhaps for the first time of the true wealth of the Knights Templar. It was here in the protecting arms of the order that he first manifested the idea of stealing their vast wealth for his political agenda.

As the Templars were free of all authority save for that of the Papal Throne, the only way Philip could lawfully seize Templar assets was to accuse them of magic and heresy, which he did.

Philip was successful at seizing much of the wealth of the Templars and murdering its leaders. Speculation of the Templars demise rages on even today. One theory is many survivors had hidden wealth and took it to what would become Switzerland where they created the banking system we know today as one of the most powerful and most secretive. But, the real lesson here is that ambitious men, men of power and position, will too often stop at nothing to please their egos, even if that means stealing vast sums of wealth. The Templars had been around for 150 years when their demise came about. The EU in its current state with 27 member countries, has been around since 1993. The Federal Reserve since 1913.

Related: Rustbelt Rage, click here

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