April may be the cruelest month (TS Eliot), but for economic meltdowns, September and October are the blackest. It looks like that is proving true again this year. September has been brutal for investors in the world financial markets. Everybody has a reason or an excuse. What one believes is causing the the economic strain is often tied to one’s political leanings. I’m sure you have your suspicions. Keynes or Hayek?
If one looks around the world objectively, what is too obvious to ignore is the mountain of debt racked up by reckless spending. This is true in Euro zone and they have again become the waste land. It might sound good for public employees to have a guaranteed bountiful retirement at 52, but Greece is bankrupt because of such generosity. Short work weeks and lengthy vacations are a reality in France but their economy has gone no where for decades. The straight up green socialism of Spain has left that country with an unemployment rate over 20%. Portugal and Italy are struggling mightily. Only Germany seems to be mostly responsible and solid.
The list of Euro zone basket cases is growing and there is open speculation if the Euro will survive:
They (pundits) are suggesting that the euro could collapse any day now, and that the EU itself may follow. Making such blood-curdling predictions is great fun, but they are getting ahead of themselves again.
We are dealing with three different things here. One is a default by Greece. That could happen any day now. Indeed, it should happen soon.
The second is a collapse of the euro, triggered by a Greek default. That would plunge Europe back into recession, and cause chaos in the world’s financial markets.
The third thing is the collapse of the European Union itself. This, we are warned, would cause it to rain blood, or at least frogs, all over Europe. And that clinking sound you hear offstage is the Four Horsemen of the Apocalypse saddling up. —Gwynne Dyer for Straight.com
Serious times we are living in to be sure. For the last three years, bailouts have the been name of the game. The can may have been kicked down the road but the piper must be paid. The next bailout just may be the International Monetary Fund. Sounds like the members of the IMF are about to be called on to pony up more to the spendthrifts in the EU. There are those in the GOP who are not happy about American taxpayer money going to shore up Italy and friends but just this Saturday, U.S. Treasury Secretary Timothy Geithner warned IMF members on Saturday of “cascading default” and “bank runs” if the situation is not immediately resolved. Resolved, as in more huge bailouts for spendthrift countries.
Over at the Bank of Canada, Mark Carney weighed in with these happy opinions:
During a weekend meeting of the International Monetary Fund in Washington, Bank of Canada governor Mark Carney appealed to European leaders to quickly approve a massive expansion of the European Financial Stability Facility (EFSF), a temporary bailout fund established May last year shortly after the Greek sovereign debt crisis began, to as much as 1-trillion euro.
This week, European parliaments, in particular the financially dominant German legislature which is to vote Thursday, are expected to approve releasing those emergency transition funds after votes on the issue. However, even if Carney’s suggested increase is accepted by lawmakers across Europe, Canada’s top banker expressed little hope the euros will flow to where they are needed the most.
“In our view, in Canada’s view, that money is being used incredibly inefficiently,” he said Sunday on CTV’s Question Period. “It could be used much more efficiently and have a much bigger impact, and that impact can extend well beyond a trillion euros for the same amount of money that would be approved,” he said, referring to the standing 440-billion euro fund.
Another TRILLION Euros! Where’s that coming from? They’ve already spent themselves into oblivion!
It sounds like things might be on the verge of coming undone “over there.” Meanwhile, here at home, things are pretty ripe as well. President Obama, down on his luck, depressed and down in the polls has a new jobs plan that doesn’t seem popular with much of anyone. More massive spending for government just doesn’t look like a winning plan.