We in this country like to view our selves as an island. Politically, socially, culturally and economically. But this has not been the case for quite sometime, if it really ever was. Just check out all the stuff you own and even the mortgage you are paying on (or not). So we like to ignore what is going on elsewhere in the world unless it directly involves Americans. Places like Afghanistan or Iran or some such. But trouble is brewing elsewhere, particularly in Europe that could very well impact us here. And vice versa.
And the thinking of those in charge is intertwined as well. Greece is posed to default on its dept.
In a statement on the impact of a potential default, Moody’s said such a default would also hurt Greek banks.
Moody’s also became the latest agency to say any kind of restructuring of Greek debt would constitute a default.
Meanwhile, the Greek opposition leader has rejected the government’s request to support a four-year austerity plan.
The plan would lay out deficit reduction measures that go two years beyond the next general election.
Greece received a 110bn euro (£96bn; $155bn) bail-out from the European Union and International Monetary Fund last year.
Which would impact other countries as well. Not the least of which is Ireland.
CREDIT RATING agency Moody’s has warned that Ireland could be pushed further into financial turmoil if Greece restructures its debt, saying bailout recipients could have debt downgraded to “junk” status if Athens defaults.
Amid renewed market attention on Spain and anxiety about new credit downgrades of Italy and Belgium, Moody’s made it clear yesterday that a Greek default would be “highly destabilising” and would have implications for the creditworthiness of bond issuers across Europe.
Alastair Wilson, Moody’s chief credit officer in Europe, said such an action would “potentially” result in Ireland and Portugal receiving a “junk” rating.
In fact the world economy is so entwined that any major problem in one could upset the apple cart for all.
So what’s the approach to that is being pushed by France and Germany and the UK and the US ? Well, throw everyone else under the buss to save the bankers and investors sorry ass. They very people who got us into this mess of course. Well this is going over real well in Greece and Spain and Ireland among other places. And to at least one individual this approach to the economic situation bares a striking resemblance to some mental disorder.
The French students who drew a connection between contemporary economics and autism have made one of the more profound observations of our time. Technically, the kind of autism exhibited by leading economists – and (although the students did not note it) leaders in politics and media – is called higher functioning autism or Asperger’s Syndrome. Here are some professional descriptions:
“Asperger’s Syndrome, also known as Asperger’s Disorder or Autistic Psychopathy, is a Pervasive Developmental Disorder characterized by severe and sustained impairment in social interaction, development of restricted and repetitive patterns of behavior, interests, and activities. These characteristics result in clinically significant impairment in social, occupational, or other important areas of functioning. In contrast to Autistic disorder (Autism), there are no clinically significant delays in language or cognition or self help skills or in adaptive behavior, other than social interaction. Prevalence is limited but it appears to be more common in males . . . Adults with Asperger’s have trouble with empathy and modulation of social interaction – the disorder follows a continuous course and is usually lifelong . . . “
“There is a general impression that Asperger’s syndrome carries with it superior intelligence and a tendency to become very interested in and preoccupied with a particular subject. Often this preoccupation leads to a specific career at which the adult is very successful . . . “
Nothing so well describes the monocular mania over “free markets” and related clichés that has characterized the thoughts and words of our elite since the days of Margaret Thatcher and Ronald Reagan. What better description of our typical political or media leader than: “Has an average or above average intelligence. Has highly developed language skills. Lacks social interaction skills. Exhibits inappropriate behavioral response to social situations. Lacks understanding of humor or irony . . .”
There has never been the slightest logical reason for believing that all of life’s mysteries could be explained by reference to quarterly reports, yet over the past couple of decades this has become a wildly held assumption of those in charge of running our country, from the think tanks to the White House to NPR.
Critics have struggled vainly to suggest the contrary with a notable lack of success. The reason is now obvious: they have attempted to defeat pathology with logic. It doesn’t work, not because the single-factor obsessives are idiots or even evil, but because they are afflicted.
And it’s far from just a matter of Reaganomics. Politics have come to be characterized by the serial introduction of small ideas of even smaller rationality but which soon find themselves elevated to iconographic status in everything from op ed pages to the federal budget.
Among them: the fictional huge federal surplus, the even more fictional Bush tax cut, the false depiction of the status of Social Security, the enormously expensive capture and imprisonment those who prefer marijuana to vodka, the very autistic assumption that counting student test scores is the same as educating students, and, most recently, an obsession with anti-terrorism to the detriment of every other aspect of American existence.
With Merkel, Sarkosiy, Obama and Congress all repeating the same chant. Regardless of the reason, the approach being taken is wildly off the mark and could make things even worse that they already are. Even precipitating a another global economic crises bigger than the last. Especially if anyone country decides to give the others the economic finger and return to their own currency. This particular variation on group think can also be found in bizarre religious cults and psychiatric wards. But as Mike Whitney observes the obvious way out will not likely be chosen. Probably for this very reason.
The problem is simple; the current belt-tightening policy has failed, so it’s time to move on to Plan B. But the folks in charge don’t want to change policies because then the banks (who own a large share of the bonds) would take a hit on their investments. So, the fiasco drags on while the debts pile up and while peaceful street demonstrations turn into violent conflagrations. The bigwigs at the EU and ECB would rather see cities across the continent descend into a bloody free-for-all than lose one euro on their original investment. Here’s how economist Mark Weisbrot sums it up:
“The peripheral European countries are stuck in a currency union where their monetary policy is dictated by the European Central Bank (ECB), which is far to the right of the U.S. Federal Reserve and has little interest in helping them. Since they have adopted the Euro, they also do not control their exchange rate, and their fiscal policy is going in the wrong direction…
“This does not make any economic sense, except from the point of view of creditors that want to make sure that these countries are punished for their “excesses” – although for the most part, it was not over-borrowing but the collapse of bubble growth and the world financial crisis and recession that brought them to this situation. Unfortunately, the view of the creditors is that which prevails among the European authorities….
“When will it end? So long as these governments are committed to policies that shrink their economies, their only hope is that the global economy will pick up steam and pull them out with demand for their exports. This does not look likely in foreseeable future – the rest of Europe is not growing that rapidly and the U.S. economy is still weak.” (“Eurozone’s Periphery Needs to Challenge Right-Wing European Authorities”, Mark Weisbrot, CEPR)
What Greece needs is a way to dig out, which means debt forgiveness and a hefty fiscal stimulus package to rev up activity and put people back to work. Unfortunately, the EU doesn’t have a mechanism for delivering fiscal aid to the weaker states. All they can do is extend loans to the struggling members and encourage them to slash domestic spending as mush as possible. But that just increases unemployment, decreases revenues and makes and even bigger hole. The whole process fuels public outrage which further exacerbates the economic troubles. The best thing to do is nip it in the bud; figure out what needs to be done and then do it. By dragging their feet, the ECB and IMF have only increased the chances of another meltdown.
“bigwigs at the EU and ECB would rather see cities across the continent descend into a bloody free-for-all than lose one euro on their original investment“ As would Obama and Congress. So the question is not whether the worlds economies will unravel, it’s more of who will pull the thread first. The US or someone else ?