My Not Endorsing Possibly Endorsing Blog
Just my opinion but this is how I see it
Well I am back from Spain which gives me an opportunity to comment on the events of the past month. Unless one is totally clueless, it cannot be said that there is little going on in the world. During the past month, the crisis in Greece, China's stock market crash, Obama's deal with Iran, various Supreme Court decisions, and the candidates for President, Trump included provided a stream of headlines for the press.
The most important story being the Greek crisis. How can any one nation permit itself to surrender its sovereignity and so readily accept years of continued hardshipb and pain for its population. The answer is simple, the leftist government of Greece elected as an alternative and opposition party to the policies and resulting hardships is actually more interested in possessing the political power than in actually improvibng the situation. Like more leftist unable to understand basic economics, Greece's current leadership like our Democrats over estimate and seek to use government as the means of achiving economic growth. This is why the more recent sprouts of economic growth in that country have withered and Greece is once again facing a contracting GDP.
Greece aseriously overplayed her hand and tried to bluff with the refremdum called to get popular support for her negoriating position which was to renegotiate and write off part of the debt while accessing tens of billions of Euros from the other Eurogroup nations. Kinda like income redistribution amoungst nations. You can undestanc why the left might see this as the solution rather that looking to encourage economic growth. After all, has not Obama and our Socialist/democrats sought to do the same here. Improve the lot of the poor not by providing growth but my demoninzing and seeking to redistribute the wealth of our more productive classes such as the 1% Obama detests but likes to vacation with.
Well the Germans and northern Europeans were not willing to let their wealth be redistributed to the Greeks. They knew that this would possibly result in additional dent write downs and redistribution to other nations as well . More importantly any success of the leftest in Greeks in improving the situation would encourage support for similar leftist parties in spain and elsewhere. Therefore, any deal with Greece had to discredit the current government of that nation and clearly put them in a worse off position. Both of which have now occured. Just imagine the Greek Prime Minister's position having gotten over 60% of the population to vote No on the terms privously offered and now having to accept terms even harsher.
The Germans were masters in setting up Greece and puting the Greeks in am impossible situation. With the banks closed indefinitely, the ATM's running out of cash, and the Greek economy nearing a meltdown, the Greeks were given a take it or leave the Euro ultimatium. The Greek government now discredited to its population and minus several figures thrown overboard in seeking to placate the Germans signed off on terms harsher than those initally declined.
Working closely with the French, the Greeks fell for a good cop/ bad cop strategy. The French always willing to play co-pilot to Germany and looking to play a role center stage played the good cop. They played the role of appearing to seeking better terms for the Greeks from the Germans while holding out to Greece an option to remain in the Euro zone. For an ancient people, one would have expected the Greeks to know enough about history to know that beig in any alliance with France has never helped anyone.
The Germans were made for the role of bad cop. Its literally in their blood. Just look at their history. Unable to see any similarity of their debt burden after World War I and that of Greece now, they ruled out any meaningful debt relief. They also apparently were able to convince the Grees, with French help that they were willing to accept a Greek Euro exit. The result is a third bailout with even less probability of sucess than the last bailouts and even more dangerous to Greece and Europe.
Students in my Economics class learn that there are two methods for attempting to control the economy. These are monetary policy, actions of a central bank and fiscal policy which is the actions of government itself. When faced with a recession or in the case of Greece a depression, monetary policy would be to lower interest rates and increase the money supply both of which are intended to increase consumpton and spur economic growth and job creation. Unfortunately as part of the Eurogroup, nations such as Spain, Italy, and yes Greece no longer control their currency and therefore must depend on the German/French controlled ECB, the source of the Euro to determine monetary policy.
With regards to fiscal policy the Eurogroup nations shlould be able to increase government spending, and lower taxes to increase consumption and spur economic growth and job creation. They also can reduce regulations increasing economic freedom and eficiency which increases productivity and growth. This however, tends to be more long terms. One reason why most economists oppose the terms of the past bailouts and now of this third one is because it not only prevents the Eurogroup nations in recession from taking the above actions but it requires them to adopt policies that are couterproductive.
For example, the new bailout requires the Greeks to increase taxes This at a time when 25% of the GDP has already disappeared and unemployment is over 26%. Hello, what affect does increased taxes have on consumption? In addition, the Greeks are required to decrease government spending again a policy that will further reduce comsumption of goods and services. Thirdly, there are cuts to pensions which means even more reductions of consumption. Anyone who has taken even an introductory course in Economics should know that business will react to drops in consumption by reducng suply which means furher job losses and even a further reduction to the Greece's GDP. The result being Greece's tax revenues will drop further and a subsequent bailout will be required sooner rather than later.
What Greece should have been encouraged to do was to adopt pro growth economic policies subsidized by the wealthier Eurogroup nations, the same nations throwing good money after bad as a result of the current bailout. A solution to the Greeck crisis requires the political will to adopt an economic and not political solution to the current economic situation.
Rather than cutting pensions, early retirement should be offered to individuals nearing retirement to create immediate job opportunities for the young people of Greece who have a 60% plus unemployment rate and are increasingly radical. Government spending should have been increased via additional EU funding of the type provided to economically disadvantaged EU nations. Billions allocated to major projects including improving transportant and automation will spur short term growth and long term efficiency and increased productivity. The privatization and deregulation required by the current bailout, should be expanded to increase free market operations and all unneccessary barriers to entry should scaled back to encourage greater entrepreneurship.
Lastly, the Greeks should reintroduce their own currency and with it the ability to use monetary policies to further encourage and incentivize economic growth. In fact, all the southern Eurogroup nations including Spain and Italy should leave the Euro. The resulting devaluations would make exports from these nations cheaper, increase the the costs of imports creating addition incentives for domestic growth and encourage growth of Northern European tourism and investment in this region.
Ultimately, the laws of economics will require Europe to reevaluate the failed policies of te past Greek bail outs and to adopt strategies similar to the foregoing. In the mean time, while the Germans might take comfort in having discredited the currenrt "radical" leftist Greek government there is a certain falacy in believing Europe has dodged a political bullet. Remember that the Weimer Republic was discredited by the economic crisis in Germany during the 1920s ultimately giving rise to Hitler and his extremist beliefs.
It would be foolish to believe that discrediting the now discredited Greek government will give way to one more conservation More likely, the increased disenfranchised youth of Greeks together with those isuch as retireees living in increasng dire conditions will have every incentive to join the more radical elements in opposing the conditions imposed by Germany and the IMF. This drama has several more acts to go but already we know we are witnessing another Greek tragedy.
As a teacher of Economics and Government, I never find myself at a loss of having something to discuss. For example, last week the nation witnessed the Republican leadership that controls Congress attempting to ally themselves with the President to pass his "Fast Track Trade" bill. Unfortunately for all, that bill has as much to do with trade as "The Affordable Care Act" had to do with making healthcare actually affordable. As a supporter of trade I totally oppose this bill that like Obamacare is deemed by the powers to be to just too good for the people to know what is in it before it passes. I was very glad to see ths bill be voted down in the House. Unfortunately I fear like the Frankenstein monster it will be allowed to get off the table because the interests behind it will try to gve it another shot at life/passing.
As consumers, would the American people buy a piece of fuit without squeezing it first nevermind actually seeing it? Yet this is what the great despot, Obama wants us to do, pass a bill giving him increased powers without actually knowing what he wants to do with those powers. Given his track record over the past six years if anything he does not need additional powers. Nor is he entitled to the trust of the people. His repeated and numerous lies, including the infamous "you can kleep your healthcare" make Nixon look honest in comparison.
Paul Ryan who I think has the potential to become an excellent president, lost some of my respect playing the role of Nancy Pelosi during the recent debate. His comment on our having to pass this bill in order to know whats in it is something one might expectfrom a hobbsian. He forgets that the people in Washington, him included work for the people and answer to US.
Spain this week witnessed one of the interesting outcomes associated with Parliamentry Government. Namely thatnits all about forming a majority in the parliament or legislative body. While the PP won the rent elections in many parts of Spain including Madrid, their failure to get an absolute majority means the secnd place PSOE, the Socialist were able to attain power by forming alliances with other parties including the new Citizens and We Can's. I am a little nervous thinking about the national elections due before year end.
One bright spot is that after one year as king, polls show that Felipe VI has restored trust to the crown. He also has broad support, including mine for the many positive changes he has instituted and for how he has handled his responsibilities this past year. All Spain can be proud of our Head of State who is an illustration of the many benefits of a parliamentry monarchy.
Greece is moving ever closer to financial ruin. Like all the other nations in the Euro denied an independent monetary policy by this common currency, Greece finds itself in a corner. With only fiscal policy, government actions to try and influence the economy the powers that be, Germany, the IMF, and the ECB want Greece to continue to use only the brake (cuts in spending and increases in taxes). This flies in the face of traditional thinking that during economic recessions never mind the depression Greece is in, the government should increase spending and cut taxes.
Greece should cast off the chains imposed on her sovereignty and if neccessary leave the Euro. What the other powers including Germany fear, is that if Greece leaves the Euro and actually restores her economic growth it will prove the dire predictions about leaving the bEuro false. Other nations such as Spain would then recognize the wisdom of dumping the Euro and using the increased freedom, ie monetary policy reflecting individual national economic conditions to attain economic growth. I did not support the euro as a common currency when it was adopted and if anything my opposition has only increased. Spain would be much better off with its own monetary policy.
The current situation provides an abundance of concepts to be applied. From the sunk costs of years of suffering to date in the weaker nations to debates over proper Keynesian policies. The Germans who have reaped the majority of the benefits from the Euro would love to see the rsst of Europe chained to this currency they control indirectly via the ECB.
Game Theorists predict Europe with more to lose will blink. All sides seem to fail to understand however, that the unknown variable can apply to states as well as individuals. This could make some last minute compromise impossible, forcing Greece to default. Greece would then be free to consider all options. Right now everyone is thinking compromise to maintain the status quo rather than looking for a new and better path to recovery. If anything Greece and Spain have had too much status quo the past several years.
Germany might be willing to split the differences in her favor 60/40 but what will follow is other nations such as Spain with even larger economies lookin for a new balance. All this will cost Germany the most in the long run.
I witnessed somethig similar to Germany's situation when I recently refinanced my car thru a new lender. Before doing so, I called my lender and explained that my only motivation in possibly changing was that I could reduce my interest rate 3%. I offered to stay with them if they reduced my current rate just 2%.
They indicated they would be sorry to lose my account and the interest income on the loan. However, they pointed out that if they agreed to reduce my loan this policy if subsequently applied to numerous other borrowers would in the end cost them too much.
Germany is well aware of what a compromise with Greece will cost plenty . Its not the Euros lost on this potential deal but rather the billions of euros that it will cost Germany if nations such as Italy and Spain as a result seek greater freedom from German fiscal controls.
If any last minute compromise occurs it will be because a third party possibly the ECB, IMF, or even the USA provides the increased or different incentives required to satisfy all the parties, Germany and Greece included. This is what Germany may actually want. Someone else o come in and agree this time to bridge the gap to "save" the Euro.
In the end however, the economic problems asociated with the Eurozone and this currency will remain and the can will only be a little further down the road.
First the Tom Brady story. Personally not surprised because I have my own reasons to believe he actually comes from a family of liars. That said, given the opportunity cost involved, getting into the Super Bowl, he had a very strong incentive to cheat and lie. This is why the rich and powerful lie and cheat more that the rest of us. Their opportunity cost (sorry its economic) is higher than ours. Also its important to consider that the probability is that this was not a one off, that he has lied and cheated in the past. Think about it. What is the chance of getting caught the one time you do something? Lets be real, Brady has been proven all too human.
Second, what's the latest on the guy in the White House, Obama? You have got to wonder if there is any end to this guy's reign and I am simply not talking about the end of his term in two years. I mean, how far he will go with his agenda? On Monday we have the government announcing new regulations on Christmas lighting which I guess means that they might be losing interest in our lunches and what we eat at sick old McDonald's. Then later in the week, Obama announces a foundation to assist disadvantaged black and Hispanic boys omitting disadvantaged whites. I guess Obama feels whites are never disadvantaged possibly because of their skin color. On Thursday we have the IRS in court defending the administrations discrimination against Jewish and conservative groups. Friday the guy is jetting off on one of his shake down trips around the country. Photo ops with the Community Organizer in Chief in Texas at $20,000 plus per pop.
Even as ISIS extends their control over parts of Syria and iraq and offshoots pop up elsewhere such as in Lybia, the White House cotinues to insist that that Obama's strategy is succeeding. This claim has about creditibility as the latest unemployment numbers.
To undermine the White House's lack of credibility, within days of the White House Press Secretary's (Squeeler) request that the press discontinue using outdated stock videos of ISIS, you have ISIS staging a massive victory parade thru the capital of Iraq's largest province. I quess the President might have authorized a drone attack in order to "degrade" this parade but that day's ration of strikes had already been used against less important token targets and sand dunes. The French could have used a Press Secretary Like Obam's when the Nazi's were approaching Paris..
Obama's mouthpiece, Eric Schultz is appropiately in the tradition of Hussain's Information Minister who insisted that US forces under Bush were on the run even as US tanks could be seen in the background of his interview in Baghdad.
Now for the state of the economy including those bogus unemployment numbers. This morning I saw that the front pages of several papers in the bay area were leading with the story that unemployment was at 5.4% or where it was in May of Bush's last year in office. Yet the fact is the unenployment numbers do not include those working part time or at lower paying jobs in comparison to their past employment.
Even more telling is that Obama's 5.4 do not include those who are "hopeless" or have given up. A recent survey found that 40% of the unemployed are now hopeless which means are not counted in Obama's 5.4%. In the past the government strove to decrease unemployment by encouraging economic growth, this president works his magic in making people "hopeless" and hense no longer unemployed. This might be whywe have record numbers of families on food stamps and over 100,000,000 or almost a third of the population on some kind type of food assistance.
Finally how about the economy in general? Well we know that the latest figues indicated a drop in productivity and the nation's GDP. THe simple supply side explanation for both is the growth of the unproductive public sector at the expenses of investment and growth of the private sector. Its the private sector that creats the actual goods and services that constitute our GDP never mind the jobs that are required. Latest figures indicate that the government's tax revenues are at a record high which means the private sector and the individuals on the top half of the pyramid are being squeezed harder than ever. And whose hand holds this fruit being dejuiced...yes Obama. The President's economic policies reflect his belief that rather than needing growth the government should simply make better use of today's resources and wealth thru redistribution. In fact isn't growth the enemy of the enviromentalists? Lets not forget how marx viewed increasing productivity, simply as a means to enrich the upper classes at the expenses of those left behind.
The fact is investment comes not from government, think Solyndra but rather from individuals investing in entrepreneurs who are seeking to create new businesses (jobs?) to produce goods and services (GDP) to satisfy our needs and wants (higher standards of living) What we see for most of Obama's reign is increaded regulations (higer production costs) and much higher taxes on individuals and businesses. This crowding out not in banking but at the level of indiivdual seeking to save and invest is why for the first time in the nation's history we have more businesses closing than starting. We also have a war on economic freedom both in restricting consumer choices and in the production of goods and services. Decreasing freedom decreassses efficiency thus decreasing productivity and thus decreasing economic growth and jobs.
The Obama administration living in their own reality, economic and otherwise now seeks to explain the fall in GDP as some flaw in how GDP is calculated. Yes GDP is in itself something of a arbitary number but the same calculation that is again heading into negative territory was the same compass that pointed out the success of Reagan's Supply Side Economic Successes.
Not surprisingly the same Community-Activist-in Chief/ Obama who worked magic with the simple slogan "Yes We Can" and get elected President devoid of any significant resume, who can lower unemployment without job creation thru holelessness, can apparent reverse the decline in GDP not with further increase in government spending but simply in seeking to recalculate how we determine GDP. Its kind of like the DOW at 18000 plus. All it required was printing $3 tillion at the FED, replacing several "dogs" or underperforming stocks in the dow with stocks that wre more likely to increase and then for good measure driving down returns on all other invrestments such as bank deposits, and CDs to drive everyone into the market and surprise the Dow is at 18,300. Just keep in mind that in 2008 the market was over 14,000 and dropped very quickly to 6,000 plus. Ask yourself, is the economy stronger or weaker tham it was in 2008?
Tee Dow at 18,000 plus might just be more of this administration's magic and nothing more than smoke and mirrors. It is quite possible that that dow's 18,000 may not survive the end of our FEd induced low interest rates.