A Hitchcockian nightmare: Europe falling off a cliff

7/6/2012 5:06 PM EDT

Indeed, Germany is firing on all cylinders. But as you pointed out, the brain drain from southern Europe into Germany has long-term serious consequences for those countries.

7/5/2012 10:08 AM EDT

Part of the problem is that a United Europe would always be German-dominated, and that is something many Europeans do not want to accept! I for one do not mind....

7/5/2012 11:35 AM EDT

Are we not already "led" by Germany because the country makes substantial exports (sales of automobiles and light and heavy engineering) and is looked to as the source of bail out money by nations at the periphery of Europe from the Mediterranean to the Atlantic seaboard.

7/5/2012 2:00 PM EDT

In effect, yes, but European countries such as Spain, Italy and even France want to have their cake and eat it. If they want German money, they should surrender fiscal policy (or some of it) to the paymaster of the European Union i.e. Germany. They are still resisting this though.

It's the same story with European defence. Europe needs money and heavy investment to have a truly independent defence policy, yet it's not prepared to let Germany have a normal army. Britain and France on their own cannot mount the necessary investment, and they can't expect Germany to fund a common European defence policy without having a major say/part in/of it. Another European paradox....

7/6/2012 4:14 AM EDT

Bert,

The US has one of the highest deficits in the world:

http://www.gfmag.com/tools/global-database/economic-data/10395-public-deficit-by-country.html#axzz1zpOtIFWX

and also one of the highest public debts (as %age of GDP):

http://en.wikipedia.org/wiki/List_of_countries_by_public_debt

7/6/2012 3:58 PM EDT

Sure, NOW, and how is anyone surprised? This administration's bailout frenzy should have scrared the pants off anyone.

Check out this, to see the egregious nature of it. Starting in 2009. And not abating.

http://www.usgovernmentspending.com/federal_deficit_chart.html

Like I said previously, the apologists like to bamboozle people into believing that if deficit spending stays steady, things are okay. But that's absurd. It means that year after year, you're spending ridiculous amounts more than you take in, putting the country deeper and deeper in DEBT.

What is brining several of the Eurozone countries down? This exact same attitude. The difference there being, those deficit-prone Eurozone countries expect the taxpayers of the more responsible countries to bail THEM out. That's what can't work. Our individual states are unable to operate independently that way.

8/4/2012 4:36 AM EDT

It was actually the previous administration that got us into this problem, and it was also them that pleaded for the first almost trillion dollar bailout. Let's not forget that.

It's a well understood economic rule that you must spend yourself out of a recession, and this one was a doozy. Unfortunately, the previous administration had already spent the money.

8/5/2012 5:33 PM EDT

The first gargantuan bailout was indeed in the last budget of the previous administration. However, let's not assume that the previous administration would have made that sort of government largesse the "new normal." Which is what it has become. Now, we seem to congratulate ourselves if deficit spending is not increasing beyond $1.5T, for heaven's sake. How twisted is that?

Furthermore, the events that precipitated the crisis, the housing bubble burst, was caused by a fairly small (well, less than 20 percent anyway) default of reckless government guaranteed home loans to people unable to repay them. That was also not your typical Republican social program, by any stretch of anyone's imagination.

Lastly, a "well known economic fact"? When people say, "It's a well known fact," that's when I brace for the unsubstantiated leap of faith.

Stimulus spending is an adrenaline shot. It takes money out of the real economy and puts it in the hands of politicians. You can't keep injecting adrenaline and expect the patient to recover.

7/6/2012 2:31 PM EDT

Bert22306 said "Just imagine what would happen to the US, if our economy worked like that of the Eurozone. Imagine, for example, that different states set their own government funded entitlement programs and their own affinity for government as the main employer of the work force, and then expected to be supported by other states with less generous policies. And imagine further that the work force was disinclined to move to states that had the jobs"

It seems to me this IS happening in the US today. States have great leeway in funding education and other social programs. Federal government funding of each state varies greatly compared to the revenue that is received from that state at the federal level. And many people may want to move to where the jobs are, but are under water on their mortgages and so they are trapped where they are until the housing market improves.

7/6/2012 2:40 PM EDT

"Federal government funding of each state varies greatly compared to the revenue that is received from that state at the federal level. "

That is the key any1, a common currency implies a mechanism for fiscal tranfers from one part to the other. This is not formalised in the case of the Eurozone and that's what must happen now, otherwise the Euro is doomed.

8/4/2012 4:37 AM EDT

I imagine exaggeration always helps an argument.

7/5/2012 4:40 PM EDT

I think it's a smoke screen actually. The problems emerged when banks started gambling depositers money in the stock market buying and selling financial instruments they understood very little about. It's an agency problem at heart.

7/5/2012 8:51 PM EDT

You are right, right, right. China is benefiting from our disastrous policy, though.

8/4/2012 4:41 AM EDT

China has significant problems of their own which will haunt them so eBay, just as happened to the high flying Japanese when we all thought they would take over the world financially.

No matter how badly an economy is run, when good times are here, it always looks good. When times turn bad however, that's when really badly, and highly corrupt, economies have problems.

7/6/2012 9:08 AM EDT

If and engineer dreamed up something as daft as a credit default swap and mortgage backed securities, while thinking they could eliminate risk from subprime lending, then they really should not be allowed to engineer anything at all.....

7/5/2012 4:43 PM EDT

I would think that the personal credit card has had a major negative influence on economies around the world. Of course, I'd also say that it has had a major positive influence. I'm not sure we have any economic metaphors that aren't double edged swords.

Credit allows consumers to buy things that they couldn't or shouldn't afford. The purchase of those things makes opportunity for companies that build and sell those things, which increases jobs & disposable income which allows people that spend beyond their means to spend even farther beyond their means...

If more people were responsible with their credit and if the card companies weren't so predatory and exploitative, then I'd say on balance, personal credit cards have been a good thing.

8/4/2012 4:46 AM EDT

The problems are far mor structural than that. Credit cards are certain,y part of the problem, but the nature of the economies are more to blame. This includes a paralyzed governmental structure.

A major problem in the EU is that these countries really don't like each other, and don't trust each other. Neither do they trust the EU government, which has little power anyway.

In addition, the fear Germany has of debt. Is making it almost impossible for them to agree on the correct steps, because the voting public, and therefor the politicians, refuse to do anything that will burden them with the EU's woes. Interestingly, as has been
Listed out by some, whatever Germany is doi g seems to benefit Germany itself. Ironic, huh?

7/5/2012 4:59 PM EDT

"I think there is a case to be examined around whether much of the financial woes in the western hemisphere can be traced back to the creation and widespread use of the personal credit card."

I'd say, PERHAPS, but only in the sense that politicians are behaving more like irresponsible credit hard holders.

I just don't see anything mysterious about most of the problems that the Eurozone is facing, or even the US, to a greater extent. You cannot mandate wealth by government edict. You cannot promise generous benefits and generous, early, government-funded pensions, by edict. Just as you can't just use the credit card to buy everything you want, without understanding the constraints.

Chronic deficit spending is the irresponsible credit card holder. Ever increasing social programs are created by chronic deficit spending.

Feeling proud that the deficit one year is no greater than the deficit the previous year is ridiculous. A ploy used by devious politicians to bamboozle the hopelessly clueless.

Sooner or later, you have to pay the piper.

7/6/2012 6:24 PM EDT

This is why I feel that Obama and most of the congress are criminals. They never did anything right for the poor middle-class but they have done so many things to protect the upper class. For instance, why should a CEO be awareded with tens of millions of bonus while those cleaning the garbage bin can be chopped off at the instant of lesser profit. The income gap in corporate America keeps growing without an end in sight. Capitalism is a common excuse, or scape-goat. At the end, it is all down to greed, especially those in the politics, bankings, financials ...

7/7/2012 5:02 AM EDT

Because they are the people who put the Politicians in power in the first place. Politicians can't turn against their Godfathers....

America's forefathers had a lot of sense (uniquely so among their peers in the world I must add) but the system they set in place was slowly highjacked by special interests. I submit that the establishment of the Federal Reserve Bank, the introduction of income tax, and the special interests role in US politics, were all fundamentally anti-constitutional.

7/7/2012 3:13 PM EDT

The problem is that politicians are not the representatives that they are supposed to be. The fact that congress has increased their salary to over 400K shows that the corruption has created careers instead of a few among our ranks that will go represent us for a while. I don't see any way to go back to the government the founders of the country envisioned.

7/8/2012 5:35 PM EDT

Yes and no. No question that politicians seem most interested in responding to the wishes of those who give them the highest contributions. But the other side of that coin is, perhaps even worse is the politician who thinks he is supposed to be our "leader," irrespective of what the constituents think. As in, "fuehrer" (look it up, that's what it means).

Our so-called "leaders" are in fact supposed to be our REPRESENTATIVES. As such, doing what lobbyists and other "special interests" advocate for is not entirely wrong. It's the way the system is supposed to work. We don't "hire" these people because we think they are geniuses or messiahs.

7/9/2012 4:17 AM EDT

The justification of special interest groups and lobbys on the grounds of "representativity" is one of the biggest CONS American people have been sold. It's fundamentally anti-democratic and anti-constitutional I would add for it gives people, groups and institutions with deeper pockets a greater influence on Government, often at the expense of those who have less. The one-man one-vote principle is eroded and we are back to the feudal system under more sanitised and modern guises of course (money and media replacing land and hereditary privileges).

7/9/2012 2:56 PM EDT

Sorry, KB, we thoroughly disagree on this one. I do agree that the contributions to polticians should either be forbidden or severely limited, but aside from that, there are NO ALTERNATIVES to lobbies and other interest groups getting to speak with politicians. By the way, in case this helps your political leanings, labor unions are part of that equation too.

To deny this would be to pretend that politicians and their staffs of devotees know all there is to know about what their constituents do. And they obviously cannot. They are typically clueless about most of the details of what happens in their districts. So something has to be in place to educate them, to present points of view they may not have heard clearly articulated before.

Also, there is no one man one vote principle in the US. The one man one vote principle applies to the House of Representatives only. The Senate, the Executive, and the Judiciary, DO NOT operate on a one man one vote principle. E.g., two senators per state can hardly be described as representing one vote for each citizen. A one man one vote principle would put minority parties and minority interests at too great a disadvantage.

IMO, one of the biggest problems I'm seeing in politics these days is that people expect their politicans to tell them what to do, instead of the other way around.

7/8/2012 7:19 PM EDT

@ww..."At the end, it is all down to greed..."

You hit the nail on the head.

8/4/2012 4:48 AM EDT

If you're going to blame a party, it's certainly not the Democrats who are responsible for that.