The Mardi Gras tautology of the collapsing Greek economy

So I read this mush today at

by some guy named MICHAEL SCHUMAN from Time magazine. Boy, what a bunch of worthless beads he’s thrown on Mardi Gras day.

The reason Greece’s debt load is so difficult to shrink is because the economy is tanking. The austerity measures and other reforms demanded by the euro zone in return for its rescue money are causing the Greek economy to contract sharply — by an estimated 7% in 2011. Further budget cuts imposed for this second bailout — another $4.4 billion of austerity measures were approved by Greece’s parliament last week — will only inflict more pain and cause the economy to continue to contract. The new reforms include a reduction in the minimum wage and major public-sector job losses, which will slice into local demand and undercut the prospects for growth. So Greece ends up like a dog chasing its tail. Meeting deficit targets and reducing debt becomes much more difficult when the economy is shrinking. The austerity at the heart of the euro zone bailout program, therefore, is killing off the chances the bailout program can resolve the debt crisis.”

Which is preceded by this: “The big question remaining, though, is: For how long? The first bailout, inked in May 2010, was considered by many to be dead on arrival, an unrealistic attempt to solve Greece’s debt crisis without tackling the serious, underlying problems.”

So, the underlying problem is too much debt, and too much borrowing, which led to an economic crisis of not being able to pay back the debt, and not being able to borrow any more, and cutting the debt will not fix the underlying problem of too much debt, so don’t cut the debt but in fact hopefully borrow more. Uh huh. Until, as Margaret Thatcher so famously said of such places, “Until you run out of other people’s money.” And if the Germans lend the money, they’ll have bigger debts and so enter the Greece cycle. Perhaps the Germans will borrow from us. Perhaps we’ll lend. Perhaps China will increase its debt to lend to the Germans to lend to the Greeks who will increase their debt to solve their too much debt problem. Yep. Brilliant!

But don’t cut the debt! That’ll lead to austerity and a sound economy with real money and real wealth. Borrow more debt! So that we can pay people who don’t work to go shopping with borrowed money, and tax from those who sell anything or earn a real living, to pay for the borrowing to keep the economy humming along until no one will lend another dime or drachma. And what will be the end result of all this new borrowing? No fixing of the underlying problem, which is, um, too much borrowing anew. No, but keep people who do nothing, aka bureaucrats, in their above minimum wages jobs, and screw reality and mathematics. Brilliant!

Well, if Time Magazine didn’t have the “spend till you drop” mentality that is apparently required for these times in America, and if they weren’t all for the Democratic Party’s “who cares about budgets and debts?” Keynesianism, well, then, perhaps a little more sanity would have prevailed in their article and a little less political mumbo-jumbo written to perhaps push for continued patterns of American spending of borrowed money, so we don’t solve our debt problem by getting rid of debt, but solve it by not solving it like they urge Greece to do. So the economy doesn’t contract now, or ever, if we keep borrowing money to keep it expanding.

For that’s the prescription offered – too much debt should not be answered with cutting the debt, but keeping the current debt and adding more, so perhaps one can borrow and spend oneself out of debt.

What the minimum wage has to do with anything I don’t know, except where government employees are covered by it, or are required to earn twice that amount, for they are good civil servants serving the people by borrowing money to pay their salaries to keep the economy from contracting. And of course, all those government employees are being paid with borrowed money, and the way to keep them spending is to apparently keep borrowing the money and paying them to do not much, in the vain hope that these government employees will spend enough to push the minimum wager earners higher in the earnings scale to pay the more taxes required to pay the more debt that’s been piled on in the second round of this charade.

Especially since the first round was merely to keep all systems going exactly as they were leading up to the first round of bailouts. Yes, well, let’s keep the 2nd round of borrowing propping up what can’t be paid back in the first place, and thus a 3rd, and 4th, and even a 5th round of borrowing will be needed for the Greeks to keep up their pace of spending which should not be altered lest it “contracts the economy” by getting rid of government employees and debt financing which can’t be paid for now.

Well, Greece is a wreck, and under this plan it won’t get any better. But to me, the point of the Time article is to tell the American public, or such as read Time, that “hey, don’t worry about the debt or paying it off, that will contract the economy, and the only way to fix our broke status is to remain broke and get broker.” Yah, sure, Time will say this quickly enough, for that’s how to prevent the economy from contracting to the rational normal size, and it keep it pumped up on the speed of borrowed money to keep that economy humming enough to borrow some more money. Yah, sure.

That our current president Mr. Obama is of this “borrow and spend us out of debt” school, I’m sure he’ll be pleased that Time is taking up the cudgel against those who preach “austerity.” Which word is now becoming a bad word if it means that a government must live within its means, and let the people keep more of their own money. One wonders why the Time article didn’t call for more taxes on the government salaries that money was borrowed to pay so that the money borrowed could be repaid? No, thou shall not tax bureaucrats more, they are good people. Or perhaps, more taxes on those who might sell anything to the hordes of bureaucrats living on borrowed money, for people who earn money are, to debt-lovers like Time and the Greeks, not good people, for not paying their fair share of taxes to keep paying back the ever growing need to borrow.

Why ever growing? Well, first to keep up the current fiction, and to pay back the last installment on the credit line. So if one spends 10 dollars today by borrowing $10, then tomorrow you must spend another $10 lest the economy contracts, and pay back the $10 you borrowed to cover your spending. So you borrow $20. And when the next day comes round, you spend the $10 on the bureaucrat, $10 on yesterday’s borrowing, and now $20 more on the current borrowing. Which will require you to borrow some more next week, lest the economy contract, of course. Onward and upward into a tornado of debt.

There is a woman named Elizabeth Warren, running for Senate in Massachusetts, who is quite clearly of this mentality too. She recently said that anyone earning money must pay most of it as taxes to all the people who paid other taxes for it’s really their money, and the earners have no real right to it for if they earned it they earned it from other people. Much as Greek bureaucrats deserve their money for without them spending at companies that sell stuff than the companies that sell stuff wouldn’t earn all that money, so tax it from them and give it to the bureaucrats so that they can spend it back at the companies. And we’ll call this “economic growth” and “economic stability.” Sure, sure. It’s a pipe dream, even some pipe smoking, for then the money is funny, it’s all borrowed, more must be borrowed, and the debt increased, and the taxes increased to pay the debt, or the lenders told to go jump in the Aegean Sea.

Well, like I said, it’s a mess, but Time magazine and this meshuganah writer, Mr. Schuman, is not helping anyone do anything but ignore reality and go with the current US governmental program of borrowing to pay current expenses and pay off old debt, until someone comes to us with a bailout program to lend us more money when we can no longer tax or seize enough wealth out of the economy to pay for our current expenses and the debt we borrowed yesterday to cover yesterday’s current expenses, and today’s debt to cover today’s spending.

There seems not to be a politician alive today anywhere who understands this. So I’m not sanguine about our prospects in the next presidential term or two. We are merely going down the Greek path, but with far bigger numbers. And every other country on earth is doing the same thing. And perhaps, just perhaps, when there’s no more money to borrow from anyone, and all the lenders need to borrow too, then we the people will realize that our current political leaders are actually a bigger drain on the economy and a bigger debt we have to worry about than any monetary debt we might hold and any austerity to get back to living within our means that might be required. But, if we all go the Greek way, soon enough, oh, less than a decade, there will be no more money to borrow or lend anywhere. And then, well, then we can get back to the underlying problems of too much debt.

Enjoy the collapse of the Euro and the tanking of many an economy with it, including China’s, which are dependent on the Euro, and watch how the riots and forces for “hope and change” take to the streets to decry living within one’s means and the need to borrow endless amounts of more money, from someone, anyone, they know not anymore who. And there are precious fewer who? left every day.

Which all reminds me, somehow, of drunken frat boys at Mardi Gras with Daddy’s credit card – spend till you’re broke, and borrow more to continue the party. Happy Mardi Gras day! Which is, in fact, this very day, so how every apropos. Maybe the Greeks and the rest of Europe can catch some worry beads. They’re going to need ’em.


1 Comment

  1. Peter

    So ignorant, OF COURSE our political “leaders” understand this, economic growth is simply a nationalised ponzi scheme.

    Its been this way since the invention of fiat currency, and compound interest.

    Sorry you just realized this.

    p.s. you have NO say in your great “democratic united states” politically. No matter which of the 2 choices you select ont he ballot the system has been built and will be maintained for 1 reason.

    To keep people like to ignorant and speculating.

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