Pragmatism Versus Polemics
The European Union and its Parliament suffered agonies of indecision, all the while knowing that the Euro had to be protected and so had one of their member-states, from financial collapse. The union of various European countries with differing values and social systems and popular social contracts sounds like such a good idea on so many fronts, and formulating laws and regulations that are meant to equalize everything seemed like an excellent solution.
But then, some countries have a reputation for financial prudence and careful stewardship of what they have, along with a dedication to hard work, and they prosper, accordingly. They also form the economic backbone of the union, when countries like Italy, Portugal, Greece, Spain and Ireland run into trouble and threaten to default.
Greece, with its generous social programs and laxity in tax collection, requiring a second hand up, perplexing the EU and sending shudders through the banking community. Should Greece default, there would be wide repercussions, and not only throughout the European Union, since international banking systems are involved.
But as financial catastrophes go, that would be a small tremor compared to the earthquake that would result should the United States, the world's most successful, powerful, wealthiest country fail on its debt. A debt that has, over the past four decades grown beyond manageable proportions to finally rest as a financially monstrous burden.
A succession of mostly Democratic, but also Republican administrations have managed to run the U.S. economy into the ground. Oversight on the corrupt and entitled Wall Street banks and financial brokerages was less than useful, enabling the free-market, U.S. capitalist system to run amok, corrupting itself with worthless paper while its executives ladled in handsome pay-outs.
Its economy is stricken in a drought of deficit, business losses, intractable unemployment rates, mortgage foreclosures, bankruptcies, municipal and state financial straitjackets, and the country is facing difficulties servicing its debt. And because the Republicans, like fiscal conservatives everywhere are loathe to raise taxes, particularly on the well-to-do, and would prefer to cut back services, agreement with the Democrats remains infuriatingly elusive.
So that if the huge figure of the current debt limit isn't raised, the country's Treasury faces collapse and its financial institutions will come to a standstill. President Obama is determined to wrestle the new Republicans associated with the radical Tea Party group into some form of acquiescence; they're equally determined to stay their principled ground.
When does principle become self-mutilation? Presumably when the largest bond-holder, China, begins to panic. And Japan, second to China as a U.S. debt-holder, also doesn't need the grief. When and if the U.S. stops paying its bills and transactions limp nowhere without the raising of the debt ceiling, social programs will grind to a halt, employees of the government, including its military, will not be paid.
America's triple-A bond rating will be imperilled. And so will the economies of much of the rest of the world, through simple fall-out, since the United States, even in its weakened economic condition is still a buying, consuming power-house. Countries like Canada will be affected deleteriously, since sales to the U.S. of Canadian products still represent three quarters of its export market.
And if the U.S. halts payments to its suppliers, the trickle-down effect will result in many lay-offs and higher unemployment than the already historically high rate. The growing lack of confidence in the U.S. economy throughout the international community is translating into a more robust showing of other countries' currencies against the U.S. dollar.
But then, some countries have a reputation for financial prudence and careful stewardship of what they have, along with a dedication to hard work, and they prosper, accordingly. They also form the economic backbone of the union, when countries like Italy, Portugal, Greece, Spain and Ireland run into trouble and threaten to default.
Greece, with its generous social programs and laxity in tax collection, requiring a second hand up, perplexing the EU and sending shudders through the banking community. Should Greece default, there would be wide repercussions, and not only throughout the European Union, since international banking systems are involved.
But as financial catastrophes go, that would be a small tremor compared to the earthquake that would result should the United States, the world's most successful, powerful, wealthiest country fail on its debt. A debt that has, over the past four decades grown beyond manageable proportions to finally rest as a financially monstrous burden.
A succession of mostly Democratic, but also Republican administrations have managed to run the U.S. economy into the ground. Oversight on the corrupt and entitled Wall Street banks and financial brokerages was less than useful, enabling the free-market, U.S. capitalist system to run amok, corrupting itself with worthless paper while its executives ladled in handsome pay-outs.
Its economy is stricken in a drought of deficit, business losses, intractable unemployment rates, mortgage foreclosures, bankruptcies, municipal and state financial straitjackets, and the country is facing difficulties servicing its debt. And because the Republicans, like fiscal conservatives everywhere are loathe to raise taxes, particularly on the well-to-do, and would prefer to cut back services, agreement with the Democrats remains infuriatingly elusive.
So that if the huge figure of the current debt limit isn't raised, the country's Treasury faces collapse and its financial institutions will come to a standstill. President Obama is determined to wrestle the new Republicans associated with the radical Tea Party group into some form of acquiescence; they're equally determined to stay their principled ground.
When does principle become self-mutilation? Presumably when the largest bond-holder, China, begins to panic. And Japan, second to China as a U.S. debt-holder, also doesn't need the grief. When and if the U.S. stops paying its bills and transactions limp nowhere without the raising of the debt ceiling, social programs will grind to a halt, employees of the government, including its military, will not be paid.
America's triple-A bond rating will be imperilled. And so will the economies of much of the rest of the world, through simple fall-out, since the United States, even in its weakened economic condition is still a buying, consuming power-house. Countries like Canada will be affected deleteriously, since sales to the U.S. of Canadian products still represent three quarters of its export market.
And if the U.S. halts payments to its suppliers, the trickle-down effect will result in many lay-offs and higher unemployment than the already historically high rate. The growing lack of confidence in the U.S. economy throughout the international community is translating into a more robust showing of other countries' currencies against the U.S. dollar.
"We believe that one of the most valuable assets of the U.S. is the safe haven nature of the dollar and U.S. Treasuries. We believe that any fears of missed payments is likely to threaten this status permanently." Analysts at Bank of America Merrill LynchThey got that right.
Labels: Crisis Politics, Economy, European Union, United States
posted by Pieface | 6:43 PM
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