From Bloomberg:
Stocks slid, while Greek, Portuguese and Irish bonds tumbled, gold rose to a record and the yen surged to a 15-year high versus the dollar on concern Europe’s debt crisis will worsen. U.S. and German bonds rallied…
The European Union put a borrowed-money band-aid on the Greek bond crisis (as well as a few other weak sisters in the EU) and that got them past the crisis of the Spring…but the only actual fix, short of default, would be a massive creation of new wealth in Greece and the rest of the European Union. Problem – all that debt, and especially the issuance of new debt to cover the old, ensures that no matter what else happens, wealth creation will slip (you see, when the government borrows money, it means that much less money for the private economy to expand and create new business…I know this bit of info will shock our liberals, but the truth has to be faced eventually, even by them…).
We can expect over the next few months – and it might end up being the next few weeks, depending on how bad thing really are – that the EU will try expedient after expedient to bridge the gap. But the problem will just remain – too much debt being serviced by too little wealth. Eventually, it all has to come crashing down – eventually, that is, Greece and a few other EU nations (Spain, Ireland, Portugal and, perhaps, Italy) will have to default on all or part of their debt. And that will be all she wrote for the European economy for at least a few years as capital dries up and governments are forced to severely pare back spending.
Our problem is this – we’re only a few years behind Greece in this debacle. We have until about 2015 to get our own house in order. If we do, then we’ll still have a hard time, but not a complete collapse. If we don’t, then we’ll have national bankruptcy and some form of default – and a ten year period of economic pain which will make the 30’s look like a picnic in comparison. We can dodge the worst of it – if we do the right thing.
Now, will we?
Blogs For Victory 