Mike Curtiss (30 May 2011)
"Obama Puts Western World into Financial Ruin"


A world of financial ruin

  May 28, 2011 – 8:18 AM ET | Last Updated: May 29, 2011 1:19 PM ET

The present U.S. administration, building, certainly on unpromising leavings from its predecessor, has shuffled from one delayed reaction placebo to another to anesthetize financial markets with a sequence of consciousness-lowering deferrals. First we were waiting for the Simpson-Bowles debt commission, which held any actual attention to the problem at bay for nearly two years. It reported quite sensibly and sank like lead weight, but without a ripple. The administration’s budget proposed a dynamic eventual freeze on 15% of federal government expenses, a solution that underwhelmed almost everyone.
The House Budget Committee chairman, Republican Paul Ryan, proposed a plan that only cut the deficit initially by a little over 10%, but cut very appreciably into future outlays and was at least something that could serve as an opening gambit. Barack Obama then pilloried the congressman on national television in strictures usually reserved for judicial or editorial condemnations of skinheads who steal the hearing aids and Zimmer frames of the elderly and the mittens of the new-born. Newt Gingrich — who succeeded the politically late Donald “the Stillbirther” Trump as the most improbable candidate for national office since the 1948 Progressive nominee for vice president, Glen H. (“The Singing Cowboy of Idaho”) Taylor (“Oh Give me a Home by the Capital Dome”), was so shaken by the implications of possibly having to do something about such bone-cracking deficits that he called for a “national conversation” about it, a tocsin that stirred the nation to the depths of its finger tips.
When Barack Obama took office, the official normal money supply of the United States was about $1.1-trillion. The $3-trillion in federal budget deficits that have been run up since then have largely, technically, escaped the money supply, though accretions have almost doubled the official total, an unheard of rate of growth (about 40% annualized) in a hard-currency country. About 70% of this debt has been paid by the issuance of bonds to the central bank of the United States, the Federal Reserve, a subsidiary of the United States government. Whatever the balance sheets say, this has produced the effect of a money-supply increase, which has brought pump-priming to a level of over-achievement not seen since Noah felt the compulsion to build an ark. And the annual trillion-dollar deluge is forecast to continue for a decade.
The world’s reserve currency, the fabled vehicle of the “faith and credit of the United States,” is now virtual money — a symbol for all the other massive problems afflicting the U.S. economy. The imported share of America’s oil consumption, for instance, has gone from 20% to 60%. Large suppliers like Iran and Venezuela have become hostile countries. Yet Americans remain neurotic about paying half the gas price of other oil-importing countries.
The cost per capita of U.S. medical care is $7,000 compared to the average among Australia, Canada, France, Germany, Japan and the United Kingdom, of $3,000; 70% of the people have immensely generous plans that they love with passionate attachment and don’t pay for, either as contributors or as taxable benefits, and the political class won’t touch this. Unfortunately, much of the other 30%, 100 million Americans, get what amounts to emergency health care only, and much of it is uninsured and is billed to the recipient until the patient is out of money, and only then provided gratis. Most of the largest states are bust; Social Security, student loans, Medicare (for the elderly in the U.S.) are all, also, in desperate need of an utterly cacophonous national conversation.
Unless the United States has the most spectacular cognitive awakening since Brunhilda, if not Lazarus, the laws of arithmetic are going to assert themselves in Zeus-like terms.
Meanwhile, the European Union is a water-logged vessel in a tempest, frantically bailing. In the six weeks since French finance minister Christine Lagarde last bravely proclaimed her personal fantasy that Greece would not default, the interest on Greek government notes has risen from 20% to 26%. Germany will not indefinitely remain so encumbered with guilt for the Third Reich that it will go on eating the costs of the false prospectus Goldman Sachs assisted Greece and others to file when they joined the Euro. The Germans have only tolerated it up to now because the strain Greece, Portugal, Ireland, Spain and eventually others put on the European banking system and the Euro,keep the Euro in fairly close downward mode with the U.S. dollar, which assists German exports. What a splendid irony that Germany, reviled as the rampaging hun in olden time, is now being entreated by genuflecting masses of its former ungrateful subjects to occupy and dominate them again, at least economically. (The Bundesbank’s uniforms are less stylish than those of the Wehrmacht.)
The EU is in hot contention with the United States as the Sick Man of the Great World Economic Powers, because less than 40% of Eurozone citizens work and over 60% are on benefits of some sort. But not to be discounted in this gripping Olympic contest for total fiscal immolation is geriatric, debt-ridden, stagnating Japan, a great but terribly beleaguered and demoralized country.
If there are signs of hope, the place we might look is Britain. Unlike the United States, the European Union and Japan, the United Kingdom is making a respectable effort to reduce unsustainable debt rather than simply devaluing the currency in which the debt is denominated. Britain’s fiscal deficit is more than 10% of GDP, approximately twice Canada’s rate and slightly higher than that of the United States, but its government does have a somewhat believable plan for reducing it.
The U.K. has never been a rich country and has not been a great manufacturing country for decades. But it has a better work ethic and political system than almost all of Europe and a better present government than most. It is on a slow and perhaps shallow rebound from New Labour, whose only novelty was that it took them three terms rather than only the one required by Attlee and Wilson to bring the country to the brink of ruin, speaks English, has a good legal system and has been one of the most respected nationalities in the world without interruption since the rise of the nation state approximately 700 years ago.
Strangely and endearingly, Queen Elizabeth’s visit to Ireland last week was the greatest success of royal diplomacy since her parents’ visit to the United States and Canada on the verge of war in 1939, if not her great grandfather Edward VII’s visit to Paris in 1903 to seal the Entente Cordiale. When Britain can’t lead as it often has, as recently as with Thatcher in the ’80s, it still muddles through. The Queen appears to have dispersed a great deal of ancient bitterness, going back to Cromwell and beyond, in just a few days. The adaptability, durability and astuteness of the British should not be underestimated. Canada has inherited, refined and demonstrated some of those qualities, and has a North American work ethic and immense resources to boot.
Both countries, as they shore themselves up and brace themselves for the disarray that the Americans and peripheral Europeans and Japanese seem determined to generate, should keep their nerve, stay in close touch, be prepared to embrace Germany and a few others when they tire of being Europe’s baggage animals, and get ready for great opportunities to lead and renovate.
National Post