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Friday, October 14, 2011

Europe's "Stealing from Children" goes into Overdrive

As explained in the Fake Economy article, most Western countries around the world have been over-borrowing and over-spending since the mid-1960's, spending mostly on socialist programs, to create fake wealth and fuel fake economies.  The U.S. and Canada have been doing this since the mid 1960's.  Europe is not much different.  The result is ever increasing debts.

However, the generation that borrowed and spent, will not be paying back the debt.  It will be the next generation.  Effectively, we are stealing money from children.

When the American fake economy came down in 2008-2009, they stole even more from children to support it.  They did this through dozens of programs that drove up their deficit and debt.  Some of these programs are:
With super-sized debts, Europeans are now hitting a limit on getting more suckers to lend money.  Therefore, they have to slow down or reduce their borrowing and spending.  This is causing their economies to come back down, closer to a level where they are living within their means and where they enjoy a standard of living that they earned and deserve.  Even though the economies are coming down, their economies are still fake because they still have huge debts.

The slowing European economies are causing deficits to persist, which continue ballooning their debts.  Now, the lenders are fearful that these governments will not repay the debt.  Many of the lenders are banks.

In a normal functioning free-market capitalist society, when a business is incompetent and makes bad decisions, the business should suffer the consequences.  If a business is a failure, it should declare bankruptcy and go away.  The banks made bad decisions by lending money to high-risk borrowers.  Incompetent banks should declare bankruptcy and go away.

Let us say that I have a relative who makes $30K/year and he borrowed a million dollars to buy a big house and a fancy car.  If I lent more money to him and I lose that money, should you bail me out or should I suffer the consequences?  If I was a banker, I would be considered incompetent.  I should be fired.  The proper solution is this:  my relative needs to lower his fake wealth and fake standard of living by paying down his debt, working harder to make more income, selling his assets or all of the above.

However, we have not had normal functioning, free-market capitalism for many decades.  Europe is especially socialistic, that believes in saving everybody.  Europe does not want to see my relative lower his standard of living and suffer.  The suffering is passed to others, mainly to their children.

The banks are a special case as well, since they are the hub of the economy and provide credit.  Businesses need credit to operate and the economy cannot expand without credit.  However, we've had a credit bubble since the early 1980's.  Nevertheless, politicians don't want the credit to shrink because the fake economies will shrink.  If the economies shrink, unemployment will go up and therefore, politicians may have no choice but to maintain the bubble credit levels.

What will the European politicians do?  They will steal even more from children to support their economies.  How?  By setting up their EFSF (European Financial Stability Facility) and its replacement, the ESM (European Stability Mechanism).  The EFSF will borrow €440 billion (by selling bonds) and then give that money to their incompetent banks and incompetent countries who borrowed and spent too much.  In fact, there is a push to lever up the EFSF to a whopping €1.5 to €2 trillion.

Essentially, this is what is happening:
  • Countries borrowed too much from the banks and investors
  • Banks and countries need to be bailed out
  • Other countries, especially Germany and France who already have large debts, will borrow more to give to the incompetent countries and banks
Can we say "moral hazard" to the extreme?  America had "moral hazard" by bailing out car companies, banks and insurance companies.  Europe wants to bail out whole countries.  Using the personal example from above, what Europe is doing is giving more money to my pathetic relative with the fake wealth who cannot live within his means, and to me, who is incompetent for lending more money to my relative.

So, Europe is trying to solve a debt crisis by going into bigger debt.  What got the Europeans into trouble was that they borrowed too much.  Now, they want to step up the borrowing another notch.

This may or may not work.  Nobody knows yet.  However, we do know that these are long term debts which means that their stealing money from children will go into overdrive.

The IMF is funded by the U.S., Canada, Australia and other countries.  These countries are already stealing from their own children.  There is push for IMF to contribute billions of dollars to the European bailout, which means that Europe can potentially steal from children globally, including your children.

If we had true democracy, where the children got to vote on these policies, will they let these policies pass?  When the children become adults and their debt-ridden economy needs to be bailed out, where will they get the money?

Before we agree to give away any more good money after bad, somebody needs to present a clear analysis and explanation, showing the long termquantified advantages and disadvantages and cost / savings to the different parties, of the following scenarios:
  1. Stop giving money to Greece.  Let them default or restructure. 
    1. Let Greece stay in the Euro Zone.  What is the cost of this to the current generation and to which countries?
    2. Let Greece exit the Euro Zone and go back to the Drachma.  What is the cost of this to the current generation and to which countries?
    3. Let the other European countries save their banks.  What is the cost to the current generation and to which countries?
    4. Let the banks fail.  What is the cost to the current generation and to which countries?
  2. Continue giving money to Greece and watch them continue to waste it.  What is the cost of this to the future generations and to which countries?
Where is this analysis from the EU, Euro Zone, European Commission, ECB or IMF?

Read more:

Europe's Solution to Debt Crisis is to Steal

Stealing from Children

Socialism vs Capitalism

Fake Economy

Fake Wealth


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