Way back in February of 2010, I wrote that a Greek bailout would be a failure. Not surprisingly, the parasites at the International Monetary Fund and the political elite from other European nations ignored my advice and gave tens of billions of dollars to Greece’s corrupt politicians.
The bailout happened in part because politicians and international bureaucrats (when they’re not busy molesting hotel maids) have a compulsion to squander other people’s money. But it also should be noted that the Greek bailout was a way of indirectly bailing out the big European banks that recklessly lent money to a profligate government (as explained here).
At the risk of sounding smug, let’s look at my four predictions from February 2010 and see how I did.
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1. The first prediction was that “Bailing out Greece will reward over-spending politicians and make future fiscal crises more likely.” That certainly seems to be the case since Europe is in even worse shape, so I’ll give myself a gold star.
2. The second prediction was that “Bailing out Greece will reward greedy and short-sighted interest groups, particularly overpaid government workers.” Given the refusal of Greek politicians to follow through with promised cuts and privatizations, largely because of domestic resistance, it seems I was right again. As such, I’ll give myself another pat on the back.
3. My third prediction was that “Bailing out Greece will encourage profligacy in Spain, Italy, and other nations.” Again, events certainly seem to confirm what I warned about last year, so let’s put this one in the win column as well.
4. Last but not least, my fourth prediction was that “Bailing out Greece is not necessary to save the euro.” Well, since everybody is now talking about two possible non-bailout options – either a Greek default (a “restructuring” in PC terms) or a Greek return to using the drachma – and acknowledging that neither is a threat to the euro, it seems I batted 4-4 in my predictions.
But there’s no reward for being right. Especially when making such obvious predictions about the failure of big-government policies. So now we’re back where we were early last year, with Greece looking for another pile of money. Here’s a brief blurb from Reuters.
The European Union is racing to draft a second bailout package for Greece to release vital loans next month and avert the risk of the euro zone country defaulting, EU officials said on Monday.
If this second bailout happens (and it probably will), then I will make four new predictions. But I don’t need to spell them out because they’ll be the same ones I made last year.
We’ve reached the lather-rinse-repeat stage of fiscal collapse for the welfare state.
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“big European banks that recklessly lent money to a profligate government.”
Recklessly, but not quite as recklessly. Because they also had the correct intuition: That politicians would support Eurozone economies that falter, through redistribution or whatever other means and power given to them. Does anyone in America ever look at bank safety when making deposits or do they look at the highest interest rate? Is that reckless? Not really; its all guaranteed by FDIC anyway! Can anyone, for sure, say that someone buying Greek bonds today yielding 15-25% is making a reckless investment? It is quite likely that, through redistribution, the European Union will keep Greece from defaulting, in which case a 20% return is a hefty reward.
Seems to me that Greece, with a 200 billion gift (I say GIFT, not LOAN at 6%) from the EU and modest changes (i.e. pulling back a bit the corrupt welfare state from the extremes – say, retreat a bit to Italian or Belgian levels) could actually survive and eventually stand on its own – under supervision. What is, after all, a 200 billion gift amongst friends. Isn’t that the right thing to do amongst friends who all individually declare adherence to Social Democratic solidarity whereby productive is obligated to give to the less productive? That is not a sure, but most likely scenario, so lending to Greece at 20% today would not necessarily be reckless.
The danger to that scenario may come from the fact that enough European individuals may finally look around and figure out that the entire Eurozone has now been taking in water for a couple of decades, as it is growing at an average annual trendline of 1.5% and that such sub-par growth in a world that grows 4.5% annually on average, leads, mathematically, to economic extinction.
And since it is I told you so time, I’ might as well remind that my main observation a year ago was that Europeans crossed an important threshold in taking the initial bailout bait. By betting ever more money, it becomes ever more difficult to let go. “If you leave the table now, you will seal in all your losses. Bet some more and things may turn around!” said the man at the Casino.”
On the ideological front, having an ensemble of Eurozone countries who inside their own borders advocate and practice the Welfare Solidarity of productive give to the less productive, it becomes morally indefensible to not extend that same mentality to trans-European solidarity as the continent seeks to unify (foolishly so, because the continent is already growing at 1.5% so I find it had to believe that harmonization and homogenization, i.e. reducing competition, will somehow entice European individuals to produce more and grow at a pace that is at least on par with the world average). But hope of increased production through lower incentives to produce springs eternal in Europe – and its seeds seem to have finally implanted firmly on American shores too.
The underlying ideology of the welfare state and the fact that European politicians stand to increase their power and demand for their services from European unification, creates an incredible juggernaut for the European Taxpayer (that is all Europeans, because in Europe everybody is taxed heavily, rich and poor). Europeans better prepare to pay the roughly $400 each that will be necessary to eventually save Greece. Already growing at a 1.5% multi-year average, the Eurozone aggregate outside Greece can certainly afford that! What a joke!