Tag Archives: Bailout

Is the Euro aggravating the European debt crisis?

ECM sent me this story from the liberal German newspaper “Der Spiegel”.

Here’s the thesis of the article:

In the past 14 months, politicians in the euro-zone nations have adopted one bailout package after the next, convening for hectic summit meetings, wrangling over lazy compromises and building up risks of gigantic dimensions.

For just as long, they have been avoiding an important conclusion, namely that things cannot continue this way. The old euro no longer exists in its intended form, and the European Monetary Union isn’t working. We need a Plan B.

Instead, those in responsible positions are getting bogged down in crisis management, as they seek to placate the public and sugarcoat the problems. They say that there is only a government debt crisis in a few euro countries but no euro crisis, citing as evidence the fact that the value of the European common currency has remained relatively stable against other currencies like the dollar.

But if it wasn’t for the euro, Greece’s debt crisis would be an isolated problem — one that was tough for the country, but easy for Europe to bear. It is only because Greece is part of the euro zone that Athens’ debts are a problem for all of its partners — and pose a threat to the common currency.

If the rest of Europe abandons Greece, the crisis could spin out of control, spreading from one weak euro-zone country to the next. Investors would have no guarantees that Europe would not withdraw its support from Portugal or Ireland, if push came to shove, and they would sell their government bonds. The prices of these bonds would fall and risk premiums would go up. Then these countries would only be able to drum up fresh capital by paying high interest rates, which would only augment their existing budget problems. It’s possible that they would no longer be able to raise any money at all, in which case they would become insolvent.

Well, the article talks about how economically productive counties like Germany are on the hook for the bailouts to underperforming countries like Greece and Portugal. That will happen unless Greece reverts to the drachma and stops dragging down the Euro. But the strong European countries are not the only source of bailout funds – there’s also the International Monetary Fund. And guess who funds them?

Consider this article by John Bolton in the New York Post.

Excerpt:

Most Americans had barely heard of the International Monetary Fund before the arrest of its managing director, Dominique Strauss-Kahn, for sexually assaulting a hotel housekeeper. Yet the race to replace him offers a chance to rethink everything about what the real American interest is in the IMF — including whether its continued existence is beneficial.

The top contenders for Strauss-Kahn’s job are French Finance Minister Christine Lagarde and Bank of Mexico Governor Agustin Carstens. Europeans have headed the IMF since its founding, as Americans have led the World Bank — prerogatives that Third World countries increasingly resent as vestiges of colonialism. Carstens’ candidacy is the most visible manifestation of this rising discontent.

[…]Europe is eager to keep the top IMF job not simply because of geographical chauvinism but because continued IMF assistance is critical to European Union efforts to bail out the fractured economic and fiscal system in Greece and several other EU countries. Lurking behind the bailout crisis is the EU’s growing panic over the viability of its currency, the euro. Having a sympathetic ear at the IMF’s pinnacle seems absolutely critical to protect Europe’s parochial interests.

What of America’s interests? We should have long ago resisted throwing our scarce resources, through the IMF or otherwise, into the sinkhole of defending the euro. The currency was always conceived to be as much a political statement as an economic policy: Its European proponents believed the euro would enhance Europe’s strength as an alternative and perhaps rival to America.

If the United States and a few other developed countries like Japan decide to break with Europe over this vote, the IMF’s voting system, based on world-wide economic strength, makes defeating Lagarde a real possibility.

Today’s IMF does little or nothing for US national interests, especially when we face enormous domestic economic challenges. Why should Washington not support Carstens, break the EU hold on the IMF and stop IMF support for the euro?

We can barely afford us, and yet we have to bailout these profligate European nations? Give me a break.

Veronique de Rugy debunks myths about public sector pension liabilities

From Reason magazine. (H/T Hyscience)

Bullet point summary:

Myth 1: Unfunded state pensions do not represent an immediate threat and are therefore not in crisis.
Fact 1: In the best case scenario, some state pension funds will run out as soon as 2017. And the longer the states wait to fully fund their pensions, the more drastic the financial consequences will be.

Myth 2: State debt accurately reflects state liabilities. And state default is not a concern because the federal government will bail the states out before they reach that point.
Fact 2: Many government pension liabilities are kept off the books, so most states and cities underestimate their actual debt.

Myth 3: State and local workers are not overpaid. And even if they are, changing their compensation won’t make a difference.
Fact 3: While this is a complex issue, the total compensation package for state workers does tend to exceed that of their private-sector counterparts.

Myth 4: The financial crisis, which caused a depreciation of pension assets, is the real culprit behind pension underfunding.
Fact 4:
While the recession dealt a severe blow to state pensions, the problem of pension underfunding dates back to the early 2000s. Many states had already failed to cover the cost of promised benefits even before they felt the full weight of the Great Recession.

And conclusion:

Here’s the bottom line: We can argue endlessly over when the pension plans will run out of cash, or what the true value of the unfunded liabilities is. We can even debate what the true meaning of being broke. But there is one issue where there is no room for debate. Once the pension plans run out of money, the payments will have to come out of general funds, meaning out of the pockets of taxpayers. If the states want to avoid this, they must push through reforms as soon as possible. A good first step would be to switch to accounting methods that show the true market value of their liabilities. Once those methods are in place, lawmakers should consider moving away from defined benefit pensions.

What states like Wisconsin and Ohio are doing is completely necessary. This is a real crisis, and we need to act now to make sure that taxpayers are not squeezed when the money runs out.

Planned Parenthood releases annual report – 324,008 babies aborted

Story from the grass-roots conservative web site Red State. (H/T ECM)

Excerpt:

Today, abortion giant Planned Parenthood released its 2008-2009 Annual Report.

Behind the colorful graphics and happy faces is a stark number: Planned Parenthood received $363 million in government grants and contracts from 2008 to 2009 alone, all at the expense of the U.S. Taxpayer and the lives of unborn babies.

How many lives are we talking? 324,008 unborn human lives destroyed in one year. How many adoption referrals? 9,433.

Abortion is the law of the land, but we are certainly not obligated to give them federal money to run their business. Certainly we are not obligated to give them a $363 million annual BAILOUT.

Excerpt:

Hmmmn, it looks like the number of abortions is varying by the amount of state subsidies. I wonder how this number will change once abortions are covered by Obamacare and Obamacare is extended to even more uninsured people, and more insured people are forced to buy health care who don’t want coverage for abortion (like pro-life men).

Social conservatives need to understand that fiscal conservatism matters. Evil costs money. Cut off the money, and you cut off the evil.

And any “social conservative” who supports single payer health care is rally a social liberal – anti-life and anti-marriage.