The Real Problem In Europe

Dear Friends,

It seems to me that what makes the Greek sovereign debt problem, so problematic, is that no one is looking at what is really the problem. Let alone fixing it. The Elite in Europe only look to “solutions” that keep the ball rolling. They seek to “Shore up” the Greek finances and to “Reassure” the investing public that they have things “Well under control“. But no one is buying that tripe any longer. Like the buggy whip it has become redundant. Everyone knows in their hearts, what the problem is, but no one will face it.

A very good friend of mine once said “in the land of the blind, the one eyed man is king.” This situation is applicable to that saying. Economists all point in different directions; like blind men. They claim, “Revenues must be increased, no spending problem can be effectively addressed, unless you first increase revenue.” They chide, “They have to hit it hard with a giant fund in the trillions of Euros.” Some opine, “No that’s foolishness, Greece should be kicked out of the Euro zone so it can print it’s way out of debt.”

But no one says what the real problem is. Because it is too big to look at. Like the leviathan it is too scary to even consider. Great lengths are made to avoid even talking about it. Those who bring it up are labeled with the most horrible monikers. So no one wants to openly say, the problem is that the Greek government spends too much money. It sounds simple but it has deep ramifications to the body politic.

The Income tax and social welfare spending are the corner stones of welfare state capitalism. This has been the paradigm in Europe and the America’s since WWII. The welfare state was seen as a means to change the ratio of wealth or the gap between the rich and the poor. As we have seen empirically it does no such thing. It does lower the growth in GDP tremendously but has no effect on the “Gap.“ In fact, where it has been put into the most practice, it has produced the worst results. Greece is only one shining example.

But where the welfare state has been fought most, by the populace, the standard of living has increased the most. The US is the best example of this. In 2010 the GDP per US citizen was around $47,000, while in Europe it was around $30,000 and that includes Lassez Faire Luxembourg with a per capita GDP of around $81,000 per person. With further proof to our conjecture, that now the US has changed course and is running fast to socialism, we see that the dynamic economy that characterized the US has been hobbled. Encumbered by ever changing welfare state regulation and the threat of more taxation around the corner… inevitably, American companies are panicked. They are hording cash and getting as much business offshore as possible. It is virtuous behavior, (in a bourgeois way), to protect the assets of your investors. To do otherwise is corrupt.

States must face the ogre of reforming the welfare state. It must be done, because sooner rather than later it, it will collapse. The World economy will breakdown long before it totally runs out of money. If the monetary system survives a total Greek default, (they have already defaulted 50%), there are time bombs planted all over in Europe. Not to mention the ticking time bombs in the US ala Social Security and Medicare/Medicaid.

Throwing trillions more good Euros after the trillions of Euros that have already been lost is simply bad business. But there again we are not talking about businessmen are we? We are talking about politicians. People who seek power as a good above all others. To them a good deal is one that lets them keep all their power. A great deal is one that gets them more power. No matter the cost to society. The career politician will bristle at this. But I notice very few did when doctors were accused of removing people’s legs for the insurance money. For logic to be logic, it must be consistent, else it is rhetoric.

So, have rotated our one eye, and focused it on the real problem. No, the thing is not a tax problem, nor is it a question of how much largess and no, printing money is no solution either, it is the welfare state. The solution is to reform welfare state capitalism. The place to start is to throw out the much misused metric of the gap between the rich and poor. Instead measure societies by their sustainable material standard of living. If a society existed where everyone was equally destitute and another where everyone was fat but a few had more money than they could ever spend… which one would be voted for, by immigration? Which one has historically?

And no, the answer is not to eliminate capitalism, to measure socialism’s outcomes by.

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