EU Austerity Madness
European/American austerity assures a wealth grab of the 1% at the expense of all others. Prioritizing banker payments causes debt bondage, human misery, economic wreckage, and eventual collapse. What can't go on forever, won't. It's not rocket science. It's fact.
Economies thrive on productive economic growth. It includes public sector infrastructure investment in transportation, research and development, roads and bridges, education, healthcare, and other vital areas. Sacrificing it for bankers and other vulture investors causes Greek-type crises.
Financialization highlights "the great problem of our time," says Michael Hudson. He defines is as "capitalizing every form of surplus income and pledging it for bank loans at the going interest rate, personal income over and above basic expenditures, corporate income over and above cash flow....and whatever government can collect in taxes over and above its outlay."
Banker nirvana depends on securing all economic surplus as interest, says Hudson, or in hard times as bailouts. However, doing it "leaves nothing over for living standards and what (18th and 19th century) economists (called) human capital formation (training and education) required for labor productivity to rise." Economies need it to thrive.
There's also "no cash left over for corporations to invest in new tangible capital formation, and no government spending for infrastructure or other social and economic needs."
Hudson talks about a financialization-caused economic/political "Dark Age," "a form of neo-feudalism." Industrial capitalism and people suffer to enrich financial oligarchs. Austerity becomes policy. Debt peonage and hard times follow. Jobs are cut, wages slashed, and living standards shrink. Prioritized banker demands sacrifice fundamental human needs.
EU Fiscal Pact Insanity
The EU's latest Fiscal Pact demands more. Terms call for constitutional debt limits. Exceeding 3% of GDP brings European Court suits. Doing so triggers automatic penalties, at least according to pact mandates.
Eurozone monetary union failed. Europe's Exchange Rate Mechanism (ERM) was introduced as part of the European Monetary System (EMS) to propel the continent to one European currency unit (ECU).
ERM never worked. ECU's failing. At issue is duplicity, conflicts of interest, and uniting 17 dissimilar countries under rigid euro straightjacket rules. Doing so usurps their monetary and fiscal autonomy disastrously.
Bernard Connolly got it right. His 1995 book titled, "The Rotten Heart of Europe: The Dirty War for Europe's Money" called it a harebrained idea doomed to fail. Saying it cost him his job as EU monetary affairs department head. He's regarded as the foremost expert on European economic, monetary, and political integration.
Months before the euro's 1998 introduction, he predicted that one or more of Europe's weakest countries would face rising budget deficits, troubled economies, and a "downward spiral from which there is no escape unaided. When that happens, the country concerned will be faced with a risk of sovereign default."
In late 2007, the great unraveling began. Massive liquidity infusions delay eventual day of reckoning inevitability. The longer it's extended, the worse the fall. It's just a matter of time.
New Fiscal Pact provisions mandate austerity. EU nations have no say. Ordinary people have none whatever. Britain and Czechoslovakia opted out, not for populist reasons. Under the Bank of England, the UK retains monetary sovereignty. Both countries retain fiscal policy control.
They'll enforce austerity their own way. Mandating more across Europe assures harder than ever hard times. Ordinary people suffer most. Recession's already biting. Europe's healthiest economy feels it. Germany's 2011 Q IV GDP contracted 0.25%. In January, its retail sales slumped 1.6%. Consensus expected +0.5%. Eurozone industrial activity contracted for the seventh consecutive month.
China's Purchasing Managers Index (PMI) showed weakness. Its growth target was cut to 7.5% from 8%. High oil prices are taking a toll. US gasoline consumption slumped 7% year-over-year. Imagine the effect of expected $5 dollar gas by summer or late spring. Real, not manipulated, joblessness keeps growing.
What affects Germany impacts the continent. Look for Europe's recession to deepen and spread. Unemployment's rising. In January, it reached double digits, its highest level since the euro was introduced.
Youth joblessness is especially affected. In Greece and Spain it's 50% or higher. Fiscal Fact austerity assures greater hardship, including higher unemployment, lower wages, eroded benefits, and less ability to survive. Mandating it's cruel and insane.
Decades of social progress is lost. Ordinary people more than ever are on their own sink or swim. In hardest hit countries, people are voting with their feet and leaving. Capital flight's joining them. Fiscal Pact madness assures economic decline, widespread deprivation, and social unrest.
At the same time, ECB Long Term Refinancing Operation policy (LTRO) gives banks free money, but not without unintended consequences. Expect eventual disruptive public anger. Deprived people take only so much. Tolerance thresholds eventually breach. The fullness of time will tell when.
For years, Progressive Radio New Hours hour regular Bob Chapman explained Eurozone madness and eventual Greek default. He calls the last four years "a warm up" for greater future trouble.
Greece, other troubled economies, and those heading there can't keep borrowing more than their revenue stream. Doing so increases indebtedness. Extraordinary levels can't be repaid. Entrapped Greece has no choice but to default and exit euro straightjacket rules.
S & P cut Greece's credit rating to selective default, its lowest level because repaying it's impossible. Moreover, European banks won't lend to each other. Speculation's safer. Unless business lending increases, economic growth won't happen.
So far, not a glimmer's in sight. Free ECB money achieves Pyrrhic victories at the expense of ultimate unwinnable ones. Follow bond, not equity, buyers. Their world view sees dark storm clouds coming. Bet on it.
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Stephen Lendman: I was born in 1934 in Boston, MA. Raised in a modest middle class family, attended public schools, received a BA from Harvard University in 1956 and an MBA from the Wharton School at the University of PA in 1960 following 2 years of obligatory military service in the US Army. Spent the next 6 years as a marketing research analyst for several large US corporations before becoming part of a new small family business in 1967, remaining there until retiring at the end of 1999. Have since devoted my time and efforts to the progressive causes and organizations I support, all involved in working for a more humane and just world for all people everywhere, but especially for the most needy, disadvantaged and oppressed. My efforts since summer 2005 have included writing on a broad range of vital topics ranging from war and peace; social, economic and political equity for all; and justice for all the oppressed peoples of the world like the long-suffering people of Haiti and the Palestinians. Also co-hosting The Global Research News Hour, occasional public talks, and frequent appearances on radio and at times television. I also am a Research Associate of the Centre for Research on Globalization. I live in Chicago and can be reached at lendmanstephen@sbcglobal.net. Also visit my blog site sjlendman.blogspot.com and listen to The Lendman News Hour on RepublicBroadcasting.org Monday - Friday at 10AM US Central time for cutting-edge discussions with distinguished guests on world and national issues. All programs are archived for easy listening. My new book "How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War" can be ordered HERE.
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Illustration: David BROMLEY
URL: http://www.a-w-i-p.com/index.php/2012/03/07/eu-austerity-madness
