FedUpUSA

Greecefire Burns Athens; Prattling Continues

 

Don’t be fooled folks, the Greek “tragedy” is nothing more than arm-waving and the people of Greece have already voted on it — from the streets.

“There is no cause for major relief: In effect parliament only decided not to denounce further aid payments at this stage,” Commerzbank foreign-exchange analysts said in a note Monday. In particular, the analysts worried whether there would still be the political will to follow through on reforms when Greece gets a new government after fresh elections, which could come as early as April.

No such thing (follow-through) will happen. 

Simply put, the politicians are unwilling to have the same honest discussion and debate with the citizens there that we must have here in the United States.  The root cause of the problem is the same, the debt trajectory we are on is identical to that which caused Greece to blow, and not only are we not facing it, neither are they.

Olli Rehn, the European Commission’s head of economic and monetary affairs, said Greece has been living beyond its means for a decade and must undertake demanding reforms.

Yeah yeah.  We ought to re-write that:

Olli Rehn, the European Commission’s head of economic and monetary affairs, said Greecethe entire Western World has been living beyond its means for a decade and must undertake demanding reforms.

Reform = you cannot spend more than you take in via taxes.

Period.

So when will we see actual reform?  The fact of the matter is that since GDP = C + I + G + (x – i) when “G” decreases (government spending) by cessation of deficit policies GDP will inevitably contract, at least on a temporary basis.

This is why nobody is serious about doing it, but the longer we take to do it the worse it gets as the compounding of artificial demand builds into the system capacity that there is no organic requirement for, nor can the employment and standard of living that goes with it be supported.

The argument is always and forever that we must “grow” out of the mess.  The fact is that we never have.  In each and every case since 1980 there has never been a time when we have in fact “grown out of the recession.”  Note that this includes Presidents Reagan, both Bush I and II and Clinton.

Not one quarter folks, up until the crash, and then only because debt defaulted so fast that it fell below GDP’s rate of change.  The paradox is that while this was being decried and the screaming reached a fever pitch it was actually good from a perspective of sustainability!

In other words the exact opposite of what people claimed “should” be done was the correct path — do nothing, allow the corrective process to run its course, and in doing so allow sustainability to return.  Instead we are desperately trying to prop up the bubbles we blew over the last 30 years.

David Walker was on CNBC this morning again claiming that we “lost our way” over the last ten years.  He’s lying.  What we have here is a geometric series and I’m going to prove it.

Over 20 years, from 1980 to 2000, the slope of the line of debt accumulation was approximately 12 degrees.  From 2000 to 2008, or approximately 9 years, it was 26 degrees (more than double the slope over less than half the time) and from 2008 to today it was 64 degrees or again more than double the slope over less than half the time.  Note that this is just the public debt — the problems in entitlement programs (internal debt) are even worse!

This is a chart of a runaway geometric series.

There is no solution that comes from “slowing it down” — you must stop this right now.

I recognize that nobody wants to talk about it, say much less do it.  But mathematical relationships do not care whether you want to talk about them or not.  They just are, and Walker is trying to put this into some sort of perspective that aims at Bush and Obama.

He’s full of crap.  The problem goes back to 1980 when we crossed beyond fiscal sustainability.  Every President since that time and every Congress has been part of a gigantic Ponzi Scheme that will inevitably blow up unless we act to stop it now.

 

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