This Just In ...

It's a short flight from Athens to L.A.

Posted by Kevin Fischer on Nov. 29, 2011

By Guest Blogger Donna Cole

 Back in the 1990's, when the European Union was being formed, I remember something my mother told me that I have never forgot. She said,"They are trying to build the Tower of Babel again." I admit, this analogy might not exactly fit. But I think it is safe to say, like the Biblical story of Babel, the construction project known as the EU and it's common currency,the Euro, is coming to an end.

 The basic problem with the EU is that some members, nation states, have been responsible with their fiscal budgets and debts, and others have not. The states that are broke threaten to drag down the responsible members with them. Germany has been the most responsible, so the broke nations are looking to the Germans to bail them out. One example of this being Greece.

 The Germans, and the European Central Bank, have demanded the Greeks take on very tough austerity measures in order to be floated loans to cover their debts. That sounds fair, their overspending got them in the mess, so they must be forced to live within their means.

 Many liberals are demanding that the Germans and the ECB should basically just buy up all of the Greek debt, eat it, and wipe the slate clean for Greece. So they can just go back to what got them in this spot in the first place.

 The Germans are resisting this and rightly so. Why reward bad behavior ? The next liberal argument is that the Germans got rich selling it's exports to Greece, which Greece was buying with all the borrowed money. So the Germans now have some sort of obligation to bail out Greece.

 This argument is right out of 3rd grade, which is where Keynesian economic theory is taught. This is no different than if I bought a bunch of stuff at Walmart on my Visa card, then when the bill came in, I went to Walmart and said they had some obligation to pay my credit card off.

 Germany does have a real interest in Greece making it through this. If Greece defaults on it's bonds, it will bring down many European banks, many of those are German banks. It would also crash and perhaps destroy the Euro. The liberal idea is to just bail out Greece with literally no strings attached. The German approach is to just keep Greece afloat and force them to deal with their bloated government budget.

 Like any country, Germany has it's own internal politics to deal with. The German people are not happy about bailing out Greece. They refer to Greece as a Club Med nation, where people pay no taxes and retire with fat pensions at age 50, while Germans pay high taxes, save a lot of money for retirement, and are generally frugal. So, German politicians have to walk a fine line.

 I think what will ultimately happen is that Germany and ECB will keep Greece from going into full default and piece them along until the economic crisis stabilizes. This will mean some tough times ahead for the Greeks, times they earned. Then the EU will restructure itself around the solvent and responsible nations and kick out nations like Greece. And rightly so.

 However, these problems go far beyond just Greece. At some point, all this debt will have to be repaid or defaulted on. So, the future of the EU and the Euro are truly unknown.

 One insurance policy the Germans have over Greece is that most Greeks can't bug out. Because of the EU's immigration laws, most Greeks can't just pack up their bags and head for a country of greener pastures. But in America, on any day, you or I can pack our bags and move. If I don't like high taxes in one state, nothing is stopping me from leaving. If I was living on welfare and I thought I could make more in another state, I can move there.

 Which brings us to a growing problem in the US. Many states are effectively bankrupt, they are borrowing new money to pay old debts. They have out of control budgets, which liberals cannot or refuse to deal with. They cannot service the debt they already have and they are only adding more to it with even higher interest rates, because they are now more of a risk. The banks keep buying their bonds because the banks have no worries, the federal government will bail them out. At some point, the chickens will come home to roost, as they have in Greece and the greater EU.

 The worst of these states is also the most populous with very high taxes, not surprisingly ran into insolvency by liberals, California. At some point ( it may be five years from now but it will happen) , California is going to come to the federal government looking for a bailout. The debt holders will be demanding it, saying the too big to fail banks can't be allowed to go belly up.

 In much the way Germans think, I ask why should the responsible states bail out California from the debt of forty years of liberal irresponsibility ? If we are to bail out California, what power do we have to dictate to them the terms ? How can we teach Californians the same lesson the Germans are trying to teach the Greeks ?

 The answer is we can't. California is already loosing more people than are moving there. The high taxes are driving businesses away and taking jobs with them. Unlike Greece, if we put the economic screws to California, people will just move away. They will walk away from the politicians they continued to vote for, so they could get the free goodies.

 As much as many of us would like to, we can't kick California out of our union like the EU will do to Greece at some point in the future.

 So, how can we punish these irresponsible liberals and the bankers who lent them the money ? We first tell the banks, you took the risk, you knew the amount of debt they were carrying, you still lent them the money ( bought the bonds), so you reap the rewards. There will be rewards, because the Californians do not get off the hook either.

 The state goes into receivership. The state government is dissolved, replaced with a federal overseer, and only the most essential services remain. The banks get what is left, all the state's assets. These would be mostly property, in the form of state parks, universities, etc. Probably several billion dollars worth of assets. What they do with them would be the bank's own business, and none of any Californians.

 This would not be like a mortgage default, where the bank does not want the house, they want the money. The banks would take ownership of California's mineral,timber and oil exploration rights. I think they can earn a few bucks off of those. Something any liberal with half a working brain would be doing now.

 I know this is radical. I know many on both the right and left will howl for various reasons. I also know this will never happen, neither party has the stones to do something even approaching this. I would argue that without some real tough love like this, we will never stop liberal irresponsibility. These people must be taught a lesson. I give the Germans, and the ECB, credit for ignoring European liberal, and the NY Times, calls they just bail out and eat Greece's debts.

 Surprisingly for a socialist nation, the Germans understand how important it is to teach an irresponsible child a lesson. A lesson liberals in this country must be taught, if not, we are just going to keep pouring taxpayer dollars into our own Tower of Babel. We all remember how that story ends.