“"We have the makings of a market crisis here."
- Neil Mackinnon, global macro strategist at VTB Capital.
This is more than just a market crisis.
The decades-long economically unsustainable experiment of the welfare state has now run headlong into the economically unaffordable consequences of government stimulunacy—government spending based almost wholly on the economically bankrupt notion that all the world’s governments will be able to borrow all the world’s money and somehow pull the world out of the valley of the shadow of depression and lead us back to another faked prosperity.
And the eleven-year experiment of a common European currency is close to collapse too, punctured by the very contradiction at its heart: that the prosperous European nations (which now just means Germany)will not indefinitely bail out and backstop the profligate policies of Europe’s unproductive welfare states (which now includes all of Europe).
This is more than just a collapse of one market. It’s a collapse of economic theory.
The experiments are over, and now all serious students of markets need to learn that Keynes was wrong: that prosperity does not come out of the manipulation of government deficits and the printing presses of a central bank. Only penury lies that way.
But will the lessons be learned . . . ?
Will they be learned in time?
Will they be learned at all?
Further commentary below on the breakdown of Greece, and the world’s economics with it.
- Who's on the Hook for the IMF's Greek Bailout? – WALL STREET JOURNAL
So who’s gonna pay for it all? Who could?
- Street Fighting Man - DOUG CASEY
Investment guru Doug Casey predicts civil unrest world-wide as the Greater Depression takes hold.
- Is This Our Moving Equilibrium? European Edition – PETER BOETTKE
This cycle of deficit, debt and debasement is the "juggling trick" that Adam Smith identified as the circus act that all governments ancient and modern engage in, unless they are effectively constrained from doing so…
What makes us think our current situation in the US is any different from the situation in Europe, let alone the cycle of deficit, debt, and debasement that Smith identified so long ago? … Is our moving equilibrium what we are currently seeing in Europe? If so, isn't our current policy path simply moving us quicker along that path? Stare at the graphic, shouldn't that make all policy makers and intellectuals wake up from their intellectual complacency?
- Sitting at the table together – RUSS ROBERTS
Rescuing Greece isn’t the end of the problem, it’s more akin to the Bear Stearns rescue of March 2008. It’s just the beginning of something that won’t end well.
- Let Greece Default - JEFFREY MIRON
A bailout … does nothing to fix the misguided policies that have generated Greece's existing debt and ongoing deficits. Bailout therefore merely postpones the day of reckoning. Worse, bailout both rewards Greece's bad past behavior and encourages such behavior in future. Greece will never change its misguided policies if the E.U. and IMF infuse it with new cash, just as no teenager who has overspent an allowance will reform if the parents merely expand that allowance. Thus bailout merely transfers resources from other nations to Greece.
- Is this the end of the euro? Or just credit crunch mark II? - IBN
Maybe, the great sovereign debt crisis that we had been warned to expect months ago, is at last beginning to make itself felt.
- Currency Crisis. - JIM ROGERS
The currency crisis has been going on for a while. It did not start this week. It has been happening for a while.
- Where Greece went wrong – MARGINAL REVOLUTION
….monetary policy was dominated by the need to finance fiscal expansion.
- Merkel’s Coalition Calls for EU ‘Orderly’ Defaults; Spain Prime Minister says Speculation of a Bailout for Spain is “Complete Madness” – MISH’S ECONOMIC ANALYSIS
"Orderly defaults" has a nice ring to it. Somehow I suspect when Greece defaults it will be anything but orderly. Nonetheless it is interesting to hear the word default bantered about so soon after an announcement of a $145 billion bailout for Greece.
- Is this the end of the Euro? – YARON BROOK on PJTV
The amount of money necessary to bail Greece out is ever-growing … and it’s not clear where that money is going to come from.
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