You have to give it to American and European governments: their bumbling incompetence at paying their own way makes Bill English look like a competent manager of government finances.
Making Bill English appear competent while his government runs record deficits, living beyond its means to the tune of one-third of a billion dollars a week, is not an easy thing. Indeed, this is a measure of just how far Europeans and Americans have been living beyond their means.
The Greek debt crisis; the Portuguese/Irish/Italian/Spanish debt crisis; the American debt crisis … the sums involved are so enormous, the unpayable figures measured with so many zeroes, that our own serious problem seem dwarfed by comparison.
But only by comparison. A government needing to borrow a third-0f-a-billion dollars a week because it’s spending so much more than it brings in is the same problem in essence facing the Yanks and the PIIGS, and the cause is precisely the same: because for sixty years western economies have been built on a foundation of deficit spending, welfare/warfare payments and money printing. Which is to say, a policy foundation based on faking reality.
But, Keynes to the contrary, economic reality can only be faked for so long.
The responses to the reality check of economic crisis have instructive. When the world economy collapsed under the weight of too much counterfeit capital (the very essence of the phoney Keynesian expansionism followed by the mainstream for the past sixty years), the world’s governments thought they could fake things for a little longer by propping up all the bad positions with trillions of dollars borrowed from the world’s bond-buyers, and spat out straight from central banks’ printing press.
The result can be seen in the world’s headlines: rising unemployment; fears of both deflation and rampant inflation; and (not despite the efforts of governments to fix things, but because of them) never-ending, soul-destroying stagnation.
And the bill for the borrowing and printing (which is what the so-called Sovereign Debt Crisis represents) is now due. And it can’t be paid.
So we see that instead of fixing the problem, the world’s economic “managers” have instead made the problem worse. The World Economic Crisis has continued to eat out our substance, and to that crisis has been added the Sovereign Debt Crisis. One failure of mainstream political economy leading to another.
But reality can only be faked for so long. The economic bill must be paid by someone. And for the Yanks and the PIIGS, and for us, the bill is now coming due.
Frightening. And it should be.
That none of the above realise that, that they all still seem to think it’s business as usual, is a signal that things over the next few years are not going to be pretty.
Batten down the hatches.
UPDATE: Slightly revised for smoothness.