As the Eurozone continues to crumble, it would be wise not to forget that we are not any better off here in the United States. We have the benefit of being the reserve currency of the world. This let’s us print money until a $1,000,000 won’t buy you a cup of coffee. Certainly, if you think the act of printing money is going to solve economic problems, you’d also find no problem with a million dollar cup of coffee. For the rest of us–sane individuals–we know this is no good.

There is no historical evidence to suggest that money printing has ever done anything except destroy economies. Just ask the people of Zimbabwe.

We’ve already enacted bailouts in the tune of trillions with no upturn in the economy. Unemployment remains high. There is no recovery without employment. The idea that unemployment is a “lagging indicator” is ridiculous. It isn’t a lagging indicator, it’s the only indicator. The stock market can go as high as it wants. A high nominal value is meaningless. As much as the stock market has “recovered”, how stable is it? When the Dow Jones can drop 1000 points in a matter of minutes, we know we aren’t standing on solid ground.

This is volatility like we’ve never seen.

Bye Bye EU

There is an excellent chance the Euro won’t be around for much longer. It was an idiot’s idea to begin with. Who has it actually helped? No offense to any of the member nations of the EU but, the only really productive nation is Germany. The rest of you are–more or less–freeloaders. Ultimately, the EU has been great for the rest of you who do very little while Germany carries your asses.

That might be okay with you but, let’s not forget how the Euro has killed tourism. It is just too damn expensive for people to travel to Europe. Especially the big spenders from America. It’s lovely that you have a “stronger” currency–for now. But, what good has it done for your economy? Imposing a strong currency on a weak economy is economically unnatural. You become dependent on the entity that imposed this currency. Example: Greece.

The Greeks are rioting. They are burning buildings. Killing people. I do not support any of it but, the Greeks will do what they do. I am glad we haven’t resorted to that here in the United States. Force isn’t the answer. We can still accomplish what we need with peace.

But, can you blame the Greeks for rioting? The EU wants to impose austerity on Greece. Sounds like a nice word. But, what does it mean? It means the Greek people are going to suffer a drastically reduced standard of living. How happy would you be if some foreign entity forcefully made you poorer? I do mean foreign. The EU is not Greece.

None of this were the fault of the Greek people. It was the European Central Bank that kept interest rates too low for too long that allowed the bubble in the Eurozone to grow. This bubble is most devastating to weaker economies like Greece, Spain, Portugal, and Ireland. This should be to no one’s surprise but, those same nations are all in trouble. At this point, it’s just a matter of time.

The EuroBubble

Anyone with any sense could have seen that this arrangement with the EU was only going to end terribly. With the ECB, the Greek government no longer had to raise taxes on the people to fund their idiotic projects. They just had to create bonds, sell it to the ECB, and voila! brand new spanking Euros! This is the same arrangement the US Treasury has with the Federal Reserve.

Low and behold, Greek never had the capacity to pay all the bonds they created! And now Greece is where they are now: about to default. But we can’t have that! Those holding Greek bonds would lose a boatload of money. And apparently, those holders have friends in high places. I have no idea who owns Greek bonds but, I would not be surprised if some of our financial wizards on Wall St owned some. These are the same geniuses that bet on mortgage-backed derivatives so, it isn’t a far stretch.

On Mother’s Day, May 9th, 2010, the Federal Reserve agreed to be one of the handful of central banks to provide for the almost $1 trillion EU bailout. Great. American taxpayers are going to be on the hook for economic crises in Europe too. We really must be rich!

But, no. We aren’t. Our economy is still in the toilet. There are now a record number of Americans on food stamps. Yea, shit hasn’t gotten better.

The Last Straw

Our involvement in the EU bailout isn’t going to implode what remains of our economy. In the bigger picture, our involvement in the EU is negligible. This doesn’t mean we should be involved. We surely should not be.

The implosion of our economy was ensured as we enacted our own bailouts and increased the national debt to over 90% of GDP. It is going to go over 100% of GDP in no time with the gigantic budget deficits–bigger than the GDP of Canada. But even that wouldn’t necessarily result in armageddon. Japan’s debt is 200% of GDP and they’re still around. Granted, they have a zombie economy. But even a zombie is still “alive”–reanimated, whatever.

The last straw is going to be when interest rates go up. They have to. Either interest rates stay low and we suffer from massive inflation or we raise interest rates, the interest payments on the national debt becomes sky high, so we print money to pay it, and suffer from massive inflation anyway. No matter what, inflation is coming. And it’s going to destroy what remains of the US economy.

I won’t even include the $60 trillion of unfunded liabilities from Social Security and Medicare. No matter how slowly those unfunded liabilities become funded, inflation is unavoidable. It would take some magical free market ingenuity to create a bunch of Apple’s and Google’s for the economy to “grow” its way out of this.

This is highly unlikely. It would be more likely that you win the lottery tomorrow than it would be for a crippled and handicapped free market to create an army of companies like Apple and Google within the next decade. But, this is what the people in government are hoping for! Cross your fingers!

A Ray of Sunlight

This is a terribly dark future. But, there is some good to all of this. Granted, it would be much better if we never bailed out Wall St and we didn’t grow government to the size it has become but, too late for that. We have what we have and there’s no sign that we can change course in time.

If we can cut the size of government drastically and alleviate the tax burden drastically, there is some hope that the worse won’t happen. But again, this is about as likely as “growing” our way out of the problem.

The only likely ray of sunlight is the fresh start we all get when the US Dollar collapses. It won’t be fun to get there but, at least the end of the rainbow will be a pot of gold.

In February of 2009, there was only one country without any national debt: Zimbabwe. They had a fresh start. Super markets with empty shelves as price controls were enacted by the government are once again plentiful.

Ultimately, this is not going to be fun. The other bright side is that all the technology we have are still going to be here. Economic destruction doesn’t just make these leaps in civilization disappear. It will never be as bad as the Great Depression or the Dark Ages. We have better technology. Humanity has improved virtually everything we do. Even Kings never had air conditioners or computers.

No matter the shit storm, it could always be–and has been–worse.