By: Scarecrow Wednesday December 1, 2010 9:22 am
My dead-tree New York Times aptly depicts the mass economic insanity now gripping the US and Europe. There are several related articles, none referring to the others, but they’re all part of the same story: Governments are on their knees from bailing out insolvent banks and rescuing their economies after the financial collapse, but further crippling themselves by pretending that punishing citizens via austerity will keep their economies from tanking further.
On the Times front page, top-right, we read about America’s hysteria over federal deficits. The article frets over whether Obama’s failed Deficit (aka “let them eat Catfood”) Commission can get even a majority, let alone the required 14 of 18 votes, to endorse measures already widely panned, partly because Simpson-Bowles merely wave their hands on health care costs that are the principal driver of structural deficit. Even worse, in the aggregate their proposals shift more wealth from the middle class and elderly to the richest 10 percent of Americans, while restricting the government’s ability to right the inequality. It doesn’t occur to the Times to hope enough members will have the courage and wisdom to just say NO!
From the Economist’s View:
Ireland’s austerity measures — which amount to punishing the public for bankers’ mistakes — aren’t working:
Eating the Irish, by Paul Krugman, Commentary, NY Times: What we need now is another Jonathan Swift. Most people know Swift as the author of “Gulliver’s Travels.” But recent events have me thinking of his 1729 essay “A Modest Proposal,” in which he observed the dire poverty of the Irish, and offered a solution: sell the children as food. “I grant this food will be somewhat dear,” he admitted, but this would make it “very proper for landlords, who, as they have already devoured most of the parents, seem to have the best title to the children.”
O.K., these days it’s not the landlords, it’s the bankers — and they’re just impoverishing the populace, not eating it. But only a satirist — and one with a very savage pen — could do justice to what’s happening to Ireland now.
By: David Dayen Wednesday November 24, 2010 8:03 am
If you thought the Irish government couldn’t possibly close its budget deficit without raising its obscenely low 12.5% corporate tax rate, you were wrong. The austerity program leaves the corporate rate untouched, balancing the budget on the backs of the people instead. Ten billion in euros come from spending cuts, and five billion from tax increases, mostly to the VAT, a regressive sales tax, as well as the income tax. The cuts go to public infrastructure payments, public sector pay and pensions, and welfare. Oh, and they shaved one euro off the minimum wage, for good measure.
By MIKE WHITNEY
Ireland could be the next Lehman Brothers. That’s what has the markets worried. If Irish leaders refuse to accept a bailout from the EU’s new European Financial Stability Facility (EFSF), then bondholders will be forced to take haircuts on their investments which will leave banks in Germany and France short of capital. Bonds yields will rise sharply slowing activity in the credit markets. An Irish default will trigger hundreds of billions of dollars in credit default swaps (CDS), which will push weaker counterparties into bankruptcy and domino through the financial system. Contagion will spread to Portugal, Greece, Spain and Italy widening bond yields and forcing governments to increase their borrowing at the ECB. Business activity will sputter, unemployment will rise, and growth will shrink. It will be a second financial meltdown.
But no one believes that will happen. Most people think that Ireland will “take its medicine” and spare bondholders any losses. Irish leaders would rather accept a decade of EU-imposed austerity measures and the loss of sovereignty, then leave the euro and start fresh. It’s disappointing. The euro is not designed to meet the needs of the smaller, less industrialized countries like Ireland. They need their own, flexible currency to ease the effects of cyclical downturns. But Irish leaders are still captivated by the idea of a united Europe. So they will cast aside the independence they earned through centuries of struggle for a pipedream and the elusive promise of prosperity.