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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Double trouble for the euro zone

Posted by WARREN MOSLER on July 25th, 2011

When Europe opens down big due to the US deficit issues, it will send a chill though the investment community and euro zone leaders.

This is the last thing they need while struggling with their domestic financial issues.
With export markets threatened, and impossible domestic debt loads given the current levels of growth,
markets could force (via deteriorating financial conditions) an ECB takeover of all national govt. funding.

Kind of like breaking your leg and getting hit by a car while trying to limp home.

13 Responses to “Double trouble for the euro zone”

  1. roger erickson Says:

    One of two assumptions seems likely.

    1) Cynical policy makers have a plan to cave into demands from their largest lobbyists – to deliver higher rentier income & greater wealth disparity.

    or

    2) Clueless policy makers actually have no plan.

    Either way, it’s clearly time for electoral mutiny on the HPBS Less-Bountiful. That brings us to option 3.

    3) What institutions are best able to re-present descriptions of operational clarity? Current messages of sanity are not being heard. Our electorate is not even adequately sampling the available spectrum of messages.

    Reply

    Tom Hickey Reply:

    @roger erickson,

    I pick #1, andI see this as replay of TARP. Another big kiss to Wall Street donors and “job producers.”

    Regarding #3, the real question is what institutions have the firepower to outbid Wall Street for politicians’ souls. Short answer — none.

    The fix is in.

    Reply

  2. Dan Furlano Says:

    Boehner and his cohorts got taken to the woodshed on healthcare and they are now looking for payback. Not wanting to be known as the republicans that couldn’t they are looking for a home run.

    At this point I don’t see a grand plan just plain ol’ vengeance.

    Reply

    Tom Hickey Reply:

    @Dan Furlano,

    Dan, they have announced their plan many times, especially Sen Jim (“Break Him) DeMint and Sen Mitch (“Stonewall”) McConnell. It is total unified opposition to the president in order to deny him a second term. And they are willing to risk all to do it. No mystery here. It’s pure politics.

    Reply

    Dan Furlano Reply:

    @Tom Hickey,

    If they wanted to win in 2012 they would have had a better chance by taking the entitlement reductions the president supposedly offered. That would have had a more negative impact on his base then anything else.

    The republicans may be unified in their desire to see Obama gone in 2012 but their ideology and methodology seems very fragmented.

    Reply

    Dan Furlano Reply:

    Oh, and they should first try and find a viable candidate.

    Tom Hickey Reply:

    @Dan Furlano,

    The GOP establishment would have loved to take the deal. Boehner couldn’t get it past his TP base, and if he had by-passed them with Dem votes, he would risk losing his speakership.

    beowulf Reply:

    @Tom Hickey,
    George W. Bush knew how to play the game. Look at how the 2003 tax cuts got passed. He used the filibuster-proof reconciliation process to ram it through the Senate and even then the bill required Dick Cheney to break the tie. When a President’s swing vote is his own VP, that’s a fellow who pushed as hard and as far as he possibly could to get his agenda through.

    In contrast, Obama wasted his big majorities in both houses with his demented idea that the only kind of stimulus/ healthcare / bank reform / climate bill worth passing was one that got at least 60 Senate votes. The first three were deformed by lobbyists and the last never even made it to a vote; all because we elected a President who didn’t understand that every Senate vote over 50 he secured was a needless waste of political capital.
    As usual, Jamie Galbraith said it best:
    What we got was George W. Bush’s policies without Bush’s toughness, without his in-your-face refusal to compromise prematurely. Without what he himself calls his understanding that you do not negotiate with yourself.
    It’s a measure of where we are, I think, that at a meeting of Americans for Democratic Action, you find me comparing President Obama unfavorably to President George W. Bush.

    http://www.alternet.org/economy/149140/galbraith%3A_whose_side_is_obama_on_/

  3. Frank Says:

    From our friends at Max Keiser :-)

    Fed’s $16 Trillion Dollar Secret Slush Fund Props Up Our Way Of Life
    By Silver Shield,on July 25th,2011

    “It is well enough that people of the nation do not understand our banking and monetary system,for if they did,I believe there would be a revolution before tomorrow morning.” -Henry Ford

    While the world waits with baited breath on the Contrived Drama of the Debt Ceiling,the real show has already been played out,secretly and behind the scenes. The first audit of the privately owned and foreign owned Federal Reserve by the GAO,has turned up $16 Trillion dollars of loans all over the world to prop up the global fiat empire. This massive money creation is over and above Hank Paulson’s $700 billion dollar heist of the American public. It is also in addition to QE1 and QE2 that resulted in an illusionary recovery of the economy. All of this money printing has done nothing to create any economic growth and it never will. The scary part is that this was done with no oversight or accountability . (Thank God we have someone like Ron Paul to hold these Elite accountable and expose their crimes before the collapse.)

    “As a result of this audit,we now know that the Federal Reserve provided more than $16 trillion in total financial assistance to some of the largest financial institutions and corporations in the United States and throughout the world. This is a clear case of socialism for the rich and rugged,you’re-on-your-own individualism for everyone else.” Senator Bernie Sanders VT (Get the full report here.)

    While Americans have been getting hammered,in this winter of our Empire,the Elite have been securing their bets gone wrong. Too Big To Fail should be Too Rich To Fail. As Americans continue to get crucified for speculating on the housing and stock bubble,the Elite get you to pay for their losses. This kleptocracy is a way of life and if the American people understood the enormity of this perverse crime,there would be revolution in the morning. And not just here in America,this money went all over the world to prop up the local Elite in foreign fiefdoms. The world is enslaved by debt and the wars they fund. We deserve better than this.

    The sick thing about this report of the largest theft in human history,is the name of the report,Opportunities Exist to Strengthen Policies and Processes for Managing Emergency Assistance. The title of the article is the equivalent IBM conducting a review of the Holocaust,which they facilitated,and titled their report, Opportunities Exist to Strengthen Policies and Processes for Managing Lebensunwertes Leben. (Life unworthy of life.) This report shows that no one is coming to save you and you had better start thinking and acting for yourself. The report seems to be about how best to do this crime again. If tens of Trillions did nothing,how about hundreds or thousands of Trillions? The government is an active and willing participant in this crime. Banksters derive power from creating debt/money and politicians derive power from spending money/debt. It is a sick symbiotic relationship that will not be cut until the whole cancerous system collapses.

    We are reaching the mathematical and inevitable end of our way of life. If not for these Trillions printed out of thin air,we would have entered into a unprecedented world-wide deflationary default. This would have destroyed all paper assets,because there would not be enough money to go around. The effect of paper asset devaluation would have rendered every nation,corporation,and individual,insolvent. The Elite fear deflation,because that means they would lose control over their source of power,the creation and spending of money. If the world economy collapsed,people would be forced to wake up from our credit induced acid trip and start looking for the drug dealer that ruined our lives.

    When the dollar dies,millions will die. Without a viable currency all commerce will stop. It won’t just be the dollar it will be all paper currencies since they are all based off of the same fractional reserve lie. That will collapse all paper assets and destroy the world wide economy. Crops won’t get planted,fuel won’t be exported. This is the first time in human history that people also have no idea how to feed themselves. This will lead to millions of people left as hopeless as the victims of Hurricane Katrina. We laugh at how pitiful North Korea is…Don’t laugh,they are a lot closer to our future without money,than we are. Eventually,humanity will adapt to this new reality and a new way of life will emerge. Our job is to make it through the storm alive and hopefully with the assets to shape the new reality.

    $15 Trillion Dollars in $100 Dollar Bills

    The inflation/deflation debate is over,yet again. This report shows the Elite will print unlimited amounts of fiat to prevent any systemic deflation. $16 Trillion dollars is larger than the total US Economy. In fact,without this massive injection,there would be NO US Economy. Any whiff of deflation,will be met with a MOAB bombs or Nuclear bombs of money creation. The inflection point is at some point people,corporations and nations will lose faith in the currency and sell their dollars,Euros and Yen to by real assets. It will become painfully apparent that the Elite are determined to destroy the currencies to keep their control system going. We don’t even really need more money to be printed. If the velocity of money sped up and people kept bidding on a limited pool of REAL tangible assets like gold,silver and oil,it would create systemic inflation that would destroy the dollar. (Reade the groundbreaking Silver Bullet and the Silver Shield.)

    The dollar is going to fail. All currencies and paper assets are going to fail. It is a mathematical certainty. Unless more money is created in excess of the debt AND interest accrued the year before,the entire system collapses. If debt/money is created in excess,we reach a point where the exponential growth of compounding interest necessitates larger and larger amounts of debt/money to be created to keep the system from collapsing. This ever expanding money/debt eventually reaches the reality of limited amounts of resources in the natural world. More money chasing after a limited amounts of goods brings about hyperinflation and the destruction of the currency.

    What do you do? I am not one for fear mongering,because fear mongering relies on an emotional response and not a logical response. You know your entire way of life is hanging on a thread. You saw it flash before your eyes in 2008. Your savings,your retirement,your job,your kids,your food,everything,rests on this fiat debt scam. There should be a default and/or a revolution any day. Knowing that it is coming and and knowing you are having a hard time committing to massive change for fear of looking stupid with the neighbors,what do you do? I spent 6 years putting together the Sons of Liberty Academy to help people get past this mental block and to give them the absolute confidence to take massive action in their lives to be aware and prepared for the largest event in human history. It is free and supported by the generous donations of our 8,200+ members. Join the Academy today to be aware and prepared.

    “Until they become conscious they will never rebel,and until after they have rebelled they cannot become conscious?”- George Orwell

    Reply

  4. Winslow R. Says:

    Via Mark Thoma

    Minority rules: Scientists discover tipping point for the spread of ideas

    “”When the number of committed opinion holders is below 10 percent, there is no visible progress in the spread of ideas. It would literally take the amount of time comparable to the age of the universe for this size group to reach the majority,” said SCNARC Director Boleslaw Szymanski, the Claire and Roland Schmitt Distinguished Professor at Rensselaer. “Once that number grows above 10 percent, the idea spreads like flame.”

    http://www.eurekalert.org/pub_releases/2011-07/rpi-mrs072511.php

    Reply

  5. Jon Says:

    Great, all we need is thirty million readers :-(

    Reply

    Roger Erickson Reply:

    @Jon,

    not to worry! something like this has been known for a long time;
    as thresholds for accelerating propagation of a theme through any & all networks;
    it’s a function of the i/o properties of system components, plus the local benefit from using the new theme;
    these guys claim the typical threshold in human networks is ~10%

    wonder if that holds for propagation of ideas through the military too?
    for new behavior variants in bees? economists? engineering?

    the whole science of campaigning (mil, economics, policy or other) is to accelerate this typical propagation pattern, by getting:
    key info to,
    key people in,
    key institutions within,
    critical time periods.

    Humans can model that process for specific contexts, and adapt faster. At least smart humans practicing campaign theory can.

    Warren’s convinced Dan, Tom & Jon – who else does he need? :) :)
    [not sure about that old Beowulf guy; he predates the Bard!]

    Reply

  6. luigi Says:

    http://www.zerohedge.com/news/italy-cancels-august-bond-auction

    I don’t understand, why they say “Citing the most hilarious explanation we have ever heard for not daring to approach the capital market”

    What’s is hilarious?

    Reply

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