The EU Crisis: WHY DOES EVERYONE THINK THERE IS AN ANSWER AT ALL?

[snagglepuss]

Forgive the caps but I'm just copying and pasting an very interesting post from the Guardian CIF thread about France.

24 April 2012 7:33AM

Neither austerity nor increasing the debt will work in solving the current crisis - that is the reality the EU, EZ & IMF are facing.

There seems to be a fundamental problem with virtually all the coverage and comments being made -

WHY DOES EVERYONE THINK THERE IS AN ANSWER AT ALL?

There isn't one - it is impossible for the debtor nations to pay off their debt - and it is impossible to drive every economy flat on its back as in Eire and avoid a deep depression for a decade or more which itself will threaten total economic meltdown - and it's impossible for countries to go on borrowing evermore money which they can't afford to pay for either.

The IMF's strategy of piling up more SDRs and hoping it will be enought to stave off the debt liquidity trap is simply playing for time, but won't solve anything - their failure to propose a more fundamental solution is because there isn't one.

Those who say simply break up the Euro haven't thought through what would happen if this were done - we are not talking "haircuts" - we are looking at mass scalpings of pension funds, banks, insurance policies and the effective defaulting on hundreds of trillions of debt will bring the world's financial system to a shuddering halt - indeed we are looking at the Weimar style hyperinflation destruction of monetary value - the "wheellbarrow full of money to by a loaf" scenario - personally when we will get to that point I won't take any money in exchange for anything, would you? Quite.

This crisis is fundamental to our economic system - it is deeply structural and reveals the unsustainable nature of a system where vast amounts of money are constantly being taken out of the real economy in taxes and profits, turned into capital and lent or invested back into the real economy, which then has to bear the ever growing burden of paying for it in interest charges and yet more profits which are then turned into yet more capital, whilst the taxes are used to redistribute spending power back into the economy to keep demand going, which would collapse otherwise.

This is in effect a giant ponzi scheme which can only work by continuing to get bigger and bigger - take away the growth and there is no more money coming in to keep the cashflow going - then when confidence in the scam begins to waver and lenders demand higher interest rates, the unsustainability of the system is revealed - welcome to 2012 - that's where we are now.

As with all ponzi schemes, there can be only one outcome - collapse - and those who put money into it must lose it eventually.

Only after unimaginable amounts of capital have been destroyed and the debt burden removed from the real economy, is there any possibility of starting again.

Of course this will wipe out those who had the assets which will be destroyed - the middle class will see their savings, homes, pensions and assets destroyed, as happened in Weimar - and with no hope of an economic recovery through the free market, they will demand forced change - welcome to the Fourth Reich - whether it's formed in Germany, France, Greece, Holland or the UK, somewhere there will be a government formed which will try and regain the living standards of the majority population by repressing its minorities, introducing protectionism and developing military power to grab resources - and as in the 1930s, we'll see others seeking to link up and spread this repressive system into other countries - "hurrah for the Blackshirts!" Take Two.

The seeds of the New Reich can be seen in the upswell of rightwing popularism across the western world, from the cryptofascists in the USA to the racist elements in Europe and the struggle for control at both ends of the extremes of the political spectrum - Greek street politics and the support of over a third of the population for the hard Left there is a portent of what is to come - as is the colpase of the Dutch government and the rise of rightwing parties in the UK.

If you want to know how we got ourselves into this mess, follow the money. Where did it come from? Where has it gone? There is only one word which sums this up - globalisation - the process of moving production to repressive, poverty wage economies like China, and delivering consumption in the old economies with historic wealth - the developed western economies - then recycle the money made in profits back in to the developed economies as lending - from credit cards through mortgages and on to sovereign debt, only by piling up mountains of debt can the cycle of production and consumption continue - and the old economies are left bearing the cost of unemployment and welfare which simply cannot be afforded in the long term, because the value produced by production has left their economies.

It's important to realise that without the debt the system would have seized up long ago - just as it's important to realise that this debt can never be repaid - certainly not by squeezing the real economy.







http://www.guardian.co.uk/commentisfree/2012/apr/23/far-right-did-well-french-election?commentpage=last#end-of-comments

[Prometheus Bound]

1. I assume it's obvious to anyone who really cares to know.

There simply is no solution. Everything being done now just kicks the can a little further down the road.

[JDPriestly]

2. At last. A respected commentator sees it as I do.

1) Free trade has to be drastically slowed down.

2) Democratic forces have to be strengthened through massive education.

3) The rich, especially those who have made their fortunes selling by producing cheap in poor countries and selling dear in formerly developed countries have to be taxed to keep things going until we get back on an even keel.

Call it what you will, but the austerity that imposes poverty on the middle class will put education, health care, perhaps eventually even heat, electricity and our urban sewage systems at risk.

If you look at history, you realize that deterioration can go very quickly when a society goes through really big economic changes. Often the economic changes set off national or ethnic rivalries that lead to war.

We have to take control of this situation and work together to insure a peaceful change -- a peaceful slowing of free trade and cultural efforts that help us work through this time without wars and violence. If history is a guide . . . .

Don't even bother with history. What happens to a family when it has no income and it can't afford to pay the rent or buy enough food and then a family member becomes ill? The family either pulls together or is pulled apart. That's what. As a nation, as a society, we have to make this choice.

If, when a family is in a crisis, one parent sits at the head of the table and eats while the other members look on, hungry, things do not go well.

[fasttense]

3. There is a solution but no political will to implement it.

Raise every country's minimum wage to above $10 an hour and enforce it. Corporations and businesses who use illegal immigrants should be hugely fined. Put huge tariffs on all imports and enforce them.

Then some of the enormous profits corporations are making will go to the people who are actually doing the work. Then those people will be able to buy the crap they make. Corporations wont be able to pay pennies for producing something in another country then sell it for hundreds of dollars in another country if tariffs are added to equal the cost of producing the item in house.

But can you imagine any country doing this? Most government are bought and sold by corporations, and they will never go against their paymasters.

[rhett o rick]

4. Like the OP says, there is no solution w/o destroying most (fake) capital.

In a Ponzi scheme participants believe they own large amounts of capital. They dont because its fake capital. Sooner or later the scheme will end. The longer postponed, the harder it will hit.

[bemildred]

5. Yes, but it never hurts to stall a bit longer, maybe a war will come along or something.

Edit:

[Joe Shlabotnik]

6. Completely agree with this article.

But would add that the environment MUST be central to our thinking, or else we are just re-arranging the deck chairs on the Titanic. A few wind turbines here and solar park there, and buying a Chevy volt aren't going to cut it. Even the well intentioned desire to help out someone struggling is window dressing as long as most people (middle class and poor people included) have the "I get mine first" attitude. A financial system based upon the notion of ever expanding growth is an unsustainable dream. What is needed is: A) for people to finally wake up and realize that the dream is just that, and B) the realization and hard decisions need to be made immediately to create a sustainable sphere of existence within a planet of limited capabilities. In short, our Values must change from what we'd Like to have or do, or believe, to what we Must do.

Such a collective cultural shift has never been attempted or accomplished on a global scale through out all mankind's history, but If we don't make these choices, the earth will make them for us. Judging by our history, I'm not optimistic (and glad that I don't have any kids), but if there is any single bright light, its that for the first time in history mankind has the ability to communicate and coordinate globally. Part of the question will be however, will that ability to communicate be tolerated by the PTB, or those that seek to exploit it as well.

As much as I'd love to see us return to a New-deal type of manufacturing society with high middle class wages, one must realize that that system is also based upon endless production and consumption, and therefore unsustainable too. Perhaps the best bet is to try and return to that type of society for the short term (say 20 years), in order to ease the pain of transitioning the global economy to the next and more intelligent level. Clearly Globalism was the wrong turn, its time to back up to the mid 70's and make the right turn this time. The pipe dreams of some, through the exploitation of others, and the phony paperwork and ideologies that legitimatize our present day world are a disaster.