The EU Political Game of Growth Vs. Austerity is Akin to Polishing the Brass on the Titanic

May 22, 2012
By gpc1981

http://albertpeia.com/eusstitanic.htm

‘France and other, weaker EU members have begun pushing for “growth.” This in of itself reveals how clueless the political elite in the EU are (economic growth in Europe is synonymous with living beyond one’s means and/or living off of others… the very policies that have lead to the EU Crisis).

Indeed, this shift from focusing on austerity to growth is really just a switch from one side of a coin to the other… without actually addressing the fact that the coin itself has no value as a concept.

Let me explain.

Both growth and austerity are political hot buttons that fail to address the core issues plaguing the Euro-zone. Those core issues are:

1)   Age demographics, which courtesy of a welfare state translates into…

2)   Massive unfunded liabilities and debt overhang that stifles growth…

3)   And an unwillingness to innovate or pursue democratic capitalism

When political leaders talk about austerity today, they’re not even actually addressing real austerity. France, for instance, is balking at the prospect of submitting to more  “austerity measures” when it actually increased its spending by $62 billion from 2009-2011.

That’s austerity?

Indeed, the whole exercise becomes a total joke when you realize that as far back as 2004 France had unfunded liabilities (social programs, pensions, etc) equal to over 500% of its GDP. As Jagadeesh Gokhale of the Cato Institute notes, in order to meet these needs without increasing taxes, France would need to set aside nearly 10% of its GDP every year indefinitely.

Put another way… in order for France to meet its unfunded liabilities, it would have to start saving NOT spending beyond its means.

Speaking of which, spending beyond one’s means is precisely what EU leaders are referring to when they talk about “growth.” For the EU, economic growth is synonymous with spending money (especially if it’s someone else’s money), NOT economic innovation or organic growth from small business.

As I mentioned before, the “austerity” and “growth” to which EU leaders refer are simply two sides of the same coin: that of assuming that massive problems can be dealt with superficially. It’s akin to polishing the brass on the Titanic as it sinks: in the short term, you’re making a small difference, but in the big picture, you’re ignoring the very real, enormous problem you need to tackle.

Those enormous problems are a massive debt overhang… which cannot be dealt with by the ECB, Fed, or even the IMF at this point. The Fed has already openly admitted that it cannot perform more aggressive easing (it is an election year in the US after all). The ECB has expanded its balance sheet to the point that its own solvency is in question. And the IMF, which is essentially a US-backed entity, cannot get funds from the Obama administration during an election year.

That’s the real deal here. And it’s all happening at a time when EU sovereigns, corporations and banks need to roll over TRILLIONS of Euros in debt at the same time as they need to issue hundreds of billions of Euros in new debt.

On that note I fully believe that the EU will collapse before the end of the summer. So if you have not taken steps to prepare for the end of the EU (and its impact on the US and global banking system), you NEED TO DO SO NOW!

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