Karl Denninger on Germany vs Greece ... = most US states vs CA, MI, IL, NY
(snip)Then there's this:
The euro crisis is looking more like a German crisis every day. The way the single currency now works is clear: It involves massive transfers of wealth from the richer to the poorer regions. And it means you have a soft, political currency. If Germany doesn’t like that, it should decide it doesn’t want to be part of the euro club anymore.
Crisis?
Germany has no crisis. It has a pension funding problem but as a percentage of the budget, as a percentage of GDP, as a fiscal matter they look like the Girl Scouts at this party.
The amusing part of this is that without Germany the Euro probably trades at about 30 cents to the dollar. Why? Because the entire Euro zone's GDP has been "borrow and blow", just like it has been in the US, and without Germany to anchor this you'll get some really amazing dislocations over in Europe.
I hope Germany does leave the Euro and goes back to the Mark. They should. There's no more reason for them to support this nonsense than there is for China to play mercantilist with us in the intermediate and longer term, although this sort of thing always looks good in the short term. In China's case their exports to America have been subsidized, and now Germany is being told they must do the same.
Bah.
Nations should do the right thing, which means stopping spending money they cannot obtain by actual taxation.
Note what Geithner said today:
European leaders face “the difficult challenge of trying to restore sustainability to an unsustainable system,” Geithner said earlier in Beijing today.
Oh really Timmy? How about restoring sustainability to an unsustainable system IN THE UNITED STATES?
The "Pump Brigade" was out this morning in force on CNBS as the futures were down 200 DOW points and 25 handles on the S&P. Why? Well gee, you think there might be recognition that the concept of spending more than you make must end at some point, and when the point comes not through your decision to stop being a profligate jackass but because your creditors start jacking up the cost of borrowing more money this leads to an economic dislocation?
How many times do we need to see this movie?
Iceland proved what happens when you borrow and spend money you don't have on an indefinite forward basis and the bubble pops. We learned nothing from it and didn't stop it, and a year later the same thing happened to Greece.
Now we have the very same pumpers claiming this is "irrational fear" in the markets today, and that "it won't come here, America is strong."
Uh huh.
We're spending 11% of GDP beyond what we have with the government borrowing it and blowing it. Remove that and GDP contracts by at least $1.5 trillion instantly and the economists all scream "DEPRESSION!"
The choice we have today is the same choice we had in 2000, 2007 and last year: We can either accept the damage that we have caused by our own hand - not as an accident, but as a consequence of our idiocy - or we can continue with the same Wimpy econolies that got us into this mess in the first place and instead of having a lot of damage we can have an economic catastrophe.
We cannot increase taxes to get out of this. Historically, no matter the tax rate, governments seem to be unable to collect more than about 20% of GDP in taxes. With a $14 trillion economy this means the federal government has to be limited to about $2.8 trillion in size maximum, and somewhat less during recessions (like now, for instance.)
But it's not - it's $4 trillion and growing.
The gap, currently $1.5 trillion, cannot be closed by "slowing the growth of the budget."(snip)
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