The sucking sound of money going into the debt wasteland is coming from Europe again. This time the sound has shifted to the Iberian Peninsula but it has a eerily familar sound and carries the same dire consequences as the put-off Greek tragedy. The only question for central bankers is how much it is going to cost them this time to keep their illusionary fiat system in place.
Spain is once again facing the bottom line of its horrendous decision to “Go Green” nearly two decades ago. The Spanish people thought it would be a great idea to become the world’s environmental leader and reclaim its rightful position as the nation of destiny it enjoyed in the hundred years after Isabella funded Chris on his ventures to find a passage westward to the bounty of the Far East.
But green technology hasn’t yet bridged the gap between its costs and fossil fuels’ economic advantages and Spain’s experiment collapsed under a sea of red ink instead. Spain found out the hard way that every green job results in the loss of about seven jobs funded through a fossil fuel-driven economy. It might have been the most advanced in terms of lessening the human footprint on the planet but it destroyed an economy that was at least surviving.
In trying to go back to black, Spain has discovered it may have lost those jobs for at least a generation or two because its citizens simply don’t have the financial will to retool once again. In the welfare state system of Europe, people do not have the ability to overcome their state-supported indoctrination–sorry, ”state-supported education” bias.
Spain’s government forced the teaching of environmentally-friendly only solutions to any and all economic theories for almost two decades. It had a system in place where anything that was not enviroment first was derided as intrinsically unacceptable. The government supported those technologies that promoted the green agenda and paid for people who lost their jobs because fossil-fuel businesses either left or simply closed their doors. (If this sounds familiar I would like to call your attention to GM’s Volt, Solyndra and the wasteful corn-to-ethanol programs which are state-supported in this country.)
As a result, Spain has an official unemployment rate over 25% with a whopping 51% among the under 25 group.(1) Obviously Spain has a long way to go before it has the ability to doctor its records like America does. Twenty-five percent unemployment here has been nibbled down to 8.2%. Spain’s lack of employment opprtunities has led to higher demands on government programs. But there is less money coming in from the Spanish economy. So government leaders simply spent more than they had, issuing bonds to cover the deficit.
The problem is nobody wants to buy Spanish bonds anymore. So the interest rate has to be large enough to cover the unease factor and that is costing the government even more than it anticipated. Other Euro Union leaders are asking for Spain to adopt some of the same austerity measures the Greek government approved in order to get the similar financial backing Greece received from the European Central Bank.
But the Greek plan did not solve the debt problem there, all it did was insure the citizens would be trapped in a permanent state of second or third-class status compared to the bigger, more solvent countries of the EU. And the Greeks are still a drag on the rest of the EU economy. Sooner or later, maybe by June, Greece is going to be back with its hat in its hand, begging for more money. Spain’s drain is much bigger than Greece’s. Spain’s economy is forty times larger than Greece’s. It is going to take that much more to drag Spain back from the brink of economic disaster. Meanwhile the problems in Italy, Ireland and Portugal still haven’t been addressed and none of the debt problem there has been solved.
Fast forward across the Atlantic to America. Instead of “sovereign” nation states, we have state States. But several states, including California’s huge chunk of the national economic bowl, are in the same shape as Greece and Spain. Some cities across the U.S. are also wholly dependent upon the bond-proceeds scene as annual revenues no longer keep up with expenses.
The U.S. government does not acknowledge a debt problem because, unlike Greece and Spain, it can print the money it needs to stay afloat. The Administration also stays above the red ink fray the states are facing, using the printing press to buy the votes necessary to perpetrate the current failing system.
The “perception-based” fiat system will only work as long as the common folk can get what they need from what they earn. The Federal Reserve has maintained artificially low interest rates because it alone has the authority to buy long-term debt under the guidelines set down by Operation Twist to try and keep a grip on inflation.
Spain went broke trying to go green. Greece went broke promising non-working citizens a good living standard. Other countries throughout history have failed when their regulatory system extracts too much from the supporting businesses. The U.S. has not had much success in breaking that trend.
There is a fundamental law of economics at play whose parameters the government refuse to acknowledge. More efficient economies always win out in any war. The developed countries, among which Spain and Greece are counted, are currently in a battle to maintain the status quo.That depends entirely on the most efficient use of resources and avoiding debt. Putting more money, available from increasing the debt load only, into backing the immediate losing proposition of long-term climate health by smothering regulation is a recipe for America’s Waterloo.
“I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man.”–Thomas Jefferson
(1)-Yahoo! Finance, Daily Ticker, April 16, 2012
Note: The Weld County Republicans have invited me to be their speaker on Wednesday. April 18, at 7 am. Breakfast starts at 6:30 and the program is slated to run from 7 to 8 am at Randy’s in the Westlake Shopping Center, 2118 35th Ave., Greeley CO. (About 13 blocks north of Highway 34 in Greeley.) I invite anyone who has an interest in a politically-based ”Rant” about the state of the U.S. economy to come to the breakfast meeting. I will try to trim my presentation so there is time for a Q-and-A session. I thank you for your support.–Mike