Wednesday, November 30, 2011

More Bailouts Are The Answer!

The New York Times has an editorial piece out blasting Germany for not bailing out the rest of Europe.  The Times says that Germany has the resources to shore up the PIIGS that are on the brink of bankruptcy and that they should do so in order to buy time for those weaker states to shore up their own systems.  Also, the European Central Bank should be allowed to print off money to buy bonds from those broke nations in order to reduce the interest paid on national debt. 

I'm puzzled by this and can't help but wonder if the Time's only goal in the world is to destroy those that are prosperous and successful.  Does anyone in this world believe that if Germany bailed out the PIIGS in the short term that these bankrupt nations would seriously reform their own systems?  These countries are bankrupt because their politicians do not want to increase taxes or decrease spending; if they don't have to, they won't.  Bailing them out now puts off making the responsible choices.  This is fact; Greece has already been bailed out and still hasn't fixed their situation.  Austerity measures nearly brought down their government.  A short term bailout buys a year, maybe, at a massive expense for Germany, but doesn't fix the problem at all.  

Similarly, printing off money, an option that should be considered a joke anyway, won't help.  Yes, interest rates may go down for a short period of time, but the more of that bad debt you buy and monetize, the higher inflation is going to go throughout Europe.  Once again, those bailed out nations have no incentive to act responsibly if someone else is paying the bill.  And interest rates are, in fact, reasonable.  Greece, Italy, and Spain are bankrupt.  It is a high risk proposition to lend to those nations.  Screwing over responsible nations to lower interest rates for irresponsible ones isn't going to give incentive for governments to act responsibly. 

Read that entire Times piece.  Does it anywhere say how reform will be brought to the poorer nations with this extremely risky bet they urge Germany to take?  No, it doesn't.  Germany has no responsibility to pay for the foolishness of other nations and gains nothing by doing so. Without a solid plan putting forward how the PIIGS will sure up their own fiscal situations without bailouts in the future, a German bailout only buys a year or so of extra time before the crunch hits, this time with Germany lacking the resources to survive as well. 

Hard times are in store for Europe.  I'm thoroughly tired of people borrowing themselves into a boom and then wanting others to save them during the bust. 

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