The International Monetary Fund and World Bank last Sunday finalized their bailout of Greece (of which, approximately $7 billion will originate from the United States of America). Along with the over $100 billion from European Union states, that will bring the grand total of bailout money to Greece to over $140 billion. When you include other funds, the estimated tab could top $1 trillion.
But once again, the titans of the financial industry on Wall Street, in the halls of Washington D.C. as well as financial institutions across the globe have made an easy calculation, in their own eyes: that the failure of Greece is unacceptable. But I guess Greece is too big to fail, isn’t it? (Greece, by the way, is smaller economically than the Dallas/Ft. Worth metropolitan area).
Well, maybe Greece is too important, considering the interconnected nature of our world economy. Already, the ripple effects can be far felt. Brazil had tried to issue more bonds last week, and had to scale back the bond offer. Values of numerous currencies, including and most importantly the Euro, plunged, as the flight to safety strengthened the dollar. This may sound good, but it also makes our goods more costly overseas, and could hurt our economic recovery.
But the comparisons of Greece to the United States are undeniable, and more than a talking point. Look at comments from the Mervyn King, Governor of the Bank of England, who fears that America shares many of the same fiscal problems currently haunting Europe :
Every country around the world is in a similar position, even the United States; the world’s largest economy has a very large fiscal deficit. And one of the concerns in financial markets is clearly – how will this enormous stock of public debt be reduced over the next few years? And it’s very important that governments, both here and elsewhere, get to grips with this problem, have a clear approach and a very clear and credible approach to reducing the size of those deficits over, in our case, the lifetime of this parliament, in order to convince markets that they should be willing to continue to finance the very large sums of money that will be needed to be raised from financial markets over the next few years, at reasonable interest rates.
Anyone looking at this must at least consider the possibility. Clearly, America is not Greece. We are a much larger and more diversified economy than any single European state, and as such are a more durable economic power. It will be harder (but not impossible) to reach the levels of debt crisis now being felt in Europe.
But the lesson is obvious. Simply put, nation states are now undergoing the reality that many families around the world have had to confront over the past year: you simply don’t have enough money to do everything. Life is about choices, and these governments have avoided making those choices for a generation. It is time to cut back, and our leaders must show courage in doing exactly that.
That is no less true for Washington. Republicans and Democrats have both misspent trillions of dollars. Certainly, Democrats spend larger and faster, but Republicans are not new to the spending game. Ultimately, some party must stand up.
It is time for Republicans to take a hold of the reins. In Great Britain, David Cameron to the Prime Ministership because of his frank talk about realities that the people of England must face. Chris Christie and other governors in the U.S. have done the same. For too long, we have babied our public into believing they can have their cake and eat it to, and that mirage is falling apart.
Barack Obama obviously is the wrong man for the wrong time. If he had been President during the boom years of the eighties and nineties, he might have gotten away with his ridiculous spending. However, he cannot face the fact that this country is out of money, just like most countries around the world are (sparing China and India). A bankrupt country cannot at the same time afford to spend trillions in deficit spending, raise taxes which will stunt economic growth, and still recover from a recession. It simply cannot happen.
In Greece, Spain, Portugal, Ireland, Italy, and Iceland, they are calling for austerity cuts. In the U.S., I would call these cuts ‘common sense’. If we are unwilling to face the over burdensome welfare state now, none of us should be shocked when a Greece-like crisis occurs down the road.