Posted tagged ‘government intervention’

The Gravitational Force that Pulled European Nations into a Black Hole

February 22, 2014

As the superb and strong statesmanship of Antonis Samaras is pulling decisively Greece out of its economic crisis, I’m republishing this piece that was written in the midst of 2012, for the readers of this blog.

Government intervention always wills the good and works the bad.

By Con George-Kotzabasis

The European Union’s sovereign debt crisis was neither an act of fate nor an act of a free self-dependent man but an act of deluded ideology whose sails were blown by the long-lasting winds of government dirigisme, i.e., intervention, and welfare dependency. Once again it was the work, the social engineering, of the bien pensants in the form of a state directory of planning that would put a floor of security for the masses and protect them from falling into abject economic privation that was always, according to their thinking, the omnipresent and inevitable result of the unjust, harsh, and unequal regime of the capitalist competitive free market. The trouble was that this floor was made out of straw and at the first jump of an economic crisis–whose seeds were planted by government intervention,  loose monetary policy and low interest rates–would open a gaping hole through which this security would disappear and drown in a massive pool of unemployment and poverty.

The Eurozone’s one dimensional foundation of monetary union without banking and fiscal union could not sustain the European edifice in the long run with the differentiating regime of taxes, social benefits, and pensions that existed among its constituent states. The proliferation and prodigality of unsustainable Entitlement Economies, which have been the characteristics of the welfare states of Europe especially in the south, could not have been continued without cracking the economic underpinnings of the Eurozone. Also, the European Central Bank’s enabling of low risk premiums on interest rates of government debt, encouraged Greece, Portugal, Spain, Italy, and Ireland to go on an orgy of borrowing and overspending. The inevitable outcome was a stampede of budget deficits that were unsustainable and the eventual loss of all credibility in the financial markets that the afflicted States would be able to pay back their debts and thus the shutting out of the latter from the global financial lending pool.

Since no private person would hazard to lend money to states lassoed in sovereign debt the only alternative left was for the richest countries in the Eurozone, such as Germany, to become the lenders and continue to finance the former for their economic survival. But such help would be given under very severe terms encapsulated in strict Memoranda to the receiving countries with the stipulation that the latter would adopt and implement stringent austerity measures that would decrease substantially government expenditure, would restructure and reform their economies making them more competitive, and privatizing public enterprises, whose inefficiency and lack of a diligent working ethos can only be sustained by a continuous expensive staple of government subsidies.

These austerity measures, however, whose formulators have been the European Commission, the European Central Bank, and the International Monetary Fund, the so called Troika, are forcefully rejected by the people of those countries who for decades have been inured to the social and economic comforts and benefits engendered by the reckless spending of their governments, and are refusing to accept any cuts to these benefits even when some are aware that the latter can no longer be provided since the governments’ coffers are empty and the convenience of funding these benefits by borrowing, as they have done in the past, is no longer available due to their nation’s sovereign debt. Moreover, these austerity measures initially had not being complemented with policies of economic development and thus led to the worsening of the economic conditions of those countries that adopted them, such as Greece, leading to unprecedented massive unemployment by the closure of large and small business enterprises and to the smashing of the middle class which is the cornerstone of free societies.

This situation is dangerously engendering the fragmentation of social cohesion in those countries and giving rise to political parties of the extreme right and left, coming out of the foam of waves of violent demonstrations that imminently threaten democracy. A latest illustration of this danger are the attacks by petrol bombs and other incendiary devices by hooded youths of anarchists and extreme leftists in Greece against the homes of outspoken journalists, offices of the governing coalition of New Democracy, Pasok, and the Democratic Left, and the burning of Bank’s ATMs. And of particular significance are the attacks on journalists, which are a blatant violation of free speech and a sinister attempt to intimidate them from expressing their opinion about events and criticizing politicians of Syriza, the official opposition, of whom obviously the fire carrying mobs are its ardent supporters.

This will be the tragic legacy of European big government and its ill-considered, indeed, destructive intervention in the processes of the free market that for at least two centuries have delivered prosperity and an unprecedented increase in the standard of living of the masses; as the socialist politicians from Francois Mitterand to Jaques Delors–the architects and enforcers of the European Monetary Union that forced Germany to succumb and pay the price of the unity of west and east Germany as demanded by France–and their present disciples of  etatisme are in the process of killing the goose that laid the golden egg, i.e., the unimpeded free market, and by doing so unconsciously and unwillingly are generating and  unleashing the brutal forces of fascism and leftist directorates of totalitarianism on the landscape of Europe.

To avoid this slide to the hell of totalitarianism only the rise of statesmen who “can act beneath heaven as if they were placed above it” is consummated. The fiscal and balance of payments crisis can only be remedied by substantial cuts in government spending and the euthanasia of big government, and by the privatization of debt ridden public enterprises–that are the last strongholds of obtuse and doctrinaire unions– and by the freeing of private enterprise to pursue profit by competition and entrepreneurial creativity and dynamism, respectively. These ‘bitter’ remedies can only be administered by statesmen of the calibre of Lee Kuan Yeu and Antonis Samaras. The latter, indeed, might not only be the progenitor of the Greek Renaissance but also the paradigmatic leader of other European politicians to imitate for their own European Renaissance. The Newtonian apple that will stop the European ‘discord’ that currently threatens the demise of the EU will fall to the gravitational force of such statesmanship.

Hic Rhodus hic salta

 

The Gravitational Force that Pulled European Nations into a Black Hole

January 14, 2013

Government intervention always wills the good and works the bad.

By Con George-Kotzabasis

The European Union’s sovereign debt crisis was neither an act of fate nor an act of a free self-dependent man but an act of deluded ideology whose sails were blown by the long-lasting winds of government dirigisme, i.e., intervention, and welfare dependency. Once again it was the work, the social engineering, of the bien pensants in the form of a state directory of planning that would put a floor of security for the masses and protect them from falling into abject economic privation that was always, according to their thinking, the omnipresent and inevitable result of the unjust, harsh, and unequal regime of the capitalist competitive free market. The trouble was that this floor was made out of straw and at the first jump of an economic crisis–whose seeds were planted by government intervention,  loose monetary policy and low interest rates–would open a gaping hole through which this security would disappear and drown in a massive pool of unemployment and poverty.

The Eurozone’s one dimensional foundation of monetary union without banking and fiscal union could not sustain the European edifice in the long run with the differentiating regime of taxes, social benefits, and pensions that existed among its constituent states. The proliferation and prodigality of unsustainable Entitlement Economies, which have been the characteristics of the welfare states of Europe especially in the south, could not have been continued without cracking the economic underpinnings of the Eurozone. Also, the European Central Bank’s enabling of low risk premiums on interest rates of government debt, encouraged Greece, Portugal, Spain, Italy, and Ireland to go on an orgy of borrowing and overspending. The inevitable outcome was a stampede of budget deficits that were unsustainable and the eventual loss of all credibility in the financial markets that the afflicted States would be able to pay back their debts and thus the shutting out of the latter from the global financial lending pool.

Since no private person would hazard to lend money to states lassoed in sovereign debt the only alternative left was for the richest countries in the Eurozone, such as Germany, to become the lenders and continue to finance the former for their economic survival. But such help would be given under very severe terms encapsulated in strict Memoranda to the receiving countries with the stipulation that the latter would adopt and implement stringent austerity measures that would decrease substantially government expenditure, would restructure and reform their economies making them more competitive, and privatizing public enterprises, whose inefficiency and lack of a diligent working ethos can only be sustained by a continuous expensive staple of government subsidies.

These austerity measures, however, whose formulators have been the European Commission, the European Central Bank, and the International Monetary Fund, the so called Troika, are forcefully rejected by the people of those countries who for decades have been inured to the social and economic comforts and benefits engendered by the reckless spending of their governments, and are refusing to accept any cuts to these benefits even when some are aware that the latter can no longer be provided since the governments’ coffers are empty and the convenience of funding these benefits by borrowing, as they have done in the past, is no longer available due to their nation’s sovereign debt. Moreover, these austerity measures initially had not being complemented with policies of economic development and thus led to the worsening of the economic conditions of those countries that adopted them, such as Greece, leading to unprecedented massive unemployment by the closure of large and small business enterprises and to the smashing of the middle class which is the cornerstone of free societies.

This situation is dangerously engendering the fragmentation of social cohesion in those countries and giving rise to political parties of the extreme right and left, coming out of the foam of waves of violent demonstrations that imminently threaten democracy. A latest illustration of this danger are the attacks by petrol bombs and other incendiary devices by hooded youths of anarchists and extreme leftists in Greece against the homes of outspoken journalists, offices of the governing coalition of New Democracy, Pasok, and the Democratic Left, and the burning of Bank’s ATMs. And of particular significance are the attacks on journalists, which are a blatant violation of free speech and a sinister attempt to intimidate them from expressing their opinion about events and criticizing politicians of Syriza, the official opposition, of whom obviously the fire carrying mobs are its ardent supporters.

This will be the tragic legacy of European big government and its ill-considered, indeed, destructive intervention in the processes of the free market that for at least two centuries have delivered prosperity and an unprecedented increase in the standard of living of the masses; as the socialist politicians from Francois Mitterand to Jaques Delors–the architects and enforcers of the European Monetary Union that forced Germany to succumb and pay the price of the unity of west and east Germany as demanded by France–and their present disciples of etatisme are in the process of killing the goose that laid the golden egg, i.e., the unimpeded free market, and by doing so unconsciously and unwillingly are generating and  unleashing the brutal forces of fascism and leftist directorates of totalitarianism on the landscape of Europe.

To avoid this slide to the hell of totalitarianism only the rise of statesmen who “can act beneath heaven as if they were placed above it” is consummated. The fiscal and balance of payments crisis can only be remedied by substantial cuts in government spending and the euthanasia of big government, and by the privatization of debt ridden public enterprises–that are the last strongholds of obtuse and doctrinaire unions– and by the freeing of private enterprise to pursue profit by competition and entrepreneurial creativity and dynamism, respectively. These ‘bitter’ remedies can only be administered by statesmen of the calibre of Lee Kuan Yew and Antonis Samaras. The latter, indeed, might not only be the progenitor of the Greek Renaissance but also the paradigmatic leader of other European politicians to imitate for their own European Renaissance. The Newtonian apple that will stop the European ‘discord’ that currently threatens the demise of the EU will fall to the gravitational force of such statesmanship.

Hic Rhodus hic salta

Social Engineering is the Devil in the Detail of Collapse of Wall Street

October 23, 2011

I’m republishing the following post that was written almost three years ago for the readers of this blog.

By Con George-Kotzabasis

This is the time for all the intellectual Lilliputians to raise their head. Before our two authors send to the gallows Milton Friedman and Frederick Hayek, they ought to be reminded of some facts. The dragon teeth that mauled the only system, i.e., capitalism that brought relative prosperity to the peoples of the world were spawned by government intervention in the first place. Roosevelt’s creation of the publicly funded Fannie Mae, and many years after its twin Freddie Mac, followed by the Community Reinvestment Act, under Jimmy Carter, and which was resurrected by Bill Clinton, were all the offspring of government intervention. They were the putty in the frame of social engineering by which all Americans would have realized their dream, to have and own their own homes.

Clinton’s decision in 1999 put pressure on lenders to “widen the pool of home borrowers.” New York Times article on September 1999 stated: “In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae corporation is easing the credit requirements on loans…encourage banks to extend home mortgages to individuals whose credit is generally not good…Fannie Mae officials say they hope to make it a nationwide program by next spring.” (The Australian, October 20, 2008) Latinos and African Americans are the biggest minorities and the more numerous mortgage defaulters in the US housing market. Fannie and Freddie were providing the easy loans and the …Reinvestment Act were enforcing bankers to render their credit services to all and sundry irrespective of the financial position of the borrowers. (Barack Obama as community organizer was the ‘Enforcer’ as he was threatening banks with prosecution if they did not take riskier lending practices with non-credit worthy customers.) And the whole saga of the sub-prime loans was resting on these rotten foundations created by Democratic administrations. The profligacy of ‘ghetto’ loans in astronomical digits was replacing Gekko greed.

Hence Wall Street collapsed through the derivatives market multiplier leveraging founded on the subprime loans by which the moguls of finance made for a while their ephemeral profits. And this collapse released the nightmare that was always embedded in the dream of mass home ownership when it became evident that many ordinary Americans were not only going to lose their homes but also their jobs all by the grace of government intervention and its blessing of easy loans. Easy come easy go.

Your opinion…