How do you walk the road to ruin?
The Greek Tragedy That Changed Europe
Greece’s dysfunctional economy is now at the heart of a rescue effort that could be disastrous for the entire continent—and the rest of the world.
But the Europeans have not been careful so far. The issues for troubled euro zone countries are straightforward: Portugal, Ireland, Italy, Greece and Spain (known to the financial markets, and not in a polite way, as the PIIGS) had varying degrees of foreign- and bank credit-financed rapid expansions over the past decade. In fall 2008, these bubbles collapsed.
Financial markets are telling us the euro zone is under threat, but the real message is much broader: Unsustainable debt dynamics can undermine us all.
“Everything on the table” means both higher and broader taxation, to be sure – but it also means touching previously untouchable mandatory spending accounts on popular middle class entitlement programs such as Social Security, Medicare and Medicaid. We are simply past the point, pace Paul Krugman, where we can just throw another trillion at it.
Unfortunately, we will throw another trillion, and then another.
AJ Strata ponders The Pending Implosion Of Liberal Socialism. He is a great deal more optimistic than I.