Greece Is The Canary In The Coal Mine

By Joel Ross

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The massive Euro TARP program just announced is simply a bailout of the PIIGS who way over spent and under taxed for all these years. In Greece few pay taxes and most who pay do not pay what they really owe. All of Europe has social safety nets programs that keep the voters happy so long as the string does not break, which it now has. The willingness of governments to just spend and raise pensions, raise healthcare benefits paid by the government, raise other benefits, and not pay for them is the root cause of this crisis. We were within hours of October 2008 all over again. The media and the administration can rant all they want about wall St, but the exact same irresponsible behavior was going on at all levels all over the world. Greece, California, New York, Spain, and now the US Congress and administration.

All the EU did this weekend is kick the can down the road again. It is highly unlikely that the austerity programs now being put in place will last long as the cost to the EU economy will be very painful and unions and the politicians will likely not endure this pain. At some point soon the Euro has to be devalued in whatever way this plays out. That is the only real solution and then a lot of pain has o be suffered as a result. We are just at the start of this phase of the crisis and there is nobody in Europe who is a true leader like Maggie or Churchill in the moment of need. Merkel should have stepped in but she completely blew it.

We all need to pay close attention to what is happening. Greece is California, New York and Illinois. The teachers union here is like the unions in Greece. Give me, give me. Tax the rich. In the US it is getting like Greece. Only 52% of Americans pay tax. If the Democrats have their way that number will drop to under 50%. Less than half of voters will have any skin in the game so they will not mind higher taxes on those of us who employ the rest and who create the capital which is the milk of economic growth.  The new healthcare bill subsidizes even the middle class making the successful pay for all. Business owners are now being charged much higher taxes and capital gains tax is about to rise. They are taking away the incentive to create capital and to create jobs.

The next crisis is states and cities in the US going bankrupt. Many are, they have just not declared it yet. We live on more and more debt, delayed pension funding, and other gimmicks. When the states and cities go under it will have the be Washington to the rescue and that means more borrowing, more taxes and more deficits.

While it may seem the economy is healing and the good times are ahead, be very careful. Long term is going to be ugly. In seven or ten years things will be in serious problems unless there is a complete reversal of direction and Washington and the states and cities take the lessons of Greece and recognize that the canary died this weekend and we better change our ways fast or we will get crushed.

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