Saturday, December 10, 2011

Spreading the wealth

Republicans are trying to minimize the impending costs to US of IMF lending to EU, put simply: US dollars bailing out Europeans.

US has leverage over IMF, but we're on the hook for at least $109 of credit extended by the Obama administration in 2009. There is little need to get excited.

IMF lending is a stop-gap measure that could sour the relations between EU and US disproportionate to the actual costs. American dollars given bureaucratically through IMF will be received with no gratitude; on the contrary such dependence inevitably breeds antagonism. Natural reticence of many Americans to being fleeced, expressed by conservatives could serve as a convenient lightning rod: "Oh, these greedy Americans." Combine this with socialistic dogma based of zero-sum game that believes that great wealth is always stolen, never earned, and you have a recipe for trans-Atlantic discord.

In addition, over the last few of days the relationship between EU and UK appears to be moving swiftly through pangs of marriage that precede divorce - it's not pretty. Further rancor is inevitable as EU tries to reshuffle itself and work without UK, Czech Republic or Hungary, and possibly others, like Greece that may need to be ditched overboard. The lack of political unity will backfire on the European project, and I see nations on the continent increasingly frustrated with each other as a result, not becoming more harmonious.

EU is fatally flawed, and its (suicide) pact will drag everyone down, as long as wide economic disparities are present between members. A few unions, each moving at different economic speeds could be viable, but this solution lacks the ideological imperative for totality. Furthermore, such a patch-work is clearly not much better than countries working out their finances individually, and it does not need to result in reduction of trade. The truth about EU is that economic benefits of the union were largely realized before the common currency, and non-elected (but rotating - whoopee!) governance from Brussels. The desired benefits were political, but common currency could not overcome national, linguistic and cultural realities, which distinguish European nation, and make it such a colorful region. The pan-European projects endanger these national identities.

Using IMF money to prop up the EU amounts to giving men fish, when they should he taught to fend for themselves. It's an expensive little Band-Aid, not just because of the money, but also because of the national friction involved. Even 'developing' nations are reluctant to lend to EU - the word is out, and confidence is gone. While costs of borrowing are barely survivable in Italy, they are also going up in Germany. All the Band-Aids can do is delay the inevitable, and kick the can down the road a bit.

There is little US can do to safeguard it's money, besides trying to put political pressure on the new IMF chief . It isn't worth the trouble. If the unfolding European fiasco only costs US $109 billion, we should consider ourselves lucky. We have plenty of our own problems to fix, starting with 1.5 trillion dollar annual deficit. Why does our government cost 3.5 trillion per annum? The Pentagon's budget is a little over half a trillion, so where do we spend 3 trillion besides the military every year?

I find myself physically nauseated by the blatant double-speak and lies behind those shilling for more 'revenues'. But, I digress.

US should let EU have its IMF dollars with minimal rancor - even from conservative commentators. They should direct their fire to our own glaring problems. It would be interesting to find out the rate at which Europe bleeds red ink, basically how much it needs to borrow on a monthly basis and figure out how long that $109 billion would last. My guess is it would be a disgustingly short term, around ten weeks.

The scary part is that there is little desire to deal with real problems in the halls of power of either US or EU. Cameroon's selfish moves, are positive in that they increase skepticism in the EU project, which ultimately has to be dismantled.

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