April 10, 2012
Austerity cuts exacerbate problems. Public rage expressed in strikes and street protests follow. Politicians pay no heed and plan more.
At the same time, they allocate hundreds of billions in vital revenues for criminal bankers responsible for the crisis in America and across Europe.
No wonder John McMurtry calls predatory capitalism a "cancer system." It gets "cumulatively worse the longer it is unrecognized."
In fact, 100 billion Euros is European Financial Stabilization Mechanism (EFSM) money. It's already earmarked for Greece, Portugal and Ireland. Another EFSF 200 billion is allocated for existing bailouts. In other words, 300 billion in double counting means less than reported is available.
Despite the 800 billion euro headline figure, at most 500 billion is available, depending on whether pledged amounts provide it. All contributing nations fund the ESM. Nominally, Spain's the fourth largest contributor. However, its private and public debt way exceed the pledged ESM total.
If Madrid needs help, Germany, France, and other contributors have to make up the difference. Whether they'll do it short-term is questionable. Longer-term's not politically or economically sustainable.
Troubled Eurozone countries can't manage their own problems. How can they take on more? Even German resources are finite. Its political will has limits. It can't bail out Europe alone without crushing its already weakening economy.
Money power in private hands caused today's problems.
As a result, economies, communities, and households have been hollowed out.Bad as things are now, expect worse.Austerity assures it.
So does rising debt.
Dozens of protests and rallies brought hundreds of thousands to the streets nationwide. Police violence confronted them. Injuries and arrests followed. It happens every time across the continent, in Britain and America.
New labor law changes demand harsh concessions. Workers must sign contracts limiting severance pay to 33 days for each year worked, up to 24 months for unfair dismissal.
If layoffs are "financially driven," companies need only pay 20 days' wages. They can fire more freely, reduce working hours, and pretty much do as they please. Collective national agreements are undermined. So is Spain as a decent place to live.
On March 30, its Popular Party government announced $36 billion in 2012 cuts. They follow $20 billion earlier with more to come.
Measures involve freezing civil service wages, ministerial spending cuts, and new corporate taxes.
Ministries had budgets slashed 16.9%. Foreign Affairs lost 54.4%, Justice 34.6%, Defense 31.9%, Education, Culture and Sport 21.2%, Agriculture 7.4%, Health 4.3%, and Economy 3.8%.
Civil servants suffered earlier. In December, the work week increased from 35 to 37.5 hours without extra compensation, and wage cuts up to 15% took effect in May 2010.
On April 1, electricity prices rose 7% and gas 5%. Other price hikes are coming with austerity strapped workers less able to handle them.
Spain has Western Europe's highest unemployment. Overall it approaches 23%. For youths, it's 50%. Expect those numbers to rise, perhaps dramatically.
Prime Minister Mariano Rajoy wants Spain's 2011 8.5% budget deficit cut to 5.3% of GDP. Like Greece and Portugal, stiff government spending cuts affect economic activity severely. Production falls. Unemployment rises. So does public anger.
Nonetheless, EU Economic and Monetary Commissioner Olli Rehn urged he implement measures immediately, saying:
"The unambiguous commitment of the Spanish government to the target of 3 percent fiscal deficit in 2013 is indeed of paramount importance. I expect this will be substantiated soon by a convincing path of fiscal consolidation," as well as economic reforms putting Spain on a "more sustainable growth model."
Nothing in Spain's budget produces growth.
Debts aren't addressed.Lower national income and GDP will follow.Capital flight continues.People are voting with their feet and leaving.Private sector lending is down.Housing prices keep falling, and household savings are evaporating.
It means lower consumption is coming.
Like other troubled Eurozone economies and America, Spain force-feeds austerity when stimulus is needed.
According to an unnamed government official:
"....let's not deceive ourselves. We are holding on thanks to the artificial respiration of the open-bar-liquidity of the European Central Bank." If not for that, "this explodes."
How long that continues isn't known. It depends on Germany's willingness to provide it. Its Bundesbank is the ECB's backbone. If German resolve wanes, all bets are off, and economists expect it eventually.
Progressive Radio News Hour regular Bob Chapman says up to $6 trillion is needed to bail out Spain and Italy combined. If both countries require amounts near that great, it's game over. No one has enough to provide it.
Day of reckoning times approaches, but no one knows when.
A FINAL COMMENT
Economies built on sand collapse.
He cites an unprecedented growing national debt bubble. "Washington spent a record $16.3 trillion since 2007." America's debt burden exploded and keeps rising because of trillion dollar + annual deficits.
In addition, we're "witnessing the Greatest Monetary Bubble in US history."
It's rising much more annually than reported. Everyone who eats, drives a car, heats a home, buys health insurance, has medical bills, and pays college tuition knows more about inflation than government economists.
Bob Chapman thinks it's around 10%. Manipulation lowers official figures. It's been going on for years.
Eventually says Weiss, America's chickens are coming home to roost. Bubbles don't expand forever. Foreign investors are shunning US debt. The Fed's had to compensate by buying record amounts.
In 2011, it bought "a stunning 61% of the total net Treasury issuance, up from negligible amounts" pre-2008.
Excess money printing not providing economic growth eventually fuels trouble. Higher inflation is coming. Bonds always get it right. When interest rates rise in response, bursting the government's debt bubble draws closer.
They all burst. So will this one. When it does, the fallout will hit globally. Financial analyst Marc Faber also predicts eventual "massive wealth destruction."
At issue is out-of-control money printing and runaway government debt.
"Somewhere down the line we will have a massive wealth destruction that usually happens either through very high inflation or through social unrest or through war or credit market collapse. Maybe all of it will happen, but at different times."
Before then, the Fed will keep printing money.
"They're going to print and print and print. So what you can get is a bad economy with rising equity prices" until the entire house of cards collapses.
Bad endings always follow. This one promises to be a whopper. Moreover, on their own and out of luck in America and Europe, ordinary people will be hurt most.
If pain exceeds thresholds of no return, all bets are off. Often the unthinkable happens. Rebellion at times follows. Street protests are precursors. What happened before will again. Bet on it.
Stephen Lendman lives in Chicago and can be reached at firstname.lastname@example.org.