When your creditors have had enough...

In this morning's NY Times Nicholas Kristof presents his case that Europe's present mess is the result of the austere policies implemented by Germany and Britain. Like Rep Merchant, whom Kristof quotes, I believe Europe is indeed setting has set an example for the U.S.. Now I don't know if Kristof is taking Merchant out of context, but when I say Europe has set an example, I'm talking about an example of how to create one royal mess. That is—on its path to this predicament—Europe has set an example of how not to be.

In my simpleminded view of the world, Europe's profligate nations have boxed themselves into the proverbial corner, and the notion that they, by the grace of the ECB, can print themselves out is utterly ludicrous. It's as if Austerity, for Greece, Spain, etc., is a choice. Clearly it's not. Austerity is what happens, in the words of Margaret Thatcher (on socialism), when "you run out of other people's money"—or, when your creditors have had enough.

If we're lucky it'll play out here at home the way I presented in the last paragraph of this June 2012 message:

Throwing Money at Problems Caused by Throwing Money at Problems

Ask yourself, who would sign on to run a company where he’d have to answer to a board made up of ardent supporters on one side of the table and individuals committed to making certain he does not receive a second employment contract on the other?

And let’s say that said company is an utter fiscal disaster and that, given the makeup of the board, there’s virtually no chance of him measurably turning things around during the course of his first employment contract. And that the pay for running this bloody behemoth doesn’t come near what he earns currently.

In summary, this new job would subject he and his family to unrelenting, and vicious, attacks, an utterly palpable sense of futility, a virtual no-win scenario and a huge cut in pay.

So who would want to be elected or reelected President? A politician is a special kind of person. Egomania is THE requisite, along with a strong will to succeed to two full terms. Which leads to an extreme aversion to short-term pain and therefore policy decisions aimed at placating the populace with short-term remedies to long-term problems. I.e., throwing money at problems that were caused by throwing money at problems.

That my friends is the fundamental “problem” in the world today. But, alas, that’s the nature of politics, and life—people pursue their own objectives. We simply have to train our officials better. We have to teach them that it’s in their best interest to make better policy decisions.

Is that a pipe dream? Of course it is! We don’t like pain anymore than politicians do.

So here’s how this plays out: The patient (the economy) ultimately heals itself—by the grace of its immune system (the entrepreneurial spirit)—and grows us out of this predicament, albeit much slower than it would have without all the meds*. And the politician takes the credit.

*Read Haven’t We Done Enough?