Tuesday, June 26, 2012

Euro Crisis and the Twilight of Sovereignty

by Steve McCann

Many Americans, viewing the European debt crisis from afar, are justified in asking how does this ongoing and apparently never ending debacle affect them. The explanations offered thus far are steeped in arcane and convoluted discussions of bond yields, sovereign debt, bank liquidity, and the role of the International Monetary Fund as well as the European Central Bank and the Federal Reserve. But there is a much larger issue at hand.

The euro crisis is a manifestation of the fact that the global economy and capital markets are rapidly approaching the point where they will be beyond the control of national governments, leaving the people and the nations of the world powerless to control what happens within their borders. Unless there are dramatic changes in government spending and the structure of their individual economies, they lose sovereignty. This process is being played out on the European continent.

In the latter part of the twentieth century the world began to separate into predominantly consuming and producing countries. Goods production began to shift to the Far East, first Japan, then Taiwan, Korea, China and other rising nations. Virtually all the Western economies began to be dependent on consumerism and the ability of the state to maintain and sustain a high level of consumption and social spending in order to grow their economies.

Enter the European Union, established in 1993, a diaphanous dream of European central planners beset with self-aggrandizement and the desire to manage the affairs of a continent consisting of 27 disparate nations with different languages, customs and history. To make matters worse, 17 of these nations, regardless of the inherent strength and structure of their individual economies, adopted a common currency, the euro, in 1999.

The most dominant member of the E.U. and the Eurozone is Germany, as it has maintained its overriding goods producing base and sought to control its social and consumer spending through the realization that wealth must be earned before it is spent. Virtually all the other nations of Europe have lived under the delusion that there is no price to pay for excessive consumption, social guarantees and the attendant ever-expanding debt necessary to finance these self-determined requirements. However, many European countries are now going broke attempting to feed the beast that is the expectations of their citizenry combined with the the need to maintain an expanding economy.

The chosen remedy for this predicament was the end-product of the universal panic triggered by the financial fiasco of 2008. First, the banks and major financial institutions collapsed and were bailed out by the various governments; then the governments unable to continue borrowing in the international capital markets needed a bailout. But who would bailout these governments? International financial agencies such as the International Monetary Fund came to the rescue. But where do they get their money? From central banks who have printed enormous amounts of money to replace all the money that vanished into thin air as bad debts that bankrupted the banks and other financial institutions in the first place.

Unfortunately, this newly created cash has no basis in actual value; it is an illusion that requires every country and government to agree that wealth can be created as the end product of a printing press -- one that can be turned on at any time for any reason. Germany, with the memory of the economic collapse and rampant inflation of the 1920s still latent in their national psyche, is, for the moment insisting on reality and not a blank check. However, the Germans are under pressure from the other nations in the Eurozone to agree to essentially unlimited bailouts and money creation in a misguided attempt to maintain the status quo and keep their citizenry placated.

Germany, recognizing that theirs is the lynchpin economy of Europe with the most to lose, is insisting that more economic and fiscal control be exerted over other members of the Eurozone. This would have the effect of eradicating once and for all the democratic accountability of national governments to their people. This would require that centuries-old national and political boundaries be erased and the citizenry robbed of their ability to have control of their tax and spending policies. A massive centralized bureaucracy would then be empowered to dictate and control the economies of each nation and the continent as a whole. With control of the economy comes control of the day-to-day lives of all the people.

Regardless of which route the continent takes, it is doomed to failure. It may be that continued money creation and dependence on global capital will eventuate in a massive collapse as these nations cannot sustain the cost, and the continent cannot survive, potential unfettered inflation. Or an agreement may create a centralized authority, which will in due course cause nationalism to rear its head and the people to rebel against a faceless bureaucracy located in a city in another country speaking another language dictating what will be seen as terms of surrender.

There is but one workable alternative. A serious cutback in national spending -- a meaningful reduction in the size of government could reduce the dependence of these countries on global capital and the European Central Bank. Government entitlement programs which devour wealth and produce nothing in return must be gradually stripped away, except for the neediest in society, and if the leadership of these nations reversed their wealth redistribution mindset, taxation could be reduced.

These policy changes, combined with a major effort to re-establish a growing goods producing and service sector, could generate a genuine stimulus of people spending money they earned, as opposed to the so-called stimulus that is currently on the drawing board -- more debt and spending to satisfy the Beast that is Euro-Socialism.

Yet what is happening in Europe is what will happen to the United States if the policies of Barack Obama continue in place. His consistent and immovable mindset regarding the economy is identical to what created Europe's difficulties: excessive government spending, growing entitlement commitments, confiscatory taxes, unlimited borrowing and fiat money creation by the Federal Reserve. If this path is not reversed, then at some point down the road America will, in mirroring today's Europe, have to look elsewhere for a bailout. But where will this safe harbor be?

Many leading global financiers, among them George Soros, are planning and plotting for the day when there is a centralized global financial and budgetary bureaucracy akin to what is being proposed in Europe today. A worldwide economic collapse that will happen if the West eventually implodes will also take with it China and other growing economies, as they will lose the prime markets for their goods. The clamor for an all-powerful entity will culminate in the creation of one.

This scenario is closer than ever thanks to the inane policies pursued by European and American leadership. With all the turmoil of the past five years, perhaps it is too late for the world economy and capital markets to be brought under any semblance of national control. The questions must be asked: have the operations of the market become too complex, too automated, too voracious and ungovernable for any nation to handle, even one as large as the United States? If so, then the concept of a democratic nation answerable to its citizenry has reached its turning point.

With all the questions hanging over the electorate in this the most important presidential election in 150 years perhaps the most important is: will the U.S. have to eventually cede its sovereignty and independence in order to finance its profligate lifestyle? Will the people have the determination and willingness to temper their expectations of government and recast the economy away from one overly dependent on consumption and government spending? If so, then there will be nothing to fear from the global economy, as the United States will sit astride the world markets having learned the lesson from the debacle being played out in Europe.

Steve McCann

Source: http://www.americanthinker.com/2012/06/euro_crisis_and_the_twilight_of_sovereignty.html

Copyright - Original materials copyright (c) by the authors.

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