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Stockman To Obama: Butt Out Of The Greek Crisis - You've Dispensed Enough Keynesian Poison At Home
Submitted by David Stockman via Contra Corner blog,
At the moment, Europe is struggling to pass an inflamed financial gallstone. The sooner that Greece is permitted to escape the debt clogged financial ducts fashioned by its Brussels paymasters, the sooner the entirety of Europe can begin the cure of debt liquidation and return to honest finance.
In their wooden-headed insistence that Greece remains obligated to 100% of its crushing $350 billion debt load, the Germans are, ironically, doing the work of the financial gods. By making it literally impossible for the new Greek government to abide by its voter mandate, Berlin is paving the way for “grexit” and is thereby setting-up the catalyst for the Euro’s demise. And with it, of course, the obliteration of the EU’s rotten regime of bank bailouts, central bank money printing and fiscal policy anesthesia.
Hallelujah! Europe and the world desperately need a big, bloody sovereign default, and there is no more worthy case than Greece. As Finance Minister Varoufakis so inconveniently stated last week, Greece is a “bankrupt state” and has been since the crisis first erupted back in 2010.
Accordingly, the Brussels bailout transfer of that impaired debt from the banks and investors, which had so richly earned the right to experience deep losses owing to their lack of prudence, to EU taxpayers was a stupendous act of economic and political folly. It paved the way for the very evil that the fiscally resolute Germans profess to fear the most. Namely, central bank financing of state deficits and the unleashing of politicians to thereby ultimately bankrupt it.
Stated differently, everywhere and always modern politicians and fiscal authorities need to face the naked wrath of an honest bond market—the bond vigilantes of yore—- when they seek to finance voter subventions today by obligating the taxpayers of tomorrow. Especially when government finances start heading south, nothing can be permitted to stand in the way of honest price discovery. Indeed, the instantaneous shock therapy afforded to authorities that comes with soaring interest rates on currently issued debt, and the associated risk that all existing debt will have to be rolled over at prohibitively high rates in the future, is the only thing that can preclude the disease of kick-the-can fiscal drift and profligacy that prevails the world over at present.
As a practical matter, only the bracing tonic of unfiltered bond price feedback and the threat of uncontained sovereign debt yields can concentrate minds and screw up courage in the finance ministries and parliamentary fiscal committees before it is too late. That is, while there is still time to avoid the debt trap of borrowing to pay the interest.
So modern welfare state democracies desperately need rough and tumble free markets in public debt and not infrequent sovereign bankruptcies. The latter will keep the bond and bank managers alert and focused on the job of risk analysis for which they presumably are paid their fees; and the former will keep politicians alert to the danger that chronic deficit finance and pie-in-the-sky fiscal projections—–i.e. Rosy Scenario—-will put them on the slippery slope from which there is no return short of politically fatal resort to sweeping tax increases and spending cuts.
Preventive health is thus the sine qua non of fiscal stability, but the EU’s Keynesian regime of bank bailouts and central bank financial repression is equivalent to binging on empty calories. In fact, there is nothing more insidious than the Draghi orchestrated orgy of hedge fund front-running that is going on in the European debt markets cheek-by-jowl with the Greek exit ordeal. In the face of that generic risk, it is flat out absurd that the French 10-year is trading at 60 bps or that the debt-besotted Italian and Spanish state issues are bid at 160 bps.
The fact is, the purported threat of “deflation” is an entirely bogus reason for the ECB’s pending lurch into $1.3 trillion of QE. Apart from the short-term impact of the global oil and commodity collapse, there is no evidence of systematic price decline in Europe, and the current transient gale of commodity deflation is actually a boon.
Likewise, it is plainly evident that the ECB’s embrace of ZIRP and QE cannot possibly help the macro-economy or trigger an escape from Europe’s state-instigated lapse into economic stagnation. That is because Europe’s private sector is already saturated with borrowings and has run smack into the limits of peak debt. Therefore, zero interest rates do not stimulate incremental borrowing, and do not goose the GDP with a one-time ratchet of credit fueled spending.
As shown below, the credit channel of monetary policy transmission is as clogged and impeded in Europe as it is in the US. During the first seven years of the “euro” boom, private debt footings in Europe soared at a 12% compound annual rate. In short order, the available balance sheet headroom on European household and business balance sheets was used up. The single currency miracle was then over because it was rooted in an artificial and unsustainable credit boom, not organic improvements in capitalist productivity and efficiency across the continent.
Since the financial crisis, however, private sector loans in the euro area have plateaued, and for an obvious reason that only Keynesian economists and central bank money printers cannot comprehend. Namely, that private incomes are stagnant and leverage ratios are at their maximums.
Even then, the 14-year CAGR for private loan growth in the euro area is a robust 6.0%. Needless to say, that is not evidence that central bankers have been too stingy. Instead, its the historical proof that the European private sector has used up its available balance sheet, and that it is now struggling to expand on its own two feet in the face of the insuperable barriers posed by governmental addiction to high taxes, welfare state largesse and statist dirigisme.
That Brussels and Frankfurt remain committed to financial repression and bond market bailouts, therefore, has only one logical explanation. They have stumbled into an unstable, destructive regime that is attempting to finance state deficits throughout the continent in a hothouse bond market that is an artificial creature of the EU superstate—-a make believe financial market where all prices are dishonest and are formed by the flood of false credit from the ECB printing press and the false price floors decreed by the bailout authorities.
In short, the sooner the EMU is busted, the sooner the fiscal free riders like Italy, France and Spain will be required to get back out into the global financial markets with their own currencies. And there is not a chance under those circumstances they could print there way to 1% ten-year money or borrow it from at risk lenders.
In the article attached, London’s most astute advocate of the monetary printing press, Ambrose Pritchard-Evans, flacks for the Obama White House, insisting that the EMU authorities let Greece off the hook. As our clueless President observed,
“You cannot keep on squeezing countries that are in the midst of depression. At some point there has to be a growth strategy in order for them to pay off their debts…”
No, paying off their debts is exactly the wrong medicine. You do not kick the can and extend and pretend that Greece can service its crushing debt. Instead, you permit it to default, and then to rebuild it’s economy and credit the old fashioned way. That is, by allowing its workers and entrepreneurs to function in an environment of honest money—– where success is rewarded with gain and where mistakes, errors and excessive greed bear their own consequences.
In any event, its a problem for the Europeans and the Greeks to resolve. Obama should stop sending Keynesian witch doctors like Secretary Lew and the national security deputy quoted below, Caroline Atkinson, to spread more policy poison around Europe.
Having pushed the national debt above $18 trillion and appointed a Federal Reserve board that has gone off the monetary deep end, Obama has already done enough damage at home. He could do everyone a favor elsewhere and just butt out.
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take from us our fiat money, buy our (mostly German) overpriced products, then be doomed with repaying that debt with interest, the best racket ever.
http://www.dailymail.co.uk/news/article-2957072/A-expensive-getaway-Obam...
just DingleBarry, organizing the global community. nothing to see here.
Don't worry, Obama doesn't give a shit about Greece. He's busy doing other things, like outlawing the commercial sale of 5.56mm M855 ammo.
http://weaponsman.com/?p=20933
Behavior reflect personallity...
It should be clearly obvious the corrupt divisive despicable incompetent arrogant narcissistic illegeal indonesian kenyan alien muslim sociopathic pathological liar in chief truly reviles all tax paying U.S. citiziens and will do everything in its executive order powers to destroy their country an their lives in the soon to be extinct land of the free....
As Greeks kicked austerity in the butt, ..........liar in chief jawboning keen-is-an truly(?) power to eurogroup...
yea, its your job but our fed prints backstopping you.
Duh !
John Kerry's flickering tongue
put greeks on food stamps
Was reading about the 1rst & only ladies' Aspen ski trip..
Of the only 10 black people IN Aspen that week, our 1rst ladies 50 car motorcade was granted an unfettered pass thru of a rather serious accident, cause nobody is gonna tell her she has to fucking wait for the injured to get loaded into the ambulance, just like while in Saudi Arabia nobodies gonna tell her what to fucking wear..
Talk about back of the bus...
Stockman to Obama: Butt out of Greek crisis because You've Dispensed Enough Keynesian Poison At Home
Spot on Priceless quote ;-)
Stockman knows this shit better than any of us. The guy is making more and more sense.
I think Obama saw all those 'lines being drawn' and figured this was something he had experience in handling.
Problem, Varoufakis won't go. He wants to stay. His best work was to point out that taxpayers, not Banks, would bear the cost of Greece's default.
The CB's chose uncoordinated global default.
And so it shall be.
Obozo butt out? Not gonna happen unless it's with Reggie!
Seriously, Obozo was most likely a D student at his best, we'll never know. Of course that doesn't stop him from doing everything he can to destroy whatever is left of the USSA!
"Gay President Barack Obama at a presidential debate at the University of Denver. Barack Obama stunned David Axelrod, one of Obama's top campaign advisers, during the 2012 election when the president allegedly cussed at him and walked out of their debate prep session."
Finally the MSM admits it, he is gay.
https://finance.yahoo.com/news/top-obama-adviser-reveals-happens-1513106...
Moo shell is merely a prop
....de fudgepacker done truly lub itself some azz burgers....
I am shocked SHOCKED to find that even with ZIRP you can reach a point where you have too much debt to ever repay. Who let this happen???
'IMF destroyed Greece to sell out its deposits'
It always amazes me how how people consider TOTUS one of history's great orators... Personally, I think the guy sounds like he has tampon shoved up each nostril.
After Bush the ETRADE baby would sound like a literary genius. ;-)
Most annoying person I've ever heard with his stupid fake coached speaking style and you can just tell he thinks he's the greatest thing to ever walk the earth.
He is well-practiced and quite competent at delivering speeches whose content is rich in Neuro-Linguistic Programming (NLP), which is basically a form of hypnosis and mind control. Like any form of hypnosis, it is most effective on intelligent yet gullible people. That's why some claim he's such a great orator. Those of us who are resistant to this mind control recognize his speeches for what they are-- retarded nonsense.
and why don't more people get this!!! ...and he has ZERO ability to think on his feet and participate in an intelligent conversation. You can tell his entire education was a scam. I'd actually love to see him in a REAL debate..the old fashion kind...monologue, case, rebuttal, etc. He'd get slaughtered. Bush wouldn't have impressed anyone either.
Keynes advocated surpluses in the good times. So, President Obama should advocate a surplus here and then give it to the Greeks.
He could do everyone a favor elsewhere and just butt out.
Ya, well.... good luck with that. Keynesians don't just butt out.
Liberal fascists don't butt out. The Obama adiministration is not going to just butt out.
Ha! Liberal fascists. Now that is one I haven't heard before. I assume you mean those neoliberals who want to reduce taxes on wealth (no, not your measly savings), privatize public assets, heap private debt onto public balance sheets and strip sovereign nations from controlling their own law making and regulator capabilities. Those are the liberal fascists you are talking about, right?
Fascism and communism are kissing cousins. The only real difference is that fascism believes in a strong national identity, whereas communism beieves in no nations at all - the One World Order. Aside from that, they both believe in concentrating all power and wealth into as few hands as possible. In the real world, that apex of that unholy wealth pyramid is, of course, the House of Rothschild, followed by the rest of the psychopathic bankster clans. It's their puppet strings that O'Pinocchio dances on, as do the rest of the assclowns in DC, London, Frankfurt, Brussels, etc.
Privatizing public assests? Really, what difference does it make? The governments themselves have been privatized, in a very real way. The parasites in power suits completely own and operate them.
Government of the People, by the Psychopaths, for the Psychopaths.
I agree with you. But the term liberal fascism was pure political tribal crap.
liberal fascism is spot on.
Maverick
If you go tribal, you are part of the problem. It's simplistic bullshit.
Very true. Putin knows that these neo Bolshevik "Keynsians" very well. Thats why he crushes them. A word to the wise.
What an asshole.
An environment of honest money, huh? That would probably be located in the hadron collider beside the higgs bosun.
Stockman at his consistently honest best.
That third to last paragraph is a gem.
That is what the U.S. needs, Obummer.
We witch-doctored some folks...
Redickless, gallstones can't be inflamed.
Anyway don't worry, Obama speaks Greekian like a native.
"Battle lines being drawn, nobody right if everybody wrong" - Stills
Wake up people ... I am poor ... no big deal but I see that asset inflation by central bankers DECADE UPON DECADE and my devaluation a threat to my very existence as created by the elites and supported by the middle class to keep those elites in power.
NOW LIST THOSE I AM ENTITLED TO KILL UNDER SUCH AN ECONOMIC SYSTEM AND FUCK THE RULES.
I would never have imagined how I would feel today over a half a century old by how the economic system is being operated.
So Mr Obama, believing in christian beliefs and how bad karma comes about. I believe in the total destruction of this planet and all life no vested interest see in humanity surviving or not. As for christianity, the pope and the rest a pack of hyppocrites on how the poorest are enslaved under such a system. Go to heaven? Nope, I reject god on the grounds he is a false god permitting this abomination of a society.
Whio would want to go to heaven to meet political leaders, central bankers and all the other thieves.
Destruction of the planet is valid in that all suffering in life of all life ends today.
So this might be part of the "German exit plan" as...one trillion euros later...Germany still doesn't own Greece.
So start nuking the euro thus making German finished products more competitive on the global stage and not just in Europe and do nothing as every other State in the EZ proceeds to go bankrupt.
Few understand the reality of not propping up the debt bubble and that's why the USA will continue to support Casino Capitalism or Whatever Capitalism. As long as the isms keep cheap money flowing to the Corporatists everyone except the Corporatists will be an indentured servant to the 1% largesse at the discount window of commercial banking. The skim at the Casino is heavy and the masses now know how the skim works so I don't see much future traffic at the Casino anytime soon, or in the foreseeable future. Even Donald Trump understands that Atlantic City is a bust along with Vegas. The jig is up and the serfs got wise to the fixed games with no chance of so-called luck in the system. All the gains in disposable income went to the top 1% over the last 40 years. Middle class income has stagnated whereas top tier incomes have skyrocketed 800%+.
Stockman knows O'Bummer is a stooge of Wall Street.
Obama is a stooge with many hats.
pentagon stooge
hollywood stooge
oil stooge
big pharma stooge
cia stooge
he is told what subject to talk about and then he is told what to say.
I a still hoping for that change I was promised..
nothing matters except one thing: will the new control of Greece cave in, kinda cave in, or stand strong...Nothing else matters, and who the hell knows when we will actually find out.