Let’s Talk About the Tax Cut Law

 

The long talked about and maligned tax cut legislation has finally passed, and will be signed as a Christmas present for all in tax lands. What has been some of the main talking points have been that the uber rich will receive more money back than the poorest of the poor and that companies having more of their money is not required for them to pay higher wages or hire more employees while expanding business, they could pay more to employees and hire more without a tax cut or expanding their business. Why don’t we simply look at these half-crazed statements which have infected much of the discussion over this economy boosting legislation?

 

The very first things we need to be honest about are that the Democrat Party elites have never seen a new tax or tax increase they did not like, a government giveaway to the lower fifty percent of earners they could not get behind, and tax cuts which includes corporations and the top fifty percent they could not hate. Since we are speaking of the tax cut, we will address the last point only. When your definition of the uber wealthy includes the entirety of the top fifty percent of earner sans the Hollywood elites, then any tax cut will provide the wealthy with almost all the tax relief as they are those in the top fifty percent of earners who pay taxes while those in the bottom fifty percent largely do not pay income taxes. The confusion comes in because the entirety of earners pay taxes, but not all pay income taxes which is what we are talking about. If the Democrats were really so concerned about the taxes paid by the lower fifty percent of earners, then they would find some way of restructuring Social Security taxes, Medicare and Medicaid taxes such that it was less of a burden on those at the lower wage earning end of the scale. One means would be to make minimum wage earners exempt from these taxes and have them begin after earners have earned a specific amount and raise the upper end cut-off one more. Of course, once this begins, very soon these taxes will end up like income taxes, only paid by the top fifty percent of earners and the lower fifty percent of earners being exempt for the most part. Such a taxation schedule should be called the “Democrats think this is almost fair tax schedule.” It is this protection racket by which the Democrats all but lock in those who earn less as their supporters and why they are scared to death of such ideas as a fair tax system where there are far less deductions and a flat tax rate for everyone. To the people complaining about this tax cut, a straight flat tax is called grossly unfair and a tax plan that helps the rich. That is only an accusation available because of the mess of a tax system the two parties have patched together through years of designing taxes to fit their ideas of fair. Such a system has produced a money wasting and unfair system which drains of close to if not over ten percent of the economic growth just to address taxation. That is unfair to everyone no matter where on the pay schedule they fall as it takes money from everybody at an equal percentage and allows the IRS to use the tax code through differing interpretations to attack people which those in power decide need targeting.

 

The people telling us that only the rich will see significant reduction in their taxes are selling you a yarn. We have heard arguments that the lowest one-third of income earners will not see a single penny extra in their paychecks resulting from this legislation. Well, of course not, they do not pay income tax but many get a refund from the income earned tax credit, a straight giveaway to those who pay no taxes such that they will receive a tax refund so they can believe they must have paid taxes. In reality, this is another form of welfare the democrats have devised calling it a tax refund for the tax challenged. What else do you call a refund sent mostly to people who never paid into the fund from whence the refund for payments comes from? We call that a backdoor, disguised Welfare payment. The other truth they leave out is virtually every taxpayer will see some degree of reduction in their tax bill with the singular exception being such special cases who claim every conceivable deduction through some form of tax wizardry and now face some of those deductions being removed from the tax code as part of simplification and those deductions outweighing the amount their taxes were reduced. Thusfar, in everything we have read, such an individual exists in examples of how such could conceivably occur and have names such as John Doe, John Smith, Taxpayer X and other such nomenclature for something which is so rare that no such individual could be found, but we are assured that there are millions who fall into this narrow class of people and they just did not have the time and resources to find anyone.

 

Capitol Cash Machine

 

The other huge problem is that this tax cut legislation actually gives corporations, which term is used such that you do not believe this includes the Ma and Pa store on the corner or down the street, it does, are receiving tax cuts. They poke fun at the idea that this will increase the ability of these companies to pay their employees more, save up and enlarge their company thus hiring more employees at a higher rate of pay. Their claim is companies, including the Ma and Pa shop aforementioned, can pay their employees more and expand their businesses and hire more people now if they really wanted to but they are not doing so which simply proves that they will just pocket the extra money and pay the top earners more while probably cutting lower earners’ salaries because they got a tax cut so do not need as much salary. These people really do hate companies and wealthy people unless they are leftist backers of the Democrat Party. Below are a few selected tweets from Hollywood and other elites we took from an article titled, “Liberals Have an EPIC Meltdown Over GOP Tax Reform” which we found online at Townhall.com and cleaned up Mr. Maher’s language to retain our family friendly ratings. These comments were extremely amusing in a provocative way as they come from people who make more in one week than we will in our combined lifetimes. Do they not realize that they are the wealthy of which they complain so loudly? If it is so rotten being that wealthy, we have another suggestion for them, not only refuse their ill gotten tax cuts, but make an example and pay double what they owe and denote that their extra payment must be used to pay down the principle of the debt, something which truly would help the nation and its financial wealth and would pay dividends far into the future. If the entirety of the mega-wealthy would make a contract that they each pay one million dollars additional taxes each year denoting that it goes directly into paying off the principle of the debt, with one proviso, the government finish that year with a balanced budget or showing a profit. That would serve a number of worthy causes, it would give the government, particularly Congress, an incentive to live within its means, pays down the principle and not just another interest payment making the interest in the future less, and eventually such a contract would remove the debt altogether making the United States debt free for the second time in its entire history (the other time was January 8, 1835, under President Andrew Jackson). Wealthier corporations could join this effort, use their participation as an advertising gimmick, and likely make more profits than the payments would cost. The biggest benefit of such a bribe would be getting Congress every few years to actually manage to spend within its limits, the more often the better.

 

Liberals Have an EPIC Meltdown Over GOP Tax Reform Tweets

 

While we are speaking on taxes and balanced budgets, there are some dangerous realities coming in the near future if the United States does not get its fiscal house in order. The first is that with the debt climbing to such a high level, the interest is eating an ever-larger share of each yearly budget making spending limitations impossible. Should the interest rates increase, which should the economy heat up would become unavoidable, then the interest on the debt, which is paid with short term loans, would balloon making even meeting that payment beyond the ability of the government leading to a default situation. This has been part of why the interest rates have been kept artificially so low as the government would collapse should they ever reach close to or above nine percent prime rate. Of course should the debt increase faster than the economy increases as was the case over the past twenty years, then nothing will prevent default within some set period of time probably within this century. The best plan for taking care of this problem would be two-fold approach; first, pass a balanced budget amendment to the constitution which would require that no budget surpass the previous years tax intake by the IRS except in time of declared warfare, and second, a tax policy which incentivizes the economic growth through simplification of the tax code which would include a wealth tax on uninvested savings, which would include trust funds and endowments, of over two-hundred-fifty-million dollars, adjusted for inflations and deflation each year, such as to encourage these large pools of revenue to be invested thus stimulating economic growth as that is the easiest and fastest way to shrink the deficit.

 

As far as the ridiculing and belittling of the tax simplification and reduction legislation, it is being done for two basic reasons. First, the left-leaning media-Democrat Party-entertainment-news conglomerate believes firmly that the government can spend your money far more wisely than can you as you would never spend your hard-earned money on some of the insanities such as investing in anthropomorphic global warming schemes from the United Nations or whatever your favorite waste of money by government might be but the government will spend money on the United Nations IPCC (Intergovernmental Panel on Climate Change) and that means they would spend your money more wisely than you could ever spend that money. Second, this was one of Donald Trump’s ideas and as he backs this plan, it must be prevented from being enacted at all costs simply because it is Donald Trump’s idea. That is the hard and basic truth. It matters not if this tax package is good for America, good for most of the populations, good for the economy; it was not done by an approved individual, read Democrat, and thus is terrible, horrible, dastardly and must be made to be unpalatable to the public. What the people pushing this inanity twenty-four-seven have not and refuse to recognize is that they have reached the point where the rest of the world is getting on with their lives and have been ignoring them for months. They cannot see this as they are locked into echo-chambers of like-minded, or out-of-minded, others who are doing the same thing. They each retweet or repost the same things in such a manner that they do eventually repeat about every seven or eight months thus these have become ring-posts which work their way around varying groups of people finally reaching back to the original point only to start around again. Some of these people are in multiple rings making the entire hodgepodge somewhat less discernable, especially for those involved. Granted, there are some who remain in contact with a number of these people either for amusement, gain information on the other extremes, or because they have lost a friend to the fire breathing circuit and are waiting for the right moment to try an make a recovery effort.

 

As a closing point, having companies pay fewer taxes is always a good thing because companies do not pay taxes, only people pay taxes. Does anybody really believe as some have posted that companies do not pass on the cost of taxes in the price of their products and in lower raises for the employees. Those are the realities of running a business as we can tell you from experience in doing exactly that. Overhead includes tax payments, licensing, rental fees, fuel costs and a myriad of other incidentals and are all summed up and then incorporated in determining the cost of their goods and services. Lower any single element and the price drops, raise any single element and the price goes up. What you are not being told is it is less expensive for you to pay a tax directly than for you to pay the tax through a corporation placing the costs of that tax into its price formula. When they incorporate the tax as part of their price formula, that cost is added to the base cost of the goods and other essentials in manufacturing or producing the goods or services and once that determination is made, it is then increased by a percentage. For example, an item costs ten dollars to make and overhead is five dollars per unit of which one dollar is taxes. The price mark-up is one-hundred percent (not uncommon for production to retail price with Jewelry far higher and low ticket items less but this is a normative range) then you take the ten dollars and the five dollars and add them getting fifteen then increase that by one-hundred percent and you get a selling price of thirty dollars of which two dollars are for the taxes. That is right, they mark-up their tax cost and pass that along and make a profit on their taxes because companies make a profit on everything otherwise they would not be in business very long. So, which is more expensive, the corporations paying the taxes or the individual paying the taxes once you realize that the corporation places the cost of taxes into the production cost and then mark-up the entire cost including a mark-up on the taxes so you pay for the taxes plus. It really is that simple, you pay for the taxes plus for a profit on their paying the taxes in the price of everything you purchase, so would it not just be easier to pay the taxes yourself instead of through a middleman? We know there are some out there still saying that the corporations and companies can afford to pay more taxes but they do not actually pay the tax, the people do. The corporation and tax costs are passed on to the customer with an allowance giving the corporations additional profits.

 

Beyond the Cusp

 

Our Economic World is Shakier Than We’ve Been Told

 

The mainstream media, especially the European Media, are all the news all the time covering the Greek economic meltdown. Some of the more honest media has also included the crises that could be soon to topple as if dominoes all in a row of which Greece is but the first domino to be tripped to fall and they have shown how Spain and Portugal would be precariously hanging and soon toppled partly as a result of Greece’s defaulting though it might be likely they would have fallen eventually all on their own. These would trigger a crisis in Ireland and Italy as to which would be the fourth victim and which would follow as the fifth victim signaling the end of the most endangered Eurozone nations too close to default to be comforting. The real horrific effect of these five weaker economies finally tripping the default cable and snagging the economic webbing, which has held the European Union and the Euro together since 1999, doing irreparable damage to the delicate webbing, more fragile than the most slightly laced spider’s web, tearing enormous holes in its intricate weaves slashing at the most vital threads and upsetting the ever so precarious balance that underlies its supporting structures threatening to unbalance and collapse even the previously though stable economies of France, Poland and many of the other east European economies possibly pushing them right to the cliff-face and potentially tipping them beyond the cusp and into default thus lacerating the last remnants of the Eurozone and possibly taking with them Germany and the ECB (European Central Bank) causing unimaginable damage to the financial structure of Europe and beyond, the ripple effect causing a second deep recession well more serious and taking longer to tank-out and hit bottom and then begin a long sluggish scent clawing for every single Red Cent and Dollar and Euro after having taken its toll on Asia and beyond. But the Euro, Greece, and the rest of the European Union and the Eurozone is but one whirlpool looking to sink every last economic boat.

 

The Euro is what we have been led to believe is the only threat. Where previously economic ships only had to worry about rising and falling tides, now they are adrift and facing not just one whirlpool representing the Euro dying, but now there is a second even more massive whirlpool coming from deep within Asia. China has hit the road’s end and is attempting to push its enormous mountain of debt using a garden trowel while piling on fresh debt using Caterpillar 990K series front end loader shoveling an additional $19.3 billion in an effort to end their three week slide totaling $3.2 trillion downturn in the past three weeks alone. These losses were the result of a Chinese Stock Market where as many as two-thirds of the stocks were frozen in a further attempt to stem the torrents of dollars flowing from their stock market and their economy like the icy waters which flooded the lower decks of the Titanic as she slowly but inexorably fell beneath the waves, something somewhat prophetic for the Chinese markets and economy. There is actually a comparison between the situation in Greece and the downturn in China as one must remember that Greece is as socialist as a nation can be without being either fascist or Communist and Greece has retained their spirit of a democratic Parliamentary system despite it all but China has taken socialism that one final step to communism, the addition of mostly state owned corporations and central planning of the economic engines and manufacturing. Chinese leaders had been attempting to liberalize their economic sectors, though not all of them, selling a number of previously State run businesses and even permitted competition between companies in the same market hoping this would charge their economy further and it had been working but even free-market economic liberalization was unable to stave off this meltdown. The problem obviously is what will this mean for the liberalization of the Chinese economy as the leadership are still Communists who serve the Party and depend on the Party, may decide that much of their financial woes are the result of these new policies and curtail or even reverse some or all of the liberalized companies, markets and take a giant leap backwards to increased government control over every iota of the economy and the manufacturing and sales etc.

 

United States Treasury Secretary Jack Lew commented Wednesday on the current crisis in China stating at the Brookings Institution, that the economies of the United States and China are “still pretty much separated.” In further testimony Secretary Lew queried, “I think the concern … it is a real one … is what does it mean about long term growth in China?” Further in his speech he pointed to the main potential impacts which could emerge as a result to the Chinese Stock Market bleeding financially leaving the leadership seeing ‘Red’ in more ways than one. The leading question is to figure out as soon as possible what the reaction of the leaders of the Communist Party is and whether they may decide that the problem dictates such as appointing new leadership, freezing prices, injecting even more dollars into the markets through the banks and state owned businesses or closing the banks and Stock Market for a week or two cool down and reset to normalcy again; the choices and potential marrying of any two or three makes predictions near to impossible. The one thing which can be computed and predicted as long as the numbers being released and any steps taken are done so in plain view then the impact of the Stock Market freefall on the Chinese economy’s core condition and whether it appears that it will have much elasticity and dynamics when the end is finally reached and the rollercoaster slides on in to the station signaling the end of the ride, and what a ride it was with vigorous growth only to drop who knows how large a percentage of that growth in this correction, and what a correction. Secretary Lew’s closing thoughts are worthy of being repeated as he emphasized, “The question isn’t their commitment to the goal; the question is the pace at which they implemented it, and do they do it fast enough for it to be effective. I hope this is not something that slows down the pace of reform. If the reaction is to put the brakes on reforms, that will slow that process.”

 

With China making a long overdue correction which will be far more severe than it should or could have been if the leadership was not so intent on what numbers they released to the world and on making their predicted economic increase and meet all targets set within the government as to fail was unthinkable and would have been a terrible loss of face thus undermining faith in the economy. This has caused the Chinese to follow the example first used by President George W. Bush and turbocharged by President Barack Hussein Obama which was in the old school simply called a ‘stimulus package’ but is now known by a more enigmatic phrase of ‘Quantitative Easing,’ either of which hides the actual result and method being implemented as who would stand for the government announcing they were devaluing the money supply and taxing every single American by a minimum percentage directly proportional to the percentage increase the total added funding was doled out in stacks of hundred dollar bills, literally thousands of such stacks in the United States and unknown amounts though what is known is the Chinese leadership pumped close to twice the percentage of GDP as did the United States. Just as the United States took their hit starting back in late 2008 and continuing through 2011 and briefly relieved with another round of ‘Quantitative Easing,’ this was like the third pitcher of beer at a table trying to drink their way sober. The economic burst from that mid and late 2011 ‘Quantitative Easing’ gave the economy a burst of hope which appeared to continue due to lowered interest rates and the paring down and mostly neutering of the Dodd-Frank Wall Street Reform Act gave the economy the needed push for President Obama’s reelection as he could run his campaign claiming to have turned the economy around and that great times lie ahead. Well, as far as that goes I’ll point to Greece and China and point out that the United States has followed similar patterns of fueling the economy and especially the Stock Market with borrowed monies and when loans were unavailable the Federal Reserve would electronically buy Treasury Bonds with funds they imagined into existence as a few strokes on a Federal Reserve keyboard and one produces and completed sale with funny money in that the receipt for the Treasury Bonds was used to balance the books as it represented the electronically derived cash used. This is a very convenient way to purchase items this way when you are the government or a very clever fraudster as just try using the sales slip from one register, say men’s clothing from a department store as cash at the Jewelry Counter and see how far that takes you. The catch, and there is always a catch, to ‘Quantitative Easing’ is that eventually you either have to pay back the money that was invented which can only be done some combination of these three methods, first is retire actual money from circulation which can also be done electronically by retiring any electronic payment made on credit cards, second is to remove the funds through higher taxes taking the money directly from the supply, and lastly one could raise the interest rates and siphon off a percentage of each loan to pay the Piper so to speak. The problem is that each of these methods actually hurt the consumer the most; it is the public that pays the price for the economic and financial misdeeds and ill-advised policies.

 

There are but a few redeeming features out of all of this and one serious and potentially unavoidable problem, and it is a big one. So, we will leave the bad news for last and the good news which will cause doom’s day to come and come quickly first. The best of news is that the meltdown in China is most likely to be relatively unfelt even amongst their Asian markets as China does not purchase many goods from outside and the few major needs she has will continue even if slightly abated, things essential like coal and petroleum. Further, the only nation carrying a trade deficit of any note is the United States and even should quotas be placed on any goods currently purchased from China will very likely have ten other sources with some popping up due to China cutting production. The European crisis is more likely to hit the United States harder than anything else on the economic horizon. Should the Eurozone break apart due to the collapse of several of their nations having financial difficulties and teetering at the edge of financial Armageddon plus one, Greece, which has in all honesty gone beyond the cusp and is currently running with his feet well away from solid ground just hanging there for that brief Wiley Coyote moment before collapsing into the darkness below only to make a small puff of dust rising depicting his hitting bottom. Even should the entire Eurozone collapse it may actually serve to keep a lid on inflation and allow for low interests rates, a necessity for the United States. That brings us back to the one thing that at first everyone would be glad to see, a real recovery with rising workforce participation which in the United States is down to approximately 63%, one of the lowest figures since the mid-1970s. This would also bring jobs, especially higher end job market opening up once again which would allow for a ripple effect. As the overqualified people working at menial or minimum wage jobs would leave those as jobs in their field became available and they gain employment thus making room for these other positions to employ more of the nations’ work force and soon inflation will return, something there has been no worry about as even the few months where such measurements showed a possibility for inflation to develop only for indicators to slide back the next couple of months with it often seeming like one big step forward and all promise breaking out only to be followed by three or four months of small to moderate steps backwards and everything gained to be lost and often more. When inflation does finally return for real then there will be a really bad situation. Once inflation starts to threaten then the interest rates will rise as a counter to inflation. Rising inflation takes a bigger bite out of people’s pockets all but actual theft. Inflation also helps with making the national debt somewhat more manageable by deflating the value of the currency taking the currency to new lows and the lessening to of the value of the debt and the purchasing power of that coinage. This was where Greece and the other nations in the Eurozone faced; they no longer had control over their coinage, their monetary worth so they were unable to simply lessen the value in order to get a handle on their debts and also make their nation more attractive to investors and new businesses. Perhaps leaving the Eurozone for a set period of possibly not less than two years and no longer than a decade or quarter century at which point they can reapply at the short end or must face a permanent decision at the longer end. Granted, this will possibly make some nations more reckless but the consequence is the only alternative to having the Eurozone nations turn their entire control of monetary and fiscal planning over to Brussels, they already control the monetary which is part of the problem, and most nations will refuse to be relieved of the power of the purse even if they are no longer able to control the coinage of said purse. Perhaps even a rotating schedule where every nation has to spend a decade using their own coinage would be another compromise. Until the Eurozone finds the answer they will be facing little impossible challenges as is Greece right now and others down the line. Let’s just hope their mistakes don’t become global economic-mines blowing the world markets haywire.

 

Beyond the Cusp

 

Greek Debt, the ‘No’ Vote, and the European Union

 

The first domino has fallen and Greece has laid down their challenge to the European Union (EU) basically asking if the European body will respect them the morning after the vote to thumb their noses at the demands made on the Greek government and its people demanding that they be further bailed out for free. The Greek people have chosen to support their government in firmly demanding they be granted support from the rest of the EU, European Central Bank (ECB) and International Monetary Fund (IMF) for restructuring the repayment schedule and not be so strict and mean demanding that the Greek government act what they define as responsibly using the restrictive austerity measures forcing the struggling nation to tighten its fiscal belt and stop the generous expenditures giving literally free tickets to the people and retired workers and other items standing directly in opposition of the demands for austerity measures for the struggling nation to be imposed by the EU, IMF and the ECB to prevent the very default on Greek debt which occurred late last week. The Greek default on their debt payment made them the first EU member to fail to meet their financial obligations slapping them in the face and throwing down their gauntlet. Now all that remains is a seemingly simple vote for the members of the EU on whether to hold the Greek government to impose strict terms in order to meet the financial demands of those attempting to collect on their ‘loans’ made with demanding Greece now act in good faith and honor the terms imposed on them and the restructure of the Greek governments debts such that they would be capable to repay those debts. The crisis was brought to a head with the Greek failure to meet the $1.7 billion payment to the International Monetary Fund as part of a previous set of further loans and restructuring made to avoid a similar crisis last year. Now an apparent ‘No’ vote is a direct challenge for all that entails.

 

The Greek people have now, with their ‘No’ vote, rejected the imposition of the austerity measures demanded of Greece by those holding the notes of indebtedness from the Greek government. This is forcing a crisis which has very few options and will now test the EU and whether its single currency policies are functional or inherently flawed. This threat to the EU single currency system was set into motion the second that there was not any central monetary planning unifying the disparate desires and quirks of the independent nations. Without such a system, the Euro was bound to produce just such a financial disaster leaving only the question as to which nation would be the first to fall off the fiscal cliff, the first to dare to tread beyond the cusp of financial responsibility. The predictions of an eventual default had raised its ugly face before threatening the very foundations of the Euro system and posing the exact challenge being faced today with the Greek rejection of the financial restraints being foisted upon them by the centralized powers within the EU. I suppose that Greece was as likely a candidate as any to be the first to face the imposition of external financial limits or simply defaulting thus threatening the stability of the Euro shared currency system. What are the questions needing to be answered and the actions available to be decided defining the path forward?

 

The questions are simple ones that get down to the basis of the Euro and through that to the entire EU. The writing is on the wall for anybody with the nerves to read the warnings telling the tale that there would be a day where a people made comfortable by the very structures put in place as a universal safety net designed to care for those unable to afford the necessities of life due to unemployment or other difficulties eventually making living off the government’s various programs sufficiently comfortable that work becomes an option and not a necessity. With such a system in place it becomes not only possible, but in some cases preferable to live a simple life permitting government to foot the bill. Eventually such a life would become far more attractive living large off the government than working and living not all that much differently and people would realize that not working was as much an option, and a far more enticing option, and simply choose to live an easy life seeking other means by which to have the government pay for more and more until there is no more and they start borrowing. This works for a while and the government stimulates the economy with infusions of money and the Ponzi scheme becomes the way of governing always staying one step from ahead of defaulting on loans. Finally there is a downturn of the economy and a country with finances so fragile becomes a nation unable to recover sufficiently to pay its debts. A nation unable to repay its debts is recognized immediately to be a threat to the entire system so this government cannot be permitted to collapse and start anew and is instead propped up by the wealthier governments and international bankers whose sources of income have always been shady and now are becoming downright unsustainable.

 

Soon another country teeters at the edge and begins to go down the exact same path as the previous, only more rapidly, then another and another until it becomes the crisis that is so large it can no longer be ignored or swept under the rug and propped up under auspices that this next new solution, austerity being the latest, will save the system, a system so broken that saving it is well past any possibility. The eventual default was set in motion at the very outset as was predicted by British Prime Minister the Lady Margaret Thatcher when she wisely refused to allow Britain to become dependent on the Euro and instead reached a balancing point that her merchants and industries would accept Euros as payment but that such payments must always be transferred into the Pound Sterling on the British ledgers and thus met by the EU. The Lady Thatcher once stated it referring to exactly this problem when during an interview with Thames Television’s This Week on Feb 5, 1976 she was quoted as saying, “I think they’ve made the biggest financial mess that any government’s ever made in this country for a very long time, and Socialist governments traditionally do make a financial mess. They always run out of other people’s money. It’s quite a characteristic of them.” This is exactly where Greece now finds itself and where Spain, Portugal, Italy and soon potentially others find themselves all in different points on that slippery slope, it is simply further along and at a steeper point that Greece finds itself, the point where other people’s money has run out and they have become reluctant to continue providing, period, or have they. There is one option where Greece is freely given yet another infusion of monies and the marry-go-round will continue. The debt will be restructured except this time there will be no set repayment process set up but instead a demand that Greece show its good faith of intent to eventually repay the debt once profitable times return, and those providing the crutch will continue to pour good money after bad with no false expectations of ever being repaid. Greece will have become that poor wretched relative who nobody ever speaks about but find themselves constantly meeting their bills for them. This eventually leads to the next crisis, what happens when most of the family of EU nations becomes Greece?

 

The EU cannot financially choose to continue supporting Greece but not because it would be a strain on them financially, it would hardly be noticed as such is how small a percentage of the total EU financial institutions that Greece requires even if it were to totally fail and every Greek citizen were receiving government livable wages. The problem is one of precedence. Once the EU sets the precedent financially holding Greece’s hand and paying its way then the path is set for other nations to demand similar treatment should they fall upon hard times. Should one look far enough down the road and it is not difficult to paint the picture they will envision, an EU that half its nations survive and are carried by the other half, and the wealth produced by the providing half is completely consumed supporting the rest. The entirety of the EU production and profits are consumed by the other nonproductive half. That is not a system that will survive even the slightest of difficulties and that will spell the end of the EU right behind the end of the Euro. But is the other option going to end any differently?

 

Imagine if the EU forgives the parts of the Greek debts it is able and forces Greece to return to their own currency yet remain in the European Union, where will that lead? Again it becomes a matter of precedent as now any nation which is approaching insolvency will demand the same generous exit strategy gaining a partial bailout which does not need be repaid and a return to their native currency without any penalty. There will come a point where the EU will no longer be the panacea promised and instead will become a small block of successful and wealthy nations having paid the exit fee for the remaining nations who now use their own currency and benefit from EU membership solely when conducting trade within the EU. This will have greater effects outside the EU as the EU will set their exchange rates for the Euro against their own national currencies until they are determined to be financially readmitted to the Euro club once again. There will always be the possibility that these less productive and less affluent nations will find their stride economically and be capable of rejoining the Euro based nations but most would be relegated to using their own national currency. The real problem will strike when even those nations which had been marginally able to keep astride the powerhouse economies of the likes of Germany will now constitute the least wealthy of nations still using the Euro and there may come during a time of economic stress where they too may be forced to return to their own currency or an even more frightening scenario would be the most productive nations decide to be like Britain, namely accepting the Euro in payment for trade deals or from tourists but operating using their own national currency as they would realize that would benefit them in deals outside of the EU and they also would no longer be pressed into supporting the economically weaker nations.

 

Any path taken would necessarily result in the end of the Euro and the stresses from the nations all returning to their own national currency eventually dissolving the EU as it would no longer serve any purpose beyond setting unified trade agreements through the Euro. Anyway one might slice this rotting cake that started with the Greek default; the result is the same, the unraveling of the EU starting with the demise of the Euro. The Euro might continue on much as Roman coins and the Spanish Pieces of Eight hung around well after their issuing nation no longer held the sway and influence they had in their prime. The question then comes as to what Europe may look like down the road without the EU as a calming inclusiveness that it once provided largely through the sharing of a common currency. Would this signal the return to the epidemic of conflicts, much as was the way of things throughout history? What will happen when the EU dissolves and there is no European unified front and each nation is now unleashed to trade completely without any concerns or other brotherly obligations. The initial return to cutthroat trade practices with each nation set against its neighbor may, over time, exacerbate old rivalries leading to skirmishes and even on to open warfare? Violence is only one part of the problems as there may be demands for reparations from the nations which had debt forgiven under a moment of weakness and magnanimity more forced by the EU than entered into with willingness and a smile. The failure of the Greek economy to sustain any kind of parity with the major economic powers within the EU will necessarily result in the end of the Euro as a trans-European unified currency, also as Lady Thatcher had predicted in her actions to forestall and eventually put to rest any hope that Britain would fully resign control over her own currency. This will prove to be the death of the Euro, the necessity for every nation to control its own currency unless they would willingly surrender their fiscal and economic planning to a central budgetary committee appointed and solely answerable to the EU and acting independently of the member nations forcing upon each their assignments for production and receipt of funds from Brussels. Nationalism or completely collective socialism, which would Europe choose. Britain would never enter such a trap, but could the entirety of the rest of the EU nations join such a group and actually make it work, that’s a tall order for any organization. Nope, could never happen, not in a million years. The other question that would remain to be seen is how the death of the EU would affect the relations out of Europe with the remainder of the world. These are interesting times, and they appear to be getting ‘curiouser and curiouser.’

 

Beyond the Cusp