More spending won't rescue Europe's six big spenders

Αn illusion supporting policies that are pure delusion

By Shawn Tully

France, Italy, Spain, Ireland, Greece and Portugal have already proven that more government spending actually slows growth. Why do they want to spend even more?

The leaders of distressed European nations, from Italy's Mario Monti to France's Francois Hollande, are blaming "austerity" for their economic woes, and championing policies that promote "growth."

It's important to define the two terms. Austerity stands for shrinking budget deficits, by lowering spending, raising taxes, or a combination of the two. The pro-growth measures are what's known in the U.S. as "stimulus." It comprises short-term fiscal policies designed to limit the damage from a recession and speed recovery. Stimulus works in precisely the opposite direction of austerity by raising budget deficits, supposedly as an emergency measure. Today, southern Europe's heads-of-government, applauded by the Obama administration, advocate recharging their flagging economies by swelling the gap between revenues and expenses, chiefly by lifting government outlays.

EUROPE: A Thousand Miles Behind

The Eurozone countries are stuck with each other and with nowhere to go. But down

By Raul Ilargi

Production and exports are plummeting in Italy, Holland, Finland, Germany, just about anywhere; in China, production growth falls sharply. But your "leaders" will keep on talking about restoring growth, recovery etc. Spain has secretly asked for some $200-300 billion in bank bail-outs on Saturday (and got much less, the Wall Street Journal reports it will be €125), and 24 hours later play its first game in the Euro Cup, for which it's the great favorite.

The potential Spain bailout will need to be financed through EFSF bonds. The IMF has stated that the banks will need €40 billion, but that number looks ridiculously low. €40 billion every week over the entire summer sounds more like it.

Ambrose Evans-Pritchard quotes a few voices:

Is a Spanish bail-out viable?

Megan Greene, from Roubini Global Economics, says Spain's banks will need up to €250bn - a claim that no longer looks extreme. New troubles are emerging daily. The Bank of Spain said yesterday that Catalunya Caixa and Novagalicia will need a total of €9bn in new state funds.

JP Morgan is expecting the final package for Spain to rise above €350bn, while RBS says the rescue will "morph" into a full-blown rescue of €370bn to €450bn over time - by far the largest in world history.

Is Global Finance a Ponzi Scheme?

 Ask a Russian Expert

By Leonid Bershidsky

What's the difference between today's global finance system and a Ponzi scheme? This is the question that a 56-year-old veteran Russian financial scammer has been asking his victims.

Chillingly, he almost has a point.

Sergei Mavrodi is one of the most infamous names in Russia's recent history. Back in February 1994, amid the turmoil of the country's transition to a market economy, the mathematician organized a Ponzi scheme called MMM. He offered returns of 100 percent a month and advertised aggressively on national television. Before the pyramid crashed in July 1994, it attracted as many as 10 million depositors, making it more popular than the voucher privatization program that was supposed to give regular Russians a chance to take a stake in formerly state-owned enterprises.

Mavrodi managed to avoid prison for nearly a decade, in part by getting elected as a parliamentary deputy and using the status to obtain immunity from prosecution. He ultimately served out a four-and-a-half-year sentence for fraud. While in prison, Mavrodi wrote books and movie scripts, one of which -- PyraMMMid -- was later made into a successful film.

The 'Ruble Zone' Collapsed in the 1990s, and It Was Bad

Euro Breakup Precedent Seen When 15 State-Ruble Zone Fell Apart

By Catherine Hickley

It was a currency union of 15 states in 1992. Two years later, as budget deficits spiraled out of control, hyperinflation reigned and economies shriveled, just two members of the Soviet Union’s ruble zone were left.

As Greek politicians threaten to break terms of the country’s bailout with international lenders, Spain calls for financial help, and northern European nations balk at funding the south, historians are asking whether the euro region is about to face a similar exodus. They take a longer view of the European Union’s crisis than economists, and it’s much bleaker.

The Soviet experience tells us “an exit like this is messy and leads to loss of income and inflation, and people are right to be scared of it,” said Harold James, a professor of history atPrinceton University whose books include “The End of Globalization: Lessons From the Great Depression.” “It isn’t an attractive analogy at all because the Soviet Union states all had serious troubles for the whole of the 1990s.”

Return to Greece’s past, a radical mistake

The Great Leap Backwards

By Joshua Chaffin

It has become accepted wisdom that Alexis Tsipras, the leftwing Greek politician vying to become the country’s next prime minister, is a radical.

With good reason. Mr Tsipras’ party, Syriza, is formally known as the Coalition of the Radical Left. His campaign appearances feature homages to the revolutionary icon Che Guevara, and fiery speeches that rail against crooked bankers, corrupt politicians, the International Monetary Fund and the German chancellor, Angela Merkel.

But what if the chief appeal of Syriza is not so much the promise of radical change but rather a return to the status quo – the days before Greece ran aground on the rocks of a debt crisis and became entangled with the EU and the IMF?There are signs that Syriza may be just that. Take the campaign rhetoric. The message feathered beneath the accusations is one of comfort for a citizenry whose feelings of humiliation and embarrassment should not be underestimated: It was not your fault – it was theirs.

Club Med needs to take a long hard look at Buenos Aires.

Argentina Continues The Descent

By Walter Russell

Argentina’s President did something so amazing today that it made the world news: she announced that she’s converting her last dollar bank account into pesos.

But don’t worry; this isn’t a story about the decline of the dollar.

Argentina wasted the 20th century lurching from one ill-considered economic experiment to the next. Many worked temporarily; the country’s vast natural resources are always there to help out. But in the end, one by one they failed, sending the country into alternating bouts of hyperinflation and business depression.

Unfortunately the country is starting the 21st century in the same way; the Kirchner-Fernandez period like the Menem period before it began with high hopes but it is now slowly descending to earth. So far the government has resorted to the traditional techniques: cooking the books, hounding whistle blowers, nationalizing assets and confiscating foreign investment.

The Triumph of Hope

Europe has no good choices, only a choice among very distressing and expensive options

By John Mauldin

When the Eurozone was created it was the triumph of hope over the reality of political and economic discord. Somehow, countries that had different languages, customs and national characteristics; that had fought each other for centuries; and that all had different views of themselves in relation to the rest of their fellow Europeans, were supposed to come together into a fiscal union, because they now shopped with the same money.

Rather than simply creating a free-trade zone and allowing for a common understanding and economic integration to develop over time, the European leaders wanted to jump-start the process. And they had numerous critics. Many of the best and brightest in the economics world pointed out the problems.

How Four Jewish Butchers Brought Down the First New Deal

That’s Not Kosher

By Steven Horwitz

Jewish-Americans have a long history of finding role models who broke barriers, accomplished great things, or engaged in more mundane acts of heroism. Jewish religious schools are full of discussions of athletes like Hank Greenberg and Sandy Koufax, or the legions of Jewish entertainers and scholars, as ways to demonstrate the accomplishments of American Jews.

But in all those stories many of us heard growing up, one set of brave heroes was never mentioned: the Schechter brothers of New York City. The Schechters were kosher butchers operating in the 1930s who stood fast to their commitment to the dietary laws of kashrut in the face of ferocious pressure and prosecution by a powerful government. They eventually took their case to the highest court in the land—and won—defeating one of the most popular and powerful administrations in American history.

One would think this story of Jewish heroism and commitment to Jewish values would be inspirational for generations of young American Jews. But the Schechter brothers were up against Franklin Delano Roosevelt.

Berlin is ignoring the lessons of the 1930s

Is it one minute to midnight in Europe?

By Niall Ferguson and Nouriel Roubini

We fear that the German government’s policy of doing “too little too late” risks a repeat of precisely the crisis of the mid-20th century that European integration was designed to avoid.

We find it extraordinary that it should be Germany, of all countries, that is failing to learn from history. Fixated on the non-threat of inflation, today’s Germans appear to attach more importance to 1923 (the year of hyperinflation) than to 1933 (the year democracy died). They would do well to remember how a European banking crisis two years before 1933 contributed directly to the breakdown of democracy not just in their own country but right across the European continent.

Argentina’s Way to Decadence

To the enemy, not even justice

By Ariel Barbero

Argentina’s former president Eduardo Duhalde—elected by Congress in 2002 after a coup toppled the candidate who had defeated him in the regular elections—once said that Argentina was condemned to success. Indeed a country with fertile land, a mild climate, mighty rivers, a small population that used to be well educated, no major conflicts, and no racial rifts would seem difficult to sink. It must inevitably rise. Nevertheless, we Argentines have demonstrated a rare ability to avoid success. Fortunately destiny—good or bad—is never inevitable.

People often point out that the two Koreas provide (as the two Germanys once did) good examples of what the rule of law means for the life of a nation. Argentina provides yet another example of the changes that take place when respect for rights—including property—is no longer considered relevant. Except that in the case of Argentina, the division doesn’t concern space but time.

We Argentines started very well. People tend to forget that by 1928 Argentina had the sixth-highest gross domestic product (GDP) in the world. Income per capita was similar to Germany’s. Literature and music flourished.

Defiance. A Lost Virtue?

The Tambov Rebellion

By Brandon Smith

It was August 19th, 1920. A military detachment of Red Army soldiers led by Bolshevik authorities steamrolled into the Russian town of Khitrovo to implement a policy known as “Prodrazvyorstka”; resource allocation in the name of national security which led to the confiscation of vital grain supplies and the starvation of millions of peasants. To be sure, multiple excuses were used to rationalize the program, all in the name of the “greater good”. But in reality, Vladimir Lenin and the Bolsheviks saw the farming culture of Russia not as human beings, but as mechanisms for feeding city residents and the army; the power centers of the newly formed Communist government.

Let’s Be Friends

There's waste of taxpayers' money and then there's waste of taxpayers' money...

By Daniel J. Mitchel

While most of my disdain is focused on the clowns in Washington, I enjoy poking fun at the policies adopted by the various nitwits and thugs that can be found in other governments.

** That’s why I’ve mocked the British government-run healthcare system for letting a woman die when officials failed to notice a six-inch toilet brush handle embedded in her buttocks.

Living Europe’s Nightmare

Just because something is “unthinkable” doesn’t mean that it can’t happen

By Christopher T. Mahoney

Losing a long war is always hard to accept. Hemmed in by the Americans and the Russians in the final days of World War II, Hitler convinced himself that he had two armies in reserve to mount a counter-attack and win the war. Meanwhile, having lost the entire Pacific, Japan’s Imperial Cabinet believed that no enemy could set foot upon the country’s sacred soil. When the truth is unimaginable, human psychology finds an alternative reality in which to dwell.

That describes the global situation today. The entire planet seems to be in denial about what is about to occur in the eurozone. Pundits keep expecting Germany to pull a rabbit out of the hat and flood the continent with Eurobonds, or that Mario Draghi will mount a coup at the European Central Bank and buy up every deadbeat country’s bonds.

The IMF has just been made obsolete

Ireland wants rescue deal negotiated to match Spain's

A shopper looks at t-shirts at Liptons shop were the old Irish currency, the punt, is accepted in Clones, Ireland on May 30. Ireland wants to renegotiate its rescue plan to benefit from the same treatment as Spain, which looks set to win a bailout for its banks without any broader economic reforms in return, European sources said.

By Victor Clay

Ireland wants to renegotiate its rescue plan to benefit from the same treatment as Spain, which looks set to win a bailout for its banks without any broader economic reforms in return, European sources said on Saturday.

"Ireland raised two issues: one is the need to ensure parity of the deal with Spain retroactively on its bailout from EFSF," one European government source told AFP, referring to the temporary rescue fund, the European Financial Stability Facility.

The Phony Science of the Sexual Revolution

Kinsey’s Secret

by Sue Ellin Browder

It’s now more than 50 years since the revolution began. Sexual “liberation” has been endlessly ballyhooed by the national media, promoted in the movies, embraced by Playboy guys and Cosmo girls as a freedom more delicious than Eden’s apple. No American under 40 can honestly remember a time when sex on TV was taboo, when “living together” meant married, when “gay” meant happy, and when almost every child lived with both parents.

If truth be told, the revolution has been a disaster. Before the push to loosen America’s sexual mores really got under way in the 1950s, the only widely reported sexually transmitted diseases in the United States were gonorrhea and syphilis. Today we have more than two dozen varieties, from pelvic inflammatory disease (which renders more than 100,000 American women infertile each year) to AIDS (which presently infects 42 million people worldwide and has already killed another 23 million).

The fallen tiles are heading directly towards Rome

The Cross Of Forbearance

by Mark Grant

"What giants?" asked Sancho Panza.

"The ones you can see over there," answered his master, "with the huge arms, some of which are very nearly two leagues long."

"Now look, your grace," said Sancho, "what you see over there aren't giants, but windmills, and what seems to be arms are just their sails, that go around in the wind and turn the millstone."

"Obviously," replied Don Quixote, "you don't know much about adventures.”

                                                           -Miguel Cervantes

The wind picked up across the plains, the windmill began to turn and “The Ingenious Gentleman Don Quixote of La Mancha” rode out once more to do battle. The ever faithful Sancho Panza, not wishing to be left behind, was in attendance and the windmills were now the banks and the regional debt of the country.

Rand Paul just got on the steamroller

Rand Paul endorsed a man who is deeply hostile to human liberty

by John Aziz

Perhaps that’s Rand’s idea of playing politics? Come to the table, strike a deal, get what you can. Trouble is, it’s tough striking a good deal when the guy on the other side of the table believes that the government should be allowed to claim — without having to produce any evidence whatsoever — that certain people are terrorists, and therefore should be detained indefinitely without any kind of due process.

That’s textbook tyranny.

Time to move on beyond politics.

Lew Rockwell on Rand Paul's Endorsement of Mitt Romney

The Ron Paul campaign is over. Ron Paul has touched the minds of millions. 

The Republic Wears Prada

Obama redefines 'Green Zone'

By Mark Steyn

Queen Elizabeth II celebrated her Diamond Jubilee a few days ago – that's 60 years on the throne. Just to put it in perspective, she's been queen since Harry S. Truman was president. At any rate, her jubilee has been a huge success, save for a few churlish republicans in various corners of Her Majesty's realms from London to Toronto to Sydney pointing out how absurd it is for grown citizens to be fawning over a distant head of state who lives in a fabulous, glittering cocoon entirely disconnected from ordinary life.

Which brings us to President Obama.

Who is ruling and who is ruled

James Mill and Libertarian Class Analysis

by Murray N. Rothbard

The theory of class conflict as a key to political history did not begin with Karl Marx. It began, as we shall see further below, with two leading French libertarians inspired by J.B. Say, Charles Comte (Say's son-in-law), and Charles Dunoyer, in the 1810s after the restoration of the Bourbon monarchy. In contrast to the later Marxist degeneration of class theory, the Comte-Dunoyer view held the inherent class struggle to focus on which classes managed to gain control of the state apparatus. 

The ruling class is whichever group has managed to seize state power; the ruled are those groups who are taxed and regulated by those in command. Class interest, then, is defined as a group's relation to the state. State rule, with its taxation and exercise of power, controls, and conferring of subsidies and privileges, is the instrument that creates conflicts between the rulers and the ruled. What we have, then, is a "two-class" theory of class conflict, based on whether a group rules or is ruled by the state. On the free market, on the other hand, there is no class conflict, but a harmony of interest between all individuals in society cooperating in and through production and exchange.