Monday, April 23, 2012

So Long Sarcozy

Nicolas Sarcozy, President of France, is in deep political trouble.  He should be.  Along with Angela Merkel of Germany, Sarcozy has orchestrated the absurd policies that have been pursued in the Eurozone over the past 36 months.  The answer to too much debt, if you believe Merkel and Sarcozy, is more and more debt.  Together with half-hearted pleas for budgeting austerity, the Merkel-Sarcozy is a "more of the same" plan that simply makes a bad situation potentially catastrophic.

Tim Geithner and Barrack Obama have openly advocated even more ridiculous policies for the Eurozone, patterned after their own US policies, that make the Merkel-Sarcozy absurdities look mild by comparison.

It is amazing how often the Merkel-Sarcozy formula is used in countries throughout the western, developed world.  All of these countries, without exception, have made promises to their citizenry that cannot be kept.  So, now, all of these countries have a combination of out of control sovereign debt, declining GDP (or soon to be declining GDP), and a dawning awareness that their old folks of the future are doomed to live in penury.  Thanks for nothing.

Because debt financing is becoming hopeless in the Eurozone in country after country, there is a movement to cut government expenses.  This is not a plan, it is a necessity.  They have no funds to pay the bills anymore.  The result: political chaos.  That is the ultimate destination of the Merkel-Sarcozy path and we are moving rapidly along.

America should take note.  We will soon be on that path as well.  Other than Scott Walker and Chris Christie, no American elected politicians have successfully challenged the fiscal problems that are in front of them.  Indeed, the Obama Administration follows the "Ostrich" policy.  See no problem, hear no problem, speak no problem.  But the problem is there and it is simply a matter of time.

Sadly, Francois Hollande, who will replace Sarcozy as President of France advocates even more absurd policies than Sarcozy, if that can be imagined.  The end game of the Eurozone political posturing is economic and political chaos.

There is a much, much easier solution.  Owning up to their true fiscal situation, admitting that there is no way to finance the health care and entitlement plans in place, and sitting down with borrowers and restructuring loans is the right set of policies that could lead to European prosperity.  But, it looks like no European politicians have what it takes to get there.  So, look for increasing chaos ahead for the Eurozone.

One wonders if US policy makers will see the light before the US follows Europe down this tragic path.  The problems in the US are exactly the same as the problems in the Eurozone and, if anything, of a larger magnitude.