The frequency of doom and gloom economic headlines is on the rise once again. And again Europe is at the center, especially Spain and Greece, with Italy not far behind. These “near the brink” nations have the 4th (Italy), 5th (Spain), and 12th (Greece) largest economies in the Eurozone based on 2011 GDP. And their economies are on the precipice of collapse.
In our own presidential campaign among fiscal conservatives there is resistance, almost an antipathy-laden shout to social conservatives to “get out of the way” as if social conservatism has absolutely NOTHING to do with fiscal conservatism.
Well, I beg to differ. Here is some evidence.
We could be close to the breaking point. Already in the last week there are clear signs in credit that the selloff is becoming more systemic. If you have come across our 'five phases of grief' framework – it appears we are moving straight from 'depression' back to 'anger'. [ In other words, instead of facing reality, emotions have cycled backwards. gm]
Until the gravity of the situation is made clear, until the self-reinforcing mechanisms that already seem to be in motion are understood, we don't see how the solutions, the answers, and the certainty that market craves can be brought to the table. Our impression is that markets will need to act as the proverbial 'attack dog', forcing the issue on the political agenda. This would not be the first time that markets have had to bark to get a credible policy response. We can't escape the sense that it is probably politically easier to let the markets run loose for the time being to make it apparent that further intervention is needed. But 1000bp on Crossover is much closer than you imagine.
Moreover, every bark comes with a loss of credibility – a loss of faith in the institutional capacity of the European Union to address the fundamental imbalances. Reining in the market eventually may end up taking a bigger effort than policymakers are bargaining for.
The market needs to know what policymakers are committed to and it needs to see actions that validate those commitments. Inaction is just a carte blanche for investors to sit on the sidelines and wait for things to deteriorate further.
Here is another: Eurozone faces moment of truth in staying together.
Title: The End Game
The world has no engine of growth
First recession since 1930's
Per Capita Durable Goods Orders
Percentage of U.S. population employed
U.K. industrial production
EU Industrial output
U.S. GDP since 1802
Weakest foundations to enter a recession on
Total debt to GDP ratio by country
Series of defaults
All fall down
No. of defaults by crisis period
Defaults across the board
End of world?
The end of Europe?
The end of finance?
A collapse in world trade?
Eye of the storm
Connect the dots
The big reset
Biggest econ shock the world has ever seen
Nationalization of banks
The whole bond market will be dead
Closure of the banking system
Around 6 months left
Going back in time
What do these bleak forecasts have to do with personal responsibility, the welfare state, economic collapse, and especially, social liberalism?
Plenty! Social liberalism is at the heart of Europe’s economic turmoil.
Take note, fiscal conservatives in the US – we may be next.
So how, exactly, are these related? Let me spell it out.
- Failure to face reality; going back to anger instead of facing the hard work of fiscal constraint.
- Refusal to take personal responsibility; depending on the welfare state too long, forgetting what it takes to be productive.
- Expectation that the bigger, stronger government (Germany or maybe even the World Bank and US federal reserve) will come to their rescue and bail them out.
- At the same time refusing to commit to the fiscal restraint required by the lenders of last resort to assure their bailout won’t be squandered.
Not surprising, George Soros, the quintessential liberal financier, blames the responsible lender nation, Germany, for a share of the problem. This Soros quote from CNBC:
Yessiree. Blame the responsible, more conservative suckers for your woes. That is what social liberalism is all about.
What is social liberalism? It is a mindset that discounts God, discounts personal salvation and morality which cripples the quality of personal responsibility, and which increasingly depends on government to provide for the needs of the individual. It is the opposite of social conservatism which elevates God, personal salvation and morality, which elevates the quality of personal responsibility, and which minimizes dependence on government to provide for the needs of the individual.
Social conservative is the bedrock foundation and the catalyst for fiscal conservatism. Without it, you get Europe.
Compounding the problem of excessive dependency on government is the declining birthrates of every one of these nations. Populations are stagnant or in decline. Why? Again related to the hedonism of a socially liberal culture that has decided that pleasure is more important than offspring. This in turn decreases the demand for goods and services and shrinks the economies of these nations.
And the United States is not far behind. This is why I have given several presentations on “personal preparedness.” Stay tuned. Things will get even more interesting in the coming months.