The Greek Bailout May Well Trigger an Avalanche of Similar Defaults...

Ever wonder if ANY in the political class know ANYTHING about what they often pontificate about?

When politicians talk sports, it often becomes very obvious they don’t, as with Rep. Chris Shays (R-CT) consistently referring to Rafeal Palmeiro (pal-mare-oh) as Mr. Pal-mary, or former Illinois Governor George Ryan introducing MIKE DITKA as “the Hall of the Famer, the legend, DICK BUTKA.”

But it IS almost certainly the case in many other instances and areas, as well.

Certainly very few in the political class know much, if anything about economics and how economies work. That’s almost certainly behind the fact that despite the ever-growing mountain of evidence AGAINST Keynesian economic policies, the political class stubbornly refuses to abandon the one economic theory that sees more government intervention in the economy as a good thing.

THAT as much as anything else is why we’re nowhere near done with the ongoing economic meltdown that began with Keynesian policies and is growing toward a quick implosion because of more Keynesian policies.

Yesterday the EU announced that the Greek debt crisis would be solved...by a staggering $1 TRILLION (USD) bailout!

Only a dolt (or a member of the political class...same thing, I guess) wouldn’t wonder, “How does that “FIX” anything?! It’s like GM’s recent announcement that it had paid off its TARP loans without mentioning that it was paid back with....other TARP funds!

GM, like Greece is still in deep, DEEP, even critical debt.

Consider that Greece’s economy is about the size of current day Michigan’s economy and that $1 TRILLION  bailout is even more astounding! Moreover, to pay back that staggering loan, Greece will have to embark on a series of draconian austerity programs. Odds are that they’ll default and ultimately bring on even deeper problems not far down the road.

But Greece’s $1 TRILLION bailout is not the only reason that bailout was a bad idea.

For what the Greek bailout does is to send a very clear signal to Portugal, Ireland, Italy and Spain (the other “PIIGS”) that “profligacy pays off...and BIG!” Expect the other PIIGS to default and look for their bailouts as well, triggering an avalanche of debt and default that may well trigger a global Depression down the road.

Where are all the funds going to come from for all those other bailouts?....And at what cost to global financial stability?

The primary lesson from Greece is all too clear - the government directed economy does not work. More than 25% of Greeks work for the government, of the remaining 4 million “workers,” five hundred thousand are unemployed and eight hundred thousand are heavily subsidized EU farmers of very low productivity. Without taking into account all of those of the private sector who make all or some of their living indirectly from the state, it falls on around 2.7 million Greeks to support a million public employees, 800 thousand farmers, 500 thousand unemployed and 1.7 million retirees. Since it would be impossible for Greece’s tiny private sector to support such a heavy burden, that’s why Greece is so dependent on continuous and high levels of borrowing no matter how good or bad the times are. In short, Greece doesn’t have the productive output to sustain that gargantuan public sector...in truth NO economy does! Ergo, the government-directed economy or “Euro-socialism” does not work.

The entitlement culture that Euro-socialism and Keynesianism inculcate is a cancer. In most, if not all cases, it’s best to let those who make bad decisions deal with the consequences.

Ultimately no one and no thing is too big to fail.