Circling the Drain

by TOM MCLAUGHLIN May 20, 2012

Ten years ago a young couple I know visited Greece, Italy and Spain on their honeymoon. The young husband told me he was amazed at what a leisurely life people in those countries led. "They don't bust their butts working long hours like we do," he said. "They spend most of their time sitting in cafes sipping wine, visiting and talking. Why can't we do that? Why do we work so hard over here?" He talked about selling out his assets here and moving there, but I warned him that what he witnessed was not sustainable and wouldn't go on too much longer.

It's crunch time now in Europe and soon it will be here in the United States as well. Money to pay for cradle-to-grave entitlements liberal/socialist governments promised decades ago has run out. When leaders like France's Sarkozy told voters that the gravy train will go off the rails unless entitlements are cut back, they voted him out. They put in a socialist who promises that he'll keep it all going by taking more money from the rich. Sound familiar? The day after his election, the socialist Monsieur Hollande took a look at France's books and discovered things were worse than Sarkozy said and his first action will be talking to German Chancellor Angela Merkel about how to avoid collapse of the Eurozone.

Meanwhile, our biggest state, California, is facing a $16 billion budget deficit. Even the reincarnated liberal Governor "Moonbeam" Brown warns that it must cut entitlements or raise taxes or both. Will it? Will enough wagon-riding California voters actually jump off and join the taxpaying workers who are pulling it? That's the essential question for both Americans and for Europeans, because if they don't, it's all going to collapse and anarchy will reign.

I don't want to even imagine what that will look like. Unless the wagon-riders in Europe and in the United States grow up and realize the Nanny State cannot afford to keep taking care of them, things are going to get out of control.

Greece is the canary in the coal mine of financial collapse because they've been living the longest on borrowed money and borrowed time. Leaders there who tried to cut entitlements saw riots in the streets and were soon voted out. Germany is getting tired of lending Greece money for their unsustainable lifestyle, much the same way China is leery of lending more to the United States. Germany wants to make Greece's continued membership in the Eurozone difficult enough that they'll decide pull out. Then the task will be preventing a domino effect of Italy, Spain, Portugal, and Ireland falling down as well.

Will Greece pull out of the Eurozone and go back to printing Greek drachmas? And printing, and printing . . .? How long can that continue? Alex Tsipras, leader of the radical leftist coalition Greek voters elected on May 6th wants to roll back the salary and pension cuts imposed by the European Union and wants to hire 100,000 new government employees to bring down unemployment. How many drachmas will that take? What happens when Greeks try to spend those drachmas and discover there's nothing to back them up? One Greek political analyst sums it up thusly: "The gravity of the situation isn't appreciated . . . The only thing that will focus minds is when the money to pay pensions and salaries just doesn't arrive."

That's what scares me. Most Europeans and most Americans refuse to face reality. Financial panic is contagious and the United States is not immune. If there's another run on the banks here like there was in 1933, what will FDIC do for the lines of depositors demanding their money? Will our Federal Reserve print trillions more dollars on top of the trillions already printed?

Here, wagon-riders and those Americans whose idea of "Hope and Change" means accelerating our march to socialism together comprised a majority in 2008. Will that coalition stay together and keep socialist Democrats in power after November? It's almost six months until the election - an eternity in politics. A lot of wild cards can be thrown down between now and then. And what if leftist Democrats lose the White House and Congress? Would they allow a peaceful transition of power between November and January?

I hope so, but I don't take that for granted anymore.