Portugal, Ireland, Greece and Spain, that is. These are the four dead men walking of the European Union. Yesterday, rating agencies downgraded the sovereign debt of Greece and Portugal, with Greece achieving junk status, and now paying over 13% to borrow. Today, Spain was downgraded. To be fair, Ireland has thus far managed its decent to penury fairly well.
“Big deal, ‘Puter. That’s Europe. It’s got relatively little to do with the U.S. In fact, it may chase money into the safe haven of U.S. bond, which is a good thing.”, you say knowingly.
It is a big deal. If the European debt crisis doesn’t immediately cause a world-wide debt meltdown, a la Lehman, it will most certainly have dire consequences for America within the next five years. Here’s why.
If Europe suffers a significant crisis of confidence, it will cause global money to rush to the relative safety of United States sovereign debt. This fear-driven influx of money will provide the illusion that (1) U.S. borrowing costs should remain low and (2) the U.S. has sufficient money to maintain the profligate spending programs foisted upon taxpayers. Essentially, the safe harbor seeking influx of currency will allow America’s political class to kick the fiscal can down the road for another five or so years, until the world is unable to ignore the true toll of out of control deficit spending on America’s balance sheet.
This is similar to what happened in Greece upon its entry to the European Union. Greece’s low-cost money (enabled by piggy-backing on Germany’s good credit) permitted Greece to live beyond its means for years, all the while pretending all was well. Everything went swimmingly right up to the point where it didn’t anymore. And there Greece stands today, with its unsustainable public worker pensions, unsustainable social programs and unsustainable debt service. Sound familiar?
‘Puter hopes to be wrong about this on many levels. First, ‘Puter hopes Europe manages to get its collective act together or gracefully exit the E.U. experiment, thereby permitting Germany, France and England to save themselves. Second, ‘Puter hopes American politicians actually deal with our fiscal problems, instead of using its artificially cheap borrowing position to double-down on a losing position.
‘Puter hopes for a good result, but ‘Puter doesn’t expect one.
UPDATE: Similar thoughts here, via Instapundit.
Always right, unless he isn’t, the infallible Ghettoputer F. X. Gormogons claims to be an in-law of the Volgi, although no one really believes this.
’Puter carefully follows economic and financial trends, legal affairs, and serves as the Gormogons’ financial and legal advisor. He successfully defended us against a lawsuit from a liquor distributor worth hundreds of thousands of dollars in unpaid deliveries of bootleg shandies.
The Geep has an IQ so high it is untestable and attempts to measure it have resulted in dangerously unstable results as well as injuries to researchers. Coincidentally, he publishes intelligence tests as a side gig.
His sarcasm is so highly developed it borders on the psychic, and he is often able to insult a person even before meeting them. ’Puter enjoys hunting small game with 000 slugs and punt guns, correcting homilies in real time at Mass, and undermining unions. ’Puter likes to wear a hockey mask and carry an axe into public campgrounds, where he bursts into people’s tents and screams. As you might expect, he has been shot several times but remains completely undeterred.
He assures us that his obsessive fawning over news stories involving women teachers sleeping with young students is not Freudian in any way, although he admits something similar once happened to him. Uniquely, ’Puter is unable to speak, read, or write Russian, but he is able to sing it fluently.
Geep joined the order in the mid-1980s. He arrived at the Castle door with dozens of steamer trunks and an inarticulate hissing creature of astonishingly low intelligence he calls “Sleestak.” Ghettoputer appears to make his wishes known to Sleestak, although no one is sure whether this is the result of complex sign language, expert body posture reading, or simply beating Sleestak with a rubber mallet.
‘Puter suggests the Czar suck it.