Idiot’s Guide to the Euro Crisis

Virtually all articles on the European financial crisis are an incoherent congeries of technical terms which you can tell the writers themselves do not understand but are just passing along because they read it somewhere else: garbage in, garbage out. Also, these articles are typically immersed in the complex momentary developments of each day of the crisis and provide no larger perspective by which those developments can be understood.

Simon Edge at the UK Express has written the sort of article (copied below) that every paper in the world ought to be publishing on this story, one that explains the crisis in understandable terms. One of the key points I’ve learned from it is why default would not just be damaging but catastrophic. Countries such as Greece and Italy are currently living on borrowing. They do not have the money to pay government workers’ salaries or provide for essential services; they get this money from continued borrowing. If they were to default on even a single loan, all lenders would immediately stop lending to them, and they would instantly cease having the cash to function.

On another point, Edge writes that the adoption of the euro and a common monetary policy in 1999

was good news for the weaker economies. Effectively guaranteed by their stronger partners, they found they could borrow money at much more favourable rates of interest than before.

Fuelled by this cheap credit, countries such as Greece (which had an Olympic Games to stage), Italy, Portugal and Ireland embarked on an orgy of spending.

This is not clear to me. How exactly did the mere fact of the common currency lower the cost of borrowing money for the weaker countries? Perhaps a reader could explain this point.

Also, Edge concludes that the best way to end the crisis would be for the financially troubled countries to give up the euro and return to their national currencies, allowing them to devalue, a point I’ve made before.

Here is the article:

IDIOT’S GUIDE TO THE EURO CRISIS
Friday November 11,2011
By Simon Edge

WE seem to be peering over a financial precipice but it’s one that is so obscured by jargon that very few of us can see the sides of it, let alone the bottom. You may think you’re the only one who doesn’t know what a bond yield or a debt rollover is but you’re in good company.

Greece’s outgoing premier George Papandreou, who has a master’s degree from the London School of Economics, has admitted he only recently learned what a credit default swap was.

It would be too glib to say in that case it’s not surprising his country is teetering on the verge of bankruptcy. The point is that all this stuff is bewildering in the extreme.

So hopefully our simple guide will help you understand …

How do countries borrow?

If you have money in a savings account you are essentially lending money to the bank or building society.

The interest you get is your fee. You can usually get a higher rate if you put your savings in a fixed-rate bond.

That’s where you give the bank your money for a fixed term, typically one to five years, and you get a guaranteed rate of interest paid at pre-arranged intervals.

Bonds are also what governments use in order to borrow cash. Instead of individual savers like you or me, the lenders are commercial banks or institutions such as pension funds.

The borrower—Italy, Portugal, Greece or Britain—issues a bond (ie borrows the money) for a fixed term, undertaking to return the cash at a pre-determined point.

Throughout that time it will pay a fixed rate of interest agreed at the start of the loan.

Why have these bonds suddenly hit the headlines?

When 11 European states ditched their currencies for the euro in 1999 (followed by six more countries later), they allowed the new European Central Bank to set monetary policy in the new “eurozone”.

This was good news for the weaker economies. Effectively guaranteed by their stronger partners, they found they could borrow money at much more favourable rates of interest than before.

Fuelled by this cheap credit, countries such as Greece (which had an Olympic Games to stage), Italy, Portugal and Ireland embarked on an orgy of spending.

In practical terms it meant they issued lots and lots of government bonds.

So what went wrong?

As we discovered in the New Labour years, politicians find it very easy to spend their way into their voters’ good books, knowing that paying the debt back will be someone else’s problem.

In Greece and Italy much of the borrowed cash went on public-sector wage rises.

In the global financial meltdown that followed the collapse of Lehman Brothers bank in 2008 all economies contracted and it became painfully clear that the governments of the weakest countries in the eurozone had precious little means of paying back the money.

The debt totals in question are massive. While Britain’s entire debt is around 63 per cent of gross domestic product, Italy’s is 120 per cent and Greece owes 160 per cent of GDP.

That’s like having an income of £20,000 a year and debts of £32,000 on your credit card. And the point of bonds is they need paying back on a specific date. Not doing so is defaulting.

Has anyone defaulted yet?

No, but several countries have come pretty close. With those 10-year bonds maturing virtually on a daily basis, there is always someone needing their money back.

For heavily indebted economies that are spending far more on salaries, services and debt interest than they are raising through taxes, the only way of honouring the debt is to resort to fresh borrowing and suddenly the terms have become much tougher.

For once it is hard to blame the banks for that. With lending to these countries suddenly looking a much riskier proposition, it’s hardly surprising that the lenders are jacking up the rates of interest.

Why is defaulting a big deal?

If a government defaults on just one bond repayment, the effect will be catastrophic. No lender in their right mind will loan it the money it needs to carry on paying public-sector salaries and the country will run out of cash very quickly.

Countries that control their own currencies can start printing money (as the Bank of England has been doing, under the euphemism “quantitative easing”) but members of the eurozone can’t do that because monetary policy is controlled by the European Central Bank rather than in Athens or Rome.

What are bond yields?

This is one of those confusing terms that make the situation seem impossibly technical. But it’s worth mastering because rising bond yields are a sign that a country is getting into deeper and deeper trouble.

The yield is the return a lender can expect to make on a sovereign debt issue.

In the simplest case it’s basically just the interest as a percentage of the original loan.

But there’s also a secondary trade in government bonds—if I start losing confidence that I’ll get my cash back at the end of the loan period I may prefer to cut my losses and sell the bond at a discount to someone else. For the new owner of the bond that pushes the yield up.

Bond yields rise when lenders sell off their bonds and they are therefore the equivalent of a plummeting share price.

This week the bond yields on Italian sovereign debt passed the seven per cent mark, which economists regard as the upper limit of repayability. That’s why it all looks so serious now.

If it’s just the eurozone, why should we worry?

It’s hard to overstate the potential hazards. Greece has already had two massive bailouts to stop it defaulting, and Ireland and Portugal have had one each.

This basically involved the European Union and the International Monetary Fund stumping up further loans on easier terms on condition that the governments in question enacted tough austerity measures to try to reduce their debt.

The donors weren’t doing this out of the goodness of their hearts. Greek, Irish and Portuguese sovereign debt is held in British, French, German and US banks which could be severely weakened if those countries started defaulting on their capital repayments. The domino effect doesn’t bear thinking about.

Even if default is avoided, the eurozone economies are already suffering as austerity measures kick in and consumer demand slows. With 40 per cent of Britain’s exports going to the eurozone, recession there is the last thing we need.

How bad is it going to get?

The crisis in Italy is seriously scary. While Portugal, Ireland and Greece received bailouts because they were regarded as too big to fail, Italy—the third largest economy in the EU and the eighth largest in the world—could be too big to save.

The only course of action may be for the ECB to print euros and buy up Italian debt, which the Germans have been resisting because it smacks of the last frantic days of the Weimar Republic.

Another option would be for Italy to leave the euro.

It could return to the lira which it could devalue thereby reducing the cost of its exports and establishing the conditions to rebuild its economy.

Such eurosceptics as MEP Daniel Hannan say this might actually be the best hope, reducing the national antagonisms which are said to be soaring within the EU as a result of this extraordinary crisis.

[end of Edge article]

- end of initial entry -


Josh W. writes:

The reason that the euro benefits the weaker economies is that creditors are protected from a weak country’s central bank simply printing more money (“quantitative easing”), which would devalue their currency. With their currency devalued, tax revenue increases (in terms of their currency only; obviously not in absolute terms), which enables them to pay back their debt. Of course, the actual payment received by creditors is worth much less in absolute terms, which would likely amount to a net loss from the investment in the weak country’s bonds. Because the Euro is controlled by powers external to the weak economies (meaning that the weak country cannot “quantitatively ease” or devalue it), the creditors know that this sort of cheating cannot happen without the entire Eurozone being complicit in it.

Thus, whereas a weak country in control of its own currency would have to pay a high interest rate on its bonds for the relatively high risk of its currency being devalued, a weak country can borrow Euros for a much lower interest rate because its creditors assume that the currency can only be devalued if the stronger economies of the Eurozone were to agree to such a move, which they would almost certainly never do. This assumes, of course, that the country will not simply go bankrupt—which is turning out to be a not-so-wise assumption.

Debra C. writes:

Regarding how being part of the Eurozone enables less fiscally stable nations to borrow at lower rates: Think of the stronger economies as being co-signers; the very fact that a solvent entity will be on the hook for the amount borrowed enables the weaker countries to borrow money at lower rates—the loan will be covered by the stronger entity in case of failure to repay.

Which is moral hazard on steroids, isn’t it, when it comes to fiscally irresponsible borrowers? It only feeds their propensity to live beyond their means. At some point, critical mass is reached and the entire boondoggle at last blows up in everyone’s face.

At least that’s the way I understand it.

Jonathan W. writes:

“This is not clear to me. How exactly did the mere fact of the common currency lower the cost of borrowing money for the weaker countries? Perhaps a reader could explain this point.”

My understanding is that it’s precisely BECAUSE the weaker nations can’t devalue. Previously, lenders took into account the risk that the countries would devalue their currency as a way out of debt, and adjusted interest rates accordingly. Now that the lenders know that they can’t devalue on their own (at least without leaving the Euro Zone), the lenders don’t have to take that risk into consideration when setting interest rates. Of course, they still have to consider that a country could just default, but since the consequences of default are much more dire to the country (and to the global economy) than mere devaluation, the lenders assume that the weaker countries are much less likely to pursue that course of action.

Gintas writes:

This is an interesting tidbit:

Italy—the third largest economy in the EU and the eighth largest in the world—could be too big to save.

I don’t think I’ve ever seen that Italy has such a large economy. That’s about the same as California’s. Imagine California being in such a fix. Wait, we don’t need to imagine …

This page gives a good perspective of the sizes of national economies:

http://en.wikipedia.org/wiki/ListofcountriesbyGDP(ominal)

Buck writes:

Simon Edge is explaining the “too big to fail” concept. Where does it end?

On the common currency, I’m guessing, but wouldn’t the continuous (daily or even more frequent) recalculating and re-adjusting of the exchange rates between all of the different currencies and the legal but manipulating arbitrage by the large currency players (Soros) add unending uncertainty about the value of each transaction as they siphon off the momentary imbalances. They take profits without adding any value. So by simply being a different currency, at any given moment, one may not be valued properly against another. That small, but inaccurate valuation against another currency is skimmed off by a third party currency trader, who adds nothing back. A single currency within the EU eliminates those imbalances. Then “normal” pricing and markets can do their thing.

Otherwise, before the single currency, the market would have to be very stable and arbitrage free. That wasn’t possible.

And, there are also Billions being saved annually from simply eliminating the costs of millions of exchange transactions.

Ken Hechtman writes:

You asked:

This is not clear to me. How exactly did the mere fact of the common currency lower the cost of borrowing money for the weaker countries? Perhaps a reader could explain this point.

When a government takes out a loan denominated in its own currency, it always has the option of depreciating and repaying the debt in devalued drachmas/liras/pesetas/etc. Lenders know this and will cover that risk by adding a “devaluation premium” to the interest rate they charge.

A common currency takes the devaluation risk away. Lenders always know the Euros repaid to them are going to be worth just as much as the Euros they lent out.

Frost writes:

Hi Larry,

Just a quick answer to your question about Greece having access to cheap money once it got into the Eurozone.

Part of the reason for the Eurozone—easy credit connection is that the Eurozone was supposedly going to enforce things like balanced budgets and fiscal responsibility on its members. So, some lenders would have interpreted Greek membership as a signal to trust Greece.

More importantly though, Euro membership removed the go-to tool that modern sovereigns use to default on their debts—debasement. With Greece on the Euro, they were not able to inflate their way out of debt, either rapidly in a hyperinflationary event, or gradually over a period of a decade of 10-30 percent inflation. Euro membership did not negate the possibility of an outright, literal default—obviously—but outright default was not a scenario lenders gave much credit to, as the idea of a first-world country straight-up defaulting was beyond the pale. End of history and all that.

How times change …

Kristor writes:

Lenders knew that Greece would devalue the drachma at the first whiff of trouble. So they compensated for that additional risk by charging a higher interest rate to Greece than to more disciplined countries like Germany or Switzerland.

When Greece joined the EMU, lenders knew that the biggest economies in the union would be reluctant to devalue the euro so as to monetize debt, because that would have imposed inflation on their own citizens and increased their own cost of capital, which in turn would have depressed capital investment and hurt productivity growth. I.e., it would have made the biggest, healthiest economies in the union poorer. So, lenders figured it was likely that if Greece ran into trouble Germany & al. would step in to support the Greek debt. And they were right. That is exactly what has happened. This extra layer of security enabled them to charge less interest to Greece—and when money is easy, lenders are competing for borrowers, so that interest rates are in a race to the bottom. Whoever charges the least is going to get the business.

This was like lenders knowing that FNMA would buy their junk mortgages, so that they charged a much lower interest rate than would otherwise have been called for. It was also like depositors knowing that FDIC will step in to reimburse them for their deposits in the event of a bank failure.

LA writes:

Many thanks for all the replies. It’s remarkable how everyone has the same answer, suggesting that the answer must be the correct answer and also that it is common knowledge.

I said recently that the refusal to give up the euro is the reason the crisis continues. Now I understand that the adoption of the euro was the reason the crisis came into being in the first place. The common currency in and of itself generated easier credit (along with the expectation of lots more credit to back it up) which led the weaker countries to spend themselves to the edge of the precipice.

Or to put it another way: the removal of the ability of the weaker countries to devalue their currency was the ultimate cause of the crisis; the refusal to restore the weaker countries’ ability to devalue their currency is the cause of the continuation of the crisis.

Kristor writes:

I should add that the crisis is not so terrific as the press would like us to believe. We went through the same thing with Latin American debt in the 80’s, and then with Russian and Emerging Market debt. In a situation of moral hazard—which is, ipso facto, the inescapable situation for all bureaucrats (state or corporate, makes no difference) who are not playing the game with their own money—over-borrowing will always occur somewhere. Banks will then sooner or later fail. As, having been imprudent, they should. Investors in those banks will then lose money. As, having been imprudent, they should. Banks and investors were imprudent. And who can blame them, really? The greater the likelihood that some government is going to step in and prevent you from losing money, the less sense it makes for you go to all the trouble of being prudent, especially when doing so will certainly reduce your returns.

All the handwringing and massive deal making that is going on right now is aimed at only one thing: preventing imprudent investors (personal friends of Merkel & Sarkozy) from losing money. But in reality (as opposed to the accounting ledgers of the banks), that money is lost, gone, spent, kaput. Greece will never pay most of it back. And all the grownups in the market know that perfectly well already. Thus the risk of Greek or Italian default is already priced into the world’s capital markets. Bank stocks are already priced on the expectation that lots of the European sovereign debt on their books is going to be written off. This is why the radical changes in the fortunes of the European debt deals are moving the markets only 1 or 2 percent each day.

If Greece defaults or devalues the drachma—these amount to the same thing over different time frames—then the losses will wash through the financial system, which will then shake them off and continue with business as usual. Risk of default comes with the territory for bankers and investors. Let them eat their risk. The longer we put this off, the worse the pain will be. As with surgery in the days before anaesthesia, best for the patient to get it over with as quickly as possible.

It is always better, and more hygienic, to recognize failure than to avoid dealing with it. That’s the genius of the Rite of Confession.

Paul K. writes:

Someone more knowledgeable will probably weight in, but here’s my take.

You wrote, “How exactly did the mere fact of the common currency lower the cost of borrowing money for the weaker countries?”

I think it’s the equivalent of getting someone with better credit than yours to cosign a loan. It lowered the risk to lenders. Germany has effectively cosigned loans to Greece and Italy, and, in the first case, has been forced to shell out money as a result.

You also wrote, “Edge concludes that the best way to end the crisis would be for the financially troubled countries to give up the euro and return to their national currencies.”

This is not easy. On “All Things Considered” (11/10/11) David Kestenbaum said it would mean the entire deposit base of the banking systems in the financially troubled countries would flee overnight as people sought refuge in stronger currencies. In other words, the greatest bank run of all time and total financial collapse as a result.

The euro was a colossally bad idea, like Communism or multiculturalism.

LA replies:

Hmm, if Kestenbaum is correct, then there is no non-calamitous way to end the crisis. Kristor has a very different view.

James R. writes:

I’ll try to keep this short but it means it will be inevitably butchered, but note also it has relevance for here:

“Effectively guaranteed by their stronger partners, they found they could borrow money at much more favourable rates of interest than before.”

“How exactly did the mere fact of the common currency lower the cost of borrowing money for the weaker countries?”

Because their loans were now denominated in euros they were implicitly backed by the ECB, which essentially meant by the stronger countries. Because lenders could be confident that each of the weaker countries wouldn’t be able to devalue their way out of a lending crisis (which makes the loans less valuable, and is just default under a different description; lets say you loan me 100 ounces of gold; I can’t pay back the whole amount, so I give you 100 ounces of alloy, 80:20 gold:some nonprecious metal. I say to you “what’s your beef? You loaned me 100 ounces, I’m giving you back 100 ounces?” But it’s worth 20 percent less—I may as well have just made you take a 20 percent “haircut,” like the EU made Greek bondholders take a 50 percent haircut—and like the Obama Administration made the holders of GM/Chrysler debt take a total bath, so that they could put the UAW first in line. These are all really defaults under different terminology).

Anyhow, lenders thought they could now be confident that the loans they were making to deadbeat countries were a stable store of value—they wouldn’t simply be inflated away at the earliest convenience, as in the past. So they made loans at lower interest rates than they would if they understood the nature of the Ponzi. They had some confidence the Euro would be run with German frugality, and somehow believed that this would impose fiscal discipline on the marginal countries—the very ones they were making loans to, and whose budgets were in fantasy land. facepalm

The ECB kept interest rates artificially lower than they otherwise would be (just as ours does), allowing these countries to build up much greater debt obligations than they otherwise could have (just as ours is currently doing), living in a sort of fantasy, where the weakness of their position was exposed only when a crisis occurred that caused bond holders to see that the political system (liberal democracy) had no way of producing responsible government; that is, reign in excess spending. the search for scapegoats began, and fingers laid on “financial speculators” (the people who loaned the money to the governments, which allowed the excess spending in the first place). Thus these evildoers are now targeted and are learning they won’t be paid back, at least in a stable form of value, and so the price people are willing to pay to hold onto these hot potatoes (Euro-denominated bonds, particularly in “exposed” countries, that is, the feckless ones—which are coming to be all of them, really) is going down, which causes the interest on them to go up.

The side-effect disaster of this is that people are, for the time being, putting their money in U.S. Treasuries, most of which are short term. This is helping allow us to finance our current deficits at much lower rates than reality would suggest, which means our political process can push off dealing with problems for longer, and build up much greater spending than we otherwise could, which will naturally dash us to bits on the rocks below when people start to wise up to the fact (It Are a FACT!) that there is no way we’ll be paying back these debts with a stable store of value (thus the Fed “quantitatively eases”). [By the way, there was a “strong hint” of this this summer, during the debt ceiling negotiations, where various people were asserting that if the debt limit wasn’t raised, it would mean we would default on our current debt obligations. In other words, the only way we’d pay the people we currently owe money to is by borrowing additional money from other people. This is exactly the scheme Bernie Madoff ran, and it, too, “worked” fine so long as additional suckers—er, money—could be brought in.]

Did you ever watch the movie “TITANIC?” Remember the scene where the guys doing the salvage operation explain how, when the flooded front part of the ship began to sink, and sort of crack, it pulled the other half of the ship down with it? Yeah….

Ok so this is long after all, but it is rather hard to explain the big picture shorter. Someone else will probably pithier, but I doubt if they’ll get all the implications, and even in this length I am leaving things out. This, by the way, is the end-state of the Keynesian Welfare State, a model that someone at What’s Wrong with the World suggested become our model political economy (where did Keynes get the keystone of his general theory? Social Credit.)

Dean Ericson writes:

It’s like the wastrel son of a rich man, who runs about town running up debts knowing Daddy’s going to bail him out.

James R. writes:

P.S. I agree with Kristor when he says: “The longer we put this off, the worse the pain will be.” However I’m not sure he realizes how long this has already been put off, not just in a few marginal countries on the fringe, but throughout the Western Welfare State; at this point there is no way for the unwinding to be less than calamitous; which of course will be blamed on market manipulation rather than the real root, unsustainable government polices that depended upon revenues increasing faster than productivity increases could possibly allow.

Also, all this has been kept going longer than it otherwise would have by artificially suppressing the interest rates that governments had to pay on sovereign debt. One doesn’t have to adhere totally to a non-mainstream economic theory to understand that centralized price-controls will produce economic discoordination, and the longer it goes on the worse this will be, and the more dramatic the surgery will be. I mean, 0 percent interest rates during a time of exploding debt, right after a wave of mortgage defaults? This is not reality, this is fantasy accounting, policy by wish fulfillment. We probably should have taken our medicine after the dotcom crash, or undertaken real surgery after the housing bubble burst, but instead we elected people who pushed the problem down the line, “put this off,” and we’re going to get what we get.

Kristor writes:

I don’t think a Greek departure from the euro is as scary as Kestenbaum suggests. As soon as the drachma was issued again, it would start to be traded on currency exchanges, and would quickly find a market value. That would be the exchange rate. If the expectation of the market was that Greece was certainly going to devalue the drachma to a massive degree, the currency would be almost worthless compared to the euro, pound, or dollar. Greeks could sell as many drachmas as they wanted at that price, but they wouldn’t be able to buy very much of other currencies. And that would mean that they wouldn’t be able to buy very many real goods with their drachmas, either. Bottom line, the Greeks are not going to be able to buy as much stuff as they have been used to; not for a very long time. And that’s only fair, right? Not that they’ll like it much. Sucks to be them, I guess.

As to whether Greeks will sell drachmas en masse and buy dollars or euros, my bet is that once they learn the exchange rate, they’ll give up on the idea. The huge shipments of currency that took place between the former members of the Austro-Hungarian Empire when it broke up were a form of arbitrage. The Czech hurrying across the Austrian border at night with his saddle bags full of crowns was trying to sell his Czech money in Vienna before the Viennese found out how worthless it was. That sort of arbitrage now takes place in seconds, and is mediated electronically. Which is to say that such arbitrage opportunities are simply no longer available to ordinary depositors. They are not even available to most banks. The very first few arbitrageurs to trade on a piece of new information make money, and then the arbitrage opportunity vanishes.

No; the Greeks will likely be stuck with their drachmas, and the hangover from their long party.

The fear and loathing over the coming devaluation of most currencies that is now everywhere rampant is a bit exaggerated. I heard a couple months ago that the crashes of the 2000s have reduced American incomes back to their levels of 1996. Oh, the inhumanity! Don’t get me wrong, I recognize how painful the delta can be. But, let’s remember 1996. Was it so terrible? What if incomes were reduced to their levels of 1986? That would be bad; but it would still be very, very good, by historical standards. And once we had made that adjustment—an adjustment that amounts to a recognition of economic realities, and an adjustment to our ideas about how wealthy we all are—we would by virtue of our more accurate knowledge be better fitted to set forth on the next round of investment of our time and labor, i.e., we’d be set for healthy growth again. Meanwhile all the stuff we’ve built over the last ten years—houses, roads, iPads, websites—would still be standing by, ready to be put to use. A devaluation of financial assets is not a destruction of real wealth. It is, rather, just a recalibration of our understanding of the value of that wealth.

November 13

James R. writes:

Kristor’s analysis is fine but depends on policy makers have done, or starting to do, the economically right thing.

Kristor writes:

A devaluation of financial assets is not a destruction of real wealth. It is, rather, a recalibration of our understanding of the value of that wealth.

Look at it this way. The total net debt in the world adds up to $0.00. If all the debt were canceled tonight, none of the real wealth of the world would go away. All the real assets would still exist, still be waiting and ready for the day’s work every morning. All that would have happened is that there would have been a massive transfer of the ownership of that real, concrete wealth from the former creditors to the former debtors.

But note that that transfer of real, concrete wealth has already occurred. Much of it has been consumed; a lot has been invested inefficiently; some has been invested well. Whatever has happened to it is water under the bridge. It’s done, over with. All we are waiting for now is the recognition of that fact.

And that recognition is absolutely crucial to our future prosperity. The sooner we all recognize that we have been playing pretend, the better. Because once everyone realizes that much of their wealth has been lost to one Ponzi scheme or another, they will start getting really serious about making real money and accumulating real wealth. And that will mean that the amount of canny, prudent, efficient, reasonable and prudent investment of time and labor will start to go up. Fast. I don’t know if you have yet noticed it, but I have, over the last few months: smart white kids working behind the counter at food joints, who are not artistes or anarchists or transgressors with tattoos and piercings all over the place. And cheerful about it, too, rather than sullen, as with so many minorities working the same jobs. For most of the country, such a phenomenon is not so rare. I see it all the time in the Midwest and the upper Pacific North West. But in the urban Bay Area, I had not seen a white youngster behind a counter in 20 years, up until a few months ago. This is a sign of cultural health. Kids are giving up on the idea that everyone can be a professional. Kids with Ivy League degrees are getting sales jobs. It’s a good thing.

Once the people who built this civilization wake up from the illusion that they are immune from economic reality and get serious again about working to improve their lot, we’ll start growing smartly again. Until then, things will be a mess.

Too bad for the imprudent creditors, and for those who would like to pretend that we are exempt from the conservation laws—i.e., liberals. That’s capitalism.


Posted by Lawrence Auster at November 11, 2011 02:41 PM | Send
    


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