Right at the start of this post, I want to make it clear that I have generally been in favour of President Obama, from this side of the pond, he looks like a great choice for US president. Intelligent and dignified are not necessarily attributes that other recent candidates can claim as their own. However, I have to take issue with his recent attack on Europe, particularly as the whole sub-prime fiasco is firmly rooted in his own back-yard.
The left-wing view has been that huge national debt is an acceptable price to pay for the mismanagement by our banks. Cut-backs have been looked upon with disdain by the socialists as if there is a way to continue to over-inflate the economy despite the glaringly obvious fact that there is nothing left to do it with unless we sell the family silver... The balanced view is surely that we must do what we can to pay down the debt including down-sizing where the markets are proving unsustainable.
I have been unemployed, so I can empathise with those that are suffering, but the truth is that the economy was over-inflated by debt - the whole of the Western economy was simply living beyond its means, shored up by bad debts. The only fix is to try and get the economy back to a sustainable size, painful though that will undoubtedly be.
Look at it like this, let's say for a simple example that the economy is 10% over-inflated - effectively we have been living 10% beyond our means for a sustained length of time. This is supported by bad debts - in other words, there is money floating around in the economy that simply should not be there, buying goods and services that we can't actually afford - persuading employers to employ 10% more workers than are sustainable. This money is secured against property that is worth less than the value of the debt. The American (Obama) solution is to try and shore up these bad debts, ie. to try and continue the unsustainable economy to the point where defaulting on the debt becomes a very real possibility.
The irony of Obama's criticism is that countries like Greece face exactly the same problems that he himself has experienced recently. It was only a few short months ago that the US itself was staring at the possibility of defaulting on it's debt. Obama has presided over the US whilst it's credit-rating has been reduced - an achievement that hardly qualifies a man to urge the rest of the world to follow his example. The situation in Europe is serious because Economic Europe has taken weak economies under it's wing believing it has the resources to protect them. The UK is outside of the European Economic currency, but will not be immune if economic collapse comes knocking.
Even Gordon Brown understood the value of 'talking up' the economy, I doubt that Obama's outburst will shake the world, but it takes a certain arrogance to put your own political ambition for re-election ahead of the stability of the world economy. I hadn't appreciated Obama the political animal until now - I stand corrected, maybe he's not the shining example, he's a politician after all..
It remains to be seen how Europe will deal with this crisis, but the majority view of the voting public is that they don't want to bail anyone else out of debt. What the individual voters in neighbouring nations don't appreciate is that much of the debt is owed to them. I have heard fellow-Europeans saying 'let them default' without appreciating that Greece now owe EUR120bn to the IMF and the European Union - In contrast many Greeks still believe that Germany 'owes them' for the damage done in WWII, so there is a strong contingent in Greece saying 'let's default'. Ironically the position of the average man in the street in both Greece and Germany is that Greece should default. The Germans not appreciating that the debt is owed largely to them - and the Greeks not really appreciating that their government is not really in a position where they can pump money into their own economy and just not bother to pay their debtors.
Of course, it's not just the Germans who are complaining, there is a strong view in the UK that we should be exempt from further Euro-bailouts as we have our own currency to protect, but it should be made clear that the UK will suffer alongside it's European neighbours common currency or not..
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