May 03, 2010

European Socialism is Bleeding like Stuck PIGS

Dexter Wright

Over that past several months we have been watching the slow death of European Socialism due to the hemorrhage of red ink which massively inefficient social programs have caused. The countries that are bleeding the most red ink are Portugal, Ireland, Greece and Spain or the P.I.G.S. of Europe as they are known in financial circles.

At the close of April the worst of the PIGS, Greece, was bailed out financially by the European Union (EU) and the International Monetary Fund (IMF) by barrowing money mostly from Germany. The agreement that permitted that transaction to occur forced the Greek government to agree to austerity programs reducing social services and pensions. This essentially means that the massive socialist programs instituted over the last forty years in Greece are being rolled back simply because these programs have run out of money.

Margret Thatcher, the former Prime Minister of Great Britain, once said "The problem with socialism is that eventually you run out of other people's money."

Clearly Greece has run out of its own money and is now using German money to prevent total collapse. Bonds covering Greek debt have been degraded to junk bond status.

The next of the PIGS to start squealing looks like it will be Portugal followed very closely by Spain. Both countries will have to issue new debt to support their socialist programs because they have run out of their own money. The combined debt of all the PIGS is $3.7 Trillion. This exceeds their combined Gross Domestic Product by 63%. They are upside down in their debt. They owe more than they are worth. The citizens will ultimately pay for the years of over spending. In order to float the loans to cover the debt, these nations have offered their own citizens as collateral.

If the story of the financial collapse of the PIGS seems familiar that is because we have seen this story unfold before throughout the twentieth century. Most recently, this script was played out upon the world stage when the Soviet Union collapsed, before that the Weimar Republic and before that Tsarist Russia.

The events that are transpiring in Europe are what a script writer would call foreshadowing of the events that will take place in America if the government continues to spend more money than the U.S. Treasury takes in. But these lessons are seemingly lost on American socialists as they push ahead at top speed to institute the Obama socialist agenda by packing the federal budget with huge amounts of pork. At the current rate of spending the United States will be upside down in its debt obligations by next year. That is to say that America will owe more than its annual GDP. Currently the national debt is $12.9 trillion, and our GDP is $13.7 Trillion. Next year, the federal government will have to barrow $1.4 trillion to cover all of the expenditures in the budget. The collateral the government will use to secure these loans is the American tax payer. The taxpayers may not know it, (and the politicians hope they never find out) but the share of the national debt that each taxpayer owes right now is $117,380.00, essentially two years of engenderment, working off the debt for each household based on annual household incomes.

The big question is who will have any money to lend the U.S. Treasury once the IMF and the EU have emptied their own coffers to cover the PIGS debts; China? Currently, 28% of the national debt is owed to foreign governments like China and Saudi Arabia. But will they be willing to loan more? And what strings will be attached if they do lend the money? Will America be asked to trade Taiwanese sovereignty for a loan? America even owes Taiwan $116 billion.

http://www.americanthinker.com/blog/201 ... eding.html