Fiat Money, Fiat Rule

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Yesterday I wrote about how the prime ministers in Greece and Italy seem to have slipped out the back door under the guise of handling the ongoing euro-debt crisis…

And how did Europe react?

Did the Greeks get their referendum on the terms of the bailout plan, austerity and everything?

Well…no.

The good folks at the European Central Bank hatched a different plan…

They got busy with Greece and Italy and ditched democracy along the way with strides towards fiat rule by the European Central Bank…

All because Greece and Italy couldn’t manage their own affairs…and ended up owing just a bit over their credit line.

And the immediate result?

Today, the debt markets are reeling in Europe, as the euro-debt contagion continues to grow…

Could this be from fact that holders of Greek bonds will receive only 50 cents on the dollar in return?

Maybe so…

Any clue as to the hair cut that Italian debt holders will get?

Remember, Italy owes about $2.7 trillion, the 3rd highest sovereign debt in the world behind the US and Japan…

Exactly.  Not very pretty, is it?

So, bond yields across the eurozone have dropped, and yields have risen as investors flee Euro debt in a show of falling confidence that the eurozone debt will be contained to the PIIGS countries.

That is why top-rated European nations like Austria and the Netherlands, as well as Finland and France saw the effects yesterday of deep fear in the debt markets…

I wonder, how many more eurozone prime ministers will be replaced by the ECB tomorrow?

Or next week?

Leaders Chosen By Elite Committees

This appointment of prime ministers by elite committees doesn’t bode well for free markets and democracy in Europe…

Which brings us to our little debt drama.

You see, since it’s mid-November 2011, then it must be time for another episode of debt-ceiling stalemate in the United States Congress…

To revisit the spending addiction that they didn’t cure last summer…

And which resulted in a downgrade—the first in history—of US debt from AAA status.

Think about that…

France now has a higher credit rating than the USA…

Which may in itself be a definite sign of the apocalypse…

But let’s just “never mind” that fact for right now, and ask ourselves why a less-than-full Congress is still stalemated…

And is the “super-committee” that has been appointed the job even constitutional?

It’s true, the deadlock that the less-than-super committee finds itself in is nothing less than what we’ve come to expect…

But why a super committee is necessary has not really been clear to me…

Is it because the rest of Congress is too busy to work out a deal?

Might it be because most of Congress is too stupid or intransigent to solve it?

Or…

If I were the suspicious type, I might surmise that it might be just a warm up for an even smaller group of people to step in and make decisions for us…

Without the benefit of voting on it, or even having our representative vote on it.

It is easy to draw comparisons between what happened in Greece and Italy…

Insolvency, political implosion, civil unrest, and currency devaluation...

With what’s happening here in the US.

Will The US Become Greece or Italy?

But of course, the dollar is not the euro…and the US economy is not Greece…

But the European economy surpasses that of the US, which in the eyes of some, may make US debt just as flimsy as most of the euro debt.

Is this comparison valid?

Are “super committees” constitutional?

Are appointed czars for the various government departments legitimate?

The problem that the debt-ceiling poses—aside from the obvious budgetary ones—is that it underscores a lack of political ability to solve our spending problem.

Lack of political will was among the reasons for the first downgrade last summer.

If the European Central Bank, their equivalent of the Federal Reserve, can put their men in seats of power in Greece and Italy…

Who says it can’t happen here?

After all, the Federal Reserve is the largest holder of US debt…

And it may demand “responsible” government…

Which, if you’re Greece or Italy, means less democracy…

And if you’re the USA?

I really don’t wish to imagine an answer to that question.

But in the meantime, our debt grows and our political will shrinks…

As our representative shirk their duties.

But if we were to be treated like Greece by the Federal Reserve…

A 50% discount of US debt would wreak more havoc with our economy than we’ve already got…

But maybe that’s the point.

As Bond King Bill Gross of Pimco stated today, “a business built on debt is flawed when the market no longer has an appetite for it.”

If the business model of the modern economy is flawed, then the havoc that comes will great and prolonged…

But in the end, if markets are allowed to work, they will lead to a healthier business model.

Capitalism works when it’s allowed to work.

It’s the prospect of Central Banks “restoring order” by removing democracy that has me worried.

And those are…The Gorrie Details.

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