We have been cursed by the famous Chinese curse: "may you live in interesting times." I will travel this summer to Spain to deliver a paper at the International Political Science Association's annual conference. After arranging for flights and hotels, I just have to worry about one thing: will Spain still be in business when I get there?
Fears about Spain's debt problems roiled world markets Wednesday. Stocks fell in Europe and Asia, the euro slipped to a fresh two-year low against the dollar and Spain's borrowing costs surged. Two weak debt auctions in Italy also pushed that country's borrowing costs higher, with the 10-year yield touching 6% for the first time since Jan. 30.
Spain is at the point of collapse, due chiefly to a real estate bubble that looks rather familiar. I want to see a bull fight. Are the bulls going to be butchered for meat before I get there?
I also have to wonder whether the United States will be here when I get back.
The benchmark U.S. Treasury yield fell to its lowest level in at least 60 years on Wednesday as worries of contagion from Spain's ailing banks raised bids for low-risk investments.
Apparently a two bedroom house in the Catalonian village of Rasquera is going to take down the American treasury because the residents couldn't come up with the 75% of the vote necessary to legalize growing marijuana.
What about growing marijuana to pay off crushing municipal debt? One Spanish village put the idea to the vote Tuesday, and a majority of its citizens approved — but not the 75 percent needed.
So the U.S. Treasury goes up in smoke. How do the Matadors feel about growing marijuana?
Meanwhile the jobs picture in these United States looks rather gruesome.
The proportion of Americans in their prime working years who have jobs is smaller than it has been at any time in the 23 years before the recession, according to federal statistics, reflecting the profound and lasting effects that the downturn has had on the nation's economic prospects.
By this measure, the jobs situation has improved little in recent years. The percentage of workers between the ages of 25 and 54 who have jobs now stands at 75.7 percent, just a percentage point over what it was at the downturn's worst, according to federal statistics. Before the recession the proportion hovered at 80 percent.
We are in the midst of a global depression. It doesn't feel as bad as the last one, because the world is a lot wealthier than it was last time. The stakes are the same. The regimes will either correct the problem or they will be replaced. Cue ominous music.
A reasonable person can argue that this is not the time to cut spending as that will immediately depress economic growth. Such a person would have to explain how current spending levels can be sustained, even in the short run. If you are going to borrow to cover spending, you have to borrow from someone. Who is left to lend, if there is no confidence in the US Treasury? China?
I am simple minded. I think that the proper response to a problem is to figure out what caused it and correct the cause. Governments across the globe have over promised and over-spent. That is the cause. The solution is to bring our many international houses in order. You could argue that imposing sensible discipline on government budgets all at once would be incredibly painful. It might be possible to pay the pain out gradually. The pain is unavoidable. The main thing is to make policy that will move toward solvency.
We can be sure that the Obama Administration is not in that business.
President Barack Obama said Tuesday that only Congress can take the "bold action'' needed to spur job creation, as he unfurled an election year "to do'' list for lawmakers.
Obama's action plan for Congress centers on a series of economic initiatives he has already been pushing for months, including eliminating tax incentives for companies that ship jobs overseas and promoting new tax credits for small businesses and for companies to develop clean energy.
None of the items on the president's wish list has previously gained any traction in Congress, and there was little indication that they would in the six months between now and Election Day.
Our President is not even pretending to address the country's economic and fiscal problems. He is solely concentrated on winning reelection. If he does win that, what will he do over the next four years? All we can go on is the past. He will ignore the future.
I will try to blog from Europe. I will let you know if I make it to Rasquera and if, like, they changed their minds, and man… What was the question? Maybe I'll just join the Choom gang.
Not sure that's all true, KB. Seems like Obama's ben trying to cajole congress into working together to come up with consensus solutions, but it's like herding cats. Either that, or like trying to push a piece of cooked spaghetti up a hill, pick your metaphor.
Posted by: Bill Fleming | Thursday, May 31, 2012 at 09:27 AM
"We are in the midst of a global depression," says KB. Exaggerate much? By what objective measure are you claiming this?
At the depths of the financial crisis in 2007-2009 we were close to, but not in, a "depression." If we weren't in a global depression then, it would be hard to say we are in one now.
"Governments across the globe have over promised and over-spent. That is the cause," says KB. That's not very profound. They have over promised what, and over spent on what and by what measure?
If you mean governments have promised too much to the wealthy and haven't taxed certain types of unproductive wealth in order to invest in productive wealth and to invest in humans rather than stupid wars, I'd agree.
Posted by: Donald Pay | Thursday, May 31, 2012 at 09:30 AM
p.s. safe travels professor.
Posted by: Bill Fleming | Thursday, May 31, 2012 at 06:53 PM
Put Miranda in.
Posted by: larry kurtz | Friday, June 01, 2012 at 09:45 PM
Thanks, Bill.
Posted by: Ken Blanchard | Saturday, June 02, 2012 at 12:03 PM
The President is clearly addressing reality when he asks Congress to address it. You know and I know that he can't put together any kind of legislation by himself without congressional action.
As for his re-election, is he focused on it? Of course! So is every member of Congress (well, maybe not Thaddeus McCotter anymore) and then Mitt Romney is only not focused on re-election because he got his tail kicked by John McCain in 2008. That's hardly an indictment of the President exclusively. Can you name any incumbent running for re-election who DOESN'T care about winning?
Posted by: Eli Blake | Sunday, June 03, 2012 at 02:43 PM
And more to the point, the policies that have been failing, Obama has failed to change. Only, Republicans generally suggest that we do more of what hasn't worked:
http://tiodt.blogspot.com/2012/06/its-policy-of-tax-cuts-deregulation-and.html
Posted by: Eli Blake | Sunday, June 03, 2012 at 02:44 PM
Statement from Puerto Sherry,In relation with the vauoirs informations about the cancelation in the bay of Cadiz of the European Water Sky Championship, mode wake board organized by the Water Ski Andalusian Federation, presided by Fernando Vega de Seoane. Puerto Sherry would like to communicate:1.The reasons for the cancelation of the event in the Marina of Puerto Sherry are the exclusive responsibility of the Andalusian Water Sky Federation2.Puerto Sherry Team has been working professionally since last November to make possible this event in close collaboration with the organizers 3.The Andalusian Water Sky Federation do not have the resources and official permits for the celebration of the event in the bay of Cadiz as of today4.The lack of experience and resources of the Andalusian Federation has been replaced by tremendous efforts on the site of the Marina for the last ten months 5.Puerto Sherry deeply regrets the lack of means of the Andalusian Water Ski Federation in organizing this important event and the resulting damage caused to the international water ski community
Posted by: Caique | Thursday, June 28, 2012 at 12:53 AM