Points to Ponder

U.S. Dollars Bail Out Europe – Maybe

This past week federal overseers found it necessary to close the 17th U.S. bank since Jan 1, 2012.  Couple that with 92 in 2011 and 157 in 2010, and it becomes necessary ask some key questions about which banks are getting closed and who makes those decisions ultimately? Bear in mind that taxpayers pay off the depositors when a bank is closed by the FDIC, not to mention the cost of audits and administrators to close them down. Parallel reports tell us that the administration has supported creating even bigger U.S. banks than the ones we bailed out a few years ago. This would include even more lending from the Fed to strengthen the big boys.  So we close the small ones and create a bigger banking monopoly at the top with bi-partisan political approval.  But that is only part of the story.

Since it is done with little fanfare, we can assume these are the smaller “mom and pop” banks that serviced neighborhoods and townships, keeping small business going and helping farmers with equipment and seasonal loans. We already know that a combination of a Republican and Democratic administrations gave billions to save the biggest banks in our system, along with a selective number of equity firms and insurance companies that played fast and loose with their clients money. The national press is awfully quiet about one failed New Jersey firm run by ex-governor and Senator John Corzine.  Much of what these speculating banks and firms did had international implications, and many of the loans and shortfalls we already paid off were actually debts outside of this country.

What we also learn this past week from the G20 meeting in Washington, is that the International Monetary Fund is “providing” Europe with $430 billion to keep them from capsizing as those economies continue to circle the drain with Spain and Italy on the brink of collapse after Portugal and Ireland’s early failure, and Greece which has overspent so badly that they now have riots in the streets with unpredictable frequency.  So, for the benefit of markets it is announced that the IMF will actually double the amount of debt it provides and all of that doubling will go to Europe’s failing systems. But you have to read the fine print to find out if it will really happen.

The International Monetary Fund (IMF) has 188 countries as members but the U.S. provides the largest amount of debt capital it owns at 18%.   Not prominently mentioned in the recent press releases is that the U.S. has stated it will not participate in any new funding for Europe and it should try and get its house in order on its own. Let me refine that statement a little further, it is reported that the U.S. says it won’t sign off on the new money until after the Presidential Election in November.  Don’t you just love drama and the trauma of how a few political actors play with your money and your country?  Canada and others also refused to sign off on the bailout as written and even if the funding could be provided by other members, it is likely not be available for another year.

The European Union has been unable to work out self-stabilization and the plans and single currency that promised an economy second to none seems to have fallen back to the kind of internecine national conflicts that have filled the history books for centuries. France seems poised to retrench back into a full-blown socialist tunnel; which could end the EU as we know it -  - and, what a surprise, Germany seems to have the strongest and most stable government/economy and is reluctant to bail out the weak and failing without controls, and the failed don’t want any Germans in charge - - has a familiar ring doesn’t it?

Now, let’s face reality here, Europe has been our Potemkin Village since the end of World War II.  We funded the rebuild through the Marshall Plan, policed it with our troops to keep them from each other’s throats, let them build socialist nanny states with only our military to protect them, and we fought the Iraq war to protect the supply of oil and energy to their fully dependent and desperate economies; not ours. Much of what we are still doing in the Middle East is with the interests of Western Europe front and center.

The International Monetary Fund (IMF) is funded with mostly U.S. taxpayer dollars, but once allocated; the U.S. government has little to do with determining how it is spent and for what reasons. In essence we print money for the fund in our treasury and we let the same folks who ran both our economy and the one in Europe into the ground decide how to use it. Few understand that the bailouts Washington approved over the last few years saved many European and British banks and insurance company conglomerates and now they are saving countries - - or so they say.

After the bloodbath of the First World War, that a U.S. President (Wilson) said he would never enter, we swore as a country “Never Again”, and yet 20 years and 450,000 men later we did it again.  After the second go around we set up (with our money and talent) an economic system that was guaranteed to build the kind of self-governance and self-defense network that would take us off the hook for those foreign adventures that had been so costly for a country built on leaving that continent and that kind of governing madness behind.

But we are still spending massive amounts of public money, and battling world enemies for the Europe that cannot protect itself, or apparently manage it.

Do you still want to consider sending them billions while we borrow like sums from the Chinese to pay our own bills?

Jim Foster

Editor