IMF

The main stream media in the United States has covered the European financial crisis in only the most peripheral sense. We get an occasional story of trouble in Greece, an inkling that things are not going well in Italy and Spain, and a passing remark that problems are spilling over to France, Germany and other countries. We get almost no discussion of why these problems have occurred and why the countries in trouble are past the point where they can be easily fixed.

Sure, the MSM reports on protests and riots among the populace when EU politicians, facing the very real specter of bankruptcy, try to reign in spending, reduce entitlements, and otherwise attempt to get the deteriorating situation under control. In the main, European people who have taken to the streets are characterized a heroic protesters who are being set upon by their respective governments.

In the United States, Leftist economists (Paul Krugman comes to mind) step through the looking glass and try to convince their readers that the problems in Europe have little to do with 60 years of big government policies. They argues that it can’t be socialist policies that are bringing down Greece and Italy, it must be something else—the Euro? right wing extremists? trade imbalances? —anything but over-spending, over-borrowing, and over-taxing (albeit that because of over-taxing, many Europeans have made non-compliance with income taxes an art form).

And now, Krugman’s kindred spirits within the Obama administration remain eerily quiet as the IMF moves to loan still more money to shore up Italy and Spain and the Euro. Robert Winnet reports:

Reports in Italy suggested that the IMF is drawing up plans for a €600 billion (£517 billion) assistance package for the country. Spain may be offered access to IMF credit, rather than a rescue package, to avoid it being “picked off” by the markets in the coming weeks…

An IMF rescue package involves a country being offered hundreds of billions of euros in return for agreeing to launch a major austerity programme to cut spending. A credit line is a more flexible arrangement which gives countries short term access to international finance.

Italy and Spain are likely to be forced to accept some international help as the cost of their debts has risen to unsustainable levels of about seven per cent.

The United States share of this loan is about $140 billion of taxpayer money.

If there was real hope that serious spending cuts and reduced borrowing would occur in Italy and Spain, I’d be in favor of the loans, even though the U.S. is in dire financial straits itself. After all, both Italy and Spain are allies, and helping one another is the right thing to do.

But our participation in the IMF program is more like loaning big money to an inveterate gambler as he enters a casino. Sure, he’s promised to reform himself, to use the money to pay-off his gambling debts with a promise of paying back the loan sometime soon, but …

The irony in all of this is that we’re heading in the same direction as Greece, Italy and Spain. Our fiscal path is unsustainable and all the wishful thinking about taxing the rich and redistributing wealth won’t change that a bit. When we reach the economic point of no return, who will be there to help us?