Tuesday, January 18, 2011

End of a "National" Monopoly?

I hope it would not be overly presumptuous of this humble blogster to assume that you, dear readers (all three of you) are aware that there are several states in this once perfect union who are in dire financial straits due to having overspent their budgets by substantial sums. California, Illinois, New York and New Jersey come immediately to mind with the attendant handwringing on the part of their spendthrift politicians.

That sigh of relief by residents of more parsimonious states who have assured themselves that the inevitable economic pain will be confined to the populations of the bankrupt states are in for a rude awakening.

The actions of the central bank, The Federal Reserve, are not controlled by a Congress who, due to the political climate revealed by last November's mid term elections may decline to bail out the spendthrift states. If Mr Bernanke elects to purchase the soon to default state and municipal bonds of these entities (naturally at face value) those bonds will soon join the worthless "assets" lounging on this or that  taxpayer guaranteed "balance sheet".

As disastrous as the above described nightmare scenario is, imagine the following: California resorts to printing "legal tender" dollars at its printing presses in Sacramento. Preposterous you say? Compare such a national disintegrating event with what we just learn is happening in the European Union:

In news reports that have thus far not attracted much attention, the Irish Central Bank has been printing euros out of thin air to prop up its ailing banks. The whole of Europe will pay for this action, as the result will be increased euro-zone price inflation. We can only imagine the reactions of Germans if this continues – though apparently the Irish action is legal from the EU's standpoint so long as the ECB is "informed" in advance and approves. As is often the case, we doubted our reaction to the news, so we went trolling the ‘Net to see if anyone shared our instinctive reaction that this was overwhelmingly bad news for the euro. Here's one comment we found:
"Wait... have I just slipped into a parallel universe? Is this some sort of early April's fools joke? Doesn't this defeat the entire point of a single currency and the ECB? Were the rules changed on the quiet without anyone noticing?"
The nations (states) who responsibly "lived within their means" will be handed the bill for profligate states' irrational policies. This is the stuff of which revolutions are made. We are indeed living in "interesting" times.

Got food and ammo?









cross posted at: Eternity Road

6 comments:

Nick Rowe said...

Whenever I consider the high taxes we pay and the enormous debt our state has, I have to wonder?

Why don't we have streets paved like glass?

Why don't we have a cop on every street corner?

Why are there any homeless people?

Why do mentally ill people roam the streets, assaulting innocent people?

Why don't we have public transportation that is clean, on time, and operated by safe and courteous drivers?

Why don't our public schools have a zero dropout rate and a 100% college enrollment rate?

In a democratic state, there is supposedly a tradeoff between tax rates and the level of public services. The insult added to the injury of high taxes is that we don't even get what we pay for.

The Whited Sepulchre said...

I like the idea that several other bloggers have floated out there on this topic. If a state declares bankruptcy, renegotiates its debts and INSANE public pension obligations, then it can stay in the union.

If they have to take money from the other states (meaning The Fed prints a bunch for them), though, they're kicked out and can only re-enter as a territory.

That would solve the problem, don't you think?

Solaris said...

Huh, I could've sworn there was a fourth reader here.

Here's one problem I have with removing statehood from the parasitic states: What happens when the have-nots decide to take from those of us who have and feel like we've robbed from them that which they think is rightfully theirs?

Pogo said...

"...What happens when the have-nots decide to take from those of us who have and feel like we've robbed from them that which they think is rightfully theirs?"?

Got ammo?

Solaris said...

And that, my friend, must remain unacceptable. Not us defending ourselves, of course, but them resorting to violence to take from us. I've seen firsthand what a highly motivated but poor people can do against well-equipped, well-motivated personnel. They'll lose, but not before inflicting casualties on the good guys.

ΛΕΟΝΙΔΑΣ said...

"...unacceptable."???

Those who wield political power will ultimately determine what is "acceptable". Historically, political entities such as tribes, city states, nations and empires have organized and fielded armies to deal with what their rulers determined to be unacceptable. Contrary to the current practice of using the military as a social engineering experiment, armies exist for the sole purpose of killing people and breaking stuff. This was true of Assyria, Persia, Greece, Rome and the modern nation states. In EVERY instance each antagonist believes itself to be the "good guys".

Ultimately each contest will be decided by the judicious application of sufficient power (force) and THERE WILL BE CASUALTIES; there being no such thing as a free lunch.