I’m just left shaking my head over what’s going on in Ireland. We all saw the financial meltdown coming, but now the government is falling apart at the seams as well. What’s scary is that we still have Spain and Portugal to go in Europe. Scarier still is who holds the majority of Portugal’s debt. That would be Spain…
What kills me is that there wasn’t anything unusual going on in any of those countries. There were no wars or any other thing that was threatening the countries, they just had a badly constructed financial industry and things went south. The fact that the fallout of bad financial dealings is bringing down governments is even more amazing. Whatever you think caused this mess, it is clear that the governments, and by extension the tax payers in those countries, were far too involved for their own good. The fact that the taxpayers had no choice points out the on going issues of political power and money interests.
Many people look at what’s happening and yell that this proves that there needs to be more regulation, that the government needs to be more involved. It’s clear to me that the governments were too involved, that in their efforts to prop up politically connected groups and/or attempt to stave off the suffering that was going to occur because of the issues, they took everyone down with them. What isn’t clear to me is how having more government involvement will stop this from happening again. It seems to me that if the government tried to minimize the exposure to the problems, fewer people would be involved in the fallout. At the very least, the people directly involved would feel it more keenly.
I really hope that we aren’t seeing our future in Europe. On a national scale, we are in bad shape financially, we are going deeper and deeper into debt and we have ballooning liabilities in the form of medicaid and social security. Things on the state level look even worse. California is a leading indicator, but there are plenty of states that have unfunded liabilities well beyond what the taxpayers can pay. We will see what the future brings, but I’m afraid that too much central planning by the Fed, not allowing debt to be removed via deflation, and continued spending does not bode well for us. Let’s see how the PIGS countries fare. Even better, let’s see how the countries bailing out the PIGS countries fare. What are the odds that any of these places (including the US) will actually reform the relationship between the banking system and the national treasury such that a downturn doesn’t cause massive, system-wide collapse?