The European Union and Bailouts


Let us not forget that debt issues with nations are not new. Many countries of used debt as a way to finance various things, wars, roads, etc. Never before in history has it been used as a method of sustaining the ‘normal’.

I think we need look no further than Europe to see our future if we don’t adjust the steering on the ship that is the United States. There are talks now about several other countries needing bailouts. The first after Greece and Ireland being probably Spain. They are having some really bad budgetary problems and they are just hoping that deep spending cuts will fix it. Deep spending cuts normally means more people on various forms of ‘assistance’ which is a different budget column no one ever cuts. I’m sure Spain isn’t counting for what will be the increased spending there and in my opinion as a result will be asking for a HUGE bailout from the rest of the EU as they all share a currency (the Euro).

The issue is normally when a country gets in this predicament they just cause inflation therefore the money is worth less than it used to be and the level of debt doesn’t seem so bad. We are toying with that here in the US (doubt me? Wait six months then let’s talk). Here is the problem….Germany….They are the biggest bank account over there to go take from and bail out other countries. The challenge is they aren’t in THAT great a shape on their own. So after bailing out Greece and Spain what happens? I think the Euro as a currency will go away, or stupidly the US will try to bail out all of Europe.

Now that being said what happens next? The world resorts back to gold? I’m really not sure what happens next but it doesn’t appear like it will be pretty economically speaking. What I am saying is that as the world economy becomes more and more connected we may not be out of the recession woods just yet. I think it gets worse before it gets better due to lack of economic leadership that makes sense anywhere. When I say makes sense I mean like as in a world that understands ENORMOUS debt is BAD!!!!

DaScienceGuy

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One response to this post.

  1. one can argue that it can go both ways

    Reply

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