Monday, November 28, 2011
- Euro Bailout: Bailing Water From A Burning Boat...
OK... here is the 'funding plan' from the last post that woke me with such a great laugh this morning. The basic idea is that the IMF (using mostly US taxpayer money) will 'bail out' Spain and Italy, circumventing those nefarious market forces that are attempting to value those bonds objectively.
But it says nothing of the perverse incentives that would be put in place by the 'bail-out'. And that means that no matter how you structure this, it will be the good actors paying for the bad, so the bad actors will have absolutely no interest in modifying their behavior to prevent the next round of fiscal profligacy and corresponding bailouts.
To bail out the euro countries is literally to bail the water from the bottom of a burning boat. Bail as fast as you like - you won't save it. You wont even address the real problem... which is the tendency of social welfare states to spend money they don't now, nor will ever have.
And for the record, if you think this news was what was driving the US equity markets today, I have 30 Trillion dollars worth of European sovereign debt I'd like to sell you. Either that...or a lovely bridge... your choice. (But if you buy both... you get free egg roll.)