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Reports

Euro’s Crisis Has American Fingerprints

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Posted on May 11, 2010

By William Pfaff

The obituaries written of the European currency, the euro, have demonstrated divergences in national and cultural temperaments, the European funereal and laden with gloom about the future, but unyielding, and the American and British cheerfully and self-satisfiedly shoveling earth onto a casket of euros already six feet into the ground. Defy the markets, will they, these Europeans! Suddenly, the lid of the casket flew open early Monday morning, and the euro burst forth, bigger, better and brighter than before!

Sunday night, German Chancellor Angela Merkel was prudently off in Moscow to watch a V-E Day parade in Red Square, rather than witness electoral humiliation in North Rhine-Westphalia (where her party lost because of voter resentment of pleasure-loving Greeks squandering German wealth amidst permanent sunshine!). Britain was politically decapitated, without a functioning government.

Before Merkel was back, the German government had run up the white flag. The euro crisis was over. If any individual was a winner, it was temperamental and widely derided French President Nicolas Sarkozy, who has insisted since his election in 2007 that Europe (or the euro’s users) requires a politically sophisticated decision-making authority.

Europe now has Sarkozy and the French government, which put this deal together while the Germans gnashed their teeth. He insisted that a self-governing currency was as dangerous as a market left totally free to regulate itself, expected to do so in the interests of all because it infallibly pursued the interest of each—otherwise known as the Reagan-Greenspan-Ayn Rand-School-of-Chicago fantasy. Now the world has Dominique Strauss-Kahn running the IMF, Jean-Claude Trichet running the European Central Bank, and Sarkozy performing a miracle in Brussels.

What was decided in the pre-dawn hours of Monday was that some 750 billion to possibly a trillion euros would be committed to back the worth of the euro. This was not—as was constantly and erroneously reported—“bailing out” anyone. It was EU and IMF money to stand behind the repayment of bank loans to sovereign debtors—meaning governments. This automatically reduced the interest rates demanded by those offering the loans. The agreement staggered world markets.

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Among the recent and anxious holders of Greek debt, suffering for their imprudence, have been many German banks, their own financial stability supposedly guaranteed by the loads of U.S. derivative and “securitized” toxic paper that they themselves eagerly bought in recent years, like rubes at a carnival sideshow. (Foreign readers should consult an American slang dictionary.) One must keep in mind that there would have been no Greek crisis if international traders had not deliberately set out to panic markets, drive Greek rates sky-high, and go home laden with ill-gotten gold.

The markets now are calmed, for the present. The Europeans, for their part, have come to believe that the project of European union does advance by way of crises. Whether this will be proved true this time has to be seen. Certainly President Sarkozy has been proved right.

By Tuesday, there already was widespread concern in the press, including the serious press, that the amount of austerity now demanded of all of the euro-zone economies may prove too severe for electorates to accept. For some economists, the agreement is one that will manufacture a long recession, if not a depression.

Austerity will destroy consumption. To apply the pledged measures of austerity will require billions of euros in savings on government expenditures. The rich will have to be taxed more.

Pensions will be cut, and begin later. Corporate business must be forced to pay taxes. In the current situation, corporations—particularly in the U.S.—pass billions in earnings through overseas tax havens, where their corporate “headquarters” are located (consisting of a token office with a brass plate), and then report huge earnings to their stockholders and next to nothing to their national tax authorities.

A Feb. 2 Washington Post analysis of the 2009 U.S. federal budget showed corporate taxation in the U.S. now amounts to only about one-third of the return from personal income taxation. This is in contrast with the situation in Europe. In the French 2009 budget, corporate taxation is higher than the total contribution from personal income taxation. It has been observed—by a European—that all great fortunes originate in crime.

There is a remedy to this, which has no chance of being passed through the American Congress. This would require a company to pay tax to the government of the country where its principal activities and management are located, on the entire income declared to the stockholders of that company.

A feature of modern capitalism, in which the United States seems currently the leader, is that the countries where corporations are effectively headquartered have impoverished schools, rusting infrastructure, and Third World social and health facilities, while billions are paid to corporate and banking executives. This is a moral scandal even though economic elites promoting the dominant economic theory prevailing until now in the leading free-market countries have identified morality as a source of market distortion and economic inefficiencies.

Self-admittedly profligate Greece did not invent the world crisis, nor did Portugal, Spain or Italy. The guilt lies with the United States, source of modern intellectual global leadership and exemplar of democracy. It did not even have a serious reason. Americans did it to make money gambling with other people’s money.

Visit William Pfaff’s website at www.williampfaff.com.

© 2010 Tribune Media Services Inc.



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G.Anderson's avatar

By G.Anderson, May 16, 2010 at 4:50 pm Link to this comment

Take a deep breath.. In America, we have the fantasy of government, of the people by the people and for the people…

But unfortunately, for us here in the USA, government instead, has turned into one whose primary job is to protect the corporation, to secure them from liability, if they accidentally kill hundreds of thousands of people, or destroy the environment.  And finally to make possible unlimited profits and access to cheap labor and resources, with only cosmetic regulation, as a way of manipulating public opinion.

The congress has also done a good job, of turning regulatory agencies into tools of corporate control, by which corporate policies, are turned into law, and corporate production practices are legitimized as safe, so that consumer’s can feel secure about the products the consume. This also has a way of legitimizing the corporate view of things, the one that it wishes American’s to believe in. 

The result has been devastating to millions of Americans.

Yet because those very same corporations are incompetent, there have been an ongoing series of crises that will continue, the stock market, unemployment, etc..  Now Greece, and soon Italy, Spain, Portugal., and the oil spill.

What is happening is a result, of the very practices of the corporations, themselves, their way of doing business, and the outlaw and predatory nature of their functioning, as entities free of the constraint. Something that they, themselves engineered.

What good is being above the law if you don’t engage in evil doing? And evil they have done.

You can bet, these crises will continue, and will get worse, because corporations cannot function as governments, and because the corporations themselves are the principal cause of governments not functioning. The corporations castrate government, but when something goes wrong, they finger point, and dodge responsibility. This is the bottom line for why, things will continue to get worse.
   
The have played Russian roulette with the people, and when you play Russian roulette, every so often, there’s a bullet in the chamber when you pull the trigger.

It’s only a question of time until GMO’s,  Herbicides, a nuclear accident, a software glitch, or some grey goo kills millions of us.

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By melvin polatnick, May 16, 2010 at 9:15 am Link to this comment
(Unregistered commenter)

Giving a child a toy will keep the child busy while the parents attend to other matters. Never attempt to take back that toy, it will result in a deafening howl that will make the parents sorry that they ever tried to pacify the child. It was no different in the battle against Communism and the malcontents of the world, they were given toys to keep them quiet. The government of Greece recently attempted to take back its pacifiers under an austerity program,  howls of resentment were heard throughout the world. There are those in the US that want its government to take back millions of toys that they used to pacify malcontents, but if they do, it would be best to a have a supply of earplugs handy.

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By bogi666, May 14, 2010 at 12:37 am Link to this comment
(Unregistered commenter)

Eugenio Costa, the likelihood of Americans whom have been forged into NARCISISSTIC, CONSUMERIST, GLUTTONS of mindlessness after over 60 years of government, business and religious propaganda. Americans are conditioned into being obedient like the dogs they train as household pets. Example being the shoe removal at airports, the main purpose of which is obedience training of adults. In the 1950’s the USG had a nationwide paychological terrorism obedience training of all school children with mock nuclear bomb attacks compeling children to hide under their wooden desks to protect them from nuclear bombs. This obedience training program was nationwide irrespective of location which included rural area’s where no nuclear attack was evem remotely feasible.

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By Eugenio Costa, May 13, 2010 at 6:13 pm Link to this comment

corr: “Finance Capitalism”.

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By Eugenio Costa, May 13, 2010 at 6:12 pm Link to this comment

“We must now try to sum up, to draw together the threads of what has been said above on the subject of imperialism. Imperialism emerged as the development and direct continuation of the fundamental characteristics of capitalism in general. But capitalism only became capitalist imperialism at a definite and very high stage of its development, when certain of its fundamental characteristics began to change into their opposites, when the features of the epoch of transition from capitalism to a higher social and economic system had taken shape and revealed themselves in all spheres. Economically, the main thing in this process is the displacement of capitalist free competition by capitalist monopoly. Free competition is the basic feature of capitalism, and of commodity production generally; monopoly is the exact opposite of free competition, but we have seen the latter being transformed into monopoly before our eyes, creating large-scale industry and forcing out small industry, replacing large-scale by still larger-scale industry, and carrying concentration of production and capital to the point where out of it has grown and is growing monopoly: cartels, syndicates and trusts, and merging with them, the capital of a dozen or so banks, which manipulate thousands of millions. At the same time the monopolies, which have grown out of free competition, do not eliminate the latter, but exist above it and alongside it, and thereby give rise to a number of very acute, intense antagonisms, frictions and conflicts. Monopoly is the transition from capitalism to a higher system.

If it were necessary to give the briefest possible definition of imperialism we should have to say that imperialism is the monopoly stage of capitalism. Such a definition would include what is most important, for, on the one hand, finance capital is the bank capital of a few very big monopolist banks, merged with the capital of the monopolist associations of industrialists; and, on the other hand, the division of the world is the transition from a colonial policy which has extended without hindrance to territories unseized by any capitalist power, to a colonial policy of monopolist possession of the territory of the world, which has been completely divided up.

But very brief definitions, although convenient, for they sum up the main points, are nevertheless inadequate, since we have to deduce from them some especially important features of the phenomenon that has to be defined. And so, without forgetting the conditional and relative value of all definitions in general, which can never embrace all the concatenations of a phenomenon in its full development, we must give a definition of imperialism that will include the following five of its basic features:

(1) the concentration of production and capital has developed to such a high stage that it has created monopolies which play a decisive role in economic life; (2) the merging of bank capital with industrial capital, and the creation, on the basis of this “finance capital”, of a financial oligarchy; (3) the export of capital as distinguished from the export of commodities acquires exceptional importance; (4) the formation of international monopolist capitalist associations which share the world among themselves, and (5) the territorial division of the whole world among the biggest capitalist powers is completed. Imperialism is capitalism at that stage of development at which the dominance of monopolies and finance capital is established; in which the export of capital has acquired pronounced importance; in which the division of the world among the international trusts has begun, in which the division of all territories of the globe among the biggest capitalist powers has been completed.”

Vladimir Lenin

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By Eugenio Costa, May 13, 2010 at 6:08 pm Link to this comment

It’s called Faince Capitalism.

Lenin had it down cold.

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By firefly, May 13, 2010 at 5:31 pm Link to this comment

All part of the ‘get rich quick’ doctrine that is now
taught at the highest schools of economics.

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By bogi666, May 13, 2010 at 2:05 pm Link to this comment
(Unregistered commenter)

Carlton, FYI, 1st it was Goldman Sach’s and 5 Hedge Fund managers met in NYC to plot Greece’s bond market manipulation to set up the short sale. In 2008 short sales were curtailed during the crisis at its peak and the investment bankster whined to high heaven that this was the collapse of the universe. Now we know why short sales were curtailed then. The names will emerge if they haven’t already.

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By Eugenio Costa, May 13, 2010 at 5:42 am Link to this comment

January 2002 oil = $19 per barrel

August 2008 oil = $147 per barrel

That was not a supply and demand event.

As oil went up in USD, USD went down in the EURO.

There was no shortage of oil at any time.

That was the collapseof USD, which led to the world wide economic collapse (except China, Cuba, and so forth).

The US Finance Capitalists had dumped an enormous amountof bad paper on the Europeans, which led to their own collapse.

Meanwhile, having got bailouts, the US Finance Capitalists first shorted USD with Federal funds, and then went to work on the EURO.

Now they expect not only the US population but the Greeks and other Europeans to pay for the
Finance Capitalists’ blunders and frauds and theft with thirty years of debt credit slavery.

The Greeks, for one nation, will have none of it.

Unlike the Americans they are not docile sheep and they know exactly what is going on.

The Greeks lead the way. The revolution has begun.

Americans can either wake up and start fighting their own exploitation or go the way of sheep sucked dry by vampires.

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By Eugenio Costa, May 13, 2010 at 5:32 am Link to this comment

US Capitalism is systematic violence against the world, the environment, and its own people.

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By walldizo, May 13, 2010 at 1:39 am Link to this comment
(Unregistered commenter)

Hey Carlton, you must be nuts to throw accusations all over while knowing that traders,profits and greed are the essential driving force behind capitalism.Its these factores that make capitalism work

Report this

By Steven, May 12, 2010 at 8:30 pm Link to this comment
(Unregistered commenter)

I hope that traders/investors in the US stand tall on a moral obligation not to bet
against or short the USA.  Don’t fall for greed’s easy lure and back the truck up.

The USA needs all the common sense the stars and stripes can get right now- 
traders need exercise restraint, and prudence on behalf of an anonymous citizen
in a place unknown, USA..

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By MadeFerWalkin, May 12, 2010 at 1:39 pm Link to this comment
(Unregistered commenter)

BOTH Keynesianism AND Hayekism are failures.  Also, we have neither.

Unfortunately, no one teaches history (or political economy) anymore.  If they did do, we would all understand very clearly that you cannot sustain financial value in a society that creates NOTHING.  Of course, the United States and Europe are going broke.  What do we do, exactly?  Shuffle numbers around all day, doo dah doo dah…because the productive jobs have gone away! Ah da doo dah day!

@moonraven…

“That should have been a clue that Greece had nothing to back up its claims of solvency.”

Oh, of COURSE Greece never had anything to back up its claims of solvency.  Its debt to GDP ratio was exactly the same BEFORE it joined the Euro as it is today.  But back then, it had its good pal Goldman “Iago” Sachs around, to help it hide its debt in synthetic CDOs, so it could look nice for the ECB.  GOSH, GS, THANKS a WHOLE BUNCH!

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By Carlton, May 12, 2010 at 1:21 pm Link to this comment
(Unregistered commenter)

The one thing that simply does not make sense is this:

“One must keep in mind that there would have been no Greek crisis if international traders had not deliberately set out to panic markets, drive Greek rates sky-high, and go home laden with ill-gotten gold.”

If this is true then these international traders should be named, and if not shot outright then at least brought before court and stripped of every last asset. I’m sure the Germans would love to do that.

What I’m saying is why would Europe allow the near-collapse of their currency so that a few traders could get rich? I don’t think they would, there is more to this story than this.

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By Archie1954, May 12, 2010 at 12:29 pm Link to this comment
(Unregistered commenter)

With great privilege comes great responsibility. The most privileged country in the world has reneged on its responsibility. The most privileged corporations in the world (Exxon, Chevron, Shell etc.) have reneged on their responsibility.

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By swain, May 12, 2010 at 11:29 am Link to this comment
(Unregistered commenter)

GREAT ARTICLE& GREAT COMMENTS—-THE LAISSEZ FAIRERS ALWAYS
MADE THEIR BONES DANCING ON ROOSEVELTS GRAVE—BUT THE VOTERS
THAT GAVE HIM FOUR TERMS KNEW MORE ABOUT REALITY THAN A TON OF
CHICAGO SCHOOLS OF ECONOMICS

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politicky's avatar

By politicky, May 12, 2010 at 11:15 am Link to this comment

I knew this was coming.  I read Naomi Klein’s the Shock Doctrine.

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By mozer1, May 12, 2010 at 11:07 am Link to this comment

Great article and insightful comments! Take a look at http://www.bailoutmainstreetnow.com <a > Grassroots Online Local Newspaper Alternative News – There Is A War On For Your Mind</a> A breaking alternative online news website. A lot of interesting articles and the community can upload their own news videos and even comment about them.

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By BobZ, May 12, 2010 at 10:33 am Link to this comment

The so called “financial crisis” in Greece sure sounds like “Shock Doctrine” at work
again. And if we here in America weren’t getting the message, Wall Street
manufactured a panic last Thursday by unleashing computer trading without the
requisite curbs. Our European leadership manages to select an inept politician
from Belgium to run the new European Community who has zero credibility. What
we have here is an accident waiting to happen. Once again average citizens end of
holding the bag while the billionaires in residence short the markets and blame
the poor civil servants in Greece. Unfettered free market capitalism has been an
absolute disaster this decade wiping out trillions of dollars of savings of who were
told the “fundamentals of our economy are strong”.

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By firefly, May 12, 2010 at 10:14 am Link to this comment

Brilliant article. If only those who have absolute
faith in free-market fundamentalism were able to see
for themselves the results of multinational
corporations and capitalism gone made in third world
countries. If we take the oil companies as a prime
example, what has happened in the Gulf of Mexico is
chicken feed compared with what happens in countries
like Nigeria where oil companies not only have
governments on their side (as they do here), but are
not required by Congress to clean up after
themselves. And who cares? Certainly not the majority
of American citizens (that is until some
disillusioned man from a developing country tries to
commit some terrorist act).

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moonraven's avatar

By moonraven, May 12, 2010 at 10:07 am Link to this comment

So far as I can tell, there should be no surprise that Greece is bankrupt.

Two years ago at tis time I was there for several weeks visiting an old friend who explained how the Greek currency went from being traded at a fixed rate when Greece converted to the Euro to a runaway devaluation from night to morning, leaving the dracma worth nothing.

That should have been a clue that Greece had nothing to back up its claims of solvency.

Just while I was there I watched the unfolding of several major corruption scandals, and the president (or prime minister?) went on t.v. and told the enraged citizens that everything was going to be okay soon—that probably within a year Hugo Chavez would come for a visit and make deals and Greece would be saved!

Really?  Greece has something Venezuela wants?  Sure was news to me, as well as a clear indicator of the level of foolishness that passes for government planning in the so-called “Euro Zone”.

While I was there the government was also running a scam to manipulate the unemployment stats—putting young folks with bachelors and masters degrees into a “training and internship program” where for a month they attended workshops on the use of computers thatwere designed for primary school children and then placed in “internships” for another month with a company thathad no jobs but let the “interns” hang around their offices and drink coffee.

For that bogus program the young folks were paid 30 euros a day.  I am not sure how much the companies that agreed tolet them drink coffee were paid.

I have lived for many years in Mexico, and I have seen this kind of Third World fatuosity at close range here—which is why I told my friend:  Greece is a banana republic which, unfortunately, even imports its bananas from Ecuador.

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By satwell, May 12, 2010 at 8:17 am Link to this comment
(Unregistered commenter)

Euro’s demise was foretold in Atlas Shrugged just like it is, a failure of the paper money backed welfare state. Reagan and Greenspan were advocates of paper. Ayn Rand was an advocate of objectivity, in money that means gold.

Semi regulated “capitalism” (the system that’s failing) just takes longer to collapse than fully regulated socialism. Don’t kid yourself that regulations would have made things better. The regulators are in bed with their banker cartel buddies. Capitalism wouldn’t have any of it.

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By dipconsult, May 12, 2010 at 6:22 am Link to this comment
(Unregistered commenter)

The disaster of Reagan/Thatcher deregulation and the return of unfettered, undirected capitalism (all espoused by Thatcher’s heir, Tony Blair and his rightist New Labour - other leaders were not much different) is now clear for all to see.

We let the good times roll without making Keynsian provision for the bad times. Instead in our greed we ran up huge deficits. Now when we should be supporting our economy with our savings (both government and individual)there’s no support fund and we are obliged to make drastic cuts further depressing instead of stimulating our economies.

So we are at a historical crossroads - we must change the system as though we were in a shooting war when changes are easily made to win a war. As in a war we must make capitalism work for us - it’s a superb servant for providing whatever societies need but, undirected, it’s massively wasteful (We’ve just had a half century era of waste). And what we need now are the means to try to deal with the existential challenges humanity now faces. Otherwise we will go on down the old road to perdition.

So we must choose directed capitalism. China best - though still imperfectly - understands that. And Russia is learning. Europe is far nearer understanding than the USA with its popular screams of “socialism” the moment anyone tries even a whiff of regulation. Still, I find most people do start to think when one points out that you can’t play any game without rules that are strictly enforced. And - like football - capitalism is a world game par excellence.

The two top priorities for foreign policy today are, first, to shift to cooperation after the decade of GWBushian confrontation - and so, second, getting some consensus on the economic activity needed for the survival of our species.

Certainly this war-time mentality without war will come eventually as the noose tightens. The big question is whether the world get to it in time to save us. Or whether, as things get worse and worse, we descend into endless real wars over depleting resources - as the Pentagon foresees.

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By Eugenio Costa, May 12, 2010 at 6:19 am Link to this comment

“Greece” is not profligate.

Worthless presumption, worthless article.

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By bogi666, May 12, 2010 at 3:32 am Link to this comment
(Unregistered commenter)

Great comments, thanks. FYI, 5 hedge fund managers met in NYC to implement the strategy Pfaff identified, to run up Greek interest rates, thereby reducing the cost of their bonds, shorting the bonds because the crisis would necessitate the lowering of interest rates and raising the price of bonds. This is global capitalism, the One World System, the Beast of the Bible. EXXON made net profit of $45 billion last year and did not pay 1 cent in U.S. taxes. Meanwhile EXXON availed itself of the World wide protection of its investments, protection by the Pentagon.It is the CORPORATE WELFARE KINGS whom[they are persons now SCOTUS] that create and chase the proceeds of the Treasury bonds which pay for the Federal deficit with the interest and principle paid by individual taxpayers. This is evidenced by the facts that in 1980 there were 400 lobbyists in D.C. and the deficit was $60 billion. Raygun initialed the huge deficits and today there are 45,000 lobbyist in D.D. all creating and chasing the Treasury proceeds.

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By jay, May 11, 2010 at 11:19 pm Link to this comment
(Unregistered commenter)

Yes, I agree with you. Those european politicians spend way too much because they read Ayn Rands books.

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By zaphodity, May 11, 2010 at 10:40 pm Link to this comment
(Unregistered commenter)

The American people didn’t make money but your corrupt
government and Wall St sure as sh@t did, ONLY real
terrorists (financially and Military) is the U.S. of A.
The world was horrified on 9/11 when those planes flew
into the WTC, the next time something like that happens
the world will CHEER !

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By P. T., May 11, 2010 at 9:43 pm Link to this comment

The Greek government and other governments have followed policies that make them vulnerable to pressure. Unwilling or unable to tax the rich, governments borrowed to pay for their operations in good times. Having run budget deficits in good times, these authorities are in a poor position to add more debt when it is most needed—in the current recession in particular.

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By gerard, May 11, 2010 at 8:08 pm Link to this comment

As if American capitalists were not guilty enough for dominating Middle Eastern countries by force and violence for the sake of oil.  Along with that, they dominate European financial systems, tax free. A despicable system that must be controlled before it destroys the human race.

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By Big B, May 11, 2010 at 4:50 pm Link to this comment

Let’s here it once again for the failed ethos that was Reaganomics!

Wait, did anybody tell that dumb son of a bitch Obama that it doesn’t work?

Oh well, we are circling the drain anyway. Just keep de-regulating and lowering taxes, that’ll do the trick. After all, those prosperous businesses will surely share the wealth with the labor that produced it.

Right?

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