The notion that American taxpayers are about to subsidize another Greek bailout (via the Keystone Cops at the IMF) is way beyond economically foolish. It is also morally offensive.

To turn Winston Churchill’s famous quote upside down: “Never have so many paid so much to subsidize such an undeserving few.”

Let’s start with a few facts:

o Greece’s GDP is roughly equal to the GDP of Maryland.

o Greece’s population is roughly equal to the population of Ohio.

o Despite that small size, in both terms of population and economic output, Greece already has received a bailout of about $150 billion (actual amount fluctuates with the exchange rate).

o Don’t forget the indirect bailout resulting from purchases of Greek government bonds by the European Central Bank.

o Now Greece is angling for another bailout of about $150 billion.

Is there any possible justification for throwing good money after bad with another bailout. Well, if you’re a politician from Germany or France and your big banks (i.e., some of your major campaign contributors) foolishly bought lots of government bonds from Greece, the answer might be yes. After all, screwing taxpayers to benefit insiders is a longstanding tradition in Europe.

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From the Associated Press:

Allegations of sexual assault in a New York hotel have torn France’s presidential race asunder and savaged the reputation of the suave and self-assured Dominique Strauss-Kahn, chief of the International Monetary Fund.

The 62-year-old Strauss-Kahn has topped French opinion polls for months as the man most likely to become this nation’s next president, consistently outshining the little-loved conservative incumbent, Nicolas Sarkozy.

Yet on Sunday, Strauss-Kahn’s allies and rivals alike struggled with shock at news that he was hauled off an Air France flight minutes before takeoff, arrested and facing charges of attempted rape and a criminal sex act. An arraignment expected Sunday night was postponed until Monday.

In cafes and outdoor markets, French voters shared that disbelief.

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The INET Bretton Woods summit, summoned by George Soros and those who alternatively hide behind, or gather around him, has now happened.

But before trying to analyze whatever we may discover of what occurred there, it is critical to discern how it fits an overall picture.  For context, one must also see what the IMF and World Bank “communitarian” elitists are up to.

We find that before the Bretton Woods affair, focusing upon “new solutions,” there was a similar IMF meeting, called “New Ideas for a New World.”  It was centered upon “Post-Crisis Policy Making” and occurred March 7-14.  That gave some of them a lot of time to communicate and plan in quiet (the traditional word for that is conspire) when they were not attending official sessions, or making videos.

Then, we see that Soros’ April 8-11 conference ended just as the IMF and World Bank took up their April 11-17 Spring Meetings, just a limo ride away.  “Blossom of Spring, won’t you bloom and grow?”  Let us see what is budding in this intensive series of conferences, by the first one’s own promotional vid.

Here is a collection of pitches for “New Ideas for a New World.”  Hey, they left out the last word, “Order.”  Could it be that some of them know their version of order requires fomenting massive disorder first, the crises not to be wasted?  They also left out the word “Brave,” before “New World.”  Maybe that is because some of them like Huxley, have qualms.

http://www.youtube.com/watch?v=Nsst1U8jidA

This video puts their dexterous foot forward about that March 2011 conference, while their sinister footfalls go on.  So who are these dudes, getting together and yukking it up (well, three out of four globalist manipulators seem to approve) and just how spooky are they?  What are the messages of the Big Money priests, to the unwashed, PITI-ful masses of principal, interest, taxes, and insurance payers?

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What would you think if George Soros were organizing his fellow anti-American, globalist, neo-Marxist “thought leaders,” in pursuit of globally governed banking and finance, in a second Bretton Woods conference?

Would you consider that their goals include dragging American influence and incomes down, while confiscating much of our personal finances and giving them to other nations (and yes, the age-old financier network behind them) in the name of “communitarianism?”

Would you find their goal is to replace the bad influences of the IMF and the World Bank, with a much worse, more powerfully controlling, post-American global apparatus?

What would you think, if that meeting were being held this April 8th through 11th?

I got an email, last week; it was Tuesday the 22nd.  It was from George Soros.  To hear as straight from the dragon’s mouth as feasible, I had subscribed.  In this emailed article, he lamented the inequities of wealth among the nation-states of Europe, under the strains of their continuing insolvency crisis.  He warned of the dangers of national interest.  Rather, he proposed, not surprisingly, a further blowing of the global insolvency bubble, so the more indebted European nations may get along owing, while their lending nations get along being owed — all the while, blending and worsening the  financial and monetary crises and spreading this yeasty recipe further throughout the world, especially to America.

That was quite provocative.

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U.S and world stock markets are slumping badly as intensified systemic risks from the Greek and European debt-default contagion continue to spread. Disciplinarian markets of stocks, bonds, gold, and currencies are signaling the inadequacy of European Union rescue plans and the global fear that economic recovery will be blunted.

Europe is the main source of the current upheaval. Specifically, the biggest issue right now is short-term funding. Key funding risk indicators, such as LIBOR and various short-term swap spreads, are showing credit and liquidity stress in Europe. Interbank funding looks increasingly sloppy and worrisome. These are dangerous market signals.

The repo market for bank-to-bank loans was the source of the credit freeze back in the fall of 2008. And while today’s funding risks are not even remotely as bad as they were back then, liquidity stresses seem to worsen with the passing of each day. If these funding problems keep worsening, along with stock markets that keep declining, all hell will break loose. Another meltdown is possible.

So I have a thought.

In the autumn of 2008, when financing markets completely froze up during the very worst of the credit meltdown, the FDIC guaranteed all bank debt, from 30 days out to 30 years. In addition, the Fed and Treasury essentially guaranteed overnight lending in the repo market and the commercial-paper market for bank debt. It worked.

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Just as a frog will jump out of a hot frying pan, but will sit in water that slowly goes from cold to hot until he cooks to death; California’s politicians have sat quietly as the accumulation of chronic budget deficits bubbling up from an uncomfortably warm problem to a scalding hot crisis.  Even the release of Governor Schwarzenegger’s $19.1 billion budget deficit projection for the coming July fiscal year appears to have failed to bludgeon the state’s political establishment into action to avoid a looming credit rating downgrade to sub-prime that would set off a Greek style default on steroids.

The media, after months of missing the potential consequences of a Greek default, have now become focused on the similarities between California and Greece.  Both do owe gobs of money, have huge budget deficits, massive unfunded pension liabilities and can’t print their own money; but California’s situation is worse!  The California economy is 5 times larger than the Greek economy.  Los Angeles alone is twice the size of the $356 billion Greek economy.  Greece is less than 2.5% of the European Union (EU) economy, but California is over 13% of the US economy.  From 2000 to 2008, the Greek economy grew at 3.1% annually, the second fastest growth in Europe, whereas California’s growth of 2.3% during the same period was only slightly better than the rest of the US.  Greek unemployment just hit a crisis 12.1%, unemployment in California is 13% and has been above Greece’s since the start of the year.

What started out a month ago with Greece having trouble making a $10 billion debt payment has mushroomed into a worldwide liquidity crisis.  Germany and France have been forced to lead a $1 trillion bailout.  Even the U.S. was required to kick in $50 billion to the support International Monetary Fund’s contribution.  For a few days this block-buster financial backstop calmed the bond markets and allowed short-term interest rates across Europe to decline, but by the end of the week Greek interest rates were headed back up.

Chief Executive Josef Ackermann of Deutsche Bank, Germany’s largest financial institution, said last week he was “doubtful whether Greece will really be in a position to achieve” the repayment of the emergency loans.  However, he went on to stress that Athens had to be propped up, because if it fell, it would lead “with great certainty to a spillover to other countries,” sparking “a type of meltdown,” he added.  Ackermann’s comments are all the more surprising because they follow recent reports that Deutsche Bank itself is preparing to provide €500 million ($625 million) in loans to Greece on the same conditions as those set by the German government.

Last September the state of California sold $8.8 billion of prime rated short term debt to investors at an interest cost of 3%, similar to rates Greece was paying before the threat of default sent the rate to 24%.  The Governor Schwarzenegger’s new budget projections indicate that California will need to borrow $12-15 billion just to get through the fall.  Given that state’s economy is five times larger than Greece, if California is downgraded to sub-prime this fall and the crisis spreads to  municipalities and other states, it might take up to a $5 trillion bailout to stabilize the situation.

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After three weeks, most Americans still do not understand all of the behind-closed-door deals that had to be cut on the $965 Billion dollar bailout of Greece.  It’s yet another complicated deal, with little transparency to let non-governmental folks understand the specifics.

But, I do understand the power of a dream that can inspire a new generation.  And I know that Obama just killed that dream.

Obama’s decision to expand bailouts to include Greece coincided with a Senate hearing on another decision Obama  made to cut funding for a government space travel program, killing the dream of a permanent station on the Moon or a landing on Mars.

As an unintended, but cruel, joke,  Obama’s decision to retreat from space exploration has been pushed as an example of  the President’s fiscal discipline.  No doubt, Obama was hoping that such cuts would mask the fact that  he has endorsed the greatest deficits spending in the history of the United States.

But, as with many of Obama’s posturings, fiscal discipline was a canard.  Obama’s decision to cut NASA’s space travel wasn’t fiscally disciplined, it was just ill-informed.

Let’s take another look  at these two decisions.

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The New York Times has an article describing widespread tax evasion in Greece, along with an implication that the country’s fiscal crisis is largely the result of unpaid taxes and could be mostly solved if taxpayers were more obedient to the state. This is grossly inaccurate. A quick look at the budget numbers reveals that tax revenues have remained relatively constant in recent years, consuming nearly 40 percent of GDP. The burden of government spending, by contrast, has jumped significantly and now exceeds 50 percent of Greek economic output.

The article also is flawed in assuming that harsher enforcement is the key to compliance. As the video shows, even the economists at the Paris-based Organization for Economic Cooperation and Development admit that tax evasion is driven by high tax rates (which is remarkable since the OECD is the international bureaucracy pushing for global tax rules to undermine tax competition and reduce fiscal sovereignty).

Ironically, the New York Times article quotes Friedrich Schneider of Johannes Kepler University in Austria, but only to provide an estimate of Greece’s shadow economy. The reporter should have looked at an article that Schneider wrote for the International Monetary Fund, which found that:

Macroeconomic and microeconomic modeling studies based on data for several countries suggest that the major driving forces behind the size and growth of the shadow economy are an increasing burden of tax and social security payments… The bigger the difference between the total cost of labor in the official economy and the after-tax earnings from work, the greater the incentive for employers and employees to avoid this difference and participate in the shadow economy. …Several studies have found strong evidence that the tax regime influences the shadow economy. …In Austria, the burden of direct taxes (including social security payments) has been the biggest influence on the growth of the shadow economy… Other studies show similar results for the Scandinavian countries, Germany, and the United States. In the United States, analysis shows that as the marginal federal personal income tax rate increases by one percentage point, other things being equal, the shadow economy grows by 1.4 percentage points. …A study of Quebec City in Canada shows that people are highly mobile between the official and the shadow economy, and that as net wages in the official economy go up, they work less in the shadow economy. This study also emphasizes that where people perceive the tax rate as too high, an increase in the (marginal) tax rate will lead to a decrease in tax revenue.

It is worth noting the Schneider’s research also shows why Obama’s tax policy is very misguided. The President wants to boost the top tax rate by nearly five percentage points, and that’s on top of the big increase in the tax rate on saving and investment included in Obamacare. Based on Schneider’s research, we can expect America’s underground economy to expand.

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Price fixing is illegal in the private sector, but unfortunately there are no rules against schemes by politicians to create oligopolies in order to prop up bad government policy. The latest example comes from the bureaucrats at the International Monetary Fund, who are conspiring with national governments to impose higher taxes and regulations on the banking sector.

The pampered bureaucrats at the IMF (who get tax-free salaries while advocating higher taxes on the rest of us) say these policies are needed because of bailouts, yet such an approach would institutionalize moral hazard by exacerbating the government-created problem of “too big to fail.” But what is particularly disturbing about the latest IMF scheme is that the international bureaucracy wants to coerce all nations into imposing high taxes and excessive regulation. The bureaucrats realize that if some nations are allowed to have free markets, jobs and investment would flow to those countries and expose the foolishness of the bad policy being advocated elsewhere by the IMF. Here’s a brief excerpt from a report in the Wall Street Journal:

Mr. Strauss-Kahn said there was broad agreement on the need for consensus and coordination in the reform of the global financial sector. “Even if they don’t follow exactly the same rule, they have to follow rules which will not be in conflict,” he said. He said there were still major differences of opinion on how to proceed, saying that countries whose banking systems didn’t need taxpayer bailouts weren’t willing to impose extra taxation on their banks now, to create a cushion against further financial shocks. …Mr. Strauss-Kahn said the overriding goal was to prevent “regulatory arbitrage”—the migration of banks to places where the burden of tax and regulation is lightest. He said countries with tighter regulation of banks might be able to justify not imposing new taxes.

I’ve been annoyingly repetitious on the importance of making governments compete with each other, largely because the evidence showing that jurisdictional rivalry is a very effective force for good policy around the world. I’ve done videos showing the benefits of tax competition, videos making the economic and moral case for tax havens, and videos exposing the myths and demagoguery of those who want to undermine tax competition. I’ve traveled around the world to fight the international bureaucracies, and even been threatened with arrest for helping low-tax nations resist being bullied by high-tax nations. Simply stated, we need jurisdictional competition so that politicians know that taxpayers can escape fiscal oppression. In the absence of external competition, politicians are like fiscal alcoholics who are unable to resist the temptation to over-tax and over-spend.

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What leading vacation destination has a warm, temperate climate, villas overlooking the sea, terrific food and drink, and an enormous debt crisis? Greece has been in the news recently because its massive debt is sparking a crisis in the European Union. But I was actually referring to California.

While Greece dominates the headlines, California’s state debt is actually rated as more risky than Greek debt by at least two rating agencies. Although the rating agencies differ in their assessments of Greece and California, Moody’s rating agency gives California a Baa1 while it gives Greece a higher rating—A2. Don’t be mistaken: both ratings are severe warnings from the financial markets to California and Greece that they must get their fiscal house in order. The recent downgrades in California’s debt ratings mean that the state will face much higher costs of borrowing both now and in the future. Similarly, even though both have the euro as their currency, Greece’s borrowing costs are twice that of Germany because of the difference in the two nations’ perceived creditworthiness. And both Greece and California face similar problems attracting lenders to purchase their debt.

In the bond markets, Greece is known as one of the “PIIGS” – Portugal, Ireland, Italy, Greece, and Spain – countries that joined the euro in 1999 and have faced problems in adjusting and adhering to the strict economic discipline theoretically required of members. These problems may result from the economic union of weaker nations like the PIIGS with fiscally stronger nations like France, Germany, and the Netherlands. Right now, Greece is creating a problem for the European Union (EU). Greece’s national debt compared with the size of its economy, GDP, far exceeds the 60% ratio that is the limit for EU member states to adopt the euro as their currency. It is surprising that our fiscal status has declined so much in recent years that even if the United States wanted to adopt the euro, our federal debt to GDP ratio does not even come close to meeting the minimum criteria.

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Leftist troublemaker George Soros has already made it explicitly clear he wishes to destroy capitalism.

Maybe the Third World will help the hedge fund manager and currency manipulator do it.

The preeminent funder of the left in America wants the International Monetary Fund (IMF) to become a kind of globetrotting Bernard Madoff, offering low-interest loans to poor countries so they can invest in the doomed global warming industry.

George Soros, owner, Democratic Party

According to Soros, the loans would allow developing countries to “jump-start forestry, land use, and agricultural projects – areas that offer the greatest scope for reducing or mitigating carbon emissions, and that could produce substantial returns from carbon markets.”

Soros, who personally wants to invest $1 billion in “clean” technology, wants the IMF to help stimulate demand for the technology he plans to underwrite.

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