by J. D. Heyes
August 06, 2011
In case you haven't noticed - and, in lieu of the press generated by the
recent battle royal over how much to increase the U.S. national debt, most
of you probably haven't - Europe is on the brink of financial collapse.
before you shed too many tears for the Mother Continent, save a few for
America because at the pace we're going, we're next.
Expert economists, who have watched the financial situation in Europe
deteriorate over the past year, have watched its politicians and
policymakers make one bad fiscal decision after another, each of which has
served to perpetuate, if not accelerate, the continent's impending economic
Though Europe's fiscal problems are systemic, they first began to manifest
in Greece, Portugal and Ireland, where the global economic downturn badly
exposed these nations' habitual overspending. Most of it was on social
benefits and entitlements that they haven't been able to afford for years,
but they were able to buy mostly by borrowing against their future (sound
In Greece in particular, the overspending has put the national debt at about
€300 billion, or $413 billion, which is
larger than the country's entire
Worse, though Greek lawmakers and European Union officials tried
to implement austerity measures, they were vehemently opposed by the
nation's entitlement generations. In response, workers across the country
staged strikes that closed airports and government offices, courts, schools
and other public offices.
employment data in the world's biggest economy for
last month doesn't seem to stem the river of bad vibes concerning Europe's
future. On Friday, the U.S. Department of Labor sparked a short run into
positive territory for American and global stocks when it released a much
anticipated report showing job growth in July was, at 117,000, higher than
But lingering doubts among investors about Europe's ability to pull itself
back from the economic abyss took over and left markets dazed and staggering
by day's end.
In fact, markets in France, Germany and Great Britain - the
continent's strongest economies - all ended the day on a negative note.
At this point, maybe the most savvy investors and politicos
seen the writing on the wall, and the markets are reflecting that
"We are less than three years away from where Greece had its debt crisis as
to where they were from debt to GDP," David Walker, former chief Comptroller
and head of the Government Accountability Office, told CNBC in an interview
The negativity is justified.
Remember that Greece's debt is already more
than 120 percent of its entire annual GDP (gross domestic product, the sum
of income from all goods and services). The U.S. just hit that level of debt
this week after Congress authorized, and President Obama signed, another
increase in the government's debt ceiling. Worse, economic growth in the
U.S., like Europe, is also floundering.
See the parallel?
"The fact of the matter is that government has grown too big, promised too
much and waited too long to restructure. Our problem is overwhelmingly a
spending problem," Walker says.
And while that would appear to be obvious, lawmakers set the entire country
up for failure when they, some time ago, forgot about stewardship (taking
care not to injure or harm the next generation of Americans) and instead
focused on buying loyalties here and now using the U.S. Treasury as a
personal piggy bank.
European leaders have done the same thing.
The only difference between
Europe and America is that they appear to be closer to being swallowed by
the coming fiscal tsunami.