The Folly of the Euro and the Disaster that is Greece

The circus that has been the Greek financial crisis over the past five years reached a new crescendo over the last few weeks with all the mystery of a Shakespearean tragedy.  Leftist Greek Prime Minister Alexis Tsipras played the role of populist defender of the needy by standing up to those bullies in suites from all those pompous European nations trying to extort austerity from the Greek people. In defiance he defaulted on the first round of IMF loans and called for a referendum. When the Greek people voted over 60 percent in favor of rejecting the onerous terms Tsopras went to the European parliament and gave a defiant speech in favor of giving money to the people not the evil bankers. Then, after reality slapped him in the face with all the subtly of a wet tuna, he promptly folded like a cheap suit on a humid day. Of this outcome there was little doubt. Greece’s entire banking system was about to implode, the savings of every Greek were about to disappear. The world was about to see a first world nation, all be it only barley, turn into a third world disaster live on CNN.

Greek Voters in the Street Following July 8 Rejection of EU Demands

Greek Voters in the Street Following July 8 Rejection of EU Demands

While the intricacies of the Greek Crisis will be filling the pages of Economic Journals for years to come, the problem is remarkably simple. When you spend more than you make you go to others to borrow money. When you borrow more than you ever hope to repay, your creditors run the show. This is as it is in every household’s finances and thus it is with nations as well. If financial debt had physical weight, Greece would be down at the bottom of the Aegean along with the lost city of Atlantis. With a debt exceeding two times GDP and with five years of IMF/EU enforced austerity under its belt with little to show, Greece is an economic corpse. This article is not focused on how Greece ended up where it is, but the reality is national overspending comes to an end when the banks run dry. Simple.

Now this is nothing new, the economics of South America in the 20th century is littered with failed economic turn around and booms gone bust. The drama played out repeatedly with similar script each time. A “new” regime took over in a nation and turned around the sick economy they inherited. Happy days were there again! Foreign banks rushed in and willingly funded deficit spending that fueled a boom akin to a sugar high. Then, at the first sign of real trouble the bubble burst. However the South Americans (and yes, not all South American countries experienced this or followed the outcome below, but enough did, you know) with all their experience with the blue suits from the IMF, ever end up where Greece finds itself. That is because when their government felt the domestic pain of austerity was exceeding that of the foreign banks, they simply devalued their currency. As sovereign debt is almost always denominated in the home currency, if a country owed let’s say 100 billion pesos and it did a 3 for 1 devaluation, the total money supply would increase by 3 times (economists reading this please excuse my simplicity, this is for illustration) but the debt would remain the same. Sure devaluation is painful, but not as painful as cutting pensions in half and may prevent you from being overthrown like the last government (but not likely!). The foreign banks likely take a hosing, but they will soon forget and with the promise of a “new” economic miracle will be back lending to you in a few years. After several decades of this the 21st century has seen several of the South American problem economies seem to actually achieve a free market renaissance.

But Greece no longer has the Drachma and monetary policy is now controlled by the Blue Suites (well tailored, very nice) from the EU. After decades of irresponsible fiscal policy and a national economy which has seen a significant decline in its base economic generating ability, the Greek government has about as much influence as the homeless man begging outside trump Tower. Yet what makes this story truly Shakespearian is that the new “loans”, almost 100 billion Euro worth, will never be repaid. Take a person who maxes out their credit cards, more debt to pay the existing debt never solves the problem; it just kicks it down the road. The Greeks want debt forgiveness (sorry they call it restructuring) but the fiscally disciplined German voters, and to a lesser extent French, would never stand for it if their leaders simply gave their cash to those Greek spendaholics. So for the sake of the phony Euro, the game goes on yet sadly nothing is resolved.

Now all this would be an amusing economics lesson if it were not for the potential consequences. While world markets largely factored in a Greek default and thus did not really react to the events of the past week, the stakes have simply risen for an eventual uncontrolled collapse. Additionally, if you think this is a uniquely Greek problem, think again. Europe has Portugal, Spain and potentially even Italy lined up to face similar situations. While each is unique and those economies have better underlying fundamentals than Greece, they are also of increasing magnitude and with the resources (and generosity) of the EU increasingly strained, the potential for significant global economic consequences are very real. Not my problem you say? A default of a major Euro member (say Spain or Italy) would dwarf the financial losses that triggered the 2008 economic crisis. “Tax the Banks” and “Let em Fail” make for cute slogans, but when your money vanishes and stock markets melt down the pain would be widely felt.

Here is why the Euro is not only an economic folly but potentially a dangerous accelerant. Macroeconomics 101 defines that nations have two tools to manage their economies, Fiscal Policy and Monetary Policy. The EU however takes away the handle of monetary policy from a National Government and hands it over to the unelected bureaucrats of the EU. Fine individuals all, they simply have too big and diverse a group of national economies to deal with no shared fiscal policy. Quite simply and regardless of your philosophical approach, monetary and fiscal policy have to work in a coordinated manner; in the EU that simply cannot happen. When the fiscally responsible nations have to continually bail out the spend happy, politics will kick in and the hand outs will stop. National self determination is the right of all nations but each must accept the consequences of their own actions. The Euro simply cannot long exist within that reality.

Greece would be far better off with a controlled exit from the EU and abandoning the Euro. Let’s be clear, Greece has made its bed and things are going to become less comfortable before they improve. However a realization that Greeks should control the future of Greece makes global economic sense and faces political reality. Today the wisdom of Margaret Thatcher in keeping the UK out of the Euro zone seems increasingly bright.  I wonder if the Germans could have the Deutsche Mark back how their people would decide.

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He Came in Like a Wrecking Ball: The Political Disaster that is Donald Trump

Living most of the last two decades in the tri-state area one cannot escape the presence of one Donald Trump. His presence is ubiquitous from the high end condo developments and office complexes to the billboards promoting his various ancillary ventures in media and branded products. Donald Trump is not a man, he is a brand that is bigger than life. In the business world, his record is admirable not just for his over the top promotion and resulting economic payout for him (he is very very rich), but as a survivor in an industry where may titans of today are dust in the wind tomorrow. Donald Trump is bigger than life and he knows it.

The Political Wrecking Ball that is Donald Trump

The Political Wrecking Ball that is Donald Trump

Donald Trump is also a political chameleon who has poured considerable money in to political campaigns, mostly democratic including the likes of Andrew Cuomo and Hillary Clinton. In stark political terms, Donald Trump has the political convictions of a weathervane. As the wind goes, so goes the Donald. Thus he has decided to run for President in 2016 and joins the 16 other declared major candidates. No person can deny the importance of money to the political equation and Trump brings the satchel filled to the rim. He also brings an incredible understanding of how to feed and manipulate the media machine who love a big mouth and love one even more if it is damaging to the Republican party. Trump is an amazingly shrewd self promoter and has acutely identified the frustration in the conservative base. For years we have been promised large and delivered light by Republican candidates and leaders. With so many truly viable and electable candidates as are in the GOP race this year, trump understands that a low teens popularity puts him near the top of the polls and his mouth has an unlimited ability to entertain.

While many of Trumps remarks this year are objectionable and have rendered him undetectable (Donald Trump will not the the 45th President of the United States), what is most regrettable is that Trump has not brought his considerable business expertise to the debate around improving the American economy. In this area he has much to add and could have created a compelling case for a Trump presidency. Instead he resorted to his carnival barker roots and went loud and wild. Its not his policy proposals that are wrong, there are polls that consistently show a majority of Americans want real boarder control (ie a BIG wall) on the southern boarder and economic disincentives for Mexican illegals crossing the boarder have been discussed before, and need to be back on the table. Trump had much to add to the debate, but instead has emerged as one of the most destructive forces to enter conservative politics since Joseph McCarthy.

Donald Trump has introduced a tone of hate and negativity into this campaign which is not only destructive to both the Republican brand but also his own reputation. Additionally he is discrediting the very positions he is advocating by framing his positions with anger and hate. Mr. Trump is a big boy and he can answer to his own conscience for his positions and statements. I support the 1st Amendment rights of any American even when their words are, in my opinion, vile and repugnant. But all conservatives and republicans should understand, the broader electorate sees Trumps rantings as being representative of the GOP. In 2012 the repugnant statements of Missouri GOP Senate candidate Tood Akin not only assured the reelection of one of the worst senators in recent history, Claire McCaskill, but contributed to the defeat of at least 4 other senate candidates and several house nominees. Donald Trump has the ability to make Akin look like a tremor to the earthquake that is Trump.

Oh how the media and the left are eating this up. They cant get enough of Trump and when some second rate poll shows him leading in the mid teens, they gladly anoint him the GOP front runner. These news organizations are run, without exception, by New York limousine liberals who are already planning Hillary’s coronation. The fact Trump makes good copy is just icing on the cake. All this is seriously eroding the Republican position in 2016. The election which on the fundamentals is strongly leaning in a conservative direction could well be handed to the Clinton left if they conclude the GOP cannot lead. Conservatives must understand, if the Republican nominee does not win, Hillary will be the next President, the very woman Trump has enthusiastically supported for more than a decade. One never really knows what motivates a person to run for president, but for Trump it is most assuredly not conservative principles.

Its time for those of us on the right to speak up for real conservative candidates, to speak in an inclusive and positive tone, not with hate. I came of age during the Reagan era when he sought an America which would be a shining city on a hill, not a junk yard dog fight in the Bronx. This is our time and this may well be our test. Decide carefully.

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Nuclear Agreement with Iran; A Historical Disaster

An Agreement in the Fine European Tradition of Appeasement

In a rush to chalk up some diplomatic achievement in the waning days of a presidency characterized by foreign policy naivete, confusion and failure, President Obama trumpeted the deal reached today with Iran. This agreement confirms international recognition of Iran as a nuclear power while allowing Iran to continue weapons research while impeding production during its term. In exchange Iran grants inspection rights to the United Nations while simply ignoring the question of access to all military facility. Most notably the international sanctions placed on Iran, one of the worlds foremost terrorist nations come to an end. After the 15 year term of the agreement restrictions on and access to Iran’s nuclear facilities come to an abrupt end. Welcome the Islamic Bomb. Neville Chamberlin would be proud of this uniquely European deal which has as its center peace appeasement.

President Obama and Secretary of State Kerry Champion Appeasement in Nuclear Deal with Terrorist Iran

President Obama and Secretary of State Kerry Champion Appeasement in Nuclear Deal with Terrorist Iran

The central failure of this agreement involves its failure to restrict Iran’s research and the development of capability. Assuming it is honored by Iran, a very big assumption, it allows Iran to maintain 2% of its enriched uranium. Simplistically this sounds good as they must dispose of 98%. However all enriched uranium is not equal and weapons grade material requires considerable research and refinement. This is most important if a nation wants to not simply produce a crude bomb which can be delivered in the back of a truck. Iran has an aggressive ballistic missile development program not affected by this deal in any way. A warhead size bomb requires a very sophisticated design and Iran has just been given a green light to continue its work towards a nuclear ballistic missile capability.

Proponents are pointing to a two thirds reduction in centrifuges, however we again run into the question of technological quality; all centrifuges are not created equal. Only a small number of centrifuges are required to continue full scale research. At the end of the agreement, of at any point during its term if Iran chooses to violate, they can simply commission a large number of new centrifuges, a process which would take months if not weeks.

In exchange for relatively minor concessions from Iran President Obama and Secretary of State Kerry have given up the store. The sanctions which brought the Iranians to the table will be gone. Make no mistake our appeasement friendly allies in Europe will quickly move to commercially profit from this and once gone will never return. The Iranians showed up for these negotiations with a weak hand and leave with the candy store near fully stocked. Not bad for the leading terrorist state in the world.

President Obama today reminded us that while congress has the right to review and vote on this his veto pen stands ready to stop any congressional “interference”. Well done President Obama; by classifying this as an agreement not a treaty you seem to have dodged the Treaty Clause of the Constitution. Article II, Section 2, Clause 2 of the United States Constitution grants to the President the ability to negotiate and sign treaty but then requires the advice and consent represented by a 2/3 vote of the Senate for the treaty to be ratified. Constitutional government is an inconvenient thing to leaders who seek to exercise unilateral power. Foreign parties should be fully aware that this agreement is not binding on the Government of the United States of America but only on the Obama Administration. At 12:01pm EDT on January 20, 2017 there will be a new administration in power. One only hopes they have a different view of appeasing terrorist states.

Desperation in diplomacy is never a good thing. To be sure the Iranian nuclear threat may be the most complicated and serious foreign policy dilemma since the fall of Soviet Communism. There are no good military options and the use of diplomacy is itself a positive thing. But bad deals are just bad deals and they help nobody in the long run. President Obama in advancing this agreement has imposed a terrible price of the future of the United States, one his successors will have to clean up, simply to get a hideous agreement he can put on a display wall at his soon to be built presidential museum and claim it as an accomplishment.

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Filed under Barack Obama, Congress, Foreign Policy, Iran, John Kerry, Terrorism

The Face of Evil: ISIS Demonstrates the Inhumanity of Islamofascism

Today we were all saddened with the formal news we had all feared, the death of Kayla Mueller at the hands of her ISIS captors. This was a young woman who went to Syria because she wanted to aid in relieving the suffering of the Syrian people at the hands of their corrupt leaders. Today we saw statements form Kayla’s friends and family and their pain was hard to watch. All America stands with her family in their grief and mourns the loss of a very special life far too soon. This comes just over a week after the posting of ISIS Burning captured Jordanian Pilot Moaz al-Kasasbeh was announced by the Islamofascist group. Moral relativists would tell you we need to understand why ISIS would be led to perform such atrocities. The truth is much simpler; ISIS and its Islamofascist philosophy are the face of pure evil in the world today.

Jordanian Pilot Moaz al-Kasasbeh Murdered by ISIS

After much thought a screen capture from that video of the insane slaughter of the pilot has been included with this post as it is important to see what ISIS has done. In performing such acts the killings of Kayla and Moaz the Islamofascists have surrendered any claim to humanity they had. They are a cancerous growth on humanity and like any malignancy, they must be eliminated. The reality is we will see more such acts, and given ISIS’s progression towards increasingly sadistic acts, the worst is yet to come.

What is equally starling are the differences in our two nation’s responses. King Abdullah II of Jordan pledged to wage war and wipe the ISIS infestation off the face of the planet.  Spending much of his time since the execution became public with his troops, he has said ‘The only problem we’re going to have is running out of fuel and bullets.’ True leaders lead and can come from any nation great or small. Jordan is fortunate to be lead by a courageous leader and his time in history is now.

Contrast that with comments made by President Barack Obama at the National Prayer Breakfast when he compared the atrocities of Islamofascists with the acts of Christian crusaders more than 500 years ago. The Democrat administration continues to use the minimum amount of force needed to keep the American people and their representatives in congress from removing the decision from his failed Presidency. The world should have no misunderstanding; Barack Obama does not speak for the majority of the American people. He has abdicated that responsibility.

Barack Obama and King Abdullah II of Jordan WH Photo

We are past the point of taking legal or legislative action against President Obama; he is a lame duck and will be on the stage for less than 2 years. Yet if left unchecked by Western Democracies ISIS will morph during that period into something even more depraved than it is today. One act the Congress could take is to drop all discussions on Approval of Force resolutions and instead pass an unambiguous Declaration of War against ISIS and any state or group providing support. Even will all his arrogance, I suspect Barack Obama would realize vetoing the Declaration of War would be political suicide, assuming the Declaration was passed by less than a veto proof majority.

It may be unpopular in some circles to say this, but President George W. Bush was right in that we are engaged in a multi generational struggle that will determine the very nature of humanity in the future. The responsibility lies with each and every one of us to ensure the scourge of Islamofascism is wiped from the face of the earth.  The more we wait the more death and misery will be endured.

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Filed under Barack Obama, Foreign Policy, Islamofascism, Politics, Terrorism

War, Peace and Political Cowards: Debating Conflict with ISIS

As a nation America is now engaged in a debate about a potential full scale war with the islamofascist group ISIS. At its face there is little debate that ISIS is a modern manifestation of evil with social media savvy which must be eliminate before it gets to the point where such elimination is either not possible or has caused damage that will make the events of 9/11 seem tame. This post is not going to debate the virtuous goal of wiping the ISIS infection from the planet but rather the political dance currently going on and the widespread political cowardness being demonstrated in Washington. Let’s be fair, there are some who have taken well thought out policy positions, at considerable political risk. Senator Rand Paul favoring very restrictive use of force to Senator Lindsey Graham who favors a virtually unlimited authority for fight the Islamofascists.  Then there are the fast majority of politicians who are desperately trying to hide from being the ones to make the decision to send America back to the Mideast in what is almost certain to end up another large ground war. No one epitomizes this more than former Secretary of State and presumptive Democrat nominee for President Hillary Clinton who seems to be using a “Grandma Strategy” to be avoiding any public statements on the largest foreign policy debate of the election cycle and which emerged in large part as a result of the policy of the State Department she led. We are not going to debate the policy positions today but rather the growing game of political hot potato being played. It’s almost spring in Washington and the Yellow Back flowers of Capital Hill and the White House are in full bloom.

Constitutional Confusion

Dating back to the administration of our first President George Washington, the Constitution has provided ample opportunity for confusion over the requisite authority needed for the United States to wage war. This is not entirely accidental as during the constitutional convention which drafted the Constitution, the delegated debated the same core issue we are today, the respective powers of the Executive Branch personified by the President and the Legislative being Congress. At the time the debate and the resultant compromise was less of an imperative as waging a war in the 18th Century was a relatively time consuming process of raising an Army and or Navy and then dispatching it into harm’s way. Short of an enemy fleet arriving on our shore without notice, an event which would clearly result in war, there was time to work the process to resolution. The founding Fathers could never have anticipated our world where wars are fought in real time. Just imaging George Washington’s reaction to a B-2 crew who after breakfast with their family near their bases in the heartland go to work, board one of the most power weapon systems ever developed, take off and several refuelings later bomb targets in the middle east and then turn around and after a few more refuelings  land back home just about a day later. This is a challenge for which the constitution was not written.

President George Washington in Uniform at Fort Cumberland Prior to the Whiskey Rebellion of 1794

First let’s understand the inherent constitutional conflict. Article 1, Section 8, Clause 11 clearly gives Congress the power to declare war. Additionally the same section specifically gives power to the Congress to establish, provide for and maintain a Navy and Land Forces of the United States. It actually reads rather clear. The complicating factor is Article 2, Section 2, Clause 1 which makes the elected President the Commander in Chief of the Armed Forces (thus clearly establishing civilian control). Now in the late 18th century this kind of made sense as Congress could have lots of time to debate while the President readied his forces to execute any Declaration of War which Congress may ultimately issue. They never envisioned the military technology of today which has made war fighting real time but more importantly they never envisioned the television camera in the 24 hour news cycle. Get ready your hair care products and makeup, congress is ready to debate; well at least a few members.

Yet for all the complexity assumed to be the foundation of the modern debate, simply reading the constitution, word for word, a few times seems to indeed provide much clarity. Congress has the sole power to declare war and once declared the President has the authority to carry out that war. Now the real issue is that congress is totally unwilling to step up and declare war. The last formal declaration of war by the United States was June 5, 1942 when a declaration was passed by unanimous votes of both houses against Bulgaria, Hungary and Romania. Those actions we fought since the Korean, Vietnam, Gulf War (1991), Afghanistan and Iraq as well as number of smaller conflicts have been fought with some ad hoc form of congressional resolution. Presidents, with the possible exception of the current, have been more than willing to pick up the ball congress has dropped. In 1973 congress passed the War Powers Resolution which became law over the veto of a Watergate weakened Richard Nixon. However a core element of that legislation is the ability of congress within 30 days to vote to end conflicts is the so called congressional veto. That mechanism was declared unconstitutional in 1983 (INS v Chadha) and thus most likely would not have any weight today, other than political. The result is a brain numbing debate that occurs every time we face an international threat and always results in some overly vague (think Gulf of Tonkin) congressional dribble.

Today’s Debate over ISIS

Leaving the merits of the conflict with ISIS aside for this discussion, it seems like the debate we are in, as the great 20th century philosopher Yogi Berra said “It’s like déjà vu all over again.” President Obama is showing no leadership and we are engaging in mission creep chillingly reminiscent of Vietnam. After waiting two years  and not intervening until it seemed like the Iraq government was about to fall, the President unilaterally launched an air war only with commitment to not put American boots on the ground. Within a month he authorized up to 300 advisors and targeting support personal. Within months we had up to 3,000 advisors. Here we go again. One of the core lessons we took away from Vietnam was never to go to war without a clear mission and a commitment by the people by way of the Congress to achieve that mission. Let there be no doubt young American men and women in uniform are going to die fighting ISIS. The insanely barbaric of a Jordanian pilot captured after his aircraft was shot down is just a preview. Another lesson of Vietnam is an AK47 can bring down multi-million dollar jets.  Every member of congress should be required, without cameras to play up to, to go to the Vietnam War Memorial in Washington before this congressional circus goes any further. Having been to the memorial numerous times, there is something haunting about the more than 58,000 names etched in the black granite. Brave young Americans who answered their country’s call and their days cut tragically short. The one lesson congress must take from this is they need to step up and meet their constitutional responsibility.

President Obama in the White House Situation Room

Like Vietnam 50 years ago, we face a conflict where the only certainty about its future is uncertainty. We must, congress and the American people, make a decision to either engage ISIS with the full weight of American military power or walk away and let regional powers resolve the problem in some way. Life is about the choices we make; choices and their consequences. If we engage there will be a major war and American lives will be lost. Those losses will occur on the battlefield, in the air above and most likely in the homeland as ISIS will bring the fight to America in some form. If we walk away we likely will have to deal with a world with an ISIS controlled state, the size and nature of we can hardly imagine. Congress must make a choice, the President most certainly will not.

For me in this debate, as it has for the last 226 years the Constitution provided clear guidance. The Congress must either pass a clear and unrestricted Declaration of War. The President must then either sign that declaration and then fight the resulting war with vigor to victory or veto the declaration. Decisions must be made, forget politics and ignore perceived places in history. Look into the eyes of late teens and early twenty something men and women who will be called upon in one way or another to pay the price of that decision, or worse, indecision. They deserve leaders who lead, not elected cowards who hide within the Beltway. Those young men and women will show extraordinary courage if called upon just as previous generations have and continue to in Afghanistan. Congress and the President must show political courage that pales in comparison and make a choice. Just as importantly the American people much stand and be counted. Cowboy up.

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Filed under Barack Obama, Congress, Islamofascism, Politics, United States Constitution