Belmont Club

Who's In Charge of the Oncoming Train

A sense of palpable depression came over conservative America after the Supreme Court upheld Obamacare subsidies and decided that gay marriage was a constitutional right.  Many felt as if the America they knew and loved had been abducted by space aliens and replaced with something new and hostile.  In contrast to this emotional devastation the left seemed buoyed by euphoria.

“Look ma, I’m on top of the world!” Yet over the same period the liberal landscape fell apart even faster.The last decade has witnessed a vertiginous decline in Washington’s economic, political and military power.  The economic engine of liberalism was dying under them, sustained only by the vapors of deficit spending and illusionism.

Its political dominance was being challenged by totalitarian regimes in China and Russia.   Even the triumphant tide of liberal values was being offset by the rise of neo-Nazi parties in Europe and the spread of Islamic ideas throughout the world. Justice Kennedy’s decision was answered in the real world by the Turkish police breaking up the Gay Pride parade in Istanbul.  Elsewhere its adherents were experiencing rapid descents from multistory buildings in without the benefit of an elevator at the hands of ISIS executioners.

If the world that conservative Americans once cherished has diminished; it has not been as rapid as the shrinkage of the liberal universe.  Both aspects of old world are dying  never to come back.  The post World War 2 era of Franklin Roosevelt has nearly run its course.  The difference is that the conservatives are more aware of its passing and may become more active in building what replaces it.

A miniature representation of the crisis is being acted out in Greece where the left is embarked on a Battle Royale against reality. With reference to reality ‘we refuse to accept it,’ says the Greek government, vowing to block expulsion from the Euro. There are no reasons, no math, no proofs that 1+1 <> 2. Just refusals. Insistence has taken the place of facts, and is uttered in the confidence that Someone will provide it.  Yanis Varoufakis, the finance minister said:

“We are taking advice and will certainly consider an injunction at the European Court of Justice,” he told The Daily Telegraph.

“The EU treaties make no provision for euro exit and we refuse to accept it. Our membership is not negotiable.”

The defiant stand came as Europe’s major powers warned in the bluntest terms that Greece will be forced out of monetary union if voters reject austerity and reform demands in a shock referendum on Sunday.

Not that lawyers can restock the ATMs, the supermarkets or the gas stations. All they can produce is paper, of the kind the Supreme Court decisions are written on. But paper has its limitations — once past the world of paper  Greece is being ripped apart as a sacrifice to the European fantasy. It seems like Greece must die so the narrative may continue live as explained by Ivo Daalder, president of the Chicago Council on Global Affairs, in an NPR interview. Obama was working to keep Greece in the EU because it is part of the Plan.

ROBERT SIEGEL, HOST: Washington wants Europe to work out a deal that keeps Greece in the eurozone that is using the common currency. President Obama has called German Chancellor Merkel. Treasury Secretary Jack Lew has spoken with Greek Prime Minister Tsipras. Why are the highest-ranking figures in Washington working the phones so ardently? What’s in it for the U.S.? … Why is it so important for the U.S. to avoid a so-called Grexit – a Greek exit from the eurozone?

DAALDER: Well, Greece … been a member of NATO since 1952 … and if the Greeks were to leave the European Union, or even the eurozone, there is a fear in Washington … particularly at a time when we see a growing confrontation with Russia, that Washington is saying this is probably not the time to shake up the system … Potentially you can see the Orthodox getting together and saying these are the kind of traditional values that – you hear that already from Russians and from President Putin – that need to be strengthened against the immoral values that are coming from the West … it’s that kind of thinking that I think we need to prevent from happening by not pushing Greece in the direction that it’s moving.

The Plan must be saved. The EU project and “progressive values” are a project that is too big to fail. Therefore it will be saved. Yevgeniy Feyman described how deceptive paper victories can be. He writes, “King v. Burwell is in the history books. Subsidies on federal exchanges will continue to flow and supporters of the ACA will (correctly) see this as a big win for the president. But to pretend that this means smooth sailing for Obamacare from here on out would be disingenuous at best.”

Federal backstops for insurers (risk corridors and reinsurance) will disappear after 2016, likely resulting in significantly higher premiums on the exchanges. Additional changes to how subsidies for premiums are calculated in beginning in 2019 also threaten to push more premium costs onto consumers. The exchanges have also largely failed to attract younger enrollees, and middle-class enrollees have been frozen out by (unsubsidized) Obamacare-sticker shock.

The Supreme Court just upheld a program that will bankrupt the treasury and send the health insurance industry into a death spiral. “Maybe not today, maybe not tomorrow, but soon and for the rest of your life.”  That’s what Greece is learning now, after the “victory” of entering Europe.

Saving these sacred cows will come at the cost at a high cost. George Selgin at Cato writes “if you think that the Fed isn’t involved in the Greek mess, you may want to think again. Paul-Martin Foss, our good friend at the Carl Menger Center, wrote a very nice post a few days ago concerning how the Fed may be getting itself tangled-up in an impending Greek default, through its swap lines with the ECB.”

According to the Federal Reserve Board of Governors, those swap lines were first established in December 2007 “to improve liquidity conditions in U.S. and foreign financial markets by providing foreign central banks with the capacity to deliver U.S. dollar funding to institutions in their jurisdictions during times of market stress.” … but then, in October 2013 — what do you know! — they were made permanent. … What has all this got to do with Greece? Here is Paul-Martin: “If you want to get a sense of the Fed’s involvement in Europe, watch the swap lines. … even if the Fed doesn’t say anything about Greece, its money-printing to pump up the swap lines will do plenty of talking.”

Greece illustrates how incredibly fragile the liberal world order has become.  That one small, almost insignificant European country has the potential to wreak major damage on the entire world economic system is terribly frightening and gives lie to all the bombastic claims about claims to being the wave of the future.

Conservatives shouldn’t feel too bad about the Supreme Court’s decisions. It’s the liberals who are living a house of cards.  If liberals were rational they would making alliances with conservative Christians, Third World Roman Catholics, Orthodox Christians and that favorite sector, the moderate Muslims to fight godless Communism and radical Islam.  To paraphrase Casablanca, “I wouldn’t bring up transgendersism and gay marriage in Tunisia, where hotel workers tried to defend their guests with ashtrays and bottles against the ISIS gunman, if I were you.  It’s poor salesmanship.”

But they don’t care, they’ll do it even though it costs them. Do it because there was always someone to pay for things; someone to fix what they broke. Therfore they will destroy Greece in order to save it as they will ruin Puerto Rico in order to prop up Democratic economic policies. Max Ehrenfreund at the Washington Post explains:

Alejandro García Padilla, the governor of Puerto Rico, is expected to say publicly Monday afternoon that the government of the island territory cannot pay its debts. The consequences could be serious both for the island and the rest of the United States. …

Puerto Rico has been doing worse than the rest of the country for the past 15 years. The economy began to contract in 2007, a couple of years before the economy collapsed on the mainland.

It’s no surprise that people have been leaving Puerto Rico if they can. The population is declining at an alarming rate of 1 percent per year. …

The report cites one surprising problem: the federal minimum wage, which is at the same level in Puerto Rico as in the rest of the country, even though the economy there is so much weaker. There are probably some people who would like to work, but because of the sickly economy, businesses can’t afford to pay them the minimum wage.

Someone working full time for the minimum wage earns $15,080 a year, which isn’t that much less than the median income in Puerto Rico of $19,624.

The report also cites regulations and restrictions that make it difficult to set up new businesses and hire workers, although it’s difficult to know just how large an effect these rules might or might not have on the labor market.

A report by the New York Fed also suggests that Puerto Rico has a relatively large underground economy employing a big part of the population. These workers aren’t taxed or counted in formal employment numbers.

In any case, it’s relatively expensive to hire and pay workers in Puerto Rico, which along with the high cost of transportation, energy and other goods, means that fewer tourists are planning trips to Puerto Rico than they were a decade ago and the number of hotel beds is the same as it was four decades ago, according to Krueger and her colleagues.

PR has a Caribbean level of productivity and a Washington DC level of bureaucracy, a grotesque combination rivaled only, with the possible exception of Chicago, by something like Greece with its pastoral body upon which the Brussels regulatory machinery has been grafted. Both are struggling in their mutant state but in any such clash of interests it’s the island which must die so that the greater bureaucracy can survive.

Their sacrifice will not be enough to save the post-war world, however. If conservatives are disturbed by the changes shaking their universe, their vision is at least unobstructed by the Narrative, which is blocking the sight of a freight train bearing down the Western liberal elite. When it hits, boy will lots of people be surprised.

The more perceptive individuals are already beginning to feel the rails vibrate beneath their feat and are inquiring into the cause. Paul Krugman wrote a few days ago that “it has been obvious for some time that the creation of the euro was a terrible mistake. Europe never had the preconditions for a successful single currency — above all, the kind of fiscal and banking union that, for example, ensures that when a housing bubble in Florida bursts, Washington automatically protects seniors against any threat to their medical care or their bank deposits.”

Maybe Krugman can tell Obama about the “obvious” Euro mistake.  Perhaps he thinks the freight train crushing Greece will pass the other set of rails. Wait till he realizes there’s only one set of tracks in the globalized world they’ve made.

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