The Biggest Threat From Greece That No One Talks About

The world is terrified of Greece, a nation with a gross domestic product roughly the size of North Carolina's and an economy that, as one investor quipped, peaked in 450 B.C.

Maybe we're all overreacting? Maybe. But the biggest threat that Greece imposes on the U.S. isn't direct. It doesn't even have much to do with Greece per se. It's that if ripples from Greece's fallout have even a minor impact on the U.S. economy, there's little we can do other than sit there and take it. Our immune system against economic ills is exhausted. And when a patient's immune system is exhausted, even a mild cold can be vicious.  

Greece lightning
How does Greece affect us at all? The worry is that Greece's mess will hammer the euro currency. This is already happening somewhat. Late last year, one euro was worth more than $1.50. Today, it's worth just over $1.20, and plenty expect it to reach parity ($1.00) before long.

That's where things start getting real itchy. With consumer spending and housing construction still moribund, most recovery forecasts rely on a surge in exports. The idea is a weak dollar will spur exports to other economies like China, South America, and Europe.

But thanks to Greece, the dollar is now the strongest it has been in years. As long as that's the case, you can kiss growth from exports goodbye -- and perhaps the recovery as well. That's why companies with large foreign-currency exposure like Philip Morris International (NYSE: PM  ) and Intel (Nasdaq: INTC  ) have been particularly crushed lately, and it's why you've heard newfound rumblings about a double-dip recession.

So let's say Greece does push the U.S back into recession. The question you have to ask is "What do we do then?" Or really, it's "What can we do?" And for both governments and businesses, the answer is not very much. Our quiver of recession-fighting weapons is empty. As PIMCO CEO Mohamed El-Erian put it, the world has "already used its spare tire(s)." 

What are those spare tires? There are three big ones.  

(1) Interest rates
When the economy starts cracking up, the standard response is for the Federal Reserve to slash interest rates. This is the most popular weapon against recession because it's extremely easy to implement and can be quite effective.

Problem is, we can't lower interest rates any further. The short-term rates controlled by the Fed are already pegged at 0%, which is as low as you can go.

The danger here is falling into a liquidity trap. It's what happens when consumers realize that with interest rates bottomed out at 0%, deflation will become an ever-living problem. Eventually you get a self-fulfilling cycle where expectations of lower prices stall consumption, which begets lower prices, which stalls consumption, and on and on. This is basically what Japan suffered through for the past two decades -- negligible interest rates and an economy that has gone nowhere. It hasn't been fun.  

(2) Stimulus
Between the Bush stimulus checks of 2008 and the monster stimulus package of 2009, Washington has committed nearly $1 trillion to stimulus. Much of this has been wasted, politically driven, and poorly targeted. On the whole, though, there's broad consensus that the stimulus has done plenty of good. Whether you believe the Congressional Budget Office's estimate of up to 2.4 million jobs saved or created, or Moody's Economy.com estimate of 1.59 million, or economic consultant Macroeconomic Advisers' estimate of 1.06 million, the fact is the economy is stronger today because of the stimulus.

But so much has already been spent, and the spending is so contentious, that the thought of another stimulus seems unlikely even if it's totally necessary. All budgetary wiggle room and political bargaining power was spent last year.  

Same goes for bank bailouts. Yes, banks now have much stronger capital and liquidity ratios than in years past. But they're also larger than before, meaning a potential failure could make 2008 look like cheesecake. If one of the mega banks like Citigroup (NYSE: C  ) or JPMorgan Chase (NYSE: JPM  ) (both of which have large exposure to Europe) get into trouble, there's absolutely no more political will to bail them out again. That's good from a moral hazard standpoint, but it could get ugly if bailout fatigue means we just let banks blow up and take everyone else down in their wake.

(3) Corporations cutting back
For nearly all businesses, the main response to a recession is to lay off excess workers, sell unnecessary assets, shut down idle factories, and scale back on fringe expenses. "Get lean and mean," as they say.

This has happened in awesome ways lately. As wretched as this recession was, first-quarter S&P 500 profits were actually higher than they were in late 2005. You can chalk that up to companies running obsessively tight ships, propping up profits as much as possible.

But there's only so much cost-cutting and plant closings you can do, and most of what's possible has already been done. The holiday parties have been eliminated. The job redundancies have been cut. The factories have been shut down. My parents' workplace even jacked the coffee machine. The low-hanging fruit is long picked, and the only thing left to purge if business heads south again is corporate profits.

Where to now?
No one knows what Greece's fallout really means. Fears might be way overblown, and before long we may wonder what the ballyhoo was about. But again, the real risk isn't directly from Greece; it's that even a small reverberation from Greece could morph into something big only because we're out of recession-fighting bullets. The irony is that we may be more vulnerable than ever in the face of an otherwise solid recovery.

Got a different take? Share it in the comments section below.

Check back every Tuesday and Friday for Morgan Housel's columns on finance and economics.

Fool contributor Morgan Housel owns shares of Philip Morris International. Intel and Moody's are Motley Fool Inside Value picks. Moody's is a Stock Advisor choice. Philip Morris International is a Global Gains selection. The Fool has created a covered strangle position on Intel. Motley Fool Options has recommended a buy calls position on Intel, and has a disclosure policy.


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  • Report this Comment On May 25, 2010, at 2:46 PM, militauro wrote:

    Maybe we should use the bailout funds returned from banks to prop up a bailout for the people? Just a thought.

  • Report this Comment On May 25, 2010, at 2:46 PM, militauro wrote:

    By bailout I also meant stimulus. They should know by now what worked and what didn't.

  • Report this Comment On May 25, 2010, at 3:08 PM, FREENATION wrote:

    Don't count on "They". "They" have proven themselves pretty clueless. In many ways it is better to have "they" not spend "our" money period. False economic stimulus is already showing its futility. "Our" money would be much better spent, invested or saved by "us".

  • Report this Comment On May 25, 2010, at 3:33 PM, gfbjohn wrote:

    Why do we insist "...our quiver is empty"?!?! It is not. We need to decide what we want to do and do it. Production capacity didn't vanish. Banks have some money to lend. VC's have money to invest. We are in fact digging a deeper hole as the government insists on "here's a fish" instead of "here's how to fish" solutions.

    What's missing is consumer demand. It's not like demand just disappeared. It's missing because the jobs to provide the consumer side of the equation are missing. The jobs are missing because the will to produce is missing. Businesses, rightly, are not going to produce inventory that will not be bought. The problem here is that we have a supply-side economy.

    Demand comes along after the supply is present. No mousetrap, then no demand for mousetrap.

    What we really need is to start saying "What do you really want?" to everyone, and then address that demand by exposing this aggregate demand information to businesses so their confidence rises to the demand.

    It is unconscionable that a civilized society with our productive capacity should have an unemployment rate of 10%, or a real employment shortage more like 20-25% if you factor in all under-employment of people squandering their life capabilities in "would you like fries with that" types of jobs.

    We command energy, robotics, distribution infrastructure, communication, data management, and other technology unheralded a century ago. It is time to implement a quantum shift in how we do business.

    Quiver empty -- NOT!!!

  • Report this Comment On May 25, 2010, at 3:34 PM, TMFTomGardner wrote:

    Thoroughly informative article, Morgan. Great stuff.

  • Report this Comment On May 25, 2010, at 3:44 PM, TMFAleph1 wrote:

    Greece was the catalyst, but we're facing a full-blown European crisis now, one that could certainly spread to the U.S.

    Alex D

  • Report this Comment On May 25, 2010, at 4:37 PM, Racovius wrote:

    I don't know. In 450 BC the Olive Market was pretty bad.

  • Report this Comment On May 25, 2010, at 5:21 PM, BMFPitt wrote:

    "If one of the mega banks like Citigroup or JPMorgan Chase (both of which have large exposure to Europe) get into trouble, there's absolutely no more political will to bail them out again."

    I wish I believed that.

  • Report this Comment On May 25, 2010, at 5:34 PM, RobertC314 wrote:

    $1 Trillion in stimulus saving 1-2 million jobs? Am I the only one doing the math on that? Does it really take $500,000 to $1 million PER JOB to save a job? How can anyone call that a "success"?

    Next time just call me and I will happily give up my job to someone else and just take the cash.

  • Report this Comment On May 25, 2010, at 6:29 PM, freemarkets57 wrote:

    We have seen the enemy and he is "they." This is how globalism can go viral and sicken economies around the world. Localism seems all but dead, but employment would be far greater if it were not dead. This is the other side of the global economic sword. We get lower prices when we export jobs to poor nations willing to work "cheap." Then we eventually lose our economic muscle and can't buy the goods due to a lack of income producing jobs.

    The central banks around the world have been an almost unlimited ATM card for excess government spending creating massive debts.

    I'm for more localism becasue it is almost impossible to hold gloablists accountable. We have allowed powewr to become ever centralised, and we are getting the corruption and inefficiencies I'd expect, from monopolies and quasi-monoplistic systems. We can start by btaking a closer look at the Fed.

  • Report this Comment On May 25, 2010, at 6:35 PM, Snertie wrote:

    Greece isn't so much a threat than it is a lesson. Because where Greece is, is where most of the Euro zone and eventually the US is going; a place where over 50% of the people are net consumers enslaved to the production of the rest, and who will never willingly accept any reduction to their promised benefits. What is going to happen when everyone finally realizes that our neo-Keynesian economic agenda is little different than the one Greece has been practicing for the last 30 years?

  • Report this Comment On May 25, 2010, at 6:58 PM, 50something wrote:

    I've read somewhere that the budget situation of California is four times worse than that of Greece, and that the rest of the US is effectively bailing it out through its common currency, the dollar.

  • Report this Comment On May 25, 2010, at 7:12 PM, kelleecrisafulli wrote:

    This article is way off base regarding the need for another big stimulus package. Since we are quickly pushing into the same debt to GDP levels as Greece I think suggesting more US stimulus is foolish. Yes it would provide short term gain however the increased debt load to service when the economy recovers would cause even large cuts to medicaid, medicare, and social security than we will currently need to do. And add to that the long term devaluation of the dollar due to risk associated with our high debt. Add to that the potential for the world to get off the dollar standard and a skyrocket in the price of oil again because of the risk of the dollar. Do we want a lot of long term pain or a little short term pain. There is no way out without some pain. Just say no to more "Stimulus".

  • Report this Comment On May 25, 2010, at 8:02 PM, TMFBane wrote:

    Great article, Morgan. Hopefully, there will be other, more favorable effects from the falling euro. For example, our loss in exports will be their gain. And maybe a revitalized Germany will bring stability to the region. And our imports will be cheaper, thereby leaving more money in the pockets of the American consumer.

    So the export boost from a relatively weak dollar was fun while it lasted. But I'm not sure that can be relied on forever. It's funny the cycles we go through with currencies. I can remember when the euro was born everyone was saying it was dangerously weak. And then, more recently, it was amazingly strong. Now, apparently, we're back where we started from.

    Anyway, fascinating stuff.

  • Report this Comment On May 25, 2010, at 8:24 PM, altrue1090 wrote:

    There is another way to stimulate the US economy besides borrowing and spending money. 70% of the economy is based on consumer spending. If you dramatically increase the US population, spending must go up. Bring in large numbers of young legal immigrants with skills. This will also help the Social Security and Medicare age imbalance. Increased spending will create jobs without raising the deficit.

  • Report this Comment On May 25, 2010, at 8:41 PM, Buckeye46 wrote:

    Hey, how about this: Give us our damn money back and let us dispose of it as we see fit. No more social welfare programs dragging the country into the abyss. Let the chips fall where they may and then march on Washington and imprison the resident of the White House. I've had it.

  • Report this Comment On May 25, 2010, at 8:53 PM, zobelzone wrote:

    I'm sorry but I thought this article was all over the map. I'm fairly new in stock market investing but this article makes me want to sell everything and put my money under the mattress. I actually am a little disappointed that many investors panic at any little variation in the news. Seems just to screw up others that see though it and stay the course. Whoops now I'm all over the map. Sorry.

  • Report this Comment On May 25, 2010, at 9:12 PM, kmv98finance wrote:

    We have one more bg lever: impeach Obama. That'll send the market back up 30%.

  • Report this Comment On May 25, 2010, at 9:27 PM, ctconyers wrote:

    Can anyone explain why Greece was allowed into (and continued in) the E.U. with fraudulent numbers? Why were they not rejected now & warnings given to the rest of the "pigs" that they could be next ? The Euro may be finished as a reserve currency. The E.U. can still be saved by drastic action but is there any leader yet who will do it?

  • Report this Comment On May 25, 2010, at 9:37 PM, jomueller1 wrote:

    Yes, the politicians screw up. Practically everything they touch. But it seems the super wealthy are also politicians. Economic facts don't count, fear is the big motivator. Those jittery billionaires and money managers are like old women, they go from one panic to the next and squander OPM big time.

    So my recommendation: Stay out of the market and you can sleep well by not wasting your time trying to "make" money. Nobody "makes" money but the Fed. The rest of us has to wrestle it from someone.

    RIP

  • Report this Comment On May 25, 2010, at 10:08 PM, Snertie wrote:

    Why is Greece allow to stay? Because the fatal flaw of progressivism is that nobody is ever held accountable for their excesses.

  • Report this Comment On May 25, 2010, at 10:23 PM, joestera wrote:

    Cut government 50% and lower taxes on businesses and individuals. Have government get out of the way. Don't believe it will work look at 1920 when we had a severe recession and then we cut government and taxes and had the lowest unemployment ever on record at less then 2% in the twenties. In the 1930s we grew government to fight another great ression that turned into the great depression. Sound familiar!

  • Report this Comment On May 25, 2010, at 10:43 PM, rd80 wrote:

    "the fact is the economy is stronger today because of the stimulus."

    That would be an opinion, not a fact.

    An opposing opinion would be that the borrowing needed to fund the stimulus package sucked up available credit. That money would have been available for business loans, easing the commercial credit crunch, had the gov't not been as active in the credit markets.

    Under the opposing theory, the stimulus package put brakes on a recovery rather than making the economy stronger.

  • Report this Comment On May 25, 2010, at 10:50 PM, rd80 wrote:

    One other take on why Greece is seen as such as threat is it's the first domino in a long chain. Greece by itself isn't enough of an economic impact to reach much beyond Europe, but it's the early symptom of bigger problems.

    For a recent analogy, Greece is the subprime market. Places with names like California, New York and Illinois are Alt-A.

  • Report this Comment On May 26, 2010, at 1:01 AM, crichton2 wrote:

    How about a public declaration of US bailout of Greece and other countries? It's already doing it anyway under the umbrella of IMF.

  • Report this Comment On May 26, 2010, at 2:42 AM, cruikshank wrote:

    altrue1090 with our current unemployment, many who are skilled workers, just what will these skilled immigrants be doing to earn their money to buy things? There are 1000's of skilled immigrants already laid off in the IT sector alone.

  • Report this Comment On May 26, 2010, at 2:46 AM, normgarnett wrote:

    Before Japan.... it happened in Spain in the 16th Century. I think it probably happens to every country that thinks a gentle inflation is the way to happiness. Spain's "loss of economic muscle" was caused by the influx of free gold from S. America, benefitting the rest of Europe. Unfortunately, there is no "free lunch"!

    Norman Garnett

  • Report this Comment On May 26, 2010, at 5:12 AM, blumelo wrote:

    I don't think there will be more bailouts. At least huge bailouts like AIG. The market is on their feet, learning how to walk again, on baby steps. Large companies are not making the big mistakes they did (maybe because they don't have the money for it).

    Greece, Spain and Portugal are making huge cutbacks. Economical indicators are back up.

    Like TMFBane said above "we're back where we started from".

    Speculation is the problem now. Voices from the unknown are painting ugglier images, bringing the euro down, putting the financial world under bear pressure.

    The moment the storm passes... we'll see.

  • Report this Comment On May 26, 2010, at 6:42 AM, XMFSinchiruna wrote:

    Terrific article, but unfortunately I don't share the view that the quiver is empty. When you have a printing press, it is never empty. Therein lies the true danger of fiat currency within a debt crisis. When the derivatives beast next rears its fire-breathing head, we will print more arrows for the quiver faster than we can say: "but Ben, those arrows belong to our grandchildren!".

    You saw how quickly low political will turned into quantitative easing in Europe. Some may recall how a reluctant Congress here was bullied into TARP by closed-door threats regarding the chaos that would ensue if too big to fail were to fail .... I suspect Angela Merkel received a similarly persuasive final-hour briefing about the nature of the beast they/we face.

    It's not really about European "contagion" ... the debt monster spawned here, and never left our shores. It's just that it stopped growling for a few months after we fed it some trillions.

    This is no ordinary debt crisis. The opportunity for a reasonable solution (letting them fail while we still had a workable balance sheet) having long-since passed, all bets are off regarding the lengths to which they will go to combat an un-slayable foe. If the quiver goes empty, they'll roll dollars into a fuse and convert the quiver into a dollar-stuffed bottle rocket. Watch how they will trample our currency. It will be a sad sight to behold.

  • Report this Comment On May 26, 2010, at 7:27 AM, hovruder wrote:

    Sounds familiar jenifferhomes, and the same faux prosperity that led up to the great depression is what led to the current crisis. There needs to be balance, government does have a role in that, but in recent years (last 30 or so) unfettered capitalism became a popular cry, government got out of the way, and we rapidly returned to the economic policies of the prosperous 20's. And here we are, sounds familiar certainly. I can envision the world we'd be in right now had government stayed out of the way.. oh yes, the cries would be far different -- "Why doesn't the government do something!!?" It would be that way because there would be a lot more of us on the unemployment roster. At some point we need to learn to use our big brains and give the problem far more critical thought than tossing up some buzz line someone feeds us.

  • Report this Comment On May 26, 2010, at 8:39 AM, ewent0 wrote:

    Unless the laws of gravity have changed radically, what goes up must come down. Try getting that through to the chief decision makers who continue to spiral consumer costs out of control. They've tried stimulus, they've tried bailouts and avoid the 800 lb. gorilla in the room.

    Unless those big guns at the top are willing to live within their means as they expect the rest of us to do, they'll continue to make upward moves that are not sustainable in conjunction with the business decisions they've made to cut their costs but not that of consumers.

    No one must, must, must be wealthy. Wealth isn't sustainable if it's built on short-term shaky business decisions that are nothing more than band-aids try to plug a leak in the Hoover dam.

  • Report this Comment On May 26, 2010, at 8:44 AM, YouHeardItFirst wrote:

    Lately it seems like the concept of a rational market has kind of flown the coop. Personally, I think that this is going to be more of an issue of human nature at this point. Our capacity for fear of the future seems to be limited to some degree, and when things don't go well at this point - the less rational of us think "Wow, great buying opportunity!", thinking that they are getting in on the ground floor of a recovery. Get enough people thinking that way, and the illusion becomes a reality because wishful thinking isn't just wishful thinking anymore, Greece or no Greece.

    I think we're getting used to things being not so hot, and it has become the new norm. The message has been consistently "Don't worry about it too much, the government(s) will do something." And that isn't just the message in the US - it's endemic. Everyone is playing that same song to their populations, with the few exceptions like Spain and Greece, who can't do it. But we're not in Greece, and neither are the majority of the people in the market.

    Have we played all the hands that we can? Not sure about that. If everyone thinks that things are bottomed out and that the gov't just needs to throw more funny money at the problem, like Bernake suggests - the new norm keeps being pushed until it truly blows up in our face, or we pull out - whichever comes first.

    People want to believe it's going to be okay. The current crisis has been redefined as a bump in the road because most people who have money to invest aren't feeling the pain themselves. Those that are affected the most aren't going to get heard because they don't have a voice - or any say in what happens next for that matter.

    I predict we'll keep leaning on our politicians to do what they do best, make us feel better about things and calm our nerves.

    We may or may not end up paying with a double recession - but I personally think that any fallout won't happen until governments become unable to whitewash the problems any more. There's really no telling where that will lead - but I suspect it will depend on how clever the spin is and how long nations can pushed to believe that their governments can handle the problem. When/If that changes, a lot of people will start getting angry, just like Greece.

    I personally think Americans will be the last to get upset, though. The politicians awfully good at pointing fingers in our corner of the world, muddying the waters enough to confound and confuse the public and make it hard to focus on what really is happening. Most people in the US still don't understand the housing crisis or what Goldman Sachs did to earn their bad reputation. They only seem to realize that Goldman Sachs = Bad Evil Company - and that has typically been enough to diffuse the clarity of our anger, at least for a long, long time.

  • Report this Comment On May 26, 2010, at 8:54 AM, katheter wrote:

    Why do so many believe that tax cuts for the rich, less government and letting businesses regulate themselves (especially oil companies, banks and other financial institutions) will solve everything? Wasn't that the policy for eight years of the Bush administration? And isn't that what got us into this mess? Why were no jobs created during that time? Oh, no, it's all Obama's fault. He should be put in prison. People's stupidity never ceases to amaze me. Turn Glen Beck off and educate yourselves.

  • Report this Comment On May 26, 2010, at 9:17 AM, maximummm wrote:

    As long as the economy follow the market anarchy without any control or plan, the main goal remain making profit that profit no one and who cares about fulfilled the needs of the human being, we will see crisis after crisis, wider and wider, deeper and deeper... drill baby drill

  • Report this Comment On May 26, 2010, at 10:15 AM, JeanDavid wrote:

    There is one more arrow in our quiver that is large enough to make a difference. End our wars of aggression throughout the world. Cut our so-called defense budget in half to begin with. We do not need stealth bombers to protect ourselves from IEDs. Our strategic air command could not even shoot down four aircraft in 2001. So most of that defense budget is wasted.

  • Report this Comment On May 26, 2010, at 10:17 AM, catoismymotor wrote:

    Nobody ever talks about Yanni. I tell you he is a menace!

  • Report this Comment On May 26, 2010, at 10:47 AM, sid2286 wrote:

    @joestra: Are you really advocating a return to the economic policies that led to the Great Depression? Lessez Faire was a huge disaster. Sure it works great as long as everything is going perfectly, but it leads to a much bigger fall when things get more, let's say "realistic."

  • Report this Comment On May 26, 2010, at 11:12 AM, FOOLBEFREE wrote:

    Two spare tires not mentioned :

    1.Europe Central Bank will have to restructure the debt of Greece and possibly Spain and Portugal. US and European banks will have to post a loss, which will not produce bank failures.

    2. Guarantee the debt of all European Union banks.

    The Europe Central Bank,ECB, has to continue buying their bonds , but more decisively. Lately , ECB has not bought enough and that scared the markets.

    US exports to Europe will go down , but it will not cause a US recession or a US bank failure.

  • Report this Comment On May 26, 2010, at 11:45 AM, PoundMutt wrote:

    Oh yeah, get gov't. out of the way!

    My dad and his father worked in a W. Virginia coal mine in the '20s. They hand drilled holes, stuffed them with black powder, blasted down the coal, shoveled it into a nine-ton capacity car on rails and pushed it out of the mine by hand. For this, they were paid 25 CENTS each!!! WITHOUT GOVERNMENT INTERFERENCE!!! You greedy bums want EVERYONE but a select few to live like that!

  • Report this Comment On May 26, 2010, at 11:48 AM, biotechmgr wrote:

    Thanks for a vivid and candid discussion of the underlying risks.

  • Report this Comment On May 26, 2010, at 12:35 PM, tiffan13y wrote:

    The premise of the article is erroneous.....the euro was at $.85 and we did fine. There is little risk to the export to Europe creating a substantial risk to growth here.

  • Report this Comment On May 26, 2010, at 1:04 PM, jambenfool wrote:

    Geez, can we stop the basenote drift on Foolish FINANCIAL op-ed pieces? If I want to read libertarian, tea party, ultra vegan (I'm not anti-vegan :) or any other political rants, I can go to their political website. Please go there to advocate impeaching Obama, nuking the Fed, or whatever else it is that you would like to advocate. I come here to read financials, not wingnuts, and the disrespect for netiquette alienates me and, I suspect, many other Fools.

  • Report this Comment On May 26, 2010, at 1:49 PM, MedPeddler wrote:

    I predict we'll keep leaning on our politicians to do what they do best, make us feel better about things and calm our nerves.

    This is the smartest thing said in this discussion. Many of the arguments here are good, but they largely ignore the cultural dimension of the crisis. Problems of this magnitude are multi-factorial and to boil it down to underregulation or overregulation is an oversimplification and a grave mistake. Glenn Beck may be a wingnut, but he's right about one thing at least. It's time for some introspection.

    How long can we be a culture that will eat, drink, or smoke whatever's in front of us expect a pill to fix it all? And then blame the drug industry for not giving it away? How long can we spend hours a day tuned in to brainless entertainment and playing video games and blame the obesity epidemic on McDonald's? In large measure, this problem is cultural. Too many people think they deserve the world and are willing to sacrifice nothing. They also think they're entitled not to experience any pain or suffering. That's why I led off with quote above.

    We live in a culture where the mass of people want more wealth than they've earned. Young married couples expect to live as well as they did before they moved out of their parents' houses. People with budgets that support $150K homes get mortgages for $400K. Then add in cable or satellite signals to their 50 inch TV's, cell phones so they can stay connected to everything all the time and vacations paid for on credit. The big banks weren't the only ones that got greedy.

    And all Washington has to offer is cultural Xanax served up in the form of stimulus packages and "everythings gonna be alright" happy talk about jobs they've "saved." And they continue to grease the skids via Fannie and Freddie.

    To solve a big problem you have to get to all the causes, not just one or two. And not just the ones that are politically expedient.

  • Report this Comment On May 26, 2010, at 3:45 PM, 2Think4Profit wrote:

    I wouldn't go so far as to say there's nothing we could do but take it. Likewise, one could say the impact would be worse if things were better. It's like being pushed while sitting on a high stool -- long way to fall. However, if you're already sitting on the floor you might only roll a little.

    That said, I think we've already seen a lot of the impact. There is still a lot of social proofing at play in the market, and when the hype hits the herd follows and a sell-off ensues. In the end I think it's just going to be a long, slow recovery process with lot's of ups and downs. I'm in for the long haul so I'll bargain hunt on the dips.

    Of course, I could be wrong and we do indeed face a dystopian future. Maybe I should hedge with a bomb shelter . . .

  • Report this Comment On May 26, 2010, at 6:33 PM, MKArch wrote:

    The quote below is from Morningstars chief economist Bob Johnson. According to him not only is the U.S. consumer not weak they have already exceeded pre recession spending levels and manufacturing has yet to catch up to this increase in spending. He also noted in another article that U.S. exports only account for 12% of GDP and exports to Europe only account for 2% of GDP although he does concede the weaker Euro will make european exports more competitive. He cites higher productivity in the U.S. as a counterbalance to the cheaper euro.

    http://news.morningstar.com/articlenet/article.aspx?id=33774...

    As good as all the production data were, there's still a lot more room for improvement in the months ahead. The industrial production index has recovered just 43% of the business lost during this recession. In contrast, consumer spending overall has now surpassed its previous high and recovered more than all of its losses.

    Given that the consumer leads industrial production by four or five months, I believe it is just a matter of time until production, and the high-paying manufacturing jobs associated with it, gets much nearer to its old highs. Strong durable goods orders and purchasing manager data from last week, as well as extremely strong data out of the transportation sector (rails, trucking, and air), also bode well for the manufacturing sector in the months ahead. Eric Landry, head of our industrials team, notes that the pace of recovery in the industrial production index is ahead of three of the last five recessions, but a little slower than the recoveries from the disastrous recessions of 1975 and 1982.

  • Report this Comment On May 26, 2010, at 8:03 PM, jeffhre wrote:

    RobertC314

    Not even close to the trillion lined up was spent. The 2 million jobs saved doesn't include the potential collapse of the auto industry, or an deeper intl. collapse in '08 if the loss of AIG lead to an expected complete collapse of Ireland which would not have been bailed out by European central banks that blamed the US for the crisis.

    A collapse of Ireland leading to Eastern Europe being caught in an credit squeeze that devastated several smaller economies would have led to long term fun times for all, no?

    At any rate look up the total actually spent and the amounts in billions already returned to the treasury - sometimes facts really are helpful in decision making.

  • Report this Comment On May 27, 2010, at 1:07 AM, frankwindes wrote:

    I think the economists big concern is the possibility that the whole EURO zone could fall apart. It is after all the 2nd largest economy after the USA and we are very interdependent with each other. Because of the heavy social benefits promised to Europeans and the recession triggered by the too big to fail USA banks, many of those countries are having trouble fulfilling their promises without excessive borrowing, and the problems arise when they can't make payments on their debts due to reduced tax revenues.

    In Greece the political upheaval being caused by the severe belt tightening is likely to make the government fall, and whatever party picks up the reins will have the same problems. If the Greek people refuse to tolerate the impacts there could be a long turmoil in which the Greek economy could drag the EURO down fast, that would be very messy for the EURO zone countries. Germans are grumbling about having to cover most of the bail out capital for the EURO zone. If Spain and Portugal collapse for the same debt payment reasons the EURO zone may have to rethink whether it is possible to have a common curency without a single central bank to manage it. The fallout from countries dropping from the EURO or restructuring to a central EURO bank would possibly send some nasty shock waves through the world's economies. Greece would only be the trigger that started it, not the direct cause of collapse by itself. If that worse case happened the world recession could see another big dip and it could last a long time.

  • Report this Comment On May 27, 2010, at 7:21 AM, jan1971 wrote:

    The last analysis is much too fatalistic. The actual debtlevel of the state of Spain is around 70 % of GDP, that is LOWER than the total debtlevel of the British state (around 78%) and lower than that of the US federal government (around 92% of GDP). Of course there is always the problem that in case of a lack of trust investors simply stop refinancing that debt or demand very high interests on new loans.

    I want to emphasize here that in most continental European countries debt-levels of households are usually much LOWER than in the USA and UK. One tome i met a couple from Belgium who were living and working in the UK. They told me the Brits borrow for everything, they have usually a collection of creditcards and their mortgages are high. this is much less common on the continent. Also the current-account situation is by far not as bad as that of the USA. Actually the Eurozone as a whole has almost a balance of exports and imports, something one can´t say about the USA. I thought the UK has a serious current-account deficit too. There are of course other problems like the graying of the populations in a lot of European countries and the large number of too well paid civil servants in especially the southern countries like Greece and France but some of the problems that the USA and UK have are much less serious in continental Europe. That is something that Wall Street never tells you.

  • Report this Comment On May 27, 2010, at 10:25 AM, slpmn wrote:

    http://www.japantoday.com/category/commentary/view/whats-up-...

    For almost 20 years, commentators have been talking about the failure of the Japanese economy, and holding it up as an example of what must be avoided at all costs. There's no question the popping of the bubble in the early '90s was painful and caused a severe recession that impacted many people. However, in the years since, I question whether things are actually so bad. Clearly, its not an ideal situation, particularly from the perspective of investors, but is it possible that what the Japanese are "mired" in could be called "sustainable growth" if observed through a different lens? As the commentary in the article in the link notes, things aren't all that bad there.

  • Report this Comment On May 28, 2010, at 11:13 AM, mikecart1 wrote:

    Who cares about Greece. When will the USA worry about the USA?

  • Report this Comment On May 28, 2010, at 11:38 AM, holdco99 wrote:

    The U.S. has its problems, but I don't buy the contagion argument. US banks don't hold much European paper, and if Europe disappeared tomorrow it would hit US earnings by 20%, not any more than that. Big deal. Europe will not cause global systemic risk in my view. And if someone is scared of that, then buy bonds. And if you're scared of inflation, then buy floating rate bonds in a safe company.

    Most of the sovereign debt issues in the US is debt we owe to ourselves. It's social security, medicare liability, etc. We need to restructure those. Politically difficult, but at least it's debt we owe to ourselves.

  • Report this Comment On May 28, 2010, at 11:48 AM, holdco99 wrote:

    Another thing to keep in mind. Not all currencies are bad currencies. If there are bad currencies, then there must be good currencies. Swtizerland, Denmark, Australia, Sweden, Norway...and Canada.

    A think a good portfolio would include: stocks which can grow earnings in most environments which are cheap, short duration credits, floating rate notes, cash but keep a portion in it in the currencies above, and some hard assets like real estate, precious metals, timber, etc. I own some gold, but it's not a huge position for me. Gold can surely go higher, but it does bother me that 1. every cab driver in NYC knows about gold, 2. hard to value, 3. few uses for it. I agree it's always been a store of value though, but I don't like that I can't value it with any precision. Buy some out of the money puts for additional downside exposure. When cyclical credits have bonds at par, short a few of them. And that's a decent portfolio.

  • Report this Comment On May 28, 2010, at 11:51 AM, wickii wrote:

    A man i China is paid $132.00 per month to make your Iphone ...there in a nutshell is your problem.

  • Report this Comment On May 28, 2010, at 12:05 PM, travelpm wrote:

    I have looked several times this week at how euro currency futures are trading and the prices are not dropping, so whoever it is that thinks it will go to a $1., it is not those who are buying and selling currency futures. In fact, the price looks pretty stable going forward.

  • Report this Comment On May 28, 2010, at 12:25 PM, mj2boogie wrote:

    Can't wait for the Euro to be at parity!! Traveling in Europe will be even cheaper!! Just have to keep that portfolio in good investments to provide the cash in retirement!!

  • Report this Comment On May 28, 2010, at 12:55 PM, lewloG wrote:

    Wow. Plenty of really, really BAD news. CNBC,not to mention Fox and radio types. Now even the Fool is piling on. Really smelly junk news being piled up while Target, Costco, TJ Maxx, and others are having record sales. Whoa ! What would happen if there were even a whiff of good news !! Is this when stocks are cheap, when fear is high ?? This is my 50th year doing this. Vietnam days were far worse, not to remind you of the days we waited for Soviets to attack.

  • Report this Comment On May 28, 2010, at 12:57 PM, efmagowan wrote:

    The sky is not falling. This will pass. The root cause of all our woes is overpopulation. Too many people, not enough 'stuff'.

  • Report this Comment On May 28, 2010, at 1:56 PM, Techlog wrote:

    Snertie is right when he said: "Greece isn't so much a threat than it is a lesson. Because where Greece is, is where most of the Euro zone and eventually the US is going; a place where over 50% of the people are net consumers enslaved to the production of the rest, and who will never willingly accept any reduction to their promised benefits. " Many contries are surfing on the welfare state board. You have on one side all the bureucrats that produce no net value, and on the other side, productive people who have to pay incredible taxes to support them. And in between, as in Greeec, you have black market, huge governement spending that go nowhere, huge pension plan that governement can't afford, etc.

  • Report this Comment On May 28, 2010, at 2:08 PM, Wonderland35 wrote:

    So, what's the solution?

  • Report this Comment On May 28, 2010, at 2:12 PM, markofzorro wrote:

    All this anti-government, anti-Obama whining is hogwash. Here's some news from the reality-based world:

    1. When government reduced regulation on banks, they went broke and had to be bailed out by the GOVERNMENT.

    2. Obama and the government are paralyzed by NEWLY-MINTED REPUBLICAN DEFICIT HAWKS who hypocritically voted for Bush-era tax cuts and deregulation. Now that we face the greatest crisis since the great depression, they are voting lockstep to prevent much-needed help from reaching the people and insisting on loopholes and subsidies to their corporate masters as the price of any slight reform or meaningful help for our shrinking ans suffering middle class.

    3. Incumbents voted to start two largely useless wars. Now we waste billions monthly and sacrifice the lives of our young continuing the wars long after they have served any purpose.

    4. In the golden age of Eisenhower in the 1950's people with incomes over $200,000 paid a 95% marginal tax rate. If the cut-off is adjusted for inflation there is EVERY reason for these people to carry their fair share.

    5. Obama has made lots of mistakes such as kowtowing to republicans and corporate lobbies (who have captured both parties), continuing the wars, wimping out on his inspiring agenda for change. Here's he needs to do: Stop the wars, raise taxes on the rich (including me), force republicans to filibuster if they want to obstruct help for Americans, insist that banks stop dealing in derivatives (risky and an obvious conflict of interest), subsidize small ( < $1 billion cap) businesses which are the engine of innovation and job creation, tax the daylights out of too-big-to-fail banks, bring justice to Wall St. greed heads, and get over his timidity and love affair with the malefactors of great wealth.

    Now that's a tea party we can all join.

  • Report this Comment On May 28, 2010, at 3:17 PM, markofzorro wrote:

    To those who feel the government and/or the unemployed are the source of our problems, consider, "E plurbus unim," "from the many, one." Those who would divide us in this deep crisis, will conquer not only government and the poor, they will conquer our society -- which is based on communities of trust and helping one another.

    Those who wish to shrink or neuter government should, to avoid hypocrisy, should refuse Medicare ( socialist plot, right?), and refuse social security unless they are poor. Social Security is not a pension, but a welfare program that transfers money to the rich and old at the expense of the poor and the young.

    Do this, and serious people will take your views seriously.

  • Report this Comment On May 28, 2010, at 4:12 PM, tylee100 wrote:

    Let's be fair here.

    When you say: "Between the Bush stimulus checks of 2008 and the monster stimulus package of 2009", you are showing your biases.

    It should have read "Bush stimulus checks" and "Obama monster stimulus package".

  • Report this Comment On May 28, 2010, at 4:29 PM, dhuddle wrote:

    Morgan, I always enjoy your articles... they are insightful and thought provoking. Thanks for writing them.

    I agree with "markofzorro" above.

    To " Buckeye46" - Tell us exactly which programs you would abolish? How about bankruptcy? (if you owe it, pay it - stop letting deadsbeats off the hook) How about FDIC insurance? (let people take their chances- let banks provide their own insurance. Yeah - let them use "credit default swaps" and try to explain to depositors how that is safe LOL) Stop ranting and try to find some solutions.

    To " kmv98finance " - I'm sick iof guys like you. What would you have done differently from Obama besides health care? Would you have not continued the stimulus Bush started? Would you have risked a depression? Give us specifics (and not lies you heard form Glenn Beck like the one about Obama loaning Brazil $2 billion). Your rants don't help at all. If you think the Republicans are all good and Dems all bad you are either on the RNC payroll or a fool. Focus on people, not parties. Join both the RNC and DNC so you can see what they are saying. I'm supporting Corker in TN, Crist in FL, Brown in Mass., Lincoln in Ark., maybe even Paul in KY, but to blame everything on Obama is unfair. Stop hating. If you are a Christian, read the words of Jesus in the Gospels.

  • Report this Comment On May 28, 2010, at 6:20 PM, drborst wrote:

    Too many comments on this already, but part of the following doesn't make sense:

    "The idea is a weak dollar will spur exports to other economies like China, South America, and Europe."

    The Weak Euro clearly hurts the US exports to Europe, but isn't the Chinese Yuan tied to the dollar? Doesn't that mean China and its export driven economy would, in some sense, hurt more than than the US?

    Other than that oversite, a good article.

  • Report this Comment On May 28, 2010, at 7:48 PM, rrwillis wrote:

    "Eventually you get a self-fulfilling cycle where expectations of lower prices stall consumption, which begets lower prices, which stalls consumption, and on and on."

    In the short term, it is a disaster, but in the long term, I think it would be very healthy. We live in a finite world. Any economy that depends on ever increasing consumption of things we don't really need, and sometimes don't even really want, will collapse at some point.

    Given the longer lives we're leading, we need to bite the bullet and increase the age for Social Security and Medicare benefits to reflect the new reality. (Being 65, this would affect me personally, but so it should. I can still work. Why should the government support me?)

    We live in interesting times. I just hope I last long enough to see the final direction of the changes we're going through.

  • Report this Comment On May 29, 2010, at 1:10 AM, imexcited wrote:

    Why bailout Greece?

    l dont believe its greece,s problem. its the international banks that are in trouble in greece.

    Did someone say Banks manage money,what a joke bankers are at it again?

    This could be a hangover from 2009 and the banks are looking for more stimulus.

    l remember my dad telling me that greek farmer were paid not to farm,he said it was a great racket a bonus for having the EURO .

    The MAIN INDUSTRY in Greece are Banks he said because international tax incentives.

    Its a holiday desternation a place where the rich buy holiday homes.

    Now we are told that Greeks need a trillions euro,s to bail themself out!!

    Hang on a minute 11.5 million people in Greece. How much stimulus ?

    Who put Greeks in debt,

    Greek people spent a trillion euro,s. ya and pigs can fly.

    The banks and their business friends have done it again one too many bad deals.

    or were they really GOOD deals for someone !!!!!

  • Report this Comment On May 29, 2010, at 4:14 AM, koolkrissy wrote:

    It is not Greece's fault that America is weak; it is our own fault.

    Our state and federal governments will not have adequate tax revenues to balance their budgets as long as there are only "poverty level" jobs to replace the millions of decent paying manufacturing jobs that have been so sinisterly eliminated from our economy. These jobs have been removed and set up on other shores that are not US soil; ie., China, South Korea, Taiwan, India, Egypt, Mexico, Indonesia, and names of countries (just check your clothing labels for the names) that many Americans have never heard of. Since this has taken place, have you noticed any decrease in the cost of foreign made clothing, automobiles, technology gadgets, or any of the rest of the imports that we so greedily gobble up? Probably not!

    But, we have all noticed a HUGE increase in the salaries of the CEO's of these same companies who now have the majority of their manufacturing employees based in third world countries? Have you noticed any HUGE increases in the amount of dividends that are paid to the shareholders of the stock of these companies who have exported all of their good paying jobs to foreign soils? Probably not!

    Have you seen where any income tax has been collected from these new foreign employees? Or, has any social security taxes been collected or paid by these new employees of U.S. corporations?

    Then, of course, we have the 10 to 11 million "undocumented workers" in the USA who are no less than criminals because they have broken our immigration laws; but they are doing work that our "citizens" do not want! What a crock! Most of these people live in squalor in houses that are filled with 25 to 30 people. The majority of their income is sent back to whence they came (Mexico or other countries). Yet, they have no medical insurance and they fill the emergency rooms each day and evening and demand that they receive care. Our federal, state and local governments pick up the tabs for these people and these "undocumented workers" are also eligible for food stamps, housing and heating assistance and other welfare programs as well as disability social security for which they have no legal right or claim. Our prisons are full of these creatures who are also drug dealers, sex offenders and other sorts of criminals.

    I have no problem with legal immigrants to the U.S., but it is time that our nation woke up to the fact that we cannot afford to allow people who are in this country illegally to "squat" here and pay no taxes, or contribute in any way to this country's well being. We need to close our borders and to deport those who have no right to be here.

    We would not be financially bereft in this country if it were not for all of the above. Our problem is not GREECE or Europe! Our problem is the "give away" of our country's financial well being by our corporate, financial and governmental leaders of this country. If our country was financially sound itself, it would not be dependent upon any other nation, or frightened about their financial problems.

    If we fall, it will be by our own hands, NOT by the hands of the Greeks, or the Europeans. We are so weak and corrupt, we stink!

    Isn't it about time that our nation looked after its own people and its own problems before it tries to solve everyone else's problems?

    If all of us who are invested in the stock market, turn tail and run every time the world shudders from its own greed and corruption, then we deserve whatever we get.

    I intend to do my talking in the voting booth in November and I hope that all of you will do the same. I am also going to talk to all of my friends and neighbors about doing something too. It is time to get rid of the entire "House of real fools!" out in Washington and elect reps who are ready to do the hard jobs that we have sent them there to do. We don't need a House full of Democrats and Republicans. We need a house full of real Americans who will roll up their sleeves and go to work for the betterment of all of us. No offense intended to the Motley ones.

    Yes, I realize that I am probably not the most politically correct person on the block; but I am an American and I hate to see what has happened to my country in the past 20 years. I am so sick of the divisions that have been set up for us by our "media" and others in this country. No American citizen should allow anyone to group them into any group other than "American citizen." There should be no one addressed or grouped as an African American; Latino American; Gay or Lesbian American; Asian American; Japanese American; Chinese American; Hmong American; Muslim American; Caucasian American; Catholic American; Protestant American or whatever. NEVER, NEVER, NEVER! WE ARE AMERICAN AMERICANS! If we divide ourselves into groups, we will divide our country and we will crumble from within! Abraham Lincoln understood this only too well. We fought a civil war over this issue. Why are we setting ourselves up for the same thing again?

  • Report this Comment On May 29, 2010, at 6:54 AM, docwife wrote:

    Read Nouriel Roubini's new book, Crisis Economics, for more information about asset bubbles throughout history and their consequences, which last for years.If history holds true, we will have a decade of turmoil and black swan events, now made all the more frightening by the globalization of capital and computerized trading. Also, the world will change as the boomers age -- less consumption, the need for more medical care, etc. When Johnson established Medicare, the size of the elderly population vs. the boomers was miniscule.. The commission that created Medicare told him that it was unsustainable once the boomers reached retirement age. He bludgeoned them into silence. Now, after paying Medicare and Social Security taxes for 40 years, the boomers will find health care access will diminsish as doctors are forced out of business by low reimbursements; Social Security will be taxed into oblivian; and fixed income investments will yield next to nothing.Meanwhile, government employees will have their rich retirement pacages and gold-plated health benefits. We now work for the government. It does not work for us. According to Malcom Gladwell, young people who graduated from college during the Depression never landed the jobs they might have expected. Career paths were delayed by ten years, and their salaries never compensated for what they lost for a decade. That is happening right now. The country is in for trouble for a long time.

  • Report this Comment On May 29, 2010, at 12:36 PM, hyefool wrote:

    You go, markofzorro! No one is entitled to a free ride.

    After years of paying off our own debts, holding off buying big toys or too much house, paying our own education tuition, paying our full medical bills, we find ourselves paying to bail out high-wage talking heads, consultants who should have known better, and over-indulged CEOs. I'm not happy about it, but we'll keep working because that's what it takes to move us (individually and collectively) forward. I'll plant a bigger garden this year, can more of our own produce, keep that 16-yr-old car for as long as it holds out, continue shopping for used clothing and household goods as needed....

    A healthy economy needs to be well rounded. We can't all be in high-tech, high-wage jobs. Our economy can't be based solely on consumption - we have to be producing the things that make real life happen. We need to use more of our own steel, employ more of our own technical experts, pick our own fruit, drive our own taxis, haul our own trash. It isn't possible to create a living situation where everyone is being served - we all have to take a place where we serve, produce, and get our hands busy - and maybe even dirty - doing things that meet the foundation needs of this country.

    There is much to be learned from the more recent immigrants to this country. For most of them, survival and security depends on the entire family; everyone works, from the youngest to the eldest, and everyone ends up doing some. of the menial tasks.

    It's time to roll up our sleeves

  • Report this Comment On May 29, 2010, at 9:21 PM, docboyer wrote:

    Yes consumer buying is down. That's because ou true unemployment rate is 17.6%. The government is not counting theb 8,000,000 who have been out of a job more than a year.Obama has used Keyneasian economics to end the recession. Had he taken just one course in ecdonomics at Harvard or Yale, he would have known that Keyneasian has NEVER worked. Maybe the Muslims who paid forn his education

    couldn't afford it.

  • Report this Comment On May 29, 2010, at 9:41 PM, plasmakc wrote:

    LOL, yeah I used LOL. Fact is all the "economists" and the theorys that got us into this mess are still there calling the shots.

    It's real simple, why would anyone by an apple from me i bought off a farmer and am reselling and charging a mark-up on, when they can grow it themselves or go directly to the farmer? I know, I know...I am simple minded and don't really understand the "global" economy, right? Bullcrap.

    I have good friends and family who subscribe to the belief we dont really need to make anything to be prosperous. A service economy they call it.....absolutely absurd.

    What the heck did you all think was going to happen when we don't manufacture anything here anymore, we allow cheap exports into the country, trade laws benefit our worst enemies and biggest competitors, no regulation of banks and shared resources....and the list goes on. Fact is the top 5% are still wealthy and they sold us out. Wake up you C- students......you dumb folks didnt get any smarter or wiser it appears since high school. Disgusting!!!!!

  • Report this Comment On May 29, 2010, at 9:43 PM, plasmakc wrote:

    Oh and by the way, it's your fault. Tahts right ....YOU!!!! You're just a cog in the whell right............

  • Report this Comment On May 29, 2010, at 10:31 PM, mars021can02 wrote:

    In the big fuss, one could have forgotten what friends are good for. You may have friends, even very good friends, remember? It is possible a weak, disturbing force in the balance, be recovered by another dim push in the opposite side. It's not about playing dirty but - rather - simple physics and, friendship. Best wishes and, try thinking 'beyond the fence', you know very well what I mean!

  • Report this Comment On May 30, 2010, at 12:49 AM, jdelassus wrote:

    Capitalism is essentially irrational because it's based on two less than stellar human attributes - greed and fear. Anything to make capitalism more rational is a step forward which does not mean totalitarian socialism. It could all work out if anybody could figure out what something/anything is worth before it's sold. Our government could do a lot to rationalize and stabilize the economy and still have market capitalism. A big problem is that economics is all mixed up with politics. One thing that should be crystal clear is that Reagan era laissez-faire capitalism is an abysmal failure and should be abandoned forever.

  • Report this Comment On May 30, 2010, at 2:57 AM, jfrankh57 wrote:

    Everybody, including the author, who has a half baked degree in economics (or do they?) says that if the government had neglected to bailout the big banks that we would be in a much rougher position than doing so. Why? What happened to the FDIC, et al? Where these programs so worthless that the smart@$$es who beat their drums for the stimulus would not allow natural cycles to happen, survival of the fittest (smartest and/or less greedy)? Let's face the fact that no one knows, but can only conjecture. I would postulate that had these too big, albeit, stupid, greedy and shortsighted companies should have been allowed to fail, be placed on the chopping block and let someone else, who had a modicum of intelligence and integrity take over. Had the moral decay that is rampant in our society not been a part of of corporate culture, you wouldn't have these problems. Of course, you could have done the smartest thing and bailed out the tax payer instead. That money would have been better spent by providing money to tax PAYERS who then could have paid off their homes, autos, and whatever other loans they cared to handle. Had that happened, the banks would have been flush with a purposeful infusion of cash and many of the worthless loans would have been made good.

  • Report this Comment On May 30, 2010, at 3:08 AM, tomjtoon wrote:

    What is missing in all of this -- no one points out a large part of Greece's problem -- the revenue side. That is the failure for the wealthy and others in Greece to pay a reasonable amount of tax proportionate to their income and assets. Here is a link to a recent NY Times article on swimming pools in Athens:

    http://www.nytimes.com/2010/05/02/world/europe/02evasion.htm...

    We have our own examples of ecconomic injustice -- offshore corporations avoiding taxes, outsourcing of good paying jobs, cadres of corporate lobbyists doling out money to the elected to support their "special interest" trying to stifle real reforms.

    The tea partiers should be angry -- but be angry at the true creators of our economic turmoil -- obsessively greedy and immoral bankers and their ilk. Last time I checked, a nine to fiver, union employee, social security, or medicare recipient haven't brought our economy to its knees while subsequently being paid a bounus in the millions and billions.

    Capitalism works best in a regulated environment so that all facets of society and environment are taken into account -- government (us) needs to make sure the children are playing fair and nice, so we can all benefit.

  • Report this Comment On May 30, 2010, at 6:47 AM, jacksabo1 wrote:

    There is more that companys can do, i.e. cut back on extravagant senior management compensation. What manager is worth more than 10 mil? Is it Abercrombie's CEO who makes 71 mil? Who needs more than 10 mil? Come on guys, our culture has swayed to greed is great...screw the productive little guy in the corp, give the CEO another bonus. Was it the trickle down theory that got us here? Who knows, but it's most often the middle managers who make a place run efficiently, not the senior management who spend their time cultivating board members and promoting themselves. Whatever happened to having leaders who try to ensure that all members of their "team" get treated well, instead of me, me, me, more, more, more. These guys are the root of all our economic problems.....

  • Report this Comment On May 30, 2010, at 8:31 AM, grafx301 wrote:

    You say: ". . .the dollar is now the strongest it has been in years. As long as that's the case, you can kiss growth from exports goodbye." Many of the components used to manufacture American goods are imported from Asia and beyond. Much of what is manufactured under American brand names is manufactured overseas as well. The only things we export that are "all American" are agricultural products. A weak dollar won't help us. No economy ever has had long term and continuing success with a weak currency. A strong dollar is in the best interest of the U.S. economy.

  • Report this Comment On May 30, 2010, at 11:50 AM, Stan0301 wrote:

    What we really see is that our !@#$%^ MBA bottom line worshiping culture discovered "outsourcing"--and we really don't produce all that much anymore--what we export is our money--and that money once exported has very little ability to strengthen our economy. We are in this much deeper than most admit--stimulus such as we "gave" our selves is a three fold affair. First is the knee jerk response--things are "supposed" to get better--so, instantly to some extent they do. Then comes the "tempered by inertia response"--we dumped a trillion into our economy--something better happen, and even though the bankers outright stole half the trillion still the other half makes a difference--we are in this phase right now. Then comes the face that money must be based on value--that value doesn't come into existence until we sweat our brows and EARN the value of the trillion we dumped it will be a millstone around our necks--figure fifteen rather rough years to accomplish that--we need to make the multilateralists walk the plank and grow ourselves instead of making our dollars our number one export. There is a huge difference between saving banks and saving bankers--but you can't give away what you don't have-and now we have to earn that which we gave away, which in an "outsourcing" economy is going to be impossible--outsourcing is a fraud, and must be eliminated--invest in ourselves first.

  • Report this Comment On May 30, 2010, at 12:59 PM, dspallas wrote:

    The Biggest Threat For The World That No One Talks About"....

    Talking about Greece and it's likely effect(s) on the World is all good and well for the short-term, but isn't it the equivalent of trying to solve housing and transportation problems in a country, with more and more people living in that country, all while that country's physical area doesn't change?

    At one point you WILL run out of room to 'expand' into. And this is not just one imaginary country... ALL countries around the world are running up against that unavoidable wall in due time.

    More and more we will see (are seeing) the inter-connectivity between one country's behaviour influencing others.

    All this an outcome of there just being too many people that are occupying this planet.

    Nothing is being done to stop that. No politician dares to touch the subject, as it is considered political suicide even mentioning population control.

    This maelstrom that we're in will not stop and only speed up.

    Communism turned out to be an experiment that didn't work out in the long run. Now we're finding out that this experiment called 'capitalism' is not working out either.

    Money is placed above all else. There are many, many examples of that. Money has also been dictating that more and more, and more, and more people is a good thing....

    Which reminds me:

    "...If one joke is good, then a thousand jokes must be hilarious..."

    There's a lot to be said for constraint.... A Lot! And for once, "a lot" is a good thing! ;-)

  • Report this Comment On May 30, 2010, at 7:00 PM, bblats wrote:

    You've all ignored the biggest reason behind the problems in Greece and most of the problems in this country. UNIONS, more specifically, UNION leadership. They are urging their members to fight any reasonable rollback of wages or benefits that might help their country (State) through the budget deficits now facing them. Why? Because UNION dues are tied to wages and benefits and UNION bosses wages are tied directly to them as well. The UNION bosses are the ones who don't want to roll back and are encouraging (some might say even threatening) their members to resist any rollbacks. They threaten governments with disruption, denial of public safety, education and transit and, unfortunately, the most vocal of their membership rally to their call.

    WAKE UP America. I've been to Greece many times and it is a society based on a few supporting the majority for the better part of their lives. It is why so many well to do Greeks do everything they can to avoid taxes. THEY are tired of supporting a bunch of bureaucrats and pensions that allow benefits for life for a job that produced nothing for the economy of Greece.

    They are doing it in California and other states and we are picking up the tab for the AUTO Unions through bailouts.

    Most of what was given to the unions was given by unscrupulous Management and Politicians in better times. If we had let the banks and car companies fail, the Union contracts would have been renegotiated to a reasonable level and banks that failed would have been replaced by those who followed accepted practices.

    We are not far behind Greece. California will be next.

  • Report this Comment On May 31, 2010, at 1:41 AM, nosocksjuststock wrote:

    I've felt for a long time that the "global economy" had a very important rule missing.

    The Rule:

    If you want to sale cars (or other product/service)

    in let's say Africa; then, you should build factories and offices in Africa and hire and train local people to build cars (or whatever) for their people within their laws and wants.

    If you want to sale cars in the United States the same should apply, wheather its a US company or a company from another country.

    This way jobs within a country stay within the country.

    On another note: If you want to flood the Gulf of Mexico with oil for a couple of months; then, we should have the right and means to blast the well pipe a couple of hundred feet below the ocean floor and shut the thing down untill someone can drill a new well properly. Its not rocket science we have been blowing things up even before 1776. Ok some of its been rocket science; but, this is really submarine science. Not really...Its really just oil well management by what would be hot shots if it was on land. All that needs to be done is to poke a smaller pipe with a charge that can be detonated down the well and either blow it so it closes the well or blast forms the new pipe so a new well head can be put on it. True its a little harder a mile under water than it would be in say Oklahoma but I'm sure we have the technology sitting around somewhere. (probably made in China)

  • Report this Comment On May 31, 2010, at 1:49 AM, nosocksjuststock wrote:

    Note to bblats:

    In the 1950's 80% of jobs in the United States were Union Jobs. Today its only 8% and half of that is government related jobs. Teachers, Firemen, Policemen, government office workers, public utility workers.

    I don't know the numbers for Greese but unions are not the problem in the United States. The Problem is lack of unions. The same corporations that have been sending our jobs out of the country are the same ones who broke the unions in the 1970's and 1980's

  • Report this Comment On May 31, 2010, at 2:38 PM, delange001 wrote:

    I'm not so concerned with the strong /weak Euro. Both the Euro and Dollar zones are heavily indebted with eroding efficiencies. I'm more concerned with the Chinese vice like grip on the dollar which keeps the dollar from depreciating. No other country has so much reserves to defend a currency from appreciating like the Chinese have for their yuan. Good Luck dollar in shaking the Chinese grip on your value.

  • Report this Comment On June 02, 2010, at 11:25 AM, bobo2 wrote:

    markofzorro: if all those whiners that complain that taxes on the "rich" need to be increased to pay for the endless spending all the insatiable politicians seem to crave would just go ahead and send in their own money, the rest of us could go on creating wealth and jobs without hinderence of government. The real problem is nobody treats our tax dollars as money that actually belongs to somebody. To them its all free money that falls out of the sky. If they treated it as their own, they would spend it much more frugally. But sadly, most of those in power never balanced a budget, met a payroll, or created anything of lasting worth in their lives and if they were given more money, they would only flush that after the rest of what they've wasted.

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