The reality is that the average European voter absolutely refuses to accept “austerity”. Why would they? Bankruptcy is a vague concept to people who have lived with three generations of deficit spending and the faux lifestyle. It is not surprising that they elect politicians who promise to keep spending and provide the goodies. But who will pay? The German are a nation of savers. They absolutely refuse to debase the currency and are reluctant to fund more bailouts. Eventually they will pivot toward the boundless resources and potential of Russia. The EU and euro appear doomed. The IMF and European central banks have already sold most of their gold to fund bailouts. What’s next? The art? Already nervous Europeans are converting their euros and capital into dollar denominated investments. This is good for the dollar and giving at least a temporary capital infusion and boost to the American economy. (lucky Obama). However the greater lesson should be noted. Deficit spending squanders capital and leads to poverty. Americans should be forewarned as things will get ugly in Europe.
Paul Krugman tells CNN that the French elections vindicate his economic views that austerity measures stifle growth and are counterproductive. He believes in more stimulus spending as a prelude to growth. This is the vision that underlies Obama’s “Forward” agenda. The road to serfdom is paved with good intentions.