“It won’t be long before the EFSF has its own credit rating cut,” we wrote yesterday. And it wasn’t! Standard and Poor’s delivered the coup de grace yesterday. It downgraded the European Financial Stability Facility from AAA to AA+, according to the Wall Street Journal.
This doesn’t change much in Europe. But it does point out a simple fact: Europe has government debts it can’t pay. It probably can’t grow out of them either. Raising taxes reduces growth. Printing money unleashes inflation. What to do?
The best idea would be to get rid of the Esperanto currency – the Euro – and start all over. Europe needs to get back to the basics of Western prosperity: free markets, private property, the rule of law, sound money, and political liberty. These worked pretty well for 300 years.
Then came the greed of the bankers, the hubris of the central planners, the pettiness of the bureaucrats, and mean-spiritedness of them all. We live in the age of debauched and corrupted capitalism. It’s no wonder so many people are unhappy.
But that is just the story of the Western world. As we pointed out yesterday, animal spirits are running high in India and China, with 2 billion upwardly mobile people. What’s more, you have two 5000-year-old cultures waking up from a century of uncompetitive slumber. Let’s hope there are enough resources for the both of them!
for The Daily Reckoning Australia