10.12.2011 2

The mouse that roared?

The mouse that roared?

By Bill Wilson — It might not be an overstatement to say that the fate of representative government hangs in the balance as Slovakia has rejected the €440 billion European Financial Stability Fund (EFSF). It fell 21 votes short of a majority.

Was it the day the mouse roared? When a free people stood up — as did the people of Iceland recently — and said not just no, but hell no to more bailouts of banks?

To be certain, the Freedom and Solidarity (SaS) party, which is a coalition member of the ruling majority there, refuses to support bailing out European creditors that bet poorly on the debt of socialist governments like Greece. But the left-wing Smer-Social Democracy party? It only refuses to offer its support to help out the majority — unless the majority agrees to new elections.

Prime Minister Iveta Radicova has already lost a vote of confidence, as she staked her political career on the success of the vote. Left open is whether her coalition government will agree to early elections — which could cost them the majority — in return for the Social Democrats approving the bailout.

Ultimately, a re-do vote is eventually expected to pass, but at the cost of the current government in Slovakia completely collapsing. In other words, once the Social Democrats get their piece of the pie.

This is not unlike the United States’ vote on the $700 billion Troubled Asset Relief Program (TARP) in 2008. Then as now, a first vote on the measure failed. But, after some arm-twisting and fear-mongering over what might happen if “too big to fail” institutions were indeed allowed to collapse, plus some horse-trading, representatives eventually abandoned their principled stand against bailing out the banks that were holding worthless mortgage paper.

Such is the sorry state of “democracy” today, where public support for bailing out corrupt financial institutions is almost nowhere to be found, and yet the political class almost always comes to near-unanimous agreement on moving forward with a plan to do just that when push comes to shove.

Barring a political fallout wherein Slovakia’s Social Democrats cannot reach terms with the ruling majority on early elections, in the end, the banks will get their bailout. The “too big to fail” boogeyman is being wielded, just as Treasury Secretary Hank Paulson used to pass TARP.

To be certain, “too big to fail” is propaganda. It is a lie that has been used — with great effect — to justify the greatest theft in human history of trillions of dollars of wealth.

Would a Greek default and subsequent bank failures be painful? Would there be major disruption as a result? Yes. But, you have to clean the wound before it can be bandaged. Instead, it is becoming infected and allowed to spread until, one day, it will become terminal and the patient dies.

Greece would be unquestionably better off defaulting on its sovereign debt. It is Greece’s creditors that foolishly lent it money that could not be repaid that would take the hit. As well they should. They made the bad bets. Institutionalizing that failure will only make the problem worse.

Europe’s major powers, including France and Germany, would too be better off with Greece declaring bankruptcy. Instead, by insisting that Greece’s creditors be bailed out, as well as Portugal, Ireland, Italy, and Spain, they are in fact assuming their bad debts as their own.

They are unwisely administering the contagion to themselves. That is why Slovakia’s vote is so important.

Sadly, as appears likely, Slovakia’s no vote will not stand for long — highlighting the relative farce of today’s political system on both sides of the Atlantic.

It raises troubling questions about the nature of representative government, and of just who it is that is really calling the shots — when an idea so singularly unpopular with the people of supposedly free nations passes in spite of their numerous and vociferous objections.

Those leaders in Slovakia, Germany, Finland, Iceland, and elsewhere that have opposed the bailouts are to be praised for their principle, but they appear to be fighting a losing battle while the powers that be trade their votes for seats at the table. Meanwhile, the financial elites appear poised to escape once again from their richly deserved fates.

So, while it might make a sexy headline, this may not be the day that the mouse roared at all. Instead, it was more like the day that a pack of rats tore itself to bits fighting over scraps on the table.

Bill Wilson is the President of Americans for Limited Government.

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