What, Me Worry?

It's easy to be worried these days.

Hot on the heels of the 2008 U.S. banking crisis that tipped much of the world into recession in 2009, we're being told the 2010 European sovereign debt crisis threatens to precipitate a "double-dip" recession.

A minority parliament in Britain, riots in Greece, the spectre of countries from Portugal to Ireland defaulting and taking down the European banks with them, a billion dollar bailout by the EU and IMF setting the stage for the slashing and burning of government programs, the price of gold rising. Yep, plenty to worry about.

Pundits like Thomas Freidman in the New York Times warn of decades of painful austerity. Heck, even our own Neil Macdonald of the CBC has joined the Cassandra chorus.

Except, I have my doubts.

It's not just the self-flagellating, neo-Calvinist, cold shower, if we don't stop it we'll go blind tone of most of these Jeremiahs that makes me think they doth protest too much. It's that we've heard this stuff before.

It was only last year we were being warned that if Wall Street didn't get gazillions, the world economy would collapse. They gave themselves bonuses. And remember about fifteen years back, the Wall Street Journal warned Canada was hitting a "debt wall"? Turned out we were just being softened up for the slashing of social programs so the corporations and the rich could have tax cuts. Bend over Seamus and Julio and Franz: you're in for much the same treatment.

What would happen if a small European country or two defaulted on its debt? Well, the sun would still come up tomorrow. For instance, Russia defaulted on its sovereign debt in 1998. Defaulting on debt is a time-honoured method for governments in trouble to reset their economies. The U.S. did it in 1933, during the Great Depression.

Countries that undergo the pain of default are often farther ahead than those that limp along under the crushing burden of debt that they can never hope to repay. Just ask an African.

So you can see why the (corporate-owned) media in general, and the business press in particular are revving up the fear machine. Bondholders, (for that is what government debt is: bonds held by investors) don't like it when borrowers default. That's understandable: they lose their money.

IMF bailouts mean the banks are safe (happy shareholders) and boldholders get paid back. The austerity measures which the IMF imposes? Well, sheep are more willing to be fleeced if they're convinced they've been baaad.

Are there problems in Europe? Sure there are, plenty of them. But the consequences of default may be overstated, and the social and political costs of austerity measures underestimated. I'm just saying.