The head of the European Union slammed Barack Obama’s plan to spend nearly $2 trillion to push the U.S. economy out of recession as “the road to hell” that EU governments must avoid.
“All of these steps, these combinations and permanency is the road to hell. We need to read the history books and the lessons of history and the biggest success of the (EU) is the refusal to go this way. Americans will need liquidity to finance all their measures and they will balance this with the sale of their bonds but this will undermine the liquidity of the global financial market.”
The blunt comments by Czech Prime Minister Mirek Topolanek to the European Parliament on Wednesday, highlighted big differences between Europe and Washington on dealing with the global economic malaise. It was the strongest rebuke yet from a European leader as the 27-nation EU is fuming over U.S. criticism that it is not spending enough to stimulate demand.
Shocked by the outburst, other EU politicians went into damage control mode, with some scolding the Czech leader for his language. Europeans leaders hope the new U.S. administration will agree with them on tightening oversight over the global financial system, which they see as crucial to fixing the global economy.
Instead, the Obama administration is focusing its efforts on economic stimulus and plans to spend heavily to try and lift itself out of recession with a $787 billion plan of tax rebates, health and welfare benefits, as well as extra energy and infrastructure spending.
Our government will also pump $1 trillion into the financial system by buying up treasury bonds and mortgage securities in an effort to clear some of the “toxic assets”- devalued and untradeable assets- from banks’ balance sheets. B.O. insisted during his prime-time press conference on Tuesday, that his massive budget proposal will put the weak U.S. economy back on its feet. “This budget is inseparable from this recovery,” he said, “because it is what lays the foundation for a secure and lasting prosperity.”
Even across the pond, they appear to be able to do math. Spending our way out of a recession is just ludicrous. Today, the UK attempted a major government bond auction that failed. We’d be seeing the same thing happening here, if the Fed wasn’t monetizing our debt by buying our own Treasuries. Instead, we’re following the Zimbabwe model. Genius.
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