We won't solve America's problems until we all wake up to how economies and taxpayers are being manipulated by the rich and powerful. The recent Irish economic "crisis" provides a case in point.
As you may have read, the Irish government recently received a substantial promise of credit from the European Union. Supposedly, this was because Ireland had gotten itself in trouble by bailing out and taking over its major banks when the U.S.-centered global financial crisis hit. Not long before the E.U. action, the Irish government was pointing out that while the bank takeovers were expensive, the government was enacting responsible spending cuts and tax increases, and it would not need to borrow more money before July of 2011. When it did need to borrow more money it would face relatively high interest rates on that new debt, but it hoped not to have borrow huge amounts and it felt that it could handle the interest cost. The E.U., however, refused to accept "no, thank you" as an answer. The E.U. powers and central bank grew increasingly agitated and made increasingly alarmist statements about Ireland's financial situation, driving down the value of existing Irish government bonds. What was going on?
You would never know the real story from the media. The headlines blathered on about Ireland overextending itself and needing E.U. aid to avoid a default. In the meantime, as the value of Irish bank bonds (which did NOT have government guarantees) kept falling amid all the talk about Ireland's troubles. Wealthy U.S. and European investors in hedge funds borrowed money at the ultra-low interest rates that have been inflicted on us by the U.S. government (you know, the rates that have stripped middle-class workers of the earnings on their hard-won savings) and used the cash to buy those bank bonds at a huge discount. This is called "speculation". When the wealthy "speculate", however, think about the W.C. Fields line when he is asked if poker is a game of chance. "Not the way I play it, no." The wealthy don't need to take risks. Instead, after driving down the value of the Irish bank bonds by stimulating all the noise, they did a magical trick. The E.U. line of credit came with an important condition that was mostly ignored by the press. The Irish government was required to guarantee repayment of those existing bank bonds that the hedge funds had been buying up. That's right - the E.U. was supposedly concerned that the Irish government had taken on too much debt by bailing out the banks, and the E.U.-demanded "cure" for that was to REQUIRE the Irish government to take on MORE debt to guarantee the payment of the bank bonds. The E.U. said that it imposed this requirement in order to ensure that the banks could continue to borrow, but that, of course, is nonsense. The government could have backed FUTURE bank bonds without having to guarantee payment of the EXISTING bank bonds owned by the hedge funds. The whole thing boiled down to a scam through which money was taken out of the hands of taxpaying Irish workers and put into the greedy paws of wealthy hedge fund investors.
Similar things are happening in America, of course, but that is the subject of another post.