“…’CAUSE I DON’T HAVE A WOODEN HEART…”

The Wall Street Journal has a very interesting, some might say slippery, approach to bailouts of governments, financial institutions, etc. In principle, the Journal stands four square against bailouts of any kind, sticking out its hairy chest and declaring that a true free market has no room for bailouts of financial miscreants. However, when a specific bailout that would enable “investors” of any kind to avoid pain, the Journal always manages to find some way to justify this particular bailout this time in the interest of “preserving the world financial system” or some such drivel. It makes no difference, in the Journal’s estimation, whether the immediate bailoutee is a government, a bank, or even an industrial company; as long as the ultimate beneficiary is some kind of Wall Street institution heavily invested in that entity, the Journal argues that its ever disappearing devotion to ephemeral “principle” “must” be abandoned, just this one time.

In keeping with this long tradition of hypocrisy, today’s (i.e., Thursday, 1/14’s) Journal’s front page features an article (“In Euro’s Hour of Need, Aide Gets ‘Madame Non’ to Say Yes”) gushing over the ability of German Finance Minister Wolfgang Schauble’s successful efforts to get Europe’s former new iron, but now plastic, lady Angela Merkel to abandon her normal, and very German, fealty to monetary and fiscal rectitude in favor of getting along by going along with European efforts to bail out just about anybody in Europe who needs a handout in order to avoid the consequences of a very unGerman bout of fiscal debauchery. This is all to be done, of course, in the interest of “European unity,” which, if I were to digress a moment, lately amounts to all of Europe going over the cliff in a much unified manner. “European unity” is an addle-brained concept that has no chance of ever being achieved, and thank the good Lord for that. Europe is composed of some very different nations with markedly different cultures and approaches to life. Two wars have been fought in this century alone in order to achieve someone’s vision of European unity which was, thankfully, never realized. But I do digress.

So Wolfgang Schauble used his devotion to European integration and his considerable powers of persuasion to get Ms. Merkel to go along with a permanent bailout fund that will serve to rescue Greece, Ireland, and Portugal and to signal to any other European country that it is fine to go out and abuse the credit card; Uncles Klaus and Yves will always be there to set things right when pesky creditors make unreasonable demands for things like repayment of money borrowed.

There is much rejoicing over this next step toward societal and financial dystopia in the editorial offices of the Journal, largely because those being saved are the financial institutions in New York and London who have lent other people’s money without regard to prospects for repayment. But the Journal may have destroyed its own argument by pointing out that

Portugal’s request for a bailout last week is the first big test of whether the deal worked.

Portugal will indeed get a bailout and, as Ms. Merkel insisted, will, in exchange for that bailout, agree to some very tight restrictions on its fiscal behavior. But agreeing to anything is easy; living up to those agreements is difficult. After all, Portugal (and Greece and Ireland) agreed to pay the debts that other people are being forced to pay for them, right? So what happens when Portugal (and Greece and Ireland) says to hell with these financial restrictions when they get the least bit uncomfortable? Is the European Union going to rescind its bailout? Even if rescinding a bailout were somehow possible, would the EU actually do it, thus forcing a possibly inescapable crisis for the euro that the bailout was designed to avoid? In this game of chicken, there is no doubt that those on the receiving end of the bailout will win. Since Portugal, Ireland, and Greece know this, they will soon feel free to conduct their fiscal affairs in any way they damn well please and the bailouts will thus truly and indubitably become a mechanism by which frugal German, French, Czech, and Finnish taxpayers subsidize financial foppishness on the continent’s periphery. And the world, or at least the developed world, will take one more step to economic and financial destruction.

There is some hope, however. In Finland (motto: We do socialism right. With public debt at 50% of GDP and a budget deficit of 2.5% of GDP, who is “free market” America, for whom such numbers are only a wistful memory, to argue?), the True Finns party, whose most salient campaign issue is opposition to frugal Finland’s participation in bailouts of those who sneer at its financial propriety, is going to make a strong showing in Sunday’s election and will not, or at least says it will not, participate in any coalition government that will participate in further loan guarantees. But Finland, despite its having one of Europe’s most beautiful capitals and a history of being quite determined in the face of peril (Remember 1940; the Russians do.), is a small country with little clout in Europe or anywhere, for that matter. But even in Germany, Angela Merkel’s party and its coalition partner got walloped in February’s eletions in Baden-Württemberg, losing control of that state for the first time in 60 years, largely due to popular unhappiness with Ms. Merkel’s effectively making Germany the guy who picks up the tab for the riotous parties being conducted on the continent’s periphery while it spends its evenings studying and going to bed early. However, the beneficiaries of the right leaning parties’ electoral debacle in Baden-Wurttemberg were the Greens, who will doubtless embrace such bailout schemes with even more enthusiasm than the completely cowed Ms. Merkel.

So while there is some hope, there is, in reality, very little hope. The world has been turned on its head; bad behavior is rewarded, good behavior is punished, and we follow Dante into the inferno.