This is no time for gloating, neither for Americans nor for Europeans. For both sides are in deep economic trouble, only in different ways. The U.S. runs the worst deficit (as share of GDP) since World War II, and yet Keynesianism to the max won’t budge the unemployment rate—pace Professors Krugman and Stiglitz. What does fall is the dollar and the price of real estate, a double-whammy if ever there was one.
The euro, meanwhile, may be rising, at least against the greenback, but the common currency, now ten years old, is about as stable as was Confederate script back in the Civil War. “Civil war,” actually, is not a bad way to describe the state of Euroland. On one side, there are the “PIIGS”—Portugal, Ireland, Italy, Greece, and Spain—looking at bankruptcy. In fact, Greece is bankrupt. Its foreign debt exceeds its GDP by about one-half, and, as slices of it come due, it cannot possibly redeem the bonds without yet another infusion of cash from Europe and the International Monetary Fund (IMF). Government outlays keep rising, while tax receipts are falling (year-on-year). So austerity does not work—except in the streets of Athens, where the angry masses revolt against a tottering government.