The Euro? Um, Next Question Please

November 10th, 2011 at 8:32 am David Frum | 69 Comments |

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Last night, the CNBC anchors addressed the most urgent economic question of the moment – the fate of the euro – to four of the Republican presidential candidates: Herman Cain, Mitt Romney, Ron Paul and Jon Huntsman.

I want to begin with what we saw today, another rough day for our money, for our 401(k)s. Once again, we were all impacted by the news that the Dow Jones Industrial Average dropped 400 points today. The reason, Italy is on the brink of financial disaster.

It is the world’s seventh largest economy. As president, what will you do to make sure that their problems do not take down the U.S. Financial system? It is the world’s seventh largest economy.

As president, what will you do to make sure their problems do not take down the U.S. financial system?

The results were pretty bad.

Cain struggled to avoid the question altogether, but when pressed, gave an answer that revealed that he did not understand the problem, let alone have a solution to offer.

There’s not a lot that the United States can directly do for Italy right now, because they have — they’re really way beyond the point of return that we — we as the United States can save them.

Ron Paul was of course Ron Paul, always eager to plunge the whole world into a second Great Depression, to chasten us all into repenting our sins and returning to using rocks and metal as money.

you have to let it — you have to let it liquidate. We’ve had — we took 40 years to build up this worldwide debt. We’re in a debt crisis never seen before in our history. The sovereign debt of this world is equal to the GDP, as ours is in this country. If you prop it up, you’ll do exactly what we did in the depression, prolong the agony. If you do — if you prop it up, you do what Japan has done for 20 years.

So, yes, you want to liquidate the debt. The debt is unsustainable. And this bubble was predictable, because 40 years ago we had no restraints whatsoever on the monetary authorities, and we piled debt on debt, we pyramided debt, we had no restraints on the spending. And if you keep bailing people out and prop it up, you just prolong the agony, as we’re doing in the housing bubble.

For me, the shocker of the evening was Jon Huntsman’s answer. Advertised as the thinking man’s candidate, his answer to this urgent question was more articulate than Herman Cain’s, but very nearly as uninformed.

So we wake up this morning, and we find that the yield curve with respect to Italy is up, and prices are down. So if you want a window into what this country is going to look like in the future if we don’t get on top of our debt, you are seeing it playing out in Europe right now.

You are seeing the metastasy effect of the banking sector. And what does it mean here? What am I most concerned about, Jim? I’m concerned that it impacts us in way that moves into our banking sector where we have got a huge problem called “too big to fail” in this country.

We have six banks in this country that combined have assets worth 66 percent of our nation’s GDP, $9.4 trillion. These institutions get hit. They have an implied bailout by the taxpayers in this country, and that means that we are setting ourselves up for disaster again.

Jim, as long as we have banks that are “too big to fail” in this country, we are going to catch the contagion and it’s going to hurt us. We have got to get back to a day and age where we have properly sized banks and financial institutions.

Of course, the issue facing the US financial system today is not the size of any individual bank, but the size of the collective banks’ exposure to Euro-denominated bonds–not only Italian bonds, but all Euro-denominated bonds, including French bonds. The issue is not that we may awake to a higher yield curve, but that we may awake to discover that the world’s largest currency zone has broken apart–presenting the whole planet with a de facto continent-wide partial default on debt.

I can appreciate why a politician might want to avoid delivering an answer about such a horrible contingency. But he should at least signal that he understands the issues. Huntsman did not.

On the Italy question Romney was, as usual, unstumpable.

Romney’s answer shows that he understands the nature of the problem in Italy and Europe. He has anticipated the demands that will be put upon the US–that the US will be asked to join a Euro bailout fund, either directly or via the IMF. As always, he has hyper-awareness of the answer his audience wants to hear.

Well, Europe is able to take care of their own problems. We don’t want to step in and try and bail out their banks and bail out their governments. They have the capacity to deal with that themselves. They’re a very large economy.

And there will be, I’m sure, cries if Italy does default, if Italy does get in trouble. And we don’t know that’ll happen, but if they get to a point where they’re in crisis and banks throughout Europe that hold a lot of Italy debt will — will then face crisis and there will have to be some kind of effort to try and uphold their financial system.

There will be some who say here that banks in the U.S. that have Italian debt, that we ought to help those, as well. My view is no, no, no. We do not need to step in to bail out banks either in Europe or banks here in the U.S. that may have Italian debt. The right answer is for us…

(APPLAUSE)

BARTIROMO: But — but the U.S. does contribute to the International Monetary Fund, and the IMF has given $150 billion to the eurozone. Are you saying the U.S. should stop contributing to the IMF?

ROMNEY: I’m happy to continue to participate in world efforts like the World Bank and the IMF, but I’m not happy to have the United States government put in place a TARP-like program to try and save U.S. banks that have Italian debt, foreign banks doing business in the U.S. that have Italian debt, or European debt. We’re just — banks there.

There’s going to be an effort to try and draw us in and talk about how we need to help — help Italy and help Europe. Europe is able to help Europe. We have to focus on getting our own economy in order and making sure we never reach the kind of problem Italy is having.

If we stay on the course we’re on, with the level of borrowing this administration is carrying out, if we don’t get serious about cutting and capping our spending and balancing our — our budget, you’re going to find America in the same position Italy is in four or five years from now, and that is unacceptable. We’ve got to fix our — our deficit here.

“Fixing our deficit here” is not of course a very good answer to the question about how to protect the US from a Euro shock, and Mitt Romney must know that. In fact, Mitt Romney’s evident intelligence is one reason that he gets such a rap as a panderer. It’s credible that Herman Cain or Rick Perry might believe that “fix the deficit” is a good answer to the Euro question. It’s not credible that Mitt Romney believes it. If he says such a thing, we intuit that he must be saying it cynically.

But last night’s debate also should also debunk a false charge against Romney. He may pander, yes, but not on the epic scale of the man seeking now to emerge as the next Not Mitt: Newt Gingrich.

Listen to this, from Gingrich’s first answer of the night:

GINGRICH: Well, first of all, I think Ben Bernanke is a large part of the problem and ought to be fired as rapidly as possible.

(APPLAUSE)

GINGRICH: I think the Federal Reserve ought to be audited and we should have all the decision documents for 2008, ’09 and ’10 so we can understand who he bailed out, why he bailed them out, who he did not bail out, and why he did not bail them out.

(APPLAUSE)

GINGRICH: So, I’m glad that Ben Bernanke recognizes some of the wreckage his policies have led to.

The reason we follow — I think most of us are for tax policies that lead to jobs is because we have had two cycles in my lifetime, Ronald Reagan, and the Contract with America, both of which had the same policy: lower taxes, less regulation, more American energy, and have faith in the American job creator as distinct from the Saul Alinsky radicalism of higher taxes, bigger bureaucracy with more regulations, no American energy, as the president announced again today in his decision on offshore, and finally class warfare.

So I would say that all of us on the stage represent a dramatically greater likelihood of getting to a paycheck and leaving behind food stamps than does Barack Obama.

The Gingrich answer is so vehement that you have to believe it’s heartfelt, right? Now look again. That answer has been constructed as delicately as a bird’s nest out of all the discards and fragments favored by the Not Mitt coalition: the attack on the Federal Reserve, the warning of class warfare, the Saul Alinsky paranoia, the sly racial politics of the food stamps slam.

Compared to this pander, Romney’s carefully parsed phrases about “not being happy” about a Euro-TARP look like a profile in courage.

As always, I come away from these debates thinking: I see only one president on that stage. I don’t know that he’ll be a successful president, but at least he won’t be immediately lost in the job and won’t immediately embarrass himself or disgrace the country.

Recent Posts by David Frum



69 Comments so far ↓

  • Xunzi Washington

    You forgot to close by saying, “now of course, all these rather serious matters to the side, whoever the republican candidate turns out to be, I will be voting for that person – because I’m a loyal tribe member.”

  • overshoot

    The really tragic thing about the Italian debt is that if they only had to pay the interest rates that Germany, France, or the USA do they’d be ahead. It’s the skyrocketing risk premium that is driving them towards default and thus higher risk premia.

    The ECB could save Italy tonight by simply giving them a reasonable lender of last resort.

    That is the argument for the Fed to buy Italian bonds: they’re actually pretty sound at rates higher than US bonds, and doing so could prevent a worldwide collapse that will cost much more than the aid to Italy — which will, actually, return a profit.

    • icarusr

      Without the spreads, Italy is in surplus. To suggest that this is somehow related to a structural Italian deficit is to not understand basic economics. Or to lie.

    • dugfromthearth

      But if Italy could borrow more money, don’t you think they would? I don’t think Italy just stumbled into this mess anymore than republican presidents stumble into a deficit. They spend all they can, destroy the economy and hope someone else will pick up the pieces. They need a change in how they run their country, not just a temporary handout.

      • icarusr

        Dug: Let’s talk to the specific facts and avoid generalities, slogans and bromides.

        Bond spreads reflect perception of risk – political or financial. As well, a country – like a company – may be illiquid or insolvent. In the case of all of the European countries in danger of collapse, only Greece is technically insolvent (in that it cannot hope to pay its debt); the others, have a specific liquidity problem: Italy was carrying its debt-load quite well until last year, and is, in fact, in a surplus situation – but for the additional spreads arising out of the current state of uncertainty. There is no reason, other than the “perception” issue, for Italy to be paying four or five percent more on its debt than France, but it is, and that five percent more is making all the difference and wreaking havoc.

        So I am not quite sure what you mean by “putting its house in order”. Its house is in relative order. It would not need to borrow more, if the bondtraders did not bid up the spreads. It could cut more and the response would still be an increase in the spreads.

        So, really, I am not sure what you are saying.

  • indy

    It was pretty painful to see Huntsman’s answer I admit. He stood up to the rest of the morons on China who kept yelling ‘trade war, trade war!’, however, so he redeemed himself a bit there. Undoubtedly that caused him to go from 0% support to sub-zero support among the party faithful because it reminded them that he worked with Obama rather than, you know, reminding them that he has actual real-world experience with China as he might have hoped.

  • Graychin

    Ron Paul’s answer was the best: just pay off the debts. Problem soved! :D

    Since it’s hard to find any Republican who will praise the TARP, why should we expect any of these candidates to suggest doing anything at all about the Euro’s problems?

    The Republican mantra: “We’re broke. We can’t afford it.”

    Maybe if there was a way to link the Euro crisis to America’s national defense, we could get Republicans to pay attention. After all, shouldn’t we be spending MORE money that we don’t have and can’t afford on national defense?

  • Xunzi Washington

    How about we push a commitment to buying Italian bonds in the same way it was pushed that we needed to go to Iraq and Afganistan:

    “We’re fighting the economic war over _there_ so that we don’t have to fight it over _here_”.

  • more5600

    Romney is going to be the candidate and the rest of these clowns should start propping him up and throwing him softballs. Everyone on that stage is utterly unelectable in a general election but Romney. Sorry Teapublicans, start getting used to supporting this man, he is all that you have.

  • icarusr

    “Europe is able to help Europe.”

    Er … what the hell does that mean? If the IMF is involved, for heaven’s sake, it is because Europe is not capable of helping Europe. Not to mention that the issue is not whether the US should help Europe for the sake of Europe, but what the US should do to ensure that any European contagion 1) does not happen; 2) if it happens, does not spread; 3) if it spreads, does not affect US banks too much; and 4) if it affects US banks, measures and policies are in place to contain the damage.

    Is this so hard to convey? And for each, one could conceive of a one or two line policy response that demonstrate managerial competence.

    So we have a nonanswer buttressed by a cynical substantive reply. I am supposed to be impressed by this?

    • indy

      Well, it actually is a well constructed political reply. Everybody got to hear exactly what they wanted to hear.

      • icarusr

        But we already know that Romney knows how to say things people want to hear, and do it well.

        Frum is saying that the answer suggests that Romney 1) understands the problem, and 2) has a coherent, if possibly cynical, solution. I just don’t think the answer, however politically astute, demonstrates either point Frum is pushing.

    • gover

      There are credible opinions, I believe including Krugman, that the ECB has the means to deal with this simply by acting as a central bank. Guarantee the Italian debt and print money if necessary. I don’t know if it’s German domestic politics, close ties to the banks, paranoia about inflation, or what, but apparently the ECB wants a stable Euro and is willing to destroy Europe in the attempt.

      • icarusr

        The ECB does not have the mandate and the German Constitution does not permit Germany to backstop Eurozone debt. That, in a nutshell, is the issue.

  • lilmanny

    Not to be a sycophant, but this is pure poetry:

    “That answer has been constructed as delicately as a bird’s nest out of all the discards and fragments favored by the Not Mitt coalition”

  • Sinan

    The answer that Newt gave showed him to be nothing but a political hack whose only real desire is to have an audience lap up his drivel and pay a fee to do so. Ron Paul hates money, credit and the Federal Reserve because he has a copy of Jekyl Island under his pillow. Cain was on the Federal Reserve board but apparently never knew anything about money or banking having been appointed primarily as some form of patronage. He is clueless about banking and money. Romney knows about money in the sense that he knows how to make money off the backs of distressed companies and restructuring, Gordon Gecko with a smile. The sad truth is that this debate format is not going to reveal anything of substance from either the moderators or the candidates. The only think Newt says that makes sense is his call for a longer debate format with the two eventual candidates. I completely agree with that concept. Unfortunately for the GOP, Obama will run circles around them just like he did in the Health Care Summit which was a tour de force.

    • ottovbvs

      He will. Some of these guys like Romney certainly aren’t dummies but they haven’t Obama’s intellect nor are they as steeped in ALL the issues as he is. Day to day immersion over years is an enormous advantage over someone with a lawyer’s brief. It’s in debates that Obama who is after all a very well qualified lawyer scores. Some of those against Clinton who is no slouch were little masterpieces and I was pulling for Clinton.

      • Sinan

        The problem the right has with Obama is that they want him to be an ideologue and he is anything but one. Obama is a pragmatist first. In many ways he is like Bill Clinton in that he does indeed want the results of liberal policies but understands that the means of getting those results should be tailored to the situation, the facts and the political realities. Obama is not FDR who wanted it all tomorrow. He is more like an Ike or JFK who understood that the persistent advocate willing to take small steps is more likely to turn the ship than the man who shouts “hard to port” in the face of a giant rogue wave.

        • wileedog

          “The problem the right has with Obama is that they want him to be an ideologue and he is anything but one.”

          Ironically, that is the problem the left has with him as well.

        • think4yourself

          +1
          The only thing standing between Obama and a second term is the unemployment rate.

          The only thing standing between Obama and resolving our current challenges is GOP intransigence.

        • valkayec

          think4yourself-

          +10 So correct and on point.

    • mannie

      It certainly dosent flatter the Fed that Herman Cain was a poobah. I wonder how he got the job, and who gave it to him? I must investigate that!

    • gover

      +1 to everybody in this thread. For the rest of you, I highly recommend James Kloppenberg, Reading Obama.
      http://www.amazon.com/Reading-Obama-American-Political-Tradition/dp/0691147469

  • ottovbvs

    It is a complex issue but clearly none of them had much idea. Perhaps Huntsman’s omniscience has been exaggerated?

    • Demosthenes

      Perhaps Huntsman’s omniscience has been exaggerated?

      I don’t think anyone believed Huntsman to be omniscient but I do want to take issue with this statement that David made:

      I can appreciate why a politician might want to avoid delivering an answer about such a horrible contingency. But he should at least signal that he understands the issues. Huntsman did not.

      What is clear is that a) Huntsman did signal that he understood the issue, by opening his response by talking — in a way that none of the other candidates, including Romney, did — about the actual proximate cause of the market downturn, which was Italian bond yields shooting up past 7 per cent. But instead of continuing to discuss the particular economic issues at play, Hunstman then b) turned to one of his rehearsed talking points about the dangers of “too big to fail”, which was unfortunate because it made him sound off-key.

      • ottovbvs

        “about the actual proximate cause of the market downturn, which was Italian bond yields”

        This was not the proximate cause of the equity market volatility we’ve been experiencing ever since the early summer. Italian borrowing costs have only been an issue for the past two or three months. Actually Huntsmans answer was fairly rambling.

        • ram6968

          the gobal money crisis was triggered by mortgage backed securities and derivatives being bought and sold worldwide…..it’s all on us

  • hisgirlfriday

    Romney’s answer was unsatisfying because he supported TARP the first time around. I find it hard to believe that Romney wouldn’t support a second TARP if the events in the Europe sovereign debt crisis dictated their necessity to preserve the existing system and Wall Street was calling for it and the FDIC was going to go bankrupt if the U.S. didn’t institute a TARP to deal with that bad debt. What is Wall Street shifting their support to Romney for if he would not cater to their interests?

    I didn’t think Huntsman’s answer was that bad if he is thinking about the sovereign debt crisis in terms of its potential impact on the FDIC and individual checking and savings accounts. Because when the too-big-to-fail banks go belly-up from bad debt there simply isn’t enough money in the FDIC to make all account holders whole even to their insured $250,000 amount. Just look at Bank of America with the Federal Reserve’s consent and encouragement shifting $75 trillion in derivatives into a company mixed with FDIC-insured accounts over the objections of the FDIC. If those derivatives go bad, the FDIC is screwed. And we have an insane banking crisis at the retail Main Street banking level, not just at the Wall Street banking level.

  • Frumplestiltskin

    left unsaid is the great irony that the ECB is prohibited from inflating their way out of the debt because of their sound money mandate. This is precisely the trap that Republicans want to impose on the United States. And not one of them had the remotest answer, I actually thought Huntsman’s non answer was more intelligible than Romney’s.

    Of course one answer is to get on the phone with the Chinese premier and have the Chinese gobble up some of the Italian sovereign debt, pushing down their long term rates (I suppose the same calls can be made to Saudi Arabia, the UAE, etc.) A international effort to restore confidence will restore confidence.

    But I guess the word international sounds too Communistic.

    • mannie

      Agreed. A massive QE program is exactly the solution, in my view. You buy up bonds with new money, and the devaluation which theoretically should accompany the cash wave will improve Europe’s competitiveness. Its a shame the GOP likes to ridicule the more sophisticated economic theories. Paul seemed to be the only one who got it right, when he advocated “liquidating the debt”.

  • bdtex

    Isn’t next week’s debate on foreign policy?

  • mannie

    It sounded like Paul was plumping for an ECB program of quantitative easing! “Liquidate the debt”? Sure! Here’s yer cash, fresh from the mint! Curiously enough, that is probably the best solution. A QE program. Paul may have had the right answer, and the irony is he loaths central banks!

  • TJ Parker

    As always, I come away from these debates thinking: I see only one president on that stage. I don’t know that he’ll be a successful president, but at least he won’t be immediately lost in the job and won’t immediately embarrass himself or disgrace the country.

    This answer is valid only if you’re assuming that at least one of these guys must be a potential president. Romney is acceptable only if you assume that he’s pandering to the base. We’re going to start a trade war with China? Really? We want to compete with China on wages? Really? Platitudes and talk-radio blather that are acceptable only if untrue.

    Or did you mean Huntsman?

    • Elvis Elvisberg

      Yes, this, exactly.

      Frum wrote: “Fixing our deficit here” is not of course a very good answer to the question about how to protect the US from a Euro shock, and Mitt Romney must know that. In fact, Mitt Romney’s evident intelligence is one reason that he gets such a rap as a panderer.

      Well, or maybe he has a rep as a panderer because his entire political career consists entirely of pandering. (Oh, and also proto-ObamaCare).

      He summed up his entire response to the question by sidling up just next to lying that the US’s long-term debt problem is due to “the level of borrowing this administration is carrying out”. But the Bush administration’s policies contributed about twice as much to our debt as the Obama administration’s; the reason our deficit has increased is because of policies that long precede either of those two– sensible, counter-cyclical policies:

      And there’s no such thing as growth through austerity, which is Romney’s cure-all solution at the end of his response. Meanwhile, the market, fearing stagnation as far as the eye can see, is begging the US to spend more now to boost us out of the Great Recession:

      Romney is known as a panderer because he’s a panderer. Maybe he knows that cutting spending in a recession is a bad idea, and he just figures he’ll lie to the Republican rubes because that’s what they want to hear. Or maybe he really does believe that if only we slash government spending in a recession, a million John Galts will experience a deep emotional desire to invest in infrastructure projects. Who knows what lurks in the heart of Romney. But at the end of the day, the point is, his answer was full-bore 180 degrees wrong. He is promising to implement policies as president that will hurt America. So he shouldn’t be president.

      • gover

        And why does Frum keep supporting Romney on the blind assumption that underneath all that pandering Romney must really understand reality, rather than turn to Obama, who has proven, at least by Frum’s standards, that he understands and will act on that understanding to the extent his considerable ability to outwit and out maneuver Frum’s party allows? Does Frum believe that if we have a Republican president Boehner and McConnell’s gangs will turn reasonable? One, good luck. Two, that would be an admission that the GOPs are deliberately blocking recovery as charged.

    • nuser

      Romney just about gives carte blanche to Israel, hence Frum’s enthusiasm!

  • Southern Populist

    Romney gave a virtuoso answer. Really impressive. Only a blind partisan could believe otherwise. 

    The correct response is to let Europe deal with its own crisis with zero assistance from the US directly or indirectly. It’s their problem not our problem. If major institutions are going to fail, let them fail. 

    If the failure of these institutions will in turn have a negative impact on ordinary Americans, then the obvious solution is for the US government to help the *ordinary people* affected *not* the institutions  that caused the problem in the first place. 

    This is the error people keep making with this too big to fail concept (including Obama and the Democrats). The solution is to help the people not the institutions. 

    The US government should allow the thieves fail, let them suffer the consequences of their actions, and then help the ordinary people impacted not the thieves. 

    • TJ Parker

      If the failure of these institutions will in turn have a negative impact on ordinary Americans, then the obvious solution is for the US government to help the *ordinary people* affected *not* the institutions that caused the problem in the first place.

      Yeah, it sounds good and feels good to let the reckless take responsibility for their own stuff. But it is not always – perhaps almost never – optimal. If your neighbor has a highly infectious disease, is there no reason to go help him? Let him take care of himself, and if my kids get infected, well, then I’ll work on curing them. Let the freeloading homeowner be foreclosed on! Oh, but if he’s your neighbor, and he’s one of 10 of your neighbors in foreclosure, then your home value plummets. How are you helped by letting them all go bankrupt?

      We’re not talking about altruism here. We’re talking enlightened self-interest. This is the kind of thing that made John Nash famous and gave birth to *real* economics. But yes, in the GOP, any economics that doesn’t work at the kitchen table and appeal to the gut of the reddest of the rednecks can’t possible be *true*.

      Ya know, the banks were completely reckless with money, but it was YOUR money they were reckless with.

      • Southern Populist

        My solution to your example would be for the goverment to give money to the people facing foreclosure, or use some other solution to help those people, rather than sending remote financial institutions. If you don’t let them fail, how else is society going to break their power over peoples’ lives? The implication of your comment seems to be that bailouts for entities that enrich the wealthiest 1% but that are deemed to big to fail should continue in perpetuity should a bailout become necessary. I don’t think private institutions that have such far reaching power over peoples’ lives should be allowed to exist. Too big to fail is probably a good standard for some form of anti-trust break up.

        • lilmanny

          “I don’t think private institutions that have such far reaching power over peoples’ lives should be allowed to exist. Too big to fail is probably a good standard for some form of anti-trust break up.”

          I don’t think burglary should be allowed to exist, but it does, and so I take action to head it off. I think you are ignoring the real vulnerability of our own economy to Europe’s woes. If, probably when, the euro pits our unemployment goes up and those people stop spending their money and stagnation settles in. That’s as simple as I can make it.

        • Chris Balsz

          If that’s what would happen if Europe can’t get more financially responsible, then, it’s going to happen with the certainty of gravity. And if so, we’re better hoarding whatever fiscal power you think we have left, for our own recovery.

        • think4yourself

          @ DSP

          “My solution to your example would be for the goverment to give money to the people facing foreclosure, or use some other solution to help those people, rather than sending remote financial institutions. If you don’t let them fail, how else is society going to break their power over peoples’ lives? The implication of your comment seems to be that bailouts for entities that enrich the wealthiest 1% but that are deemed to big to fail should continue in perpetuity should a bailout become necessary. I don’t think private institutions that have such far reaching power over peoples’ lives should be allowed to exist. Too big to fail is probably a good standard for some form of anti-trust break up.”

          This is the OWS argument. Is that what you are suggesting? I don’t think that is what Romney is suggesting. Since we have people currently facing foreclosure now are you suggesting that we give taxpayer money to people who are not paying their mortgages? (A) how is this fair in a meritocracy and (B) Are there any Republicans who support that?

          Lastly, as Valkayec said, the issue for the US in the event of further financial meltdown in Europe is not just banking entanglements but the rest of the trade entaglements. The US and Europe represent 1/3rd of the world trade flows and the US exports 300B (Euros) in goods and services to Europe http://ec.europa.eu/trade/creating-opportunities/bilateral-relations/countries/united-states/. What will happen to US jobs if that trade flow is interrupted?

          Not saying we should leap to bail out the PIIGS. But, a stock political answer doesn’t solve the real problems. GWB to his credit instituted TARP because he understood this was a real problem, not just a political one.

    • valkayec

      SP –

      It may not be our banks’ exposure that will be the major problem for the US. I gather that most banks and funds have been liquidating their EU bonds to protect themselves from exposure.

      However, SP, what about all of our other businesses which will be affected? Remember most of our major corporations are global and have large stakes in the world’s 2nd largest economy, the Eurozone. If those businesses are hit by a deep recession/depression caused by a sovereign debt crisis/default, they won’t be selling into Europe. They’ll lay people off there and here to shore up their finances. Already some companies, such as Ford, are contemplating what measures to take in anticipation of Italy’s default and how that default may affect the rest of the Eurozone.

      It’s not hard to see how the crisis jumps the pond to our shores. So, just saying it’s Europe’s problem is infinitely naive.

      I couldn’t help but be amused by Jim Cramer’s remarks, post debate, on the answers to this EU debt question. I don’t always agree with him on policy issues, but I often enjoy his bluntness.

  • mannie

    As for Gingrich, the “wreckage” he alludes to seems to have been scattered mostly prior to the Bernanke Fed Years. Mr. B has largely been engaged in trying to put affairs back in order. And I have to hand it to him. I think he has done a remarkably good job.

  • armstp

    Can you imagine a bigger bunch of idiots? Cannot believe anyone of these guys could be the President of the United States. In terms of smarts and knowledge of the issues Obama skates circles around all of them.

    Cain: He is completely out of his league and in over his head. This guy has been a promotional speaker for years and it shows. He had no specific knowledge of anything.

    Paul: It becomes more clear every day that this Doctor knows absolutely nothing about economics. His ridiculous ideas make zero sense. Why does anyone ever listen to this guy? He is way out in outter space. This moron would take us back to the stoneage.

    Huntsman: What does too-big-too-fail have to do with Italy and contagion? Not clear if this guy even knows the issues. This guy is over rated. He just looks good because he is not a completely idiot and he is surrounded by complete idiots.

    Gingrich: He just throws the standard anti-fed/Bernanke talking points. I do not know why people think this guys is particularly intelligent. He has no command of reasonable and realisitic solutions of anything.

    Romney: Was probably saying that we cannot affored to help Europe or U.S. banks because we need to fix our deficit. However, not sure doing nothing is all that we can do? If there is a way for the U.S. to help Europe and not necessarily financially, then we should.

    The problem with Romney is he will say anything to get elected. It was funny that since several Republican initiatives were defeated this week (Mississippi – abortion/life; Ohio – Union bill) he has once again done a 180 turn or has outright lied about his support for these initiatives. He is on record, even on video, of supporting both of these initiatives in MS and OH and now he is saying, after they were resoundingly defeated, that he never supported them. This guy is incredible with his lies and flip-flops.

    • Clayman

      ^+1 armstp

      “Gingrich: He just throws the standard anti-fed/Bernanke talking points. I do not know why people think this guys is particularly intelligent. He has no command of reasonable and realisitic solutions of anything.”

      I think Maria Bartiromo nailed Newt by asking him to take all the time he wants and followed up with “Are you going to answer the question? The guys has built this aura of being intelligent. He sounds like a buffoon every time he tries to sound authoratative.

      BARTIROMO: What is the media reporting inaccurately about the economy?

      GINGRICH: What? (laughter)

      BARTIROMO: What is the media reporting inaccurately about the economy?

  • Tcatman

    The audience demonstrated the complete failure of the US educational system. A minimal level of critical thinking and a complete lack of economic education result in the quality of answers that Romney and Huntsman offered. The get away with it because the common denominator of the audience is so low. The republican electorate is not demanding more of them.

    The only solution is for the debate format to be restructured…. Moderators should be noted REPUBLICAN Wise men or policy wonks who have a real interest in getting the differences explored and out in the public. Pointed questions and followup are essential for the republican electorate to get an education.

    How many debates must we go through before someone tests Romeny’s ideas?

    • Sinan

      The site chosen is in one of the wealthiest parts of Detroit. Average income is over 65k with very low unemployment rates, somewhere in the 5% range. The folks in that audience are not typical Michigan voters, they are part of the 1% or believe in the notion that they are just one more deal away from joining the 1%.

  • Southern Populist

    This article is a good example of Frum applying the canned liberal media template. No one liberals don’t like understand the main issue which in this case has to do with a possible Euro bailout.  

    Frum and the liberal pundits are being very disingenuous for implying others are ininformed, because they are hardly experts on the eurozone, bonds, Italy’s finances or the other factors at issue here themselves. 

    In point of fact, excluding a very small number of full time specialists, *no one* is an expert on the interrelationships among all the various factors underlying the Euro crisis. 

    Frum and his fellow travelers in the liberal punditry are nothing but informed lay people commenting based on derivative knowledge.  

    Unlike the candidates on that stage last night, Frum has the luxury of sitting behind a computer while composing his thoughts. He doesn’t have to  give extemporaneous answers to complex questions in real time. He can kick back behind his computer with books, an Internet connection and (probably) personal access to real experts and write at his leisure. 

    When Frum writes a blog post or an article, he is able to draw on these resources to ensure his facts are correct and that he frames the issue in precisely the right way — a distinct advantage over someone in live debate who has to answer in 30 seconds with no time to reflect on the particulars of the question.

    • Elvis Elvisberg

      I agree that there can be overanalysis of debate responses. But there’s no such thing as “the liberal media”. See, e.g., the run-up to the invasion of Iraq; or the media’s treatment as “serious” any call to cut activities designed to ameliorate the condition of the poorest, I dunno, 60% or so of Americans; or the universal praise for George Bush’s Mission Accomplished pilot costume photo op. The media has its biases, but it’s false and misleading to call the MSM “liberal”.

    • Chris Balsz

      Reading through, I don’t see anything substantially different from Cain’s “they’re too far gone to save” and Romney’s “they can help themselves”. And if Frum shared the “correct” answer I missed it.

    • Tcatman

      Frum and his fellow travelers in the liberal punditry are nothing but informed lay people commenting based on derivative knowledge

      and the candidates for president differ from Frum et al… HOW?

      Communicating about their understanding of the problem and showing that they have both critical thinking and judgment to make informed decisions without all factors known is an essential qualification for the job.

      McCain failed at critical thinking and judgment about the financial crisis….who could believe he could handle the emerging crisis based on his public communication… (I will stop campaigning and return to DC…) who believed that McCain had good judgment in selecting Palin for VP. His performance was in line with his academic record.

      But Romney is not a single person show… He is the result of lots of exports who advice and write his positions. You would think that Romney would have a great set of answers given all of his high powered advisors…. His two cents… should impress and persuade far better then Frum’s single man effort.

      I believe Romney can discuss the Euro issue… BUT… I want to see some evidence of his knowledge, critical thinking and judgement. Nothing is demanded of him…

      How they sort through the complexity of euro problems, the advice they choose to follow.. (far far more staff then a pundit will have) and their ability to communicate to non exports is the reason to choose one candidate from the other.

    • think4yourself

      DSP, I understand that liberals will likely pee on any response from a GOP candidate, much like Conservatives consider Obama some version of Satan mixed with Stalin. I also understand that when you get a question you have to formulate an answer and it won’t be perfect.

      That’s not the issue here. A question regarding Euro stability was guaranteed to come up. It was a question that each candidate ought to have prepared for. No candidate gave either an answer (Gingrich) or a good answer (Romney). Romney’s answer is it’s not our problem, they can figure it out. That may be true but it doesn’t answer the question about what happens if they plunge into depression. Romney doesn’t want to answer that question (neither does Obama) because it either means that (a) we too get dragged into a depression or (b) we spend our money to prop up Europe. Neither of those answers are palatable, especially to Conservatives. But the GOP isn’t interested in the truth right now.

  • armstp

    “Speaking of memory, you know what the difference is between Rick Perry, Herman Cain, and Mitt Romney? Rick Perry can’t remember what agency of government he wants to eliminate. Herman Cain can’t remember which woman he harassed at what job. And Mitt Romney doesn’t want you to remember the position he took on that issue just yesterday.”

  • armstp

    “It occurred to me last tonight that there is a silver lining in the Cain scandals and the appalling reaction on the right. Yes, we have an entire party – in fact, the effective majority governing party of the last 40 years – dismissing sexual harassment as a concept, much less a problem. But. We also have a black man who stands credibly accused of serial sexual predation against unwilling white women, and the older, whiter, Southern portion of our body politic doesn’t have a problem with that. In a way, that reflects breathtaking progress on the racial front for America.”

    • Chris Balsz

      “Yes, we have an entire party – in fact, the effective majority governing party of the last 40 years – dismissing sexual harassment as a concept, much less a problem.”

      Wrong. We’re treating an individual case as an individual case, as the American system of justice sets forth. I understand full well that opinion editorials require pundits expound on the Deeper Meaning of everything from the price of pop tarts to the Rose Parade, but thankfully we’re not in that business.

      “We also have a black man who stands credibly accused of serial sexual predation against unwilling white women, and the older, whiter, Southern portion of our body politic doesn’t have a problem with that.”

      Nope. They don’t find the complaints credible.

      • think4yourself

        Chris – why don’t they (you?) find the complaints credible?

        At this point, I don’t have any legal evidence that the complaints are true(haven’t seen sworn affidavits or the settlement agreement), but we do have Cain’s changing story throughout the week of disclosure. We also have evidence that money was paid to two separate individuals to “settle” the complaints along with two other individuals with similar stories.

        I’m not saying that is absolute proof (nor am I saying that those activities from over 10 years ago make him unfit for the WH – although I do think he is unfit for the WH), but it’s like a grand jury, meaning not evidence enough to convict but enough to go to trial.

        • Chris Balsz

          There’s too much pussyfooting around with half-information and secret extra evidence that might be disclosed. There’s 3 women who did not volunteer to discuss this, now, but had the existence of their complaints leaked to Politico.com and the Associated Press by unknown sources. The two women who are giving the most information –while telling us it is not everything — are doing it through counsel, and this is not their only complaint about sex in the workplace. One of those two, Ms. Krashaar, did not at first allege anything more than gestures and conversation; it was after Ms. Bialock alleged what is basically an attempted rape, that she agreed her situation had been similarly aggressive–again without details. Ms. Bialock’s story of a millionaire altering a reservation might have been true 50 years ago; today Hilton almost certainly wouldn’t offend privacy by doing so–it would sell a second room and allow, as a concession to a big whale, that Ms. Bialock could cancel one without charge at check in.

          If I believe Bialock then Herman Cain is a slavering gorilla who grasps women by the crotch and nape of the neck, and must raise lots of enemies–more than 4–even among women who succumb. If I don’t believe Bialock, then what should I make of the fact Krashaar want me to think Bialock-Krashaar have had similar experiences?

          Who is shoving this story to the press?

          When I recall rape victims coming forward, either they don’t talk at all, or, having ended the criminal manuevering, they spill the beans. They don’t say “well I don’t know what can be done, but I want you to know how lousy he is. I have more information but I think I won’t share that now.” And yeah, I think Bialock was talking rape. A woman grabbed like that who kills the man involved wouldn’t be prosecuted. A man who shot an intruder who grabbed his wife like that wouldn’t be prosecuted.

          I believe, from that photo of Cain hugging a woman hugging him back at the Tea Party deal a month ago, that Cain is too trusting with physical affection. I think that jives with his life story as told in his book. It also jibes with Bialock’s account of her “confronting him” as seen by another eyewitness at that Tea Party event. I don’t believe that for a brief period while he was at the NRA, he was basically a rapist, and then, he stopped.

          And it wouldn’t make any sense, except, he’s a politician.

  • JimBob

    Frum’s solution. Print more money. The magical money printing machine will solve all our problems.

    Since Nixon closed the gold window our debt has gone from 450 billion to 15 trillion in 40 years with no end in sight. One economic bubble after another as the monetary central planners try and figure out how much money the economy needs. Frum would fit in very nicely in the old Soviet Union.

    • larocquj

      So naturally, our debt problems were definitely caused by going off of the gold standard. Is this what you are suggesting?

      “One economic bubble after another as the monetary central planners try and figure out how much money the economy needs”

      You’re right, it would be much better for the availability of a precious metal to dictate how much money the economy needs. If the economy needs a larger supply of money to function efficiently, just dig up more gold. This makes perfect sense.

      I’m sure those who invest in gold will do very well.

      • JimBob

        Closing the gold window removed the last restraint on the Monetary authorities. They were free to print as much money as they wanted.

        The Free market is perfectly capable of deciding how much money the economy needs. The idea that 12 men and women can determine interest rates and money supply is absurd.

  • chephren

    ” I see only one president on that stage. I don’t know that he’ll be a successful president, but at least he won’t be immediately lost in the job and won’t immediately embarrass himself or disgrace the country. ”

    Well – what a ringing endorsement of the Republican party and its prospects. What a glowing reaction to Mitt Romney.

    A textbook example of damning with faint praise.

  • jamesj

    “He may pander, yes, but not on the epic scale of the man seeking now to emerge as the next Not Mitt: Newt Gingrich”

    Relative to the rest of the Republican candidates, Mitt is pretty reasonable. Relative to mainstream economics and reasonable people throughout the rest of Western Civilization, Mitt is pandering to fringe elements.

    • paul_gs

      You found his response to the Euro crisis as “pandering to the fringe”? Sheesh! Romney is as mainstream and credible as they get.

      • valkayec

        He may in reality be mainstream, but at the moment he appears to be pandering. But how are we voters to know since he changes his opinions and positions on a nearly daily basis depending upon public opinion polls.