It appears that the world is now in the end game of a generation of excess leverage and excessive spending at all levels, from individuals up through sovereign governments. Starting in the sixties, and onward through very recently, we witnessed the concept that governments should provide almost everything, nobody should be left to fend for themselves, and everyone was entitled to cradle to grave support, regardless of how lazy or how irresponsible they are. What started as necessary safety net programs for truly disadvantaged and poor elderly people, has evolved over time into the entitlement generation both here and in Europe. Unions, and especially the teachers union in the US, learned how to use their money and their organizations to co-opt and corrupt the elected officials, and to get ever greater pensions, healthcare and job protection. To pay for all of this, governments at all levels, here and in Europe, took on more and more debt, in the ignorant belief that the economies will continue to grow and so tax revenue will always be there to pay the costs. Kind of like house prices never decline. The unions learned how to use the media to falsely claim that unless they got more staff and more money the children will not get educated, old people will die or go hungry, or crime will run rampant- just replay the very recent Biden speech where he absurdly claimed that without the Obama jobs bill, rape and murder will soar. In Europe the unions managed to get lawmakers to pass bills which make it impossible to fire anyone in places like Italy.

Now we have seen the result of irresponsible borrowing in the residential sector here, and in places like Spain and now China. The US housing market will not recover for many years as the politicians, media and judges sue and lambaste banks, delay foreclosures and make it extremely unfavorable to make new mortgages. Now we have millions of people gaming the system by not paying and being encouraged by the people like the AGs in Massachusetts and California, and living cost free in their homes not paying their mortgages and taxes. In Italy the labor laws make it virtually impossible to build a large company capable of competing on the global market. In Spain the entitlement payments are such that there is little incentive to aggressively seek employment. Now in the US, by granting 99 weeks of unemployment, we are seeing the exact same scenario play out despite numerous studies which show that long term unemployment payments are detrimental. Millions are becoming unemployable because they lived on the dole for far too long. We have a president, and people like Pelosi and Reid, who seem to have learned absolutely nothing from the European experience, and refuse to cut entitlements, and just want to tax the successful people. The teachers union in the US continues to claim the children will suffer if the schools reduce teachers and staff, even though the facts are that student performance has declined as the number of teachers and staff per student has increased. As we saw in Ohio, the teachers union and other unions use their members money and the members to flood a state to defeat measures that are meant to get rational budgeting and budget control back into place. You are now seeing it again in Wisconsin with the attempt to recall the governor.

All of what is playing out in Europe and the US is the attempt to put a stop to the union driven irresponsible spending and borrowing, and an end to the union backed labor laws which make it more and more inefficient to produce educated children, responsible workers and cost efficient government. The western world is in the midst of a major structural change which threatens the status quo and trends of the past 50 years, where more and more entitlements were put into place, more and more restrictions were put on companies to make good business decisions-i.e. Boeing, and more and more countries and local governments used the debt markets to underwrite all of this irresponsible and destructive governing philosophy. Just as the housing and financial markets collapsed, now it is the governments at all levels which are collapsing. We have European governments which are essentially insolvent, and in the US we have cities filing bankruptcy or being taken over by the state. Very few government worker pension plans are solvent, and have no hope of ever being fully funded. That crisis is yet to fully play out in the US, and will surely do so in the next five years as it becomes more and more clear that either the pensions must be changed and reduced, or the services provided by local governments must be reduced to a point that the voters revolt. Wisconsin, New Jersey and Ohio are the poster boys for this. Italy, Greece and Spain must change their entitlement cultures, or they will never recover because they are unable to compete in the global digital world. The teachers union in the US must be brought under control, or we will have a further deterioration of local budgets, education quality, and ability to compete in the new digital global world. They have done more long term damage to this country than any terrorists could ever have hoped to.