Opinion

Printing money to save Euro-socialism

After Wednesday’s massive stock-market rally, it looks like the world’s most sophisticated investors believe Europe is finally coming up with a solution to its sovereign-debt crisis so that economic chaos won’t be spreading across the globe.

But these same “sophisticated” investors who bid up the Dow Jones Industrial Average nearly 500 points on Euro-bailout euphoria also bid up the Dow to record levels in 2007 — betting that the big banks were safe just months before we all discovered they weren’t.

As they did then, investors misread this week’s real news: European economic policymakers (with help from those in the US) are only inching toward a bailout of countries like Italy and Spain. There’ll be plenty more ups and downs before a very imperfect solution is achieved. And, one way or another, that ultimate solution will be the bitter pill of printing money.

It’s especially bitter for the Germans — the continent’s strongest economy and de facto leader — who either recall or have been taught that printing money means lots of long-term pain, possibly like the hyperinflation of the Weimar Republic, which bred the political instability that gave rise to Hitler.

But sorry, there’s no way Europe can come up with a fix that avoids printing money. That’s the only way to “make good” on the debts run up by these welfare states.

There will be lots of gyrations along the way, as the Germans come to realize that such a massive bailout is the only way to keep the likes of Italy and Spain from default — which would lead to a worldwide banking crisis and to the political instability they fear.

The bigger problem for the Europeans is what comes next after they finish running the printing press and papering over the debts of the continent’s basket-case economies. If these countries are to avoid Third-World economic status, they’ll have to finally rein in their out-of-control welfare states. And that will be the most bitter pill for the Europeans to swallow.

For years, Europeans loved to lecture Americans on the both the safety and soundness of the continent’s banking system as opposed to our own, and how their economic system worked so much better than ours. Well, one lesson of the 2011 financial crisis is that many of their banks are probably in worse shape than the US banks were in 2008.

At least our banks’ troubled investments were tied to real estate, which may rebound once our economy improves. Their banks are holding debt tied to some of the world’s least productive, no-growth countries.

Why so underproductive? Most of the evidence points to the failure of the European welfare state.

Again, the Europeans loved to lecture Americans on how government-run health-care and cradle-to-grave entitlements provided such safety and comfort for the masses. People supposedly didn’t mind paying higher taxes because it enhanced their standard of living.

Until, of course, it didn’t enhance anything — and Greece, Italy, Spain and Portugal face the collapse of their safety nets because they can’t borrow to pay for them anymore, even as unemployment is rampant. (Meanwhile, France is not far behind.)

Privately, business people over there will concede that the vicious web of taxes and regulations makes it brutally hard for entrepreneurs to start businesses — and near-impossible for economies to grow fast enough to pay for those lavish entitlements.

You may be tempted to take some delight in Europe’s misfortunes as they basically copy our bailout methodology of running the printing press to paper over the problems. But New Yorkers’ schadenfreude shouldn’t last.

Because our city has adopted the European welfare-state model with the same disastrous results: high taxes, high unemployment and businesses leaving for somewhere else. Ironically, it’s only taxes from Wall Street’s “one percent” that keeps the city going.

Giving people what they want always comes at a price.

Charles Gasparino is a Fox Business Network senior correspondent.