Back from the edge

There’s a reason we call economics the dismal science.

There’s a reason we call economics the dismal science.

We can’t say it’s an austere study, because “austerity” has a different meaning these days (aristocrats used to be austere; now it’s the unemployed).

So dismal it will have to be, and progressively more dismal as the globe marches toward America’s fiscal cliff.

Or not.

While Canadians were watching CFL playoff games on Sunday, Europe was saving itself from destruction — or at least giving it a significant delay.

As midnight tolled through European time zones (and Edmonton Eskimos fans ended another disappointing season), new agreements were announced in Frankfurt that many believe will save the European union, save its currency, and be a lesson for American leaders hoping to find a parachute at their cliff’s edge.

The Greek parliament also passed a budget that will raise taxes and cut spending, reducing its deficit by 13.5 billion euros.

Greece’s “austerity” budget means the country can avoid default on 4.1 billion in debt that matures next week.

Europe’s central bank now has the power to buy pretty well unlimited amounts of bonds issued by its troubled economies, vastly reducing its costs of borrowing.

Europe’s Sunday agreements open what appears to be a year-long window of opportunity to work on its financial problems and avoid a costly breakup.

In other words, Europe will do what U.S. President Barack Obama wants to do, if Congress will just come along.

Europe is raising taxes and cutting spending — exactly what U.S. financial institutions want it to.

American money market funds poured themselves back into euro bonds for the third straight month, a 16 per cent rise since September. For all I know, some of that money comes from my RSP.

But in America, raising taxes and cutting spending are considered bad medicine — that’s the fiscal cliff everyone’s talking about. They reduce the ability of rich people to spend freely, withhold government services from the poor and middle class, while driving up unemployment and driving investment down.

But in dismal economics, what medicine is ever good?

Unemployment in Greece is 25 per cent, and Europe has a whole new social class: the NEET.

A NEET is a person aged 15 to 29 who is Not in Education, Employment or Training. There are 14 million of them in Europe now. This is expected to get worse before it gets better.

But that’s the point. As of this week, Europe expects to get better. America doesn’t.

Obama wants America to take its medicine. There will have to be tax hikes, sacred spending cows (the military?) will have to be bled.

Why should an economy that has run short by a trillion dollars a year for 11 straight years not take the same medicine needed in Greece, Spain, Italy, Ireland and Britain?

The mixture needs to reflect the patient’s needs, but the basic ingredients are the same.

The science is dismal, but it seems that worse-before-better still means that someday, you will arrive at better.

Greg Neiman is a former Advocate editor. Follow his blog at, or email

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