Of course, by ‘true economic governance’, our kind European masters really mean a drive towards fiscal union and European taxation. The proponents of ‘ever closer union’ never fail to exploit a crisis for their benefit and further their goals.

However, this attempt was inevitable. You cannot have a currency covering such a wide geographic area, with a single interest rate set by a central bank and just hope that it will work. The collapse of Ireland, Greece, Spain and Italy were predictable, given the cheap rates of credit they were able to obtain in contrast to the state of their national economies and levels of demand.

Yet, while the Eurocrats will always argue that a crisis is caused by a lack of integration (rather than ‘ever closer union’ itself being the actual problem), their road to full fiscal consolidation will be long and contentious – and they are very quickly running out of time and money, with events increasingly playing out beyond their control. At the end of the day, they will be swept along by the markets and events, just like the rest of us. That is European equality for you.

As I recounted yesterday, the recent U.S. deal on raising the debt ceiling and supposedly reducing the deficit and debt was a calculated fraud. Instead, the U.S. will increase its borrowing and spending, albeit at a slightly slower rate than projected.

Commenting on the announcement, Republican Senator, Jim DeMint of South Carolina observed very much the same, saying:

The deal Congress just passed over conservative objections has already had its obvious effect, the loss of America’s credibility around the world. The deal was not a serious attempt to solve our spending and debt problem, it was a political solution meant to kick the can down the road. The only real solution to our spending and debt crisis was Cut, Cap & Balance that the president rejected out of hand.

The announcement by Standard & Poor’s was largely expected with the agency having placed the U.S. credit rating under review on the 14th of July. It is therefore unlikely to have much on an immediate impact on the markets. However, the long term implications for the United States and the world economy could be far reaching.

The Chinese, who are currently the biggest single creditor to the United States, were immediately critical of U.S. debt reduction steps (or lack thereof), and called for the creation of a new, stable global reserve currency. The country’s official news agency, Xinhua, said:

The U.S. government has to come to terms with the painful fact that the good old days when it could just borrow its way out of messes of its own making are finally gone.

China has also strongly urged the United States to cut military and social welfare expenditure, warning that further credit downgrades would very likely undermine world economic recovery and trigger a new round of financial turmoil.

Meanwhile, the BBC’s great Europhile, Mark Mardell has been asking whether the separated system of Government in the United States is to blame for the financial crisis, and wondering if ‘the system itself may not be fit for purpose’.

Much like his former colleagues in the EU, Mark is rather adverse to actual opposition. In their world, the ‘dysfunctional’ government he claims the U.S. system produced has led to the prevention (mainly, in his eyes, by the Republicans and the Tea party) of a serious and unified agreement on the future of the dollar and the United States economy. If everyone would only just agree (or be given no choice in the matter) then the country could easily sort out its economic troubles in a flash – just like the EU. Oh no, wait..!

Still, we in Britain do not have the same system of Government as the United States, so I’m sure we have nothing to worry about. Our economy is so safe in fact that our MPs are able to spend time on much more important business…

The Conservative party and the Taxpayers’ Alliance have always had a very close relationship. The appointment of Isaby as Political Director, apparently responsible for ‘building links with Ministers, MPs and MEPs’, means the partnership will become cosier still.

This appointment brings to mind an occasion in 2006 when I visited Conservative Central Office at its former residence in Victoria Street. During the meeting, our group were informed by Mark Clarke, who was then the pompous Chairman of Conservative Future, and Ian Oakley, at the time a Conservative candidate in Watford, that the newly formed Taxpayers’ Alliance were simply a front organisation set up by the Tories to attack Labour on tax.

The ‘brilliant idea’, so we were told, was to create a separate organisation that could attack Blair and Brown on economic issues, meaning the Labour party, BBC and print media couldn’t just dismiss the complaints as being irrelevant because they had come from the Conservatives.

I even recall mention of how the organisation was to be funded by existing donors to the Tory party and indirectly, the Conservative party itself. At the time I wrote a blog entry on my website making note of a few of these remarks on the TPA, and criticised Mark Clarke and Ian Oakley for being slimy and insincere. Not long afterwards Clarke contacted me by email to ask that I withdraw the article, not, so he said, due to the personal criticism, but for revealing matters about the workings of the TPA at a private meeting in CCHQ. Naturally I refused, and that was the end of the matter as far as I saw it. Furthermore, in subsequent years my observations on the disgraceful Ian Oakley were rather vindicated by events.

Thus, from its inception, the Taxpayers’ Alliance existed as a Conservative sanctioned group used to indirectly assault the Labour administration over their economic incompetence, high tax policies and runaway spending habits. Of course, now that Labour are no longer in office and the Tories (and Lib Dims) have replaced them, the situation has somewhat changed.

In 2006 we had TPA reports on ‘The Real Cost of Gordon Brown’ and ‘Moving Britain Backwards’ – the latter claimed to ‘tear apart Gordon Brown’s economic record and shows how Britain’s economy has become less competitive and less able to meet the coming challenges’. Likewise, in 2008 we had ‘Gordon Brown’s Economic Failure’ and ‘Brown’s Borrowing Will Be Double The Debt Needed To Win World War One’, which, in Daily Mail-esque language, had William Norton stating:

British taxpayers enter this downturn like lions led by donkeys. Not only will full recovery take twice as long as the First World War lasted, but we are going to take on twice as much debt. Alistair Darling is sending the taxpayer over the top to face a financial Battle of the Somme.

However, since the general election the Taxpayers’ Alliance has been rather muted in their criticism of the Coalition – unsurprising given their origins. Under George Osborne the ‘official’ national debt has increased from £700bn to what Christopher Booker mockingly called ‘a much more manageable £900bn’. Where therefore are the regular TPA proclamations denouncing excessive Government debt as there were under Gordon Brown?

Likewise, where are the TPA talking heads on the BBC and Sky condemning the Prime Minister for increasing taxes and hiking governmental spending? It has all gone eerily quiet – particularly when you consider that the Coalition has increased taxes, increased the national debt and given away even more money to the IMF and EU than before.

Should the TPA ever overstep the mark and lose its special Tory stamp of approval, then it is unlikely the organisation could support itself for too long. At the moment it is a rather wealthy group, taking in over a million pounds in donations and managing to employ quite a few highly paid staff. It dare not bite the Tory hand which feeds it lest those generously charitable gifts dry up.

Similarly, the Conservative party to some small extent needs the Taxpayers’ Alliance. As one of its ‘approved’ partners, party donors and supporters may be encouraged to give money, resources and time to it, with Dave and company safe in the knowledge that it will be funnelled up a blind alley rather than spent on anything that may meaningfully change Britain.

This is not to say that the TPA is entirely useless in absolutely ever report it writes or campaign it runs. As Helen Szamuely remarked:

In the past my comments about the Taxpayers’ Alliance (TPA) have been mixed. Sometimes they do good work, sometimes it is a bit shoddy and their habit of not crediting anyone with previous research is annoying.

But, the point is that they are far too close to the Conservatives to be of any real, long-term worth – and the appointment of the likes Jonathan Isaby, who is seen as a ‘safe pair of hands’ by the Tories, confirms just that.

He noted that while rich individuals such as Bill Gates and Warren Buffett declare that the wealthy should pay more in tax, then they do not practice what they preach. Indeed, he says, Barack Obama falls into that category, earning considerably more than the average American:

If Obama is in earnest about wanting increased taxes on the wealthy, then he should send the United States Treasury $182,998. That’s the difference between his Form 1040 Line 60 (“This is your total tax”) and what he would have owed at the higher rate (plus limits on itemized deductions) he himself advocates.

So why doesn’t he tax himself more? The Form 1040, after all, only stipulates the minimum tax an American must pay. More is always welcome. Obama should write a check to the United States Treasury for $182,998.

This very much reminds me of a local debate that I attended just before the General Election. During questions from the audience, a local Methodist Minister stood up and declared that he had earned £18,500 for the previous financial year. He was happy to declare this he said, and had even brought his documents so he could tell us exactly how much tax he had paid, which he then duly listed.

Later, when he eventually got to the point (funny isn’t it how during questions from the audience, more often than not, those who raise their hand seem to feel the incredible urge to give us their long winded opinion rather than actually ask a question?), he said that he was very happy to pay that tax and he got good value for it. He went on to say that he wished he paid even more tax and would be happy to pay it for such excellent public services, etc…

That was his opinion and while I do not share it I did not have a problem with him expressing it in the public forum. My immediate verbal suggestion to him was that he make a voluntary donation to the Treasury. No doubt it would be well spent on some worthy cause I told him. This he did not like.

Furthermore, what he rather failed to mention to the audience was that he lived largely rent and bill free in accommodation at the expense of the Methodist Church. Therefore, his supposedly ‘low salary’ as he said, was not quite all it seemed. How convenient.

Our Methodist friend, Barack Obama and much of the Left are made in the same mould. When they say that they would like to pay more taxes, what they really mean is that everyone else – or usually and more specifically those wealthier than themselves – should pay more tax. In a speech in April, Obama said:

Some will argue we should not even consider ever, ever, raising taxes, even if only on the wealthiest Americans. It’s just an article of faith to them. I say that at a time when the tax burden on the wealthy is at its lowest level in half a century, the most fortunate among us can afford to pay a little more. I don’t need another tax cut. Warren Buffett doesn’t need another tax cut. Not if we have to pay for it by making seniors pay more for Medicare. Or by cutting kids from Head Start. Or by taking away college scholarships that I wouldn’t be here without and that some of you would not be here without.

Thus, in reality it all boils down to the size of the state – one of the real divides between Left and Right, socialist and conservative, or however else you wish to define those opposites. It is not so much an issue of tax, but of how many people the state should employ and the functions it should perform. Tax becomes the battleground, rather than the issue itself.

When Obama says that it’s ‘an article of faith’ to those who wish to keep taxes low, then the same could be said of the Left not wishing to reduce the size and scope of the state. The vast debts most Western economies have incurred have been borrowed precisely to facilitate massive increases in the state’s reach into all aspects of our lives. The state has, and always will be the means by which the Left attempt to reshape society.

Friedrich Hayek, wrong about much, was correct when he suggested that state socialism leads to totalitarianism. Even in the face of this mountainous national debts, the Left in most countries are loathe to reduce public expenditure, instead favouring increases in taxation to use the crisis to further the advance of the state.

By holding out against tax rises, and pushing for tax reform the Republicans in the United States are therefore actually doing what oppositions are meant to do, which is oppose the Government – unlike the Conservative Party before the previous set of elections or currently the Labour Party. Such opposition is necessary, even if it means running the risk of a U.S. default – which seems increasingly likely regardless of Republican actions.

President Obama, the Republicans in the House of Representatives and the Democrats in the Senate have been arguing at length over how to make $3 to $4 trillion in savings over the next ten years. So far the Republicans have ruled out supporting Obama’s tax increases, with Reuters suggesting that revenue is the main sticking point between the two sides.

Much like the crisis economies of the Euro zone, the United States will be on the brink of default in just over a week. This is scary stuff. Alister Bull and Richard Cowan at Reuters remark:

With the world’s biggest economy set to run out of money to pay all of its bills on August 2, the window was closing fast for a “grand bargain” of spending cuts and tax increases in exchange for Congress raising the debt ceiling.

Financial markets are growing more edgy and U.S. banks and businesses are making contingency plans for the possibility of a debt default that would drive up interest rates, sink the dollar and ripple through economies around the world.

If the United States goes to the wall, it will be for the first time in its history and will also mean the loss of its prized triple A credit rating, with far reaching consequences for the world economy.

The US, like so many Western economies, has run up vast debts in past decades, due in no small part to the ever increasing financial burden of a bloated welfare state. It is not as though this problem has happened overnight either. George Bush, that supposedly evil, nasty, right-wing zealot was a prolific borrower and spender at the expense of the American taxpayer. Likewise, Barack Obama, who has been in office for a number of years now, has had plenty of time to get to grips with U.S. domestic spending – and yet here we are, only weeks away from a massive default and suddenly there’s a mad panic to rearrange the deckchairs on the Titanic.

Even so, I’ve managed to keep a few tabs on the news (if you could really call it that) in the evenings via Sky News in my hotel room (it was a choice between that, CNN and a selection of rather dubious foreign comedy channels).

Amusingly, I also caught a late night news round-up on the BBC World Service with Richard North as a panellist. Amazing really; you go abroad to get away from the work, the blogs, Richard North et all, and yet the man still manages to find a way through!

No doubt parts of our beloved national media are being overcome with similar feelings. As much as the press try to ignore the current economic realities, they just keep cropping back up to divert their attention from the vital task of endlessly discussing themselves.

Just before my return, it seemed that, all of a sudden, the broadcast and newspaper media had finally woken up to the fact that, yes, the hacking affair was not perhaps the most important item of news on the current, reality-based agenda. The Euro zone economies are collapsing under a mountain of self-inflicted debt, and there is a very real possibility that this could destroy the single currency.

This collapse has been on the cards for some time now, and yet if you listen to large sections of the media then it would appear that they have only recently uncovered this crisis, such is the wide-eyed wonderment with which it is breathlessly reported.

It strikes me that the treatment of the financial crisis by the media is in many ways similar to the famine in Somalia. It wasn’t until this week when the United Nations publically declared that there was a famine in Somalia that the media suddenly took interest. Before the announcement, it was if the famine had not existed, such was the miniscule level of reporting. Similarly, now that the European Union, in the form of our dear leader, José Manuel Barroso, has spoken of the severity of the European economic situation then suddenly, guess what, it’s a crisis! Who would have thought it..?

It seems, in the collective eyes of the media establishment, that for something to exist or become fact then it must be acknowledged by the U.N. or receive other supposedly ‘expert’ approval. And it’s not just any old ‘expert’ that will do either, but ones carefully selected from ‘accepted’ groups and organisations who have a monopoly on officially and legitimately being allowed to care about suffering, starvation or our old favourite, climate change. If anyone outside of the bubble expresses an opinion, however valid or important, then nothing is done. It is ignored, until suddenly, an oik at the BBC or Guardian decides that, you know what, the European economies might actually be on the verge of hitting the fan because José told us so. Only then, apparently, is it worthy of being ‘news’…

Negotiations over the latest Greek bailout seem to be running into great difficulties, making Portugal’s financial outlook appear far from certain. At the moment the target seems to be the avoidance of default – but as each day passes and the crisis grows deeper then the outcome seems increasingly certain. Once again, it is not a question of if, but when.

Indeed, it could be even sooner than we expect. As the BBC reports, the legitimacy of the bailouts is being called into questions at the German Constitutional Court which will be examining their legality under German law. As Daniel Hannan observes, their legal standing is hardly difficult to ascertain though:

Let me give the judges a hint. All they have to do is look at Article 125 of the Treaty:

“The Union shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State.”

Pretty open and shut, no? Indeed, no one in Brussels seriously tries to claim that the bailouts are within the rules. It is precisely because the bailouts are illicit that the the Treaty is being changed: rather than amending its behaviour to comply with the law, the EU proposes to amend the law to comply with its behaviour.

In reality, the likelihood of the German Courts upholding the letter of the Constitution is rather slim. Their record in this department is not exactly exemplary, given their relatively recent and enlightened decision on German compatibility with the Lisbon Treaty.

As for the Portuguese, like Greece and probably this country too, their days are numbered. Eventually the money is going to run out and even the EU elites will have to give up on the bailouts. It is at that point that we enter a very dangerous period of history.

If we believe that the Greek state is on the edge of collapse then we are not all that far behind. It is not a question of if, but when. It was only last week that Christopher Booker in his Sunday Telegraph column highlighted:

More than most people realise, we in Britain are approaching a financial abyss almost as great as that into which Greece has been falling. Last week, the deficit on our Government’s annual spending widened yet again, to £143 billion, which means that we are having to borrow nearly £3 billion a week. That equates to £5,700 a year for every household.

Far from riding into Westminster as our economic saviours, George and Dave have presided over yet further borrowing and spending at our expense. Government debt continues to climb as the Bank of England persists in its policy of ‘Quantitative Easing’ – or in other words, printing more money – and in contrast to the apoplectic fits the Unions are having over the not-the-cuts, the gulf between the stalled private economy and the parasitic public sector has widened.