Fateful Fortnight of Denial

A fortnight overseas brought sunshine on the lovely Greek Isle of Naxos and gustatory classics in Provence, all enjoyed with stellar companionship of friends old and new. But in the background were ominous events that augur ill for global and domestic stability.

In the forefront was the declaration of bankruptcy by Greece’s far-leftist populist president, backed by a rousing 60 percent “no” to European central banks in a referendum on a reconstruction plan. That Athens was peaceful on referendum Sunday made for a pleasant visit strolling around the Acropolis and a lovely café dinner afterward, all the while surrounded by smiling Greek faces. The latest accord defers the eventual reckoning arising from the financial meltdown facing Greece—and for the European Union.

Across the Eurasian landmass China’s stock markets declined vertiginously, with one Wall Street Journal analysis noting that the classic signs of a bubble were all at their historical extremes:

There are four basic signs of a bubble: prices disconnected from underlying economic fundamentals, high levels of debt for stock purchases, overtrading by retail investors, and exorbitant valuations. The Chinese stock market is at the extreme end on all four metrics, which is rare.

In a worst case, simultaneous implosion of the Chinese and European economies would drag down an already stagnant American economy. After six years of a sputtering, near flat-line domestic economic growth, the last thing Americans need is another slow decade. The result would be to drive already stratospheric public debt into outer space. Then, all it would take is a modest rise in interest rates to make interest on the public debt consume the lion’s share of the federal budget; worse, rising rates would burst the stock market bubble, collapsing American assets and driving down tax revenues.

In the Mideast, aflame virtually from end to end, the deadline for the West to reach a nuclear accord was put off yet again, as President Obama and his secretary of state piled new cave-in upon cave-in, while Iran openly preached hatred of America and Israel. Yet much of the world professes to believe that Iran will as a result not become a nuclear power. But the July 14 “road map” offers Iran a path to join the nuclear club. Fittingly announced on Bastille Day, the accord may well unleash totalitarian and total war furies comparable to those loosed by the French Revolution. The president’s quixotic obsession with reaching a “grand bargain” with Iran has already opened rifts between the U.S. and Israel, its prime Mideast ally; and with the Gulf State Sunni Arabs—most notably, with Saudi Arabia. The Saudis are ready to buy nukes from Pakistan the moment Iran goes nuclear, with others likely to follow. Only a last-ditch strike by Israel can delay Iran.

And in America the Supreme Court issued a quartet of decisions that collectively shift power away from representative legislative governance, towards executive fiat by administrative agencies, and Platonic guardianship by federal judges. Chief Justice John Roberts spent 20 pages explaining why, in the Court’s ruling rejecting a challenge to Obamacare, legislators meant “federal and state” exchanges rather than merely “state” exchanges as to eligibility to receive federal subsidies, thus enabling the Obama administration to prop up state exchanges in states that had declined to fund them. Justice Anthony Kennedy divined a hitherto unknown right to gay marriage—short-circuiting state legislatures that were moving rapidly to recognize such a right—in a federal Constitution bereft of any reference to marriage, traditionally a province of state governance. In the same case, Justice Elena Kagan, who during her 2010 confirmation hearing told senators that the Constitution does not recognize a right of gay marriage, now recognizes it; her view “evolved” just two years after that of the president who nominated her to the bench. And Justice Ruth Bader Ginsburg sidestepped the definition of “legislature” in a case upholding Arizona’s creation of an electoral commission to draw new district voting boundaries.

Denial is, we say, not just a river in Egypt. Two big crises might be managed; three or four at once can turn U.S. decline into collapse.