Get ready for Greece like coverage of the next big western nation's national economic crisis - it has everything, including a state run economy, massive unemployment (over 51% for the Spainish "youth"), a seemingly bottomless housing bubble, and inept politicians (sorry for the redundancy) doing stuff like this:
Spanish private debt is 220% of GDP, dwarfing government debt, which is high and rising. So not only are banks being forced to raise capital and reduce their loan books, consumers and businesses are also overextended. The government wants to increase taxes or reduce spending by 17% to get the deficit down from over 8% to 5.5%, a combination that is not geared for growth.
€12.3 billion will be raised in new taxes, with €5.3 billion coming from corporations, and €2.5 billion is projected to come from a temporary amnesty on tax evasion (you've got to love the optimism). We have seen how such policies worked in Greece. They meant lower, not increased, revenues. Note that Britain also raised taxes on "the rich" and saw revenues fall in that category, not increase as projected.
Further, as we go along this year, watch for "breaking" news that off-balance-sheet guarantees by the Spanish government will be huge, adding multiples of 10% to total debt-to-GDP. Spain's admitted government debt is over 70% of GDP, which in comparison to other European countries is not all that bad. Except that is not the extent of the problem. There is regional debt, bank-guaranteed debt, sovereign guarantees, etc. that take it to roughly 85%.
Read more: http://www.minyanville.com/business-news/the-economy/articles/spain-economy-euro-debt-crisis-sovereign/4/2/2012/id/40185#ixzz1rvvD4aKv
My question is - what possible reason is there to believe that this won't be the fate of every democratically oriented nation? Isn't this what politicians are good at - taking someone else's money and spending it to get re-elected? "Who cares about the long term implications, I have to get elected so I can save this nation from (fill in the blank with the boogeyman you like best)." The ultimate pretense is that people, any of us, are smart enough to "run" economies, health care or even systematic exploration of science.
We aren't. But we like to believe that we are, or that our elected representatives are.
Spanish private debt is 220% of GDP, dwarfing government debt, which is high and rising. So not only are banks being forced to raise capital and reduce their loan books, consumers and businesses are also overextended. The government wants to increase taxes or reduce spending by 17% to get the deficit down from over 8% to 5.5%, a combination that is not geared for growth.
€12.3 billion will be raised in new taxes, with €5.3 billion coming from corporations, and €2.5 billion is projected to come from a temporary amnesty on tax evasion (you've got to love the optimism). We have seen how such policies worked in Greece. They meant lower, not increased, revenues. Note that Britain also raised taxes on "the rich" and saw revenues fall in that category, not increase as projected.
Further, as we go along this year, watch for "breaking" news that off-balance-sheet guarantees by the Spanish government will be huge, adding multiples of 10% to total debt-to-GDP. Spain's admitted government debt is over 70% of GDP, which in comparison to other European countries is not all that bad. Except that is not the extent of the problem. There is regional debt, bank-guaranteed debt, sovereign guarantees, etc. that take it to roughly 85%.
Read more: http://www.minyanville.com/business-news/the-economy/articles/spain-economy-euro-debt-crisis-sovereign/4/2/2012/id/40185#ixzz1rvvD4aKv
My question is - what possible reason is there to believe that this won't be the fate of every democratically oriented nation? Isn't this what politicians are good at - taking someone else's money and spending it to get re-elected? "Who cares about the long term implications, I have to get elected so I can save this nation from (fill in the blank with the boogeyman you like best)." The ultimate pretense is that people, any of us, are smart enough to "run" economies, health care or even systematic exploration of science.
We aren't. But we like to believe that we are, or that our elected representatives are.
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