I have been on the phone this afternoon to a colleague who was telling me the reality of what happens when a country is slowly 'going bust'.
This week (and it is only Wednesday) the local tax office have telephoned his accounts department and asked for a meeting. In the UK you know this usually means trouble, however the meeting was to ask if there was any possibility of paying their equivalent of National Insurance early because the Government has run out of money.
Then this morning he received a letter from their VAT office saying that the Government cannot actually afford to pay a refund this month can they wait ?
The State concerned is probably going to be unable to pay its employees and benefit claimants on Thursday, unless the German taxpayer is prepared to dig deep.
We are avoiding this situation at present by two means quantative easing (printing money) and massive borrowing.
Those marching on saturday under Unite's and Unison's banners have no idea of economic reality, nor has it crossed their mind what would happen if private industry could no longer stump up the cash they are 'entitled' to.
10 comments:
Take it this colleague is Portuguese?
Could be- I really don't want to elaborate, but this is what happens when the national credit runs out.
Its portugal for sure:
http://markets.ft.com/markets/bonds.asp
Greece as well; ECB money not covering their gaping holes in finances.
what about the solutions ?
LPL,
It (they?) going belly up is a solution from an Austrian perspective; debt defaults, depressions and recessions (in order or severe to least severe) are all sides of the same coin - it's the markets way of telling you where you are going wrong in allocating resource - it has been allowed to get thus far by the ECB's and "colleagues" being allowed to trump reality by spraying down the PIIGS with cheap money for so long.
The solution? Immeadiate 2, with second, sadly, like to be adopted:
1. Withdraw from the EU, denote Portugese currency in "Portugese Euros" then let devaluation coupled with state reforms raise export markets letting exposed bond holders take the pain.
2. The Euroweenies inject fresh off the press euros into the Portugese government coffers and expect debt repayments from the Portugese people to pay off Spanish and German bondholders (the Spanish and German states' are particularly up to their eyeballs in bonds here).
You can almost see this happening long before it plays out.
Course there is the third option.
Default.
ok, so we share common views. There is no solution but a Argentina-like default.
As someone who irregularly has dealings with Argentina I can honestly say the default didnt really dent the socialist mindset; it may have wittled down the Peroniism somewhat but left much of the incompetent mismanagement and corruption in place.
Euro-federalism collapsing will need to be matched with a strong push to sanity in what will lot certainly be crazy times with our rulers trying to convince us we need them more than ever.
We don't.
Europe was supposed to prevent countries from being to much addicted to State budget deficits ... (remember, Maastricht 's treaty criteria ?)
Off topic I know, but can anyone tell me if the LPUK still meet in London?
China
We are metting on Thursday. Details are on lpuk.org
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