The assumption of the hyperinflationists has been that governments will just print to meet their obligations. That theory is based upon revolutionary government who CANNOT SELL debt to anyone. In the case of the West, we issue debt and because of that, the first effort is to meet the demands of bond-holders. That is only deflationary as government seeks to extract greater and great amounts of money from the economy to pay the bond-holders.
The Spanish government is indeed doing just that squeezing money out of the society to pay its debts to Brussels and Berlin. Spain has shut down any real free vote of the people because they know they would vote to get out of the Europe.
Spain became a serial defaulter beginning in 1557 followed by 1570, 1575, 1596, 1607, and 1647 ending in a 3rd world status. It appears that history will repeat as well in Spain. Their economic model was one of conquest and plunder, rather than developing domestic industry and a viable economy. The mere accumulation of wealth without developing a domestic economy destroyed Spain. It was like handing kids a bunch of money so they never had to work. As the economy turned down, they restored to the Spanish Inquisition. Even the Pope came out against what they were doing for its was to raise money from Jews and Arabs.
Spain is making a very similar mistake sacrificing its domestic economy to pay Brussels. Spain is handing its national wealth to Brussels and in the process, nobody will dare start a business and invest to create jobs, which is needed to get out of the downward spiral. Ironically, this is the conquest model that Spain inflicted upon the Americas that is now being inflicted upon them by Brussels.
The lesson to be learned from Spain is precisely what Adam Smith wrote in his 1776 Wealth of Nations: “Like an improvident spendthrift, whose pressing occasions will not allow him to wait for the regular payment of his revenue, the state is in the constant practice of borrowing of its own factors and agents, and of paying interest for the use of its own money.” Smith based that observation on the spectacular fall of Spain from the richest country in Europe to the poorest.
This Spanish government is squeezing money out of anywhere it cutting spending in health, education and scientific research. Thousands of Spaniards having poured into the streets across the country to voice anger at the government’s spending cuts, higher university tuition fees and other education reforms. The chanting protesters have been holding demonstrations in Madrid as well as 16 other cities this past week marking the last day of a three-day strike by university students.
According to the national Students’ Union, which organized the rallies and strike, the government has slashed spending on public education by around 7 billion euros (9 billion USD) and dismissed around 32,000 teachers. This has turned the trend in Spain where fewer people are going to higher education.
The government of Prime Minister Mariano Rajoy has also increased taxes, frozen public salaries and limited spending on services such as education and healthcare as parts of his austerity measures. All of this, plus eliminating any right to vote on separatist movements, is a toxic mix. When the ECM turns down, it will only get much worst after 2015.75.
