The obsession with austerity stems from Germany’s experience with hyperinflation. This is akin to the USA’s obsession with the deflation of the Great Depression. Both political groups and nations fail to understand the real causes of what they experienced so we end up with rising authoritarianism that will not end nicely. Austerity cannot continue when government continues to grow in cost. This shrinks the disposable income of the people and destroys the economy. If this continues, they will welcome a Russian invasion and hand the bill to Putin for their pensions.
The European press bashes Greece as if they are all tax dodgers. The problem with Greece was that they converted their debt from drachma to euro and then the currency rose from 80 cent to $1.60 against the U.S. dollar. This effectively doubled their debt in real terms and is no different from someone who bought one of those Swiss loans who then suddenly owed 30% more when the peg broke.
The European press overall bashes Greece as if nobody pays taxes. But raising taxes to this extent in Europe is highly deflationary. No government anywhere is prepared to deal with the problem of rising pensions for government workers.
As one of our readers commented:
Thanks for the great insights and leasons.
You’ll probably enjoy this little piece of European ambiguity in tax evation:
Ferrari, whose logo features the flag colors of its home nation Italy, plans listing on the New York Stock Exchange as a Dutch holding with its fiscal residence in the U.K., Marchionne said Friday. (see Bloomberg News)
Meanwhile we’ll continue bashing the Greek for being so naughty in their tax evasion, our European media is very biased. One of the major problems in my country, the Netherlands, is that there is not a single political party that sees it right. There just won’t be a political solution in time I’m afraid. You are absolutely correct about the majority needs to be wrong. That’s a major eye opener!
Many thanks again!
Best regards,
Michiel
