"The problem with socialism is that you eventually run out of other people's money."
-Margaret Thatcher
By now we all know the line immortalized by the Iron Lady of England, and these days it should be mandatory for those tax-and-spend politicians to recite it every morning,(along with the Pledge of Allegiance). What doesn't get mentioned often enough is the next act; what happens after you have run out of other people's money? When it comes to a great nation, the answer is your country begins to fade from glory into a slide that eventually becomes a concentric death-spiral.
The Romans became fat, lazy, and entitled to the point the nation that conquered the world with its sword was forced to use mercenaries to defend its borders.
Great Britain thumped its chest with understandable pride that the sun never set on their empire. But, they spread themselves too thin and eventually had to retreat into their own little corner of the planet, save for that famous rock, and the Falklands, which is worth its weight in oil.
It all comes down to spending money you don't have, and having those obligations you cannot meet, and then compounding mistakes to avoid the inevitable revolt. The script hasn't changed since the beginning of time. Yet, even though the idea of taking money from one group of people that earned it legitimately to give to others is legal; and a felony, if you decide to go down to your local ATM and implement the same philosophy for political favor, which has never worked and in most instances has failed miserably, but it's an idea that will not die.
And you thought getting rid of that bad penny was impossible.
French Revolution II
"...need to go faster, further and deeper"
-François Hollande
It was only a couple of months ago, when the president of France made bold claims about his country, and its role in the next industrial revolution, while also coming to grips with its ever dwindling economic ranking in the world. Such musing might have soothed, a nation making the transition to socialism, but it's been a long time since France has practiced true capitalism (the United States too, for that matter.) The philosophical mumbo- jumbo didn't cut it; in fact, nothing has been able to counteract an economy in free-fall.
"France cannot be France without greatness."
-Charles de Gaulle
Hollande's approval rating has hovered above 20%, and his disapproval rating is well above 70%. It's clear that not only has he given up on the idea of "French greatness" once deposited by Charles de Gaulle, he can't even convince his countrymen that they could be a steady, but mediocre player in the global economy. The nation is sinking too fast. An interesting aside, is the alleged affair that has captured headlines in France. Normally, a badge of honor in many European countries; the toll on "First Lady" of France, and that Nero is fiddling while the nation burns feeling is not helping the situation.
The numbers are staggering:
The overall tax burden in France is 44.2% of gross national income, yet debt is equal to 53% of GDP. They're raking in the tax money, but spending it in an awkward attempt to socially engineer fairness. The result is, an ever-increasing uncompetitive nation saddled with debt and doubt. The 2014 Index of Economic Freedom ranked France 70th overall, (the United States tumbled out of the top ten to number 12) in part to government spending, being more than 50% of GDP.
Unemployment stands north of 10%:
State-run subsidies on certain products and price controls have risen under Hollande, as the government has attempted to make life easier for the have-nots. Tax payers are fighting back.
Storm Gathering:
* Soccer players have revolted.
* Savers have revolted.
* Farmers have revolted.
And the government has listened; suspending a tax on savings products, and the so-called eco-tax on trucks after farmers in Brittany staged a violent mass protest. These were shocking developments but what happened this week was most telling.
In 2011, some scientist concluded that the French Revolution, along with other events like the Potato Famine, was spurred by a great El Nino that lasted from 1789 to 1793. This time around, the revolution will be spurred by good old-fashioned desperation. Maybe Hollande is getting the message. This week, the President of France proposed eliminating the €30.0 billion obligations on businesses to fund family welfare. In addition, there is also talk of spending cuts. This is significant news, not just for France, but for those that think taxing, spending, and punishing are the ways to achieve social justice.
Yesterday, the Bank of France said the country saw a "strong pick-up" in economic activity, lifting 4Q GDP to 0.5%. You can't make this stuff up.
Will there be a Rebirth in Europe?
While France deals with its issues and the humiliation of being the current "Sick Man of Europe", nations that were on the cusp of disintegration are edging back. In 2014, the hardest hit nations during the Great Global Recession have been able to raise money at very reasonable rates, and in a couple of instances, even at pre-crisis levels. I'm beginning to think Europe could be the wild-card and bright spot this year.
Yesterday morning, it was announced that borrowing costs in Spain dropped to an all-time low, which demonstrates that the Spanish economy is recovering. The Spanish Treasury sold $3.62 billion (2.66 billion euros) worth of 3-year bonds at auction with an average yield of 1.595%, which is the lowest yield since 2004.
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