Greece’s ‘Impossible Timetable and Lessons for America’ goes way beyond a couple days of stock market volatility; here’s the insurmountable hurdle facing Greece:
Greece ran a federal budget surplus from 1960 to 1973. Once civilians regained control of the government in 1974, deficits occurred each year. Initially, the Gross Domestic Product (GDP) was less than 3% when socialist governments took control in 1981; deficits came in well above 3% of the GDP. Now debt-holders are asking for €2.0 billion in spending cuts and a haircut on pension payouts, which are now 16% of the GDP.
One More Drink
Keep in mind that Greece and austerity go together like oil and water. In the aftermath of the financial meltdown, there is still a debate about how to heal nations. One school of thought is doing more of what got you into trouble in the first place. Just like the “hair of the dog,” just drink more to cure a hangover.
However, another school of thought that can also be placed in the category of common sense is to do the opposite of what got you into trouble. In the case of Western nations, including the United States, that means less taxes and less government spending.
Instead, politicians made small spending cuts, hiked taxes, and called it “austerity.” Those same politicians are saying ‘look at our economic performance.’ This stuff doesn’t work.
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Greece, France, Italy, and Portugal hiked taxes and said austerity didn’t work.
Well, maybe it wasn’t austerity because government spending went even higher.
So now, it is time for Greece to make real concessions and that means lower taxes and less government spending.
Moreover, if they cannot get it together, the European Union (EU) will start to unravel and the markets will teeter, at least early on. The Greeks will learn the hard way because on their own, there will not be any money to tax and there will not be any money to spend.
It’s All Greek to Me
Hillary Clinton jumped on board, too, with her re-launch over the weekend. Speaking at Roosevelt Island, the Democrat front-runner wasted no time ripping into Wall Street, pointing out the top 25 hedge fund managers make more money than all kindergarten teachers combined do.
Then, Hillary Clinton took specific aim at buybacks that focused too much on short-term profits and too little on investments, jobs, and fair compensation.
“The financial industry and many multi-national corporations have created huge wealth for a few by focusing too much on short-term profit and too little on long-term value…too much on complex trading schemes and stock buybacks, too little on investments in new businesses, jobs, and fair compensation.”
However, at this point, why would businesses invest in America when it looks like there will be a serious attempt to make their income statement a part of the public domain?
Her attack on Wall Street came before the mention of our political system, climate change, health insurance, immigration, inclusion and acceptance of gays, small businesses, and college tuition. How does corporate America fight back? I am not sure, but the notion that Wall Street is the enemy is a farce designed to lay siege against profits of corporate America.
This election becomes more important every day. Giving the Executive branch power to dictate how businesses and their profits would be the last straw and propel the nation much more rapidly down its Greek path of ruins.
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