Greece on the brink

[financeguy]

Clashes as workers strike in Athens - CNN.com

 

[the iron horse]

Between Germany and Greece, a Chorus of Sturm, Drang and Pathos - NYTimes.com

 

[INDY500]

Who do they think they are, California?

 

[purpleoscar]

When Responsibility Doesn�t Pay - Mark Steyn - National Review Online

When Responsibility Doesn’t Pay


Welfare always breeds contempt.

While Barack Obama was making his latest pitch for a brand-new, even-more-unsustainable entitlement at the health-care “summit,” thousands of Greeks took to the streets to riot. An enterprising cable network might have shown the two scenes on a continuous split-screen — because they’re part of the same story. It’s just that Greece is a little further along in the plot: They’re at the point where the canoe is about to plunge over the falls. America is farther upstream and can still pull for shore, but has decided instead that what it needs to do is catch up with the Greek canoe. Chapter One (the introduction of unsustainable entitlements) leads eventually to Chapter Twenty (total societal collapse): The Greeks are at Chapter Seventeen or Eighteen.

What’s happening in the developed world today isn’t so very hard to understand: The 20th-century Bismarckian welfare state has run out of people to stick it to. In America, the feckless, insatiable boobs in Washington, Sacramento, Albany, and elsewhere are screwing over our kids and grandkids. In Europe, they’ve reached the next stage in social-democratic evolution: There are no kids or grandkids to screw over. The United States has a fertility rate of around 2.1 — or just over two kids per couple. Greece has a fertility rate of about 1.3: Ten grandparents have six kids have four grandkids — ie, the family tree is upside down. Demographers call 1.3 “lowest-low” fertility — the point from which no society has ever recovered. And, compared to Spain and Italy, Greece has the least worst fertility rate in Mediterranean Europe.

So you can’t borrow against the future because, in the most basic sense, you don’t have one. Greeks in the public sector retire at 58, which sounds great. But, when ten grandparents have four grandchildren, who pays for you to spend the last third of your adult life loafing around?

By the way, you don’t have to go to Greece to experience Greek-style retirement: The Athenian “public service” of California has been metaphorically face down in the ouzo for a generation. Still, America as a whole is not yet Greece. A couple of years ago, when I wrote my book America Alone, I put the then–Social Security debate in a bit of perspective: On 2005 figures, projected public-pensions liabilities were expected to rise by 2040 to about 6.8 percent of GDP. In Greece, the figure was 25 percent: in other words, head for the hills, Armageddon outta here, The End. Since then, the situation has worsened in both countries. And really the comparison is academic: Whereas America still has a choice, Greece isn’t going to have a 2040 — not without a massive shot of Reality Juice.

Is that likely to happen? At such moments, I like to modify Gerald Ford. When seeking to ingratiate himself with conservative audiences, President Ford liked to say: “A government big enough to give you everything you want is big enough to take away everything you have.” Which is true enough. But there’s an intermediate stage: A government big enough to give you everything you want isn’t big enough to get you to give any of it back. That’s the point Greece is at. Its socialist government has been forced into supporting a package of austerity measures. The Greek people’s response is: Nuts to that. Public-sector workers have succeeded in redefining time itself: Every year, they receive 14 monthly payments. You do the math. And for about seven months’ work: For many of them, the work day ends at 2:30 p.m. And, when they retire, they get 14 monthly pension payments. In other words: Economic reality is not my problem. I want my benefits. And, if it bankrupts the entire state a generation from now, who cares as long as they keep the checks coming until I croak?

We hard-hearted small-government guys are often damned as selfish types who care nothing for the general welfare. But, as the Greek protests make plain, nothing makes an individual more selfish than the socially equitable communitarianism of big government: Once a chap’s enjoying the fruits of government health care, government-paid vacation, government-funded early retirement, and all the rest, he couldn’t give a hoot about the general societal interest; he’s got his, and to hell with everyone else. People’s sense of entitlement endures long after the entitlement has ceased to make sense.

The perfect spokesman for the entitlement mentality is the deputy prime minister of Greece. The European Union has concluded that the Greek government’s austerity measures are insufficient and, as a condition of bailout, has demanded something more robust. Greece is no longer a sovereign state: It’s General Motors, and the EU is Washington, and the Greek electorate is happy to play the part of the UAW — everything’s on the table except anything that would actually make a difference. In practice, because Spain, Portugal, Italy, and Ireland are also on the brink of the abyss, a “European” bailout will be paid for by Germany. So the aforementioned Greek deputy prime minister, Theodoros Pangalos, has denounced the conditions of the EU deal on the grounds that the Germans stole all the bullion from the Bank of Greece during the Second World War. Welfare always breeds contempt, in nations as much as inner-city housing projects: How dare you tell us how to live! Just give us your money and push off.

Unfortunately, Germany is no longer an economic powerhouse. As Angela Merkel pointed out a year ago, for Germany, an Obama-sized stimulus was out of the question simply because its foreign creditors know there are not enough young Germans around ever to repay it. Over 30 percent of German women are childless; among German university graduates, it’s over 40 percent. And for the ever-dwindling band of young Germans who make it out of the maternity ward, there’s precious little reason to stick around. Why be the last handsome blond lederhosen-clad Aryan lad working the late shift at the beer garden in order to prop up singlehandedly entire retirement homes? And that’s before the EU decides to add the Greeks to your burdens. Germans, who retire at 67, are now expected to sustain the unsustainable 14 monthly payments per year of Greeks who retire at 58.

Think of Greece as California: Every year an irresponsible and corrupt bureaucracy awards itself higher pay and better benefits paid for by an ever-shrinking wealth-generating class. And think of Germany as one of the less profligate, still-just-about-functioning corners of America such as my own state of New Hampshire: Responsibility doesn’t pay. You’ll wind up bailing out anyway. The problem is there are never enough of “the rich” to fund the entitlement state, because in the end it disincentivizes everything from wealth creation to self-reliance to the basic survival instinct, as represented by the fertility rate. In Greece, they’ve run out Greeks, so they’ll stick it to the Germans, like French farmers do. In Germany, the Germans have only been able to afford to subsidize French farming because they stick their defense tab to the Americans. And in America, Obama, Pelosi, and Reid are saying we need to paddle faster to catch up with the Greeks and Germans. What could go wrong?

— Mark Steyn, a National Review columnist, is author of America Alone. © 2010 Mark Steyn

 

[BVS]

Mark Steyn, what a brilliant man

 

[purpleoscar]

Mark Steyn, what a brilliant man

I know it's like rocket science to figure out that social programs have to be paid for. What a genius!

 

[Vincent Vega]

Some of his criticism is valid in essence. But he makes it too easy for you and himself to perfectly ignore some Greek pecularities (with the great help of yours truthfully Goldman Sachs) which was to cheat on the balance sheet for years, spend on projects which were never going to pay, having set-up an imperfect social welfare system (which has Bismarckian aspects, but isn't Bismarckian) and so on. Their social welfare system was never grounded in reality, so it ought to fail. But his sentiment that this will be inevitably the case, backing it with one example which in some aspects is very extreme and leaving out important factors only because they don't help your point is greatly dishonest.
It was a known secret that when Greece finally was allowed to enter into the Euro they already cheated to perform within the guidelines of the Maastricht Treaty. It was a very unfortunate political decision to look the other way only so the implementation and acceptance of the Euro wouldn't have another setback.

 

[financeguy]

Mark Steyn, what a brilliant man

Much as it pains me to say it, I agree with him here.

 

[BVS]

My problem with Mark Steyn is that he's ALWAYS dishonest in his presentaion of information. Like Vincent said, he ignores a lot and uses one example to prove his point. He's built his whole career on that tactic.

 

[purpleoscar]

Some of his criticism is valid in essence. But he makes it too easy for you and himself to perfectly ignore some Greek pecularities (with the great help of yours truthfully Goldman Sachs) which was to cheat on the balance sheet for years, spend on projects which were never going to pay, having set-up an imperfect social welfare system (which has Bismarckian aspects, but isn't Bismarckian) and so on. Their social welfare system was never grounded in reality, so it ought to fail. But his sentiment that this will be inevitably the case, backing it with one example which in some aspects is very extreme and leaving out important factors only because they don't help your point is greatly dishonest.
It was a known secret that when Greece finally was allowed to enter into the Euro they already cheated to perform within the guidelines of the Maastricht Treaty. It was a very unfortunate political decision to look the other way only so the implementation and acceptance of the Euro wouldn't have another setback.

Dishonest? He's just pointing out that Greece is farther down the river and much of the west (including the U.S.) is not far behind. If you want to get into "peculiarities" it still doesn't change exactly what needs to happen. Even socialist governments can be forced to cut spending.

Maybe I need to post another Aesop's fable:

YouTube - Aesop's Fables Part 2/5

Except I could add that the grasshopper asks for a bailout and taxes the ants.

This one is appropriate as well:

YouTube - The Greedy Fox

 

[Vincent Vega]

It's dishonest if you present a case very one sided and leave out fundamental information to justify a point you are trying to make.
No one is even saying that cutting costs and making a social welfare system affordable and in line with your economic abilities isn't right. But his attempt at brushing with a big stroke saying that social welfare is, ad definitionem, leading to that outcome is stupid.
Greece had many government changes, but it basically went between conservative and socialist parties. Both are no more and no less at fault for the sorry state the government is in. The current government is just in since last October, and they are the ones who are making the deep cuts. It'd be silly to point fingers at the Socialists here.

 

[purpleoscar]

It's dishonest if you present a case very one sided and leave out fundamental information to justify a point you are trying to make.
No one is even saying that cutting costs and making a social welfare system affordable and in line with your economic abilities isn't right. But his attempt at brushing with a big stroke saying that social welfare is, ad definitionem, leading to that outcome is stupid.
Greece had many government changes, but it basically went between conservative and socialist parties. Both are no more and no less at fault for the sorry state the government is in. The current government is just in since last October, and they are the ones who are making the deep cuts. It'd be silly to point fingers at the Socialists here.

I'd agree if it wasn't for leftists making big election promises in every democracy. If conservatives in Europe or Mark Steyn support lax Euro entrance rules I would disagree with them as well. The problem with Conservatives is what are they trying to conserve? This is how conservatives get blamed for socialist policies they don't fix or repeal. Bipartisan blame is the political game today. That's why it's fun to hear people say "where were you when Bush was over-spending?". This is supposed to be the two wrongs equal a right argument. My answer to that question is another question. "So what now?"

The public in the end will have to take a stand to support fiscal prudence so politicians can feel safer doing the right thing. If a socialist wants (or has to) balance the budget then I won't stop them. If there's any weakness for politicians on either side of the spectrum to balance the budget that blame lands squarely on the protesting interest groups that will use the media to villify as many cuts as possible to prevent real deficit fighting. I'm sure conservative governments (if they had the mandate) would have balanced the budgets a long time ago if there wasn't popular dissent, just like the Democrats would have passed health-care reform by now if there wasn't a large dissent amongst the population.

 

[BVS]

I'd agree if it wasn't for leftists making big election promises in every democracy.

So only "leftists" make big election promises? What world do you live in?

This is how conservatives get blamed for socialist policies they don't fix or repeal. Bipartisan blame is the political game today. That's why it's fun to hear people say "where were you when Bush was over-spending?".

What? Oh, please do explain, in less than three sentences, what the hell this means...

 

[Vincent Vega]

I'd agree if it wasn't for leftists making big election promises in every democracy. If conservatives in Europe or Mark Steyn support lax Euro entrance rules I would disagree with them as well. The problem with Conservatives is what are they trying to conserve? This is how conservatives get blamed for socialist policies they don't fix or repeal. Bipartisan blame is the political game today. That's why it's fun to hear people say "where were you when Bush was over-spending?". This is supposed to be the two wrongs equal a right argument. My answer to that question is another question. "So what now?"

The public in the end will have to take a stand to support fiscal prudence so politicians can feel safer doing the right thing. If a socialist wants (or has to) balance the budget then I won't stop them. If there's any weakness for politicians on either side of the spectrum to balance the budget that blame lands squarely on the protesting interest groups that will use the media to villify as many cuts as possible to prevent real deficit fighting. I'm sure conservative governments (if they had the mandate) would have balanced the budgets a long time ago if there wasn't popular dissent, just like the Democrats would have passed health-care reform by now if there wasn't a large dissent amongst the population.

In my view that's a real cop-out. Everything that goes wrong within a given society, therefore, is just due to the left giving the poor Conservatives such a hard time leaving them with no other option than increasing spending. Most European conservative governments never looked that pitiful to me, but if that's the case, well then I would kindly ask them to grow some balls.

 

[purpleoscar]

In my view that's a real cop-out. Everything that goes wrong within a given society, therefore, is just due to the left giving the poor Conservatives such a hard time leaving them with no other option than increasing spending. Most European conservative governments never looked that pitiful to me, but if that's the case, well then I would kindly ask them to grow some balls.

Politicians grow balls when there's a popular mandate. I'm pretty sure Barack Obama has balls but he's banging them against popular opinion. Most politicians are worried about approval ratings and polls. I guess Barack is tough because keeps getting a beating and keeps on ticking.

So only "leftists" make big election promises? What world do you live in?

When it comes to spending promises the left is bigger than the right at this. I mean you are aware of the political spectrum aren't you? Bush was the big spender ("compassionate" conservative) until the congress turned Democrat (spending increased) and then when Obama came to power the spending increased even more. Even a moderate like McCain was talking about a spending freeze last election. The last time the budget was balanced was when the Contract with America was on. Clinton did the right thing by not getting in the way. BTW in your reponse don't attempt to equate military spending with welfare spending. Anybody who is serious knows that when the cat's away the mice play. I'm looking at you China, Russia, and Iran.

What? Oh, please do explain, in less than three sentences, what the hell this means...

Here's an example: Obama trying to get Republicans (even just 1 or 2) to support his health-care plan to then call it bipartisan. How about Obama trying to meet with conservatives he likes so he can ostracize the more conservative types (Talk Radio) and appear like he cares about bipartisanship? Bipartisanship allows you to share blame. Is that short enough?

Obama And Conservatives Break Bread At George Will's House

Obama has pledged to be a uniter once in office. He's also said he is willing to take policy suggestions from any source, regardless of ideological affiliation, as long as they work. So far, he's living up to his word.

As an aside this made me laugh:

The Courtship | The New Republic

That first encounter is still vivid in Brooks’s mind. “I remember distinctly an image of--we were sitting on his couches, and I was looking at his pant leg and his perfectly creased pant,” Brooks says, “and I’m thinking, a) he’s going to be president and b) he’ll be a very good president.” In the fall of 2006, two days after Obama’s The Audacity of Hope hit bookstores, Brooks published a glowing Times column. The headline was “Run, Barack, Run.”

 

[purpleoscar]

Oh here's a thread with GOP having trouble getting tough on spending.:

http://www.u2interference.com/forums/f199/senator-jim-bunning-hero-or-asshole-205077.html

I guess some people don't like spending cuts or freezes.

 

[BVS]

When it comes to spending promises the left is bigger than the right at this. I mean you are aware of the political spectrum aren't you? Bush was the big spender ("compassionate" conservative) until the congress turned Democrat (spending increased) and then when Obama came to power the spending increased even more. Even a moderate like McCain was talking about a spending freeze last election. The last time the budget was balanced was when the Contract with America was on. Clinton did the right thing by not getting in the way. BTW in your reponse don't attempt to equate military spending with welfare spending. Anybody who is serious knows that when the cat's away the mice play. I'm looking at you China, Russia, and Iran.

You didn't mention spending in that ridiculous statement you made and yes wars of choice most definately can be put in with "welfare" spending.

Here's an example: Obama trying to get Republicans (even just 1 or 2) to support his health-care plan to then call it bipartisan. How about Obama trying to meet with conservatives he likes so he can ostracize the more conservative types (Talk Radio) and appear like he cares about bipartisanship? Bipartisanship allows you to share blame. Is that short enough?

Nope, not one part of this addresses the contradiction of no one saying anything about Bush's spending until Obama went into power, and it didn't address how or who is blaming conservatives for social programs not being fixed or repealed... but you do get points for trying to keep it short.

 

[BVS]

I guess some people don't like spending cuts or freezes.

Some people know the time and place, assholes do not. Especially when you weren't consistent prior to this move.

How can one be blind to the differences?

 

[purpleoscar]

You didn't mention spending in that ridiculous statement you made and yes wars of choice most definately can be put in with "welfare" spending.

Most political promises involve some kind of spending so at least it's clear now what I meant.

At a minimum Afghanistan is not a war of choice and if the U.S. goes down to European levels of military mediocrity it's exactly what dictators want to see. Even without a war the U.S. needs to stay ahead of the pack of wolves to preserve democracy.

Nope, not one part of this addresses the contradiction of no one saying anything about Bush's spending until Obama went into power, and it didn't address how or who is blaming conservatives for social programs not being fixed or repealed... but you do get points for trying to keep it short.

No. What I'm saying is that when conservatives get into power they don't repeal everything they want to precisely because the public may not like all the cuts or any of them so conservatives just do small changes here and there or they just plainly pretend to be liberals if the public adores that. Then when a debt crisis comes out you'll find fingers not just pointed at socialists who want to increase government beyond where it is but conservatives that were in power when debt was racked up. Obama makes sure everyone knows that he inherited a big debt but the problem is what is he actually doing about it now?

Some people know the time and place, assholes do not. Especially when you weren't consistent prior to this move.

How can one be blind to the differences?

Consistency or not someone will hate any cuts anywhere. Look at Greece and the protesters there. Does any stakeholder of government benefits EVER like cuts?

 

[BVS]

Most political promises involve some kind of spending so at least it's clear now what I meant.

"No new taxes", "I don't believe in nationbuilding", "I'm gonna clean up Washington"

None of these involved spending, so obviously it wasn't clear. It was just another general sweeping statement that rings false.

No. What I'm saying is that when conservatives get into power they don't repeal everything they want to precisely because the public may not like all the cuts or any of them so conservatives just do small changes here and there or they just plainly pretend to be liberals if the public adores that. Then when a debt crisis comes out you'll find fingers not just pointed at socialists who want to increase government beyond where it is but conservatives that were in power when debt was racked up. Obama makes sure everyone knows that he inherited a big debt but the problem is what is he actually doing about it now?

So why does this make it fun to hear "where were you when Bush was over-spending"?

Anyways, I look at this quote above and I wonder to myself, do you really believe in these black and white generalizations you make all the time? And then I also ask myself what would a country be like if your beliefs were running it? Would you honestly cut every single "social" program ever made and then tell those in poverty to go back to school?

Consistency or not someone will hate any cuts anywhere. Look at Greece and the protesters there. Does any stakeholder of government benefits EVER like cuts?

Consistency goes to character in the case of Bunning. It still doesn't really answer anything.

Of course people will hate cuts. You got all up in arms a several months ago because Rush mentioned Obama's "defense cuts", before even investigating the cuts you got up in arms. It turned out the cuts were for vehicles no longer used by the military in over a decade and certain nuclear cuts. As a fiscal conservative you should have applauded these smart cuts, but instead you just heard "defense cuts" and because your platform tells you so, you got upset.

 

[Vincent Vega]

As long as it can be twisted so that the evil leftists are to blame it's good. Seriously, for me this argument looks like this:
"The left massively overspent and now needs to learn to cut costs."

No, the Conservatives overspent as well and now it's the Socialist government which is making the cuts.

"Well, if it weren't for the left and their demands the Conservatives wouldn't have spent a cent."

Again, poor Conservatives. Always have to put up with those evil citizens and all their leftist demands.

 

[purpleoscar]

As long as it can be twisted so that the evil leftists are to blame it's good. Seriously, for me this argument looks like this:
"The left massively overspent and now needs to learn to cut costs."

No, the Conservatives overspent as well and now it's the Socialist government which is making the cuts.

"Well, if it weren't for the left and their demands the Conservatives wouldn't have spent a cent."

Again, poor Conservatives. Always have to put up with those evil citizens and all their leftist demands.

Actually that's not bad but I would say it with less sarcasm. Though it appears New Jersey is bucking this trend.

So why does this make it fun to hear "where were you when Bush was over-spending"?

It's fun because the question doesn't lead anywhere when the current government isn't showing the way.

Anyways, I look at this quote above and I wonder to myself, do you really believe in these black and white generalizations you make all the time? And then I also ask myself what would a country be like if your beliefs were running it? Would you honestly cut every single "social" program ever made and then tell those in poverty to go back to school?

The idea that "this isn't the time" is the problem. If you don't curtail spending now you will have to do so more sharply in the future because of compounding interest. When countries get into bad debt situations they do the cuts out of a fiscal crisis which leads to beneficiaries having to go back to work or change jobs in a larger number than if you dealt with it ASAP. Remember the U.S. has huge unfunded liabilities so it's not just the debt that has actually been incurred. When retirees find that there isn't enough of a populace to pay for the promised benefits (IOUs) those harsh forced cuts come into play or the country would have to experience a default. When a country defaults they may have to tell poor people "too bad". The sooner there is fiscal discipline the less drastic the cuts have to be. I still say that if Obama actually focused on the economy and didn't threaten energy taxes and healthcare taxes he would be hugely popular and after the economy recovered he probably would have a mandate for another 4 years guaranteed. At that point if there was actually enough money to change healthcare there would be less debt panic.

Of course people will hate cuts. You got all up in arms a several months ago because Rush mentioned Obama's "defense cuts", before even investigating the cuts you got up in arms. It turned out the cuts were for vehicles no longer used by the military in over a decade and certain nuclear cuts. As a fiscal conservative you should have applauded these smart cuts, but instead you just heard "defense cuts" and because your platform tells you so, you got upset.

The reality is that the europeans spend more on social programs precisely because they can piggy-back on the U.S. for their security. Because this is the case much of what left-wing parties want to do would have to come at the expense of military spending. The small cuts you mention wouldn't come close to bridge the gap necessary with the current president and especially congress. If I made a mistake before on bloated military spending then I was wrong but we know that Europe would have to greatly change their welfare system if they were to move closer to a U.S. military model and for the U.S. to reduce their size. I still maintain that the U.S. military is why the west has freedom and democracy. If the world was so peaceful all we would need military for would be to help with natural disasters.

 

[BVS]

Wow, you're not even American and you fall for the American Exceptionalism arrogance thought... go Rush

 

[coolian2]

i can't think of any more obvious unsustainable vote buying tactic than tax cuts.

 

[purpleoscar]

Wow, you're not even American and you fall for the American Exceptionalism arrogance thought... go Rush

That's right not everyone hates America outside the U.S. and not everyone takes their military for granted, though many do.

i can't think of any more obvious unsustainable vote buying tactic than tax cuts.

Debt can keep the illusion that it is sustainable until investors start believing they won't get their money back.

 

[BVS]

Knowing the country is not perfect doesn't = hate...

Come on, you're suppose to be brighter than that.

 

[AtomicBono]

Violence Mars Greek Protest - WSJ.com

Things are getting a little crazy over here. Some of my roommates had the brilliant idea of seeking out the protests. And by protests, I mean riots. Thank you anarchists. Bombs, broken glass, fires, stealing jewelery, tear gas, and general chaos.

The Greek people are obviously not happy with their government. They are also ashamed of the way the world views them, as liars and cheaters. It's an unfortunate situation, and it's only going to get worse before it gets better. There were strikes when I first got here two months ago, and they've just been increasing.

 

[purpleoscar]

Violence Mars Greek Protest - WSJ.com

Things are getting a little crazy over here. Some of my roommates had the brilliant idea of seeking out the protests. And by protests, I mean riots. Thank you anarchists. Bombs, broken glass, fires, stealing jewelery, tear gas, and general chaos.

The Greek people are obviously not happy with their government. They are also ashamed of the way the world views them, as liars and cheaters. It's an unfortunate situation, and it's only going to get worse before it gets better. There were strikes when I first got here two months ago, and they've just been increasing.

Greece isn't the only one:

Is Japan headed down Greece's road?

Is Japan headed down Greece's road?
Analysis

Edmund Conway, The Daily Telegraph


TOKYO - The Japanese have always been fascinated with Europe. They modelled their system of government on Britain's, as well as their health-care system and roads; their railways owe something to France; their banks are being remodelled in German fashion. But right now it is another less familiar nook of Europe that is provoking the most attention: Greece.

No prizes for guessing why. With Athens having last week agreed to a set of unprecedented austerity cuts and declared itself open to the prospect of an International Monetary Fund bailout, the Japanese are asking themselves whether a similar fate lies in store for them.

The statistics do not bode well. Like Greece, Japan's net debt is close to 120% of gross domestic product. The deficit still climbs every year. Japan's credit rating has been cut again and again, leaving it far below AAA ranking. Its debt interest payments and refinancing costs account for more than 20% of its annual spending.

According to Shigeru Ishiba of the opposition Liberal Democratic Party, a crisis is approaching. "Gradually the Japanese government debt is closing in on the level of savings of the Japanese people," he says. "So when the government debt goes beyond the level of total savings, that will be the destruction of Japan. And I must say that that day may not be that far away."

But people have been predicting an apocalypse for the Japanese budget for at least a decade, and year by year, the country has defied such warnings. The government has been able to sustain a textbook unsustainable level of debt because debtholders have been willing to lend it money at interest rates of between 1% and 2%, compared with rates of more than 4% throughout much of Europe, and more than 6% in Greece. And the reason those creditors have done so? Because 95% of them are Japanese.

This peculiarity of Japanese government debt -- that it is vastly owned by Japanese citizens -- has protected it from the discipline that would be imposed by international investors. However, a growing number of experts think this buffer will soon come to an end. The savings rate in Japan, which stood at about 14% in the early 1990s, is now below 4% -- one of the lowest in the OECD.

According to Naoyuki Yoshino, professor at Keio University, the country may have only four years until the stock of savings is overtaken by the supply of debt, meaning it will suddenly have to start selling a larger chunk of its debt to outside investors, potentially triggering a sharp increase in interest rates. "When those rates start to rise, then we would have to slash government spending," he says.

The flip side is that although household savings are dropping, companies are still saving large amounts rather than investing. However, at some point even the Japanese may reconsider their faith in government bonds and diversify.

The next flashpoint comes when the newly elected Democratic Party of Japan unveils its long-term fiscal strategy. Whether it can reassure its investors that it will soon bring spending under control remains to be seen. The omens are not good. The DPJ has unseated the reigning LDP party for the first time in 50 years, but did so with promises to overhaul the civil service bureaucracy that has controlled Japan behind the scenes for that entire period. Much of the behind-the-scenes establishment is willing the DPJ on to fail--perhaps even at the cost of a fiscal crisis.

Japan was able to ward off a potential debt crisis for years, but now that all countries' finances are under the spotlight, it is hard to see that this will remain the case. It has enjoyed 20 years defying its critics, but it may be about to learn such periods can end suddenly.

---------

BY THE NUMBERS

120 Japan's net debt as a percentage of GDP.

4 The savings rate in Japan in percent.

20 Debt interest payments and refinancing costs as a percent of annual spending.

 

[purpleoscar]

Things are getting a little crazy over here. Some of my roommates had the brilliant idea of seeking out the protests. And by protests, I mean riots. Thank you anarchists. Bombs, broken glass, fires, stealing jewelery, tear gas, and general chaos.

This "class struggle" is all over the world. In my country it's starting to increase even under a conservative government (though under a stimulus plan plus minority government entanglements). Spoiled government bureaucratical classes come from the "the last shall become the first" mentality. Unfortunately when they become the first then they are the first.

The other class struggle

The other class struggle
Kelly McParland, National Post
Published: Tuesday, March 09, 2010

The Workers World newspaper, a communist publication based in New York, has a fine line on the street protests taking place in Greece and a number of other European countries where governments are pondering austerity measures to help pay off their debts. It's those dirty capitalists again, says the WW, come to steal the wages that workers have rightfully earned.

"The EU itself is an instrument of big business, a coalition of capitalists arrayed against the European working class and the nations in the former colonial world," it says. "Europe's financial bosses are insisting that before they will 'bail out' the Greek government with loans, it must impose an even harsher austerity on the workers than the taxes, wage cuts, hiring freezes, and increase in retirement age and social-service cutbacks already proposed. They aim to force the government to crack down on the workers -- using the excuse that this is needed to overcome the financial crisis. "

I like they way they put "bail out" in quotations, as if devoting billions of dollars to the rescue of Greece isn't really a bailout. Because in union-land, it isn't. By definition, everything a unionized worker earns is deserved, because someone, somewhere agreed to pay it -- especially workers employed by the government, who make up the bulk of the protesting Greeks. And since they earned it, there's no reason they should make any sacrifices to help the country avoid economic disaster. No, that's for little people, who don't have government jobs.

Canada isn't Greece, but it's no healthier here to have a country divided into two classes. Class One: Public sector workers with safe, secure, well-paid jobs it is almost impossible for them to lose, with generous holidays, guaranteed pensions and protection against the economic cycles that prevail in the private sector. Class Two: Everyone else.

It used to be that the people in Class Two had an incentive for risking exposure to economic ups and downs. The pay was generally better, and it was possible to spend an entire career with a successful company and enjoy a pension at the end. Not anymore. If events of the past few years have proved anything, it's that no company is too big to fail, and there's no guarantee benefits promised when you were hired are likely to be there when you leave. If the pension goes splat, like so many have, you're on your own.

While the incentive to face the risks of the private sector has diminished, life on the government payroll has never been better. After all those nasty cutbacks imposed by Finance Minister Paul Martin, the Conservatives were elected in 2006, and have been spending wildly ever since. All the staff reductions have been reversed and the public payroll is bigger than ever. Salaries have largely caught up with private sector levels, and the pensions are just as rock solid as they've ever been. And you can't be fired, short of indictment for murder.

So why would anyone want a job in corporate Canada? Why work for an employer dependent on the need to occasionally make a profit? As people in Greece recognize, it practically becomes a duty to work for the government when the alternative is so detrimental to your own interests.

It's not a healthy situation. The danger is not just economic but cultural: Government employment is not supposed to be a privileged position, and the more favoured the bureaucracy becomes, the more resentment it attracts.

It doesn't help that public service unions react to even a hint of restraint by declaring their determination to man the barricades in defence of every last entitlement. No sooner had Finance Minister Jim Flaherty finished his budget statement -- which referred vaguely to future restrictions -- than union representatives were on the air predicting a major battle lay ahead and warning the troops to prepare to resist, even if details of the government's plan remain unknown.

Some 13,000 federal civil servants quit or retire each year. As well, the bureaucracy is aging, and a wave of retirements is anticipated. Ottawa doesn't have to squeeze current employees too hard to successfully reduce the overall pot of cash flowing to bureaucratic paycheques. All that is required is a severe cutback in replacement hiring, and a refusal to add to the generous benefits already on offer.

The country won't grind to a halt, I guarantee it.

 

[anitram]

Kelly McParland is neither the brightest bulb around nor an objective commentator, but anyway...

Canada isn't Greece, but it's no healthier here to have a country divided into two classes. Class One: Public sector workers with safe, secure, well-paid jobs it is almost impossible for them to lose, with generous holidays, guaranteed pensions and protection against the economic cycles that prevail in the private sector. Class Two: Everyone else.

What a ridiculously oversimplistic statement to make. Nevermind that this alleged "class" struggle is something Kelly has conjured up as a major problem.

Even the stupidest person who actually bought this argument would know that in fact there is a risk/reward question here, and that we are FREE to choose class 1 or class 2; it's not a caste system for heaven's sake.