In The Red

In the Daily Telegraph, Matthew Lynn explains what happens when the coffers start to run dry across Europe:

[Last Tuesday] was the day when France ran out of money. As of Nov 7, all the money the government raises through its taxes – and this being France, there are literally dozens of them – had been spent. The rest of the year is financed completely on tick [credit].

In other words, for the French government to continue to function, the rest of November and all of December requires that they borrow money — i.e. run a current account deficit.

Most governments these days do the same, of course: the article goes on to point out that Spain likewise ran out of money on Saturday Nov 11, Romania on Nov 13, Poland will be broke on Nov 21, and Italy on Nov 26. The UK, astonishingly, will run out of money on December 7, while of the other large numbers, only Germany (duh) and Sweden (!!!) will be funded into the new year from their current tax incomes.

So, you may ask, how does the U.S.A. stack up against these spendthrift Euro countries?

We ran out of money in mid-October.

Feel free to write to your Congressweasel, or else sharpen the pitchforks, pluck the chickens and heat up the tar. Guess which action I prefer.

 

2 comments

  1. Dear Dr Kim: I have seen the politicians in action, and I have a large container of tar, and I have plucked the chickens. My question is twofold. How hot should the tar be, and will the chickens grow their feathers back before the snow flies?

  2. The borrowing frightens me. The USA paid about $485 billion/yr. in 2016 at 2.25% just for interest on the debt, which amounts to 18% of Federal revenues. We didn’t pay a dime on the principal of our debt of ~$20 trillion. I looked up the historical Fed interest rate on the debt, and found the average rate over the past ~30 years has been about 6.5%. Simple arithmetic says that when that happens, our payment rises to 54% of our revenue, not including the increases on the total debt of a trillion or more each year in the interim.
    The road to that rate will be the end of our economy and the dollar. We will become Venezuela or Zimbabwe. When that scenario approaches, will we have violence, then a collapse, or a collapse and then violence? I’m not optimistic of avoiding it.
    The self-serving status and perk-seeking glory hounds in DC deserve worse than tar and feathering for allowing this debacle to go on. McConnell as the central figure in the anti-Trump log jam makes him the leading candidate for punishment. He must go.

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