2013 July 13 Saturday
The Huge Euro Ruling Class Economic Failure

Portugal sovereign debt interest rates are up at an unsustainable level. The Portuguese government will be bankrupted by high interest rates as old debts mature and they have to issue new debt.

Yields on 10-year Portuguese bonds jumped more than 100 basis points to 7.85pc in a day of turmoil, kicked off by a government request to delay the next review of the country’s EU-IMF Troika bail-out until August.

Europe's economies can not grow themselves out of debt. They are trapped. More sovereign debt defaults seem likely. Portugal's economy will shrink 2.4% this year and will shrink next year too. If Portugal defaults the contraction will go even faster.

Long term economic conditions look far worse. Portugal's population is going to shrink 10% by 2030 and the labor force will shrink even faster as the ranks of retirees grows. The government will be forced to raise retirement ages.

Western Europe is in deep financial trouble. America's troubles are not yet as developed. But our fundamentals are bad too. Aging Japan, in much more sovereign debt, is in even more dire straits.

Democracy can not function without a growing economy to supply more production that that elected officials can take to buy off voting and lobbying interest blocks. Democracy can not function without a smart and young population. The demographic fundamentals are working against healthy democracy.

Share |      By Randall Parker at 2013 July 13 09:41 PM 


Comments
Hokkaido said at July 13, 2013 9:52 PM:

"Aging Japan, in much more sovereign debt, is in even more dire straits."

If they can get through WW2, I think Japan will be fine. They are not infested with NAMs (or any other non-Japanese types) either.

destructure said at July 14, 2013 6:13 AM:

Personally, I look forward to the impending SHTF. The conspiracy of fools has gone on far too long. I figure it will continue as long as people are fat, drunk and stupid. It's only when the food and drink run out that people become disgruntled enough to do something about it. The longer it continues the worse it gets. So, I say the sooner the better. Hopefully some of those responsible will still be alive to be held responsible.

Madame Guillotine, sing your song.

destructure said at July 14, 2013 6:15 AM:

Personally, I look forward to the impending SHTF. The conspiracy of fools has gone on far too long. I figure it will continue as long as people are fat, drunk and stupid. It's only when the food and drink run out that people become disgruntled enough to do something about it. The longer it continues the worse it gets. So I say the sooner the better. Hopefully those responsible will be dealt with appropriately.

James Bowery said at July 14, 2013 6:21 AM:

RP writes: "Democracy can not function without a smart and young population. The demographic fundamentals are working against healthy democracy."

At adequate levels of automation, "democracy" can function just fine with nothing but retired people if it is market democracy based on a citizen's dividend as the vehicle through which social goods are delivered and which enfranchise "voters" through their market choices.

I did try to warn people about the need for this due to the baby boom retirement, and offer a solution back in 1992 and even got a positive response from Brookings.

No, what _really_ can't function is a society based on rent-seeking in either the public or private sectors: Public sector rent seeking in the form of delivering social goods to people so they can afford to engage in politics to get a bigger slice of social goods. Private sector rent seeking in the form of refusing to tax the network effect value of assets.

Jack Fresco said at July 15, 2013 4:15 PM:

Resource Based Economy, the only way to go.


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