The global economy is on fire due to government Water Fountain Economics. Leaders from around the world continue to push for more government spending with hope that it will stem the flow of a sinking economic situation and put the fire out. One of those world leaders is, France’s newly elected President Francois Hollande, who is the leader of the Socialist Party. President Hollande has called for huge tax increases (75 percent) on those who have an income of 1 million euros or greater. This tax hike that President Hollande wishes to implement on the so-called “rich,” would supposedly increase revenue to the central government and supply the increase that is needed to pay for the growth of government entitlements. Government spending, or a “continuous stimulus” has drained the producers and job creators of their life blood to keep the economy afloat. This belief that the “rich” are not paying their “fair share,” has become a recent trend with many leaders from around the world. President Obama himself has called for the rich to pay their “fair share” in his “New Nationalism” speech that he gave in Kansas.
The economic fire storm that spread to Spain, has now put them into an economic situation in which Spain is now requesting a 100 billion euro bailout, which is the equivalent to 125 billion dollars. If Spain does not change the way it manages the revenue that it collects from the producers within that economy. This bailout contagion that continues to spread from country to country could have a devastating end result on the entire world economy. In response to the bank bailout for Spain, and the growing concerns within the Eurozone, ft.com reporters quoted an expert from Citigroup;
“The crisis is deteriorating at an ever-increasing pace,” said Mark Schofield, a senior strategist at Citigroup. “Investors are increasingly pricing in either of the two tail risks – full eurozone break-up or fiscal union.”
The Economic Times, also reported that Greece could be on its third bailout soon enough;
“If a state insolvency is to be avoided, then the Europeans will need to jump in again. The Bundestag (lower house of parliament) may possibly have to discuss a third Greek package again.”
Greece has been forced to seek world help many times in the past. The first time was for 110 billion euros in May of 2010, and then for another 130 billion euros earlier in 2012, plus an additional 107 billion euro private debt write off. If the elections in Greece this Sunday result in a win for the leftist Syriza party, who have claimed to stop the accepting the bailouts, could result in Greece leaving the 17-nation Eurozone. The global economic implications of Greece exiting the Eurozone cannot be properly assessed and therefore many suggestions at mitigating the financial damage have been offered. Reuters reports that;
“European finance officials have discussed limiting the size of withdrawals from ATM machines, imposing border checks and introducing euro zone capital controls as a worst-case scenario should Athens decide to leave the euro.”
Another suggestion from E.U officials would restrict the movement of people, along with the capital across borders. This is the result of government growing out of control, not only with the control of capital, but the control of the actual person from one place to another. Is this the place that America is headed? Will this be the end result for the entire Eurozone? How will the expected exit of Greece impact America, and the rest of the world? How long will other countries continue with this charade of fiscal sanity?
Greece has received multiple bailouts and is still heading down a path of fiscal destruction. Now, Spain has received its first bailout from surrounding nations, as well as Ireland, and Portugal. At some point the water fountain economic theory will run out, and lending nations will not be able to lend each other capital anymore. Nations that were previously sustaining semi-healthy economies, now have to borrow capital from neighboring nations in order to keep their economies afloat as a result of their previous lending to other nations prop up their economies.
What will happen there are no more lending countries? If nation A borrowed capital from nation B, and nation B borrowed capital from nation C, and one day nation C stops lending, what will the result be for nation A? Will banks close? How long will the economy last? What will the world look like with every economy collapsing?