Wednesday, July 13, 2011
European Debt Load Perfectly Manageable. $$
Portugal, for example, has a debt/GDP ratio of let us say 150% (it is less) ; and a budget deficit of 10% of GDP...like the USA. Assuming Portugal to be a family with a $40 000 annual income implies this family has $60 000 in debt and is spending $44 000 per year.
To get this family´s finances stabilised, all we need to do is cut expenditure by 10% or $4000 . How hard is that? We all could easily cut our family budgets by 10% ...we might not like it but we certainly would not be defying any law of physics.
(A country whose government cuts spending aggressively faces GDP contraction, but a government can also give itself a "raise" by increasing taxes...so lets assume one effect cancels the other.)
To get this family´s finances stabilised, all we need to do is cut expenditure by 10% or $4000 . How hard is that? We all could easily cut our family budgets by 10% ...we might not like it but we certainly would not be defying any law of physics.
(A country whose government cuts spending aggressively faces GDP contraction, but a government can also give itself a "raise" by increasing taxes...so lets assume one effect cancels the other.)
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