Monday, May 10, 2010

A Lesson For Governments Everywhere

What Happens When Governments 
Are Forced To Stop Spending

"It couldn't happen here" you might say. But are you sure? As a country Greece has been spending money it has had to borrow for years and finally the chickens are coming home to roost. The result? The government of the day is having to make drastic cuts to wages being paid to a bloated civil service and reign in out of control spending.

Why is it becoming a problem now? Why is Britain facing equally tough choices in the coming years? I am no financial wizard, but I presume when you keep borrowing more and more money, sooner or later the lenders want to be repaid. Of course this causes massive problems when you simply don't have the money.

So, what makes Canadians think we can keep spending money we don't have without suffering the same difficulty sooner or later?

I think our political system is to blame and the blame can be equally shared with the government and the people who elect them (that is you and I).

We have allowed governments to stay in power, by using money we don't have to offer the illusion of providing services and safety nets, we just can't afford. Sooner or later those chickens will come home to roost and the generation that has made the mess really needs to step up and clean it up and not leave it for the next one.

Only in Greece you say? Don't kid yourself.

The above story this morning tells of a $1 Trillion  global emergency rescue package to help stabilize the euro. The question still remains can Europe's weakest economies (Greece, Spain, Ireland) actually manage their debt.

Since the global meltdown of 2008, what has actually changed? The problem was attributed to out of control debts which have been hidden by throwing more pretend money at them.

Large companies like GM are making much of their apparent 'success', however, they seem to totally ignore how much money was written off when the old GM when broke. Remember that? If you are like most of us, it isn't even a slight memory.

Closer to home, the provincial government has HAD to bring in the politically suicidal HST simply because they can not manage the provinces debt any longer with existing tax measures.

Our local civic government will sooner or later have to face the reality of over spending, when they simply will no longer be able to continue to raise taxes.

The local school board is suggesting they might try to hold a referendum to further raise taxes, as they are unable to continue spending within their means, in spite of the massive amount of taxes the local schools already use up.


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