Because of Greece the Germans have to Choose Higher Taxes and Austerity or Higher Unemployment and Austerity

Posted by PITHOCRATES - November 12th, 2011

Week in Review

As the Eurozone struggles to save the Euro there is but one country that can.  Germany.  They are the only ones rich enough to bail out anyone.  Some in the U.S. like to point to Germany as a success story for the social democracy system of government.  But there is a reason why Germany is the only one that can bail out the Eurozone.  And it’s not because of their generous pay and benefits (see Eurozone Crisis: Correcting Paul Krugman by Tim Worstall posted 11/6/2011 on Forbes).

Around the turn of the century Germany realised that it was becoming uncompetitive. Labour costs were getting too high for the productivity of that labour. So they determinedly turned the screws on labour costs. They deflated that part of the economy, driving down labour costs and up productivity.

Driving down labor costs?  Increasing productivity?  Why, that sounds like things we do on this side of the Atlantic.  Us evil capitalists.  Who believe prices are set by the market.  Not by the amount of labor it takes.  As Karl Marx said.

The Germans have learned that if your costs are too great you will price yourself out of the market.  So they cut their biggest cost.  Labor.  And now German exports are leading their economy.  Which is no doubt benefited by a weak Euro.  Thanks to the European sovereign debt crisis.

Which puts the Germans in a very unique position.  If Greece fails and drops out of the Euro the Euro will grow stronger.  Which will increase the cost of German exports.  Negating all their productivity gains.  So Germany needs to save Greece.  To keep the Euro weak.  And favorable to German exports.  The only question is will the German people go along and pay the taxes required to save the Euro?

The German taxpayer can’t win.  Either higher taxation and austerity.  Or greater unemployment and austerity.  All because Greece didn’t do what they did.  Turn the screws on their labor costs.


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If Amtrak can’t Operate Profitably we have No Business Getting in the High-Speed Rail Business

Posted by PITHOCRATES - November 12th, 2011

Week in Review

Before we commit to high-speed rail we probably should figure how to make the less costly type of rail not lose money first (see Amtrak’s true costs by N.B., WASHINGTON, D.C. , posted 11/7/2011 on The Economist).

AMTRAK, America’s government-run passenger rail service, received $1.4 billion in taxpayer subsidies in 2011. Critics reckon that’s too much, and say that the company should either be self-sufficient or privatised. Some surveys suggest that the majority of Americans agree. But Amtrak’s defenders are striking back, arguing that the railroad actually receives fewer dollars per passenger mile (ppm) than highways.

Yes, but Amtrak sells tickets.  Our highways don’t.  Except for private toll roads.  But private toll roads are private.  And typically the government doesn’t subsidize them with federal money.

Airlines don’t receive subsidies like Amtrak does.  That’s because there is a demand that they can meet profitably.  Passenger rail just can’t do that.  Their costs are just too great.  Which is why Amtrak can’t survive without federal subsidies.

And if Amtrak can’t operate profitably we have no business getting in the high-speed rail business.


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Woman Dies from Drug Overdose at Occupy Wall Street in Vancouver

Posted by PITHOCRATES - November 12th, 2011

Week in Review

Sadly, a 23-year woman died from an apparent drug overdose at an Occupy movement in Vancouver (see Death at Occupy Vancouver shouldn’t force end to encampment, protesters say by Sean Sullivan, Katie DeRosa, Jason Markusoff and Sean Myers posted 11/6/2011 on

The woman, identified online as 23-year-old Ashlie Gough of Victoria, was found unresponsive in her tent Saturday afternoon from a rumoured drug overdose. Police said the death is not considered suspicious.

After news of the woman’s death broke, Mayor Gregor Robertson said he had asked city manager Penny Ballem to find a way to force the protesters from the makeshift tent city, calling it unsafe…

“This is the second critical incident in the last two days,” Robertson said over catcalls from occupiers, in reference to a man who overdosed on heroin on Thursday…

Protester Niko Guerra said the woman and her friends were peaceful and played music most nights.

“They enjoyed having somewhere to stay, as opposed to living on the street,” he said.

Sad.  Only 23 years old.

I guess we can stop calling these the Left’s Tea Party.  Because the Tea Party rallies weren’t just a place to score and get high.  They had a serious and consistent message.  Not just playing music all night and getting high.  Which appears to be the case with many of these protesters.  Not everyone I’m sure.  But enough to make these look more like a tailgate party before a concert than a political movement.


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Too Much Socialism and Tax Evasion Triggered the European Sovereign Debt Crisis

Posted by PITHOCRATES - November 12th, 2011

Week in Review

The cause of the Greek problem was too much socialism (see Newsmaker: Greece’s Papandreou, Socialist scion, felled by debt by Dina Kyriakidou posted 11/6/2011 on Reuters).

Greek Prime Minister George Papandreou was elected as a Socialist who would lavish jobs and benefits on the poor and working class, but was brought down two years later by an economic crisis that forced him to do the opposite.

That’s the problem with being overly generous.  And its why businesses are very reluctant to make long-term generous financial commitments to their employees.  Because everything works during good economic times.  But when the economy turns sour, look out.  Those generous commitments can sink a business.  Or a country.

His Socialists came to power in 2009 with promises to help the poor that had been left behind by an economic boom that followed the country’s entry into the euro single currency.

But since he took power and announced that Greece’s debts were higher than thought, the country has suffered its longest recession in generations, and the poor and working class have been hit hardest.

To stave off bankruptcy, Papandreou has been forced to impose severe spending cuts and hack back at a welfare state and a system of generous treatment of state workers seen as the legacy of his own charismatic father.

That’s right.  The Greeks cheated to get into the Euro.  Had they been truthful about their debt they would not have met the requirements to join the single currency.  And the rest of the Eurozone would not be struggling to save the Euro.  Debt matters.  Too much of it is always a bad thing.  And if you’re lying about it you have way too much.

Of course, continuing business as usual hasn’t helped.  It’s only made things worse.  Which led to the European Sovereign Debt Crisis .  And the hated austerity measures.

A raft of austerity measures followed to counter pervasive tax evasion and scale back a bloated public sector to meet the terms of EU and IMF bailout packages.

This is why socialism doesn’t work.  It takes high taxes.  Which the recipients of those generous benefits don’t mind.  Because they’re not paying those high taxes.  It’s a different story, though, for those who have to pay those taxes.  And they go out of their way not to.  Because they’re too high.

Of course, the defenders will say it’s just another example of the greed of the rich.  Those selfish people who don’t want to work long and hard so others don’t have to.  The taxpayers, of course, see it differently.  They just don’t see it as their responsibility to take care of everyone else as well as their own families.


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