Greece is richer than the U.S.?

Greece vs USA

In brief: Greece is not a poor country, as everyone thought. The U.S. is in a worse financial position.

Global financial markets are still shaking in all modes at the thought of a possible Greek defaulted. Yields on long-term government bonds in Greece by 700 basis points over similar Treasury securities yields USA. Thus, it seems that in America things are much better than in Greece. Unfortunately, it has nothing to do with the truth. Greek debt represents 120% of vnturennego GDP, twice more than in the U.S..

But the debt itself, little is said about the financial condition of the country. Economists consider it a problem of terminology: the government called its receipts and payments as they like. For example, the payroll taxes that finance the pensions and health care system, may be called borrowing and deferred benefits – payments less future taxes. In this scenario, the U.S. budget deficit will be only 15% of GDP, rather than 9%. In 1980, during the pension reform, Chile thus changed the sign over his deficit. Income, which used to be called taxes, were sent to private pension funds, whose government then took out loans to pay all the same benefits. Voila! The working population still be paying benefits to pensioners, but now it is called borrowing. Change of economic terminology allowed us to reduce costs, including the financing of air carriers, citing “too high deficit. As a result, Chile’s fiscal position has improved considerably, despite the presence of large debts in the accounts. Argentina also “reformed” pension system without any fiscal tightening. Recently, the country nationalized its pension funds, calling the confiscated assets “income”, but not including the insertion of future liabilities in their balance sheets. Thus, Argentina has sold promissory notes for the current cash. Greece did the same thing, selling the expected income from the airports and profits from lotteries. But France is not far away, especially when the seized assets of the pension company France Télécom (leaving aside the pension obligations), in order to meet the requirements of a deficit in the Eurozone.

But these countries still have someone to learn, a real master of the game words, Uncle Sam. Over the past half century, States have sold tens of trillions of informal promissory notes, assuming the obligation to pay social security benefits, medical insurance and benefits in an amount 40 times higher than official duty. So will the real U.S. debt is 40 times more than what is written in the statistics? This year the budget deficit in the country of 15% or 9%? A matter of taste, because we live in financial wonderland, where the evaluation criteria are absolutely meaningless. In economics as in physics, some concepts lack clear definition. In physics, this is an absolute time and distance, which depend on the direction and velocity in space. Such things characterize our perception of time of day or length of our table. In economics, any paid or received by the Government of the dollar can be called by different words, or terms, having thus different levels of debt. It turns out that to assess the financial stability of the country, using the rate of duty, as do the country’s Big twenties, anyway, that go to Los Angeles, focusing on the map of New York.

Fortunately, we can assess the situation without resorting to confusing standards and terms: it is the fiscal gap, or difference between the present value of all future costs and revenues. In Greece, a huge gap. According to the calculations of economists from the University of Freiberg, he is 11.5% of the future of the country’s GDP and takes into account the recently adopted to reduce costs. But in the U.S. it is even more and is 12.2%. Of course, Greece is in a terrible position to bring its finances in order, it must tighten their belts in 11.5% of GDP annually. A truly draconian measures. But in the U.S. is still worse. Because the rate of 12.2% already takes into account a decrease of 7.2% of GDP by 2020.

Some of the factors underlying this adjustment by 7.2%, are more than controversial. Among them are the growing number of taxpayers who will have to pay the “alternative minimum tax, known previously as the” tax for millionaires. ” Growth in real wages are driven working in tight fiscal vise, and Congress will cut discretionary expenses and limit the growth of social and health benefits. One problem of volition in the U.S. can not be solved. The country has one foot in the deep and gloomy economic grave. The time when she could not afford a meaningful fiscal planning, long gone.

Ukrainian Globalist
2010-07-26 20:00, Economics.


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