Times aren’t looking so good for Greece right now. Their debt is piling up and they don’t have the means to pay it off. As a result they have had their credit rating downgraded to junk status. With a deficit nearing 14% of their GDP it certainly doesn’t look good for their credit rating (by comparison the USA is hovering around 10.6%, but normally is 1-4%).
Greece’s GDP is currently $356 billion with debt of over $400 billion putting them at 112% of debt as percentage of GDP. By comparison the USA is sitting at 94%.
Now that the facts are laid out I must say that it is very interesting situation on many different levels. First off USA is only 18% behind Greece right now and at our debt accumulation rate we’ll be surpassing them soon. Could the US Treasury’s credit be downgraded? Maybe but I’d have to wonder if the reigning democrats would put the people responsible for the credit ratings on “trial” if they did lower the rating.
A interesting thing about Greece’s situation is that they are desperately trying to reduce their deficit but are being met with strong resistance by the populace who are unwilling to give up or see cuts to their pork projects and socialist programs. Apparently they don’t understand how serious and bad their situation is. When a credit rating is downgraded to junk status the perceived and real risk for lenders/investors goes up and as such the demanded interest rate rises as well because the investment is now considered highly speculative. What that means is that there is a lot less people willing to loan them money and when they do get money they will be paying a lot higher interest rates. Given this many Greek people are bemoaning the fact that they might lose some of their precious programs? Their economy is at risk and instead of trying to fix the problem they are pretty much making it worse?
I can’t say I’m surprised though, as I imagine there would be plenty of protest here if say Social Security got large cuts (which will probably happen by the way).
Debt is serious business; often it is necessary but these governments (USA included) are being flippant and irresponsible and we (the tax payers) will pay for it. The US Government, instead of being responsible and reducing spending, wants to raise taxes to pay for the deficit, they are even thinking about adding a VAT tax (value added tax which is basically a invisible sales tax).
I say why not reduce spending and lower taxes? Or better yet implement the Fair Tax (and reduce spending). The Fair Tax will not penalize people for making money or being entrepreneurial, it’ll only tax people when they buy things. So in most situations we would control when we paid taxes and the highest consumers would pay the most in taxes. It doesn’t get any more fair then that. Plus a great part about it is there would be no income tax returns for consumers, only businesses would file, and businesses to business sales are exempt from the tax which will lower prices and encourage more people to go into business. Plus think about it this way, people who have a lot of money spend a lot, yet that spending doesn’t add much to the coffers of the tax system. Yet middle to low income people who can barely afford to pay their rent or buy food or pay their bills are having 10-20% taken off before the money even gets to them. The fair tax, if implemented, would be the greatest stimulant that our economy could get and it wouldn’t cost the government a dime.
