It looks like a solution to Greece's deficit problem is near, and that's good news. However, the fact is that this is another can being kicked down the street. The thing is that the problems facing Greece are not unlike those facing the United States. Sure, America can print money, still has its AAA credit rating, and is still the most dynamic economy in the world. But we can't ignore telltale signs that there will be some serious issues that will test our reputation and test or fortitude down the line. I've already pointed out how eerily our deficit to GDP ratio echoes those European nations in a heap of trouble right now. There is yet another issue we share with our European counterparts that can't be fixed with money, at least not directly. The world's economic powerhouses are getting long in the tooth. The world's economic powerhouses are leveraged to the hilt and owe gobs of money through entitlements revolving around medical and retirement benefits.
Greece has one of the lowest birthrates in the EU, which is a problem for this nation of 10 million people. Their government is coming to grips with the unsustainable trends of aging workers, low birthrates, and outrageous pension liabilities. I read a quote from an angry Greek citizen yesterday; the guy was a 57-year old retired factory worker. Say what? In America, a 57- year old factory worker might be the new kid on the block and not thinking about the day he/she can stop punching in. New austerity measures include:
> Wage cuts
> Hiring freezes
> Cutting supplemental wage allowance
> Banning early retirement
> Raising retirement age to 63 from 61
> Hiking the top income tax rate to 40% for incomes over €60,000 from €75,000
Although 64% of its citizens accept the measures as necessary medicine, unions are going berserk, striking yesterday and today. They will likely strike later in the month as well. Things are so awful that Greece is even letting tax cheats bring money back under amnesty. Don't snicker, it's estimated that Greece needs $73.0 billion and its shadow economy is $20.0 billion a year.
By the way, in the developed world the countries listed below that have black market economies that are 24% to 30% of GDP include:
Let's take the issues facing Greece and see how America is in the same orbit. The average birthrate in the world is 20.3 per 1,000 people. In the meantime, people in the developed world are living longer. These developed nations enjoyed fabulous growth and prosperity coupled with increased productivity, thus making it easier for earlier retirement. Now it's all changing, and it's a bitter pill to swallow.
These are not official ages but instead averages; in the meantime there are changes on the drawing board. Japan will go to 65 from 60 by 2013, Spain 63 from 61 by 2015, the U.K. to 68 by 2046, and Italy 61 from 57 by 2013.
The percentage of adult women entering the workforce will increase dramatically.
A band-aid by Germany for Greece could provide the firewall the former is seeking, but how long can that wall hold back what is destined to be a painful problem at some point. Much work has to be done.
First: Let's get the economies of the world going by focusing on positives and the future. This myopic war against banks and rich people is so ass-backwards that it's killing the potential for a swifter recovery.
Second: Let's make tough decisions, people have to work longer and pensions have to be cut. Taxes should be cut as well.
Third: Let's put the onus on education, which in my mind is more important than solar panels. I disagree with President Obama that it's not the nation that takes the lead in renewable energy (once everyone has renewable energy where does anyone have an advantage since the sun and wind grace the entire planet) but the nation with the brightest population that prospers.
Initial Jobless Claims
It will be interesting to see how storm activity impacts claims data over the next couple of weeks, but today we could breathe a slight sigh of relief. Initial jobless claims totaled 440,000, 25,000 below consensus forecasts. Continuing claims had a nice drop to 4.538 million from 4.617 million previously. Consensus was looking for a continuing claims total of 4.60 million.
I did so much shoveling last night I wonder if I will show up in the government's next couple of saved or created jobs?