Greece is an example of perils of debt

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webmaster | 02/29/12
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The German Bundestag has voted to pump more euros into Greece, but the German people aren’t sure that’s a good idea. The Deutsche Leute may be right. In the end, the support from Germany will earn no love from the Greeks, who are going crazy over the fact that their days of almost-unlimited state benefits are over.

The Greeks have been rioting in the streets over the cutbacks in government spending that the rest of Europe demanded before lending Greece 130 billion euros on top of previous loans.

Greece has the 32nd-largest economy in the world, and is the 15th-largest economy in the European Union, according to the online encyclopedia Wikipedia. However, most of its economy is service based — 78.3 percent, which means the country is sensitive to changes in the world economy, especially changes which hurt tourism.

Greece faces a high and growing rate of unemployment and an inefficient and corrupt government. It also is a country of tax evaders, which means money to operate the government is hard to come by.

Lending to Greece is almost assuredly lending to a country that will have a hard time paying the loan back unless many changes are made.

One can only live on borrowed money as long as the lenders have tolerance.

It appears the Germans may have reached their limits.

That’s something for the United States to think about as we continue to lean more and more on borrowed money. We aren’t Greece yet, by any means, but Greece’s plight is a model for any country, the U.S. included, which fails to pay its way over the long haul — and even the short haul, for that matter.

A case in point: Gov. Jerry Brown wants to borrow from the Chinese to build the California high-speed rail system. That may not be such a good idea.

 

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