Thursday, December 1, 2011

Sisyphus

This might give us a good explanation of the nature of the western "decadence": most rich countries have been keeping their high standards of living by means of debt, just that easy. As huge borrowers, they are in the hands of others. This does not only refer to public spending, which always seems to be the greatest concern, but also private debt, held both by households and companies.
The terrific conditions that have been maintained in the US, Japan and EU in the last decade, giving the debt a condition of virtually real interests-"free" have boosted the speedy indebtedness. This has driven these regions in a risky territory, where any lack of credit availability after maturity of previous debt would make much heavier the load of interests on taxpayers, and would reduce the profitability of companies and also the familiar disposible income. The circle is closed, the consume falls, the aggregated demand falls, and the whole systems is caught into a downward spiral.
Now, how can that be stopped? The burden of debt is so huge in some countries that its reduction would remove such a quantity of resources from the economic cycle that would (and it's actually doing so in more than one place) sink the country into a permanent crisis with little or no hope of prosperity in the coming future.

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