Thread: Democracy could disappear

Nightmare vision for Europe as EU chief warns 'democracy could disappear' in Greece, Spain and Portugal
By JASON GROVES
Last updated at 1:52 AM on 15th June 2010

EU begin emergency billion-pound bailout of Spain
Countries in debt may fall to dictators, EC chief warns
'Apocalyptic' vision as some states run out of money
Democracy could ‘collapse’ in Greece, Spain and Portugal unless urgent action is taken to tackle the debt crisis, the head of the European Commission has warned.
In an extraordinary briefing to trade union chiefs last week, Commission President Jose Manuel Barroso set out an ‘apocalyptic’ vision in which crisis-hit countries in southern Europe could fall victim to military coups or popular uprisings as interest rates soar and public services collapse because their governments run out of money.
The stark warning came as it emerged that EU chiefs have begun work on an emergency bailout package for Spain which is likely to run into hundreds of billions of pounds.
A £650 billion bailout for Greece has already been agreed.
John Monks, former head of the TUC, said he had been ‘shocked’ by the severity of the warning from Mr Barroso, who is a former prime minister of Portugal.
Mr Monks, now head of the European TUC, said: ‘I had a discussion with Barroso last Friday about what can be done for Greece, Spain, Portugal and the rest and his message was blunt: “Look, if they do not carry out these austerity packages, these countries could virtually disappear in the way that we know them as democracies. They've got no choice, this is it.”


‘He's very, very worried. He shocked us with an apocalyptic vision of democracies in Europe collapsing because of the state of indebtedness.’


Read more: EU leaders to thrash out rescue package as Spain faces bankruptcy | Mail Online

Just went you think the apocalyptic visions couldn't get any worse...

that would be Germany in 1930s all over again,

Just what did these governments expect? You borrow more than you can afford to pay back and live above your means, then sooner or later someone has to pay for the debt. Irresponsible governments buying votes with borrowed money not just in Spain, Greece, Portugal, Ireland, Italy etc. But also US, UK, Germany, France, Australia etc, etc, etc.... Now they realize the party couldn't go on forever, somebody has got to pay for all those excesses. And its the little people through austerity measures such as decreases social benefits and increased taxes. Sure the people are going to be angry at the mismanagement of their economies. No one wants to take a cut in living standards to pay for the gross mismanagement of governments. There is going to be a lot of protests and even civil unrest, but unlikely to be anarchy and a collapse of democracy in developed countries taking the pain.

I have faith in democracy and the power of the people to vote in governments who act in their best interests. After all the social unrest and the dust settles people will realize that they cant live above thier means on borrowed money forever. And governments who promise short term prosperity based on long term debt will be out of favour. This world financial crisis is still unfolding and people in developed countries are becoming educated as to just what went wrong.

Its a generational thing. The kids of today who live through this current world financial crisis will in another 40 years be telling their grandkids not to trust governments who take their countries into excessive debt. But they will probably all be Chinese grandparents of course.

The developing world is developing fast and catching up to us in the west fast. We prospered on the cheap labour of developing nations, but somewhere down the line there is going to be an equalizing effect. Their living standards go up and ours go down. Right now, the governments of developing nations are maintaining their own austerity measures to get the edge on trade and because the people haven't known anything better. Working hard and banking the profits, while we in the spoilt west borrow more to live the high life. Somewhere down the line its got to equalize. The west is going down and the east is going up.

At least the euro is likely to die after this lot.
I can see the point of the 1930s German comment. Desperate times and all that.

Mebbe I'm being a bit thick here, but where did all this money go?

Originally Posted by mr Fred

At least the euro is likely to die after this lot.
I can see the point of the 1930s German comment. Desperate times and all that.

No big deal really. Just the poor folks get a little richer and the rich folks get a little poorer. Would have been a little less painful if it had happened gradually under a natural progression, but the $US hegemony and paper money fiat trading currency has brought it to the brink of an abrupt and painful change. Paper money can never replace real productivity and the world is just realizing this.

I think a giant flare from the sun will break apart the planet. But that's just me.

:P

Originally Posted by harrybarracuda

Mebbe I'm being a bit thick here, but where did all this money go?

Good question. Or more to the point, -- who lent all this money to the governments? Even paper money is exchangeable for labour and goods, so someone must have produced the wealth in the first place for our governments to squander it.

Governments raise money to fulfill their promises to the voting public by either taxing the people (which is very unpopular) or borrowing it by selling bonds (very popular). Bonds are like taking out a loan and acquire interest payments. Anyone can buy government bonds from private citizens to big investment companies to overseas governments. Bonds are just a promise to pay back what you loaned to the government plus interest. If the interest rate is below the inflation rate you are losing money in real terms. But governments can print money so you will always get your money back plus interest in numerical terms, even if it wont be worth as much in purchasing power through inflation. A lot of people like pension funds buy government bonds because it is safe and not likely to incur a capital loss (at least not in numerical terms on paper anyway). When a government goes broke and cant sell bonds, they have to offer higher interest rates to attract buyers. This means they go deeper into debt that they cant pay back except by borrowing more money or by simply printing more of the paper stuff. And of course that leads to inflation which makes the bonds plus interest worth less in purchasing power less than when they were bought.

So where did all this money go? Money is just paper. Wealth is something different. The money didnt go anywhere since there will be more of it around. Just that it wont buy as much anymore. Contrary to what most people think, paper money is not wealth. Real goods and services are real wealth and paper money is just a reflection of its worth. So, in the end, the money didnt go anywhere, there is still just as much of the stuff around as yesterday, if not more. But the wealth or the illusion of wealth built on debt has decreased substantially. Which means people will have to work harder for less. Their labour will buy less and governments will be less able to provide social benefits without increasing taxes, which of course means people must work even harder for less purchasing power.
Thats where we are all heading in the western debt ridden nations who dont produce enough real goods and services to pay our debts.