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The Greek Misprize

Thursday, November 1st, 2012

Sometimes a great misunderestimation.

George W. Bush’s “misunderestimate” still has a jolly ring to it, in my ear, just as does the common barbarism “irregardless.” Yet I realize that, in both cases, the prefix adds no new meaning to the word it would seem to modify.

Regardless, underestimation is today’s theme.

Matthew Feeney, at, notes the shock-without-awe of the Greek government’s 2013 budget, just released. “The budget is worse than the 2010 projections,” he notes. And that simple statement almost qualifies as understatement:

The IMF had been hoping that the Greeks would manage to get their debt to GDP down to 120 percent by 2020. Considering that the newest budget projects a debt to GDP rate of 184.9 percent in 2016 it is unlikely that this goal will be reached.

That 184.9 percent figure was revised up from previous estimates of 179.3 percent.

The amount of debt is now way beyond the country’s annual income, as measured by GDP. I’m not one to rely heavily on GDP figures, but we need some comparison, and a market/private sector income figure would not make the 2013 ratio look any better.

And this is not a new thing. The Greeks have been underestimating their debt-to-GDP ratio for years now, as a nifty graphic from Zerohedge shows.

When a country is as overladen with government workers and other tax consumers as Greece is, this is to be expected. Zerohedge was right in 2010, to note that “Greece just got bailed out so it can get into even more debt!” At some point, hope morphs into fantasy and misunderestimation of future insolvency becomes a way of life.

This is Common Sense. I’m Paul Jacob.

A Loan of Common Sense

Thursday, August 16th, 2012

If you give something that belongs to you, without expecting to get it back, that’s giving. You just hand over a gift and forget about it. Perhaps you would appreciate a “thank you.”

If you lend to someone, you expect to be repaid. Those who don’t repay are called deadbeats.

If you mug somebody on the street and grab his wallet, you are stealing. You are then a thief, a robber.

That’s all straightforward enough. This is not: Say that you steal from the productive citizens of one country or countries (Country or Countries A) and give the dough to the fiscally irresponsible government of another country (Country B), and you call it a loan. But when Country B can’t pay the installments, it is provided another loan originating in the wallets of the very same Country A citizens from whom was extracted the original loan.

What is this? You are not only stealing, you are shuffling IOUs instead of getting repaid. You are also misrepresenting the nature of the transactions, for it is clearly a gift of stolen money and not anything voluntary, like a loan.

Bill Wilson, President of Americans for Limited Government, goes into a bit more of the nitty and gritty of Greece’s tricky tranche of “repayment” on its “loan” from the European Union, and relates it to the similar finagling here in the United States . . . which all rests on credit expansion by the Federal Reserve. “The eggheads in Washington, D.C.,” he says, offer only one solution: “just keep digging.”

But how deep? At some point it gets too hot down there.

This is Common Sense. I’m Paul Jacob.

Beggar-All Promises

Thursday, October 28th, 2010

The essence of politics-as-usual is to promise the moon and bury any mention of costs.

This beggar-all promising has calcified into government policy. And we all get trapped in the web of promises that become law and then bureaucracy with “benefits” . . . as folks come to rely on those benefits. Damn the costs.

Example? Medicare.

It’s politically untouchable. Though deeply insolvent, politicians and partisan activists of both parties whip voters into a frenzy each time the program gets targeted for the slightest cost-constraining reform.

How out of control is it?

According to a report by David Naither, for The Center for Public Integrity, “Medicare is a significant part of the reason the national debt is soaring. . . .” Millions rely on it as a “safety net” that protects them “from bankrupting medical bills. But since it’s an open-ended program — with no upper limit — the nation has no similar protection to keep Medicare from bankrupting the country.”

Naither is not just fear-mongering. The trends are clear. The program itself raises medical costs, Naither notes, and, as the Baby Boomers retire, it will have “more seniors to cover.” No wonder the program now outpaces Social Security growth; it could very well bulge past Social Security within 25 years.

If the country survives the added burden, that is.

There are reasons we need to reform the structure of politics. For politics-as-usual is throwing us into a deep, downward spiral.

This is Common Sense. I’m Paul Jacob.

The Liability Behind the Curtain

Thursday, July 22nd, 2010

Do not look at the liability behind that curtain! Or: Do not mention that we don’t know what the liabilities are.

Some things are too painful to report.


The folks who audit the Social Security Administration are late on a set of reports. The reports in question account for the financial and actuarial (un)soundness of Social Security, specifically on the (un)funded liabilities of the pension system and Medicare.

Unlike corporations, which are required to report to the IRS on March 15 each year, and individuals, who must report on April 15, there’s no set date for the trustees of our federal government’s biggest program to make its report. But in recent years the reports have been published early enough to allow summary by May. The last report summary we have is for 2009.

Why so late?

Could it be that things have gotten so bad that it’s difficult to figure out — and embarrassing to sign one’s name to — the actual financial situation? After all, this year Social Security ran out of money to write checks for its promised (and quite immediate) pay-outs.

Sheila Weinberg, CEO of the Institute for Truth in Accounting, writes that she heard the reports were late because “trustees wanted to include the effect the health care bill had on these liabilities.” Ms. Weinberg not unreasonably challenges this rationale. Wouldn’t Social Security’s liabilities have been worth knowing before Congress committed to more entitlement spending?

This is Common Sense. I’m Paul Jacob.

Save the Unions’ Ponzi Schemes?

Thursday, June 17th, 2010

Senator Bob Casey from Pennsylvania is legislating something big, the “Create Jobs and Save Benefits Act.”

Innocuous? Everyone wants more jobs. Government may have a lousy track record creating jobs that actually produce things demanded by people, but still — the bill is hardly unexpected in times like these.

It’s the second half of the title that indicates the powder keg within. The bill would bail out horrendously mismanaged union pension plans.

Unions, in the current legal context, are legal creatures of the state, with special privileges. And, surprise surprise, their own pensions — the ones that they manage — appear to be in as bad shape as the public-employee pensions I’ve talked about before, the ones that are building into a tsunami of insolvency.

A public bailout would transfer money from people without any special pension plan to people with pensions that are going bust. This is horribly unjust. That’s why Americans for Limited Government — a past sponsor of this program — is calling out Republican politicians who’ve signed onto Casey’s audacious scheme.

“At issue are multi-employer pension plans, in which companies across an industry pay into a single pension pool,” explains the Wall Street Journal. “[E]ven before 2006 only about 6% of multi-employer plans were fully funded, compared to about 31% of single-employer plans. The real problem is that multi-employer plans have become a sort of pension Ponzi scheme.”

Hmmm. Where have we heard that before?

This is Common Sense. I’m Paul Jacob.

Fearing Free Fall

Thursday, May 6th, 2010

The European Union is bailing out Greece. Fearing financial contagion, EU’s policy wizards decided to throw 100 billion euros at Greece, in tandem with demands for austerity.

New spending restrictions are tough enough to elicit the verdict of “savage” from Greece’s public employee unions. But are they “savage” enough?

The euros-to-the-rescue scheme occurred only after collapses of Portuguese and Spanish bonds. As mentioned last Friday, things aren’t good on Europe’s other southern peninsulas, either.

The “Domino Theory” remains a dominant metaphor. Once, we feared countries would fall like dominos to communism. Now, it’s like dominos into insolvency.

But propping up a tipped domino isn’t easy.

Drastic solutions, like expelling the duplicitous Greek nation-state from the EU? Not on the table. The apparent aim of the bailouts? Keep as many of the major players responsible for the fiasco in as good a shape as possible.

If, on the other hand, every politician were fired and every contract with unsustainable giveaways to public employee unions were dissolved as part of bankruptcy, might future policy makers be a little more cautious?

Meanwhile, the dominos keep falling. The day after announcing the bailout, the euro plummeted.

My question: What happens when “too big to fail” is applied not to a tiny country like Greece, but to the good ol’ US of A?

What if we’re too big to bail out?

This is Common Sense. I’m Paul Jacob.

The Inglorious Mess That Is Greece

Friday, April 30th, 2010

Ah, the glory that was Greece! Too bad the modern country is anything but. The nation-state of Greece is going broke, and going broke spectacularly.

And, dare I say it, instructively?

Everybody’s blaming everybody else, there. But the simple truth of the matter is that the politicians of Greece — both socialist and “conservative” — enticed citizens to go along with a sustained binge of spending, spending far beyond revenues.

And then the government lied to European Union HQ in Brussels about how much it was spending over revenues.

And, you guessed it, Greece continued to borrow even more.

Yes, public spending in Greece was more out-of-control than government spending here in America. And that’s why it’s instructive. What is happening right now to Greece is happening elsewhere in Europe — Italy, Spain, Portugal — and is on pace to happen to us, too.

Greece does have one option the good ol’ US of A doesn’t have: It can go begging to the European Union. So far, saner heads in the EU are saying “no,” but that may not last.

While we don’t have that option, Greece lacks ours: With the Euro as its standard, it’s constrained from the monetary fiddling that American leaders are tempted with. Inflation. Hyperinflation.

When things get worse here, we’ll hear talk of huge tax hikes, confiscations, and sovereign default.

But also expect a lot of what Greek politicians did: Lying.

Inglorious, eh?

This is Common Sense. I’m Paul Jacob.