With the events of 2008 (the GFC) still reasonably fresh in our minds and the continuing demands by the International Monetary Fund (IMF) for indebted countries to reduce debt levels it is interesting to learn that IMF demands might have been based on faulty research. The latest information to hand seems to indicate that the “tipping point” of a country’s debt at 90% of GDP leading to negative growth is wrong. There may actually be a low level of economic growth at this figure – about 2% positive growth.
Also isn’t it counterintuitive to demand that Greece, Portugal and other “loser” countries introduce stringent cuts to Government budgets, increase taxation and reduce peoples wages and then to “expect” economic growth and early debt repayment? I mean, really, with lower wages Government income is reduced (even with increased taxation) and with lower income how can debt be repaid and with lower wages how can people afford to buy anything other than necessities?
So how can “growth” occur?
Henry Ford was about right when he said that people should be paid enough to buy what they make.