{"id":34476,"date":"2018-05-23T06:07:42","date_gmt":"2018-05-23T11:07:42","guid":{"rendered":"http:\/\/olduvai.ca\/?p=34476"},"modified":"2018-05-23T06:07:42","modified_gmt":"2018-05-23T11:07:42","slug":"italys-countdown-to-fiscal-crisis","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=34476","title":{"rendered":"Italy\u2019s Countdown to Fiscal Crisis"},"content":{"rendered":"
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Italy\u2019s Countdown to Fiscal Crisis<\/a><\/h3>\n
Italy’s current scheme of piling unfunded government spending on top of an already-huge debt is a recipe for disaster.<\/strong><\/div>\n<\/div>\n
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As a general rule, we\u00a0worry too much<\/a>\u00a0about deficits and debt. Yes,\u00a0red ink matters<\/a>, but we should pay more attention to variables such as the overall burden of government spending and the structure of the tax system.<\/p>\n

That being said, Greece shows that a nation\u00a0can experience a crisis<\/a>\u00a0if investors no longer trust that a government is capable of \u201cservicing\u201d its debt (i.e., paying interest and principal to people and institutions that hold government bonds).<\/p>\n

This doesn\u2019t change the fact that Greece\u2019s main fiscal problem is\u00a0too much spending<\/a>. It simply shows that it\u2019s also important to recognize the side-effects of too much spending (if you have a brain tumor, that\u2019s your main problem, even if crippling headaches are a side-effect of the tumor).<\/p>\n

Anyhow, it\u2019s quite likely that Italy will be\u00a0the next nation<\/a>\u00a0to\u00a0travel down this path<\/a>.<\/p>\n

This is in part because the Italian economy is moribund, as\u00a0noted<\/a>\u00a0by the\u00a0Wall Street Journal<\/em>.<\/p>\n

Italy\u2019s national elections\u2026featured populist promises of largess but neglected what economists have long said is the real Italian disease:\u00a0The country has forgotten how to grow. \u2026The Italian economy contracted deeply in Europe\u2019s debt crisis earlier this decade. A belated recovery now under way yielded 1.5% growth in 2017\u2014a full percentage point less than the eurozone as a whole and not enough to dispel Italians\u2019 pervasive sense of national decline. Many European policy makers view Italy\u2019s stasis as the likeliest\u00a0cause of a future eurozone crisis.”<\/p><\/blockquote>\n

Why would Italy be the cause of a future crisis?<\/p>\n

For the simple reason that it is only the 4th-largest economy in Europe, but\u00a0this chart<\/a>\u00a0from the\u00a0Financial Times<\/em>\u00a0shows it has the most nominal debt.<\/p>\n

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So what\u2019s the solution?<\/p>\n

…click on the above link to read the rest of the article…<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

Italy\u2019s Countdown to Fiscal Crisis Italy’s current scheme of piling unfunded government spending on top of an already-huge debt is a recipe for disaster. As a general rule, we\u00a0worry too much\u00a0about deficits and debt. Yes,\u00a0red ink matters, but we should pay more attention to variables such as the overall burden of government spending and the […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[14989,195,201,4994,281,19708,14323,14991,12584,1464,783],"class_list":["post-34476","post","type-post","status-publish","format-standard","hentry","category-economics","tag-daniel-j-mitchell","tag-debt","tag-deficit","tag-entitlements","tag-europe","tag-fee","tag-fiscal-policy","tag-foundation-for-economic-education","tag-government-spending","tag-italy","tag-taxes"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/34476","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=34476"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/34476\/revisions"}],"predecessor-version":[{"id":34477,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/34476\/revisions\/34477"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=34476"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=34476"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=34476"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}