This amusing headline story by Bruno Moschetto, a professor of economics at the University of Paris in the French newspaper Le Monde has me laughing out loud this morning: “No, France is Not Bankrupt”
No, France is not bankrupt … The claim is untrue economically and financially. France is not and will not bankrupt because it would then be in a state of insolvency.
A state cannot be bankrupt, in its own currency to foreigners and residents since the latter would be invited to meet its debt by an immediate increase in taxation.
In abstract, the state is its citizens, and the citizens are the guarantors of obligations of the State.
In the final analysis, “the state is us.” To be in a state of suspension of payments, a state would have to be indebted in a foreign currency, unable to deal with foreign currency liabilities in that currency.
Economic illiteracy is nearly everywhere you look and that article is a prime example. Bruno Moschetto suggests France is not bankrupt because the state is not indebted in a foreign currency.
Actually, France does have its debts in a foreign currency, euros. Note that France cannot print euros at will to pay its debts (the very essence of a foreign currency).
Moschetto says citizens would be “invited” to help France meet its obligations. Invited? The same way citizens of Cyprus were “invited” to bail out Cypriot banks?
The ability to tax citizens to death to bail out the state is hardly a reasonable measure of non-bankruptcy. I suggest having to confiscate the wealth and savings of citizens to bail out the state is proof of bankruptcy. Greece is a nice example.
Hollande has tried 75% taxation. He has tried government takeover or threats of takeover of various auto manufacturers. Hollande also seeks financial transaction taxes.
Many French citizens have had enough of Hollande and his socialist policies and have fled to Belgium, the UK, and Switzerland.
The French economy is imploding as I type.
Thought of the Day
France is Bankrupt, and it is the policies of socialist fools that put France in that state.
The thought of the day comes from reader “PTCruiser” who chimed in with “Aujourd’hui, la France. Demain, le monde entier.“… Today France, tomorrow, the world!
Mike “Mish” Shedlock
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Wine Country Conference
I am hosting an economic conference on April 5 in Sonoma, California. Proceeds go to the Les Turner ALS Foundation (Lou Gehrig’s Disease).
Please see My Wife Joanne Has Passed Away; Stop and Smell the Lilacs for my association with the disease.
To learn about the economic conference with world-class speakers including John Hussman, Michael Pettis, Jim Chanos, John Mauldin, Mike “Mish” Shedlock, Chris Martenson with guest moderator Lauren Lyster and other Special Guests, please visit Wine Country Conference April 5, 2013