spotfxtrader

this time from Bill Bonner in the Daily Reckoning…

Another thing taking a beating today is Europe’s periphery debt after the Portuguese voted against austerity. To put this into perspective, there are only two ways to go. When you borrow too much money from the future, you either have to pay it back or you go broke. The Portuguese were trying to pay down their debts, by cutting “services.” But it’s harder to cut services than you might think. Modern democratic welfare states are built on a fraud — that the government can give people more in services than they pay for. Typically, the government takes the extra money from groups that are politically weak — such as the next generation, which doesn’t get a vote.

Citizens don’t like it when the government tries to cut back. And when a majority of voters are on the taking end of the exchange — getting more from the feds than they pay in taxes — it’s very hard (maybe impossible) to impose “austerity” measures.

What the Portuguese election is telling us is that many governments will go broke before they pay down their debt. At least, that’s what it implies…