香蕉视频

The US and European financial crises have this in common: too much credit was advanced at too low prices to households in the United States and to governments in Europe. In the US, the recipients did not have either the collateral or the prospect of revenues to pay back creditors. In Europe, the governments, with their present institutions, cannot create enough taxed wealth to pay back the debt with their current institutions, taxes and regulations.

In both cases, the recipients of the loans either lied through their teeth or deluded themselves (and delusions can be powerful when they serve one's interests). In the case of mortgage recipients in the US, few did any due diligence about their future ability to pay or about the mortgage-backed bonds.

In Europe, the move toward the European Community and the euro started with lies (or delusions of German rescues). Recall that the Italians called 1987 the year of il sorpasso, since suddenly 18% was added to their gross domestic product (GDP). The politicians claimed that this number reflected part of their undeclared, unmeasured incomes.

Why 18%? Because this was the number that allowed Italy to conform to the European Community requirement of debt/GDP ratios. The European bureaucrats were aware of much undeclared incomes in Greece too. Eventually they sued the Greek government for the false national statistics.

The result? To this day in both countries some 30% of incomes are undeclared in a variety of imaginative ways, often hidden by these countries' intricate customs, traditions and systems of patronage.听

The national governments will not have an easy time changing such deeply rooted arrangements. Too many complex taxes, too many regulations, and too much corruption "on the top" resulted in ingrained perceptions that governments are wasting the money and that the courts are unreliable, rationalizing the culture of tax evasion. Why should hard-working people pay taxes when politicians and the rich get away with murder?...听

Reuven Brenner holds the Repap Chair at 香蕉视频's Desautels Faculty of Management. The article draws on his books Labyrinths of Prosperity and Force of Finance.

Read full article: , December 17, 2011