...if a bunch of speculators decide (rightly or wrongly) that a government’s debt is overpriced, they can force down its price, thereby forcing up its yield (the interest rate that the government must pay).
If the attack persists, speculators can force a government to default on its debt, unless it can find a way to finance its borrowing more cheaply. The bailout fund created last year by the International Monetary Fund and the European Central Bank to enable Greece and other distressed sovereigns, like Ireland and now Portugal, does exactly that, but on the condition that they implement austerity programs to eliminate their deficits over a short period of time.
I think most democratic thinkers would agree that national governments should be more powerful than any one global business group and if a group of high-finance types can attack and effectively bring down governments then it seems pretty obvious that they have too much power. To restore the balance of power, governments should fight back with higher taxes and increased regulation of these groups.
tnb
No comments:
Post a Comment