June 23, 2011

Banc Jeu Zero

Yesterday I read an article on a Dutch newspaper website and it was both shocking and revealing. The article was about which countries owe Dutch banks money. It has more significance when you realize that after the credit crisis of 2008 2 major banks in the Netherlands were nationalized, meaning the government took them over and rescued them with taxpayer money. So in essence the money that's being owed to the Dutch banks, also belongs to the normal Dutch citizen if I can make that correlation. (Of course the government plans to privatize the banks again once they are solvable.)

The article reads as following. Ireland (13), Portugal (5), Spain (58) and Italy (34) owe 109 billion euros in total to Dutch banks, and to insurance companies and pension funds "dozens of billions." Dutch minister of finance Jan Kees de Jager reports this to parliament. The minister is also an advocate to loaning Greece more money since he fears that when that country goes bankrupt it will have a 'domino-effect' to other south European nations. However, the average man on the street is very much against that plan and fears that loaning money to Greece will be futile endeavor.

While these amounts may not seem much in comparison to bigger economies such as the U.S., for a small country such as Holland these figures way heavily, especially if taxpayer money is involved. In Holland the taxation on consumption is one of the highest in the world. We may have a decent social net for when you get sick or unemployed but this system is already stretched to the max under the current economic climate and austerity measures are high on the agenda. The Dutch government also jumped quickly on the new paradigm that people should work until they are 67 before they can retire and made it law.

Personally, I wonder how this system can last - considering that countries such as Spain, Italy and Portugal are doing much worse than Holland. I've come across information that suggests that Spain and Italy owe 1 trillion dollars in total, Greece and Ireland are between 3-400 billion dollars in total debt. Seriously, how can this have a 'happy ending?' Even if these economies recover it will take many years, decades even before they are in the green. You simply can't keep on borrowing, everyone knows that. That begs the question; 'Are we nearing the end of this system?' Wont you get to 'zero' at some point?

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