In the dystopian classic one of the world’s best selling novel, Atlas Shrugged, written by the great philosopher, novelist and free market champion Ayn Rand, deepening government intervention in a society has led the wealthiest to refuse paying soaring taxes and to reject government regulations by shutting down vital industries and the economy.
It seems that we are witnessing a real time “Atlas Shrugged” moment in France such that even establishment media seem to acknowledge the gravely flawed political economic model.
The Newsweek recently published an article by Janine di Giovanni depicting the Atlas Shrugged moment entitled "The Fall of France".
Some excerpts (hat tip Cato’s Dan Mitchell)
Since the arrival of Socialist President François Hollande in 2012, income tax and social security contributions in France have skyrocketed. The top tax rate is 75 percent, and a great many pay in excess of 70 percent.As a result, there has been a frantic bolt for the border by the very people who create economic growth – business leaders, innovators, creative thinkers, and top executives. They are all leaving France to develop their talents elsewhere…This angry outburst came from a lawyer friend who is leaving France to move to Britain to escape the 70 percent tax he pays. He says he is working like a dog for nothing – to hand out money to the profligate state. The man he was pointing to, in a swanky Japanese restaurant in the Sixth Arrondissement, is Pierre Moscovici, the much-loathed minister of finance. Moscovici was looking very happy with himself. Does he realize Rome is burning?…
The curse of the welfare state…
But the past two years have seen a steady, noticeable decline in France. There is a grayness that the heavy hand of socialism casts. It is increasingly difficult to start a small business when you cannot fire useless employees and hire fresh new talent. Like the Huguenots, young graduates see no future and plan their escape to London.The official unemployment figure is more than 3 million; unofficially it’s more like 5 million. The cost of everyday living is astronomical. Paris now beats London as one of the world’s most expensive cities. A half liter of milk in Paris, for instance, costs nearly $4 – the price of a gallon in an American store…Part of this is the fault of the suffocating nanny state. Ten years ago this week, I left my home in London for a new life in Paris. Having married a Frenchman and expecting our child, I was happily trading in my flat in Notting Hill for one on the Luxembourg Gardens.At that time, prices were such that I could trade a gritty but charming single-girl London flat for a broken-down family apartment in the center of Paris. Then prices began to steadily climb. With the end of the reign of Gaullist (conservative) Nicolas Sarkozy (the French hated his flashy bling-bling approach) the French ushered in the rotund, staid Hollande.Almost immediately, taxes began to rise…
Productive citizens flee as the Santa Claus fund goes dry…
When I began to look around, I saw people taking wild advantage of the system. I had friends who belonged to trade unions, which allowed them to take entire summers off and collect 55 percent unemployment pay. From the time he was an able-bodied 30-year-old, a cameraman friend worked five months a year and spent the remaining seven months collecting state subsidies from the comfort of his house in the south of France.Another banker friend spent her three-month paid maternity leave sailing around Guadeloupe – as it is part of France, she continued to receive all the benefits.Yet another banker friend got fired, then took off nearly three years to find a new job, because the state was paying her so long as she had no job. “Why not? I deserve it,” she said when I questioned her. “I paid my benefits into the system.” Hers is an attitude widely shared.When you retire, you are well cared for. There are 36 special retirement regimes – which means, for example, a female hospital worker or a train driver can retire earlier than those in the private sector because of their “harsh working conditions,” even though they can never be fired.But all this handing out of money left the state bankrupt…The most brilliant minds of France are escaping to London, Brussels, and New York rather than stultify at home. Walk down a street in South Kensington – the new Sixth Arrondissement of London – and try not to hear French spoken. The French lycee there has a long waiting list for French children whose families have emigrated.
Read the rest here
So no matter how mainstream media portrays improving statistics or rising financial markets as signs of recovery, in the real world, for as long as the government wages war on her productive citizens, real economic recovery will hardly materialize.
And considering France’s ballooning debt (measured by debt to GDP which stands at 90% as of 2012), soaring yields of French bonds (10 year as shown in the chart above from Bloomberg), which extrapolates to higher cost of servicing debt amidst economic stagnation, will equally make the highly levered French economy vulnerable.
Importantly, given the global dynamic of rising bond yields, France may serve as another potential trigger for a Black Swan event in 2014.
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You write France may serve as another potential trigger for a Black Swan event in 2014.
Another trigger could be the credit situation in China.
Finviz charts show Chinese Financials, CHIX, have fallen 2.6% this week, continuing a 9.9% fall in the last month, which has caused a 4.8% fall in Chinese Stock, YAO, in the last month.
Bloomberg reports China’s credit holes seen limiting 2014 growth prospects. China’s new credit probably fell by a record in the second half amid a crackdown on speculative lending, limiting prospects for economic expansion this year as policy makers focus on controlling financial risks. The broadest measure, aggregate financing, was 7.1 trillion yuan ($1.2 trillion) based on published figures plus economists’ median estimate for December data due in coming days. That would be about 931 billion yuan less than in July-to-December 2012, the largest drop in figures going back to 2002.
And Bloomberg reports Crisis risk flagged by Haitong as debt snowballs. China's second biggest brokerage said record debt threatens to trigger a financial crisis as borrowing costs jump to unprecedented highs despite a cooling economy. Liabilities at non-financial companies may rise to more than 150% of gdp in 2014, raising default risks, according to Haitong Securities Co. The ratio of 139% at the end of 2012 was already the highest among the world's 10 biggest economies, according to the most recent data. "We are concerned that the debt snowball may be bigger and bigger and turn into a crisis," Li Ning, a Shanghai-based bond analyst at Haitong Securities, said in an interview.
An important economic question is what type of governance will emerge out of a black swan event or multiple black swan events.
Jesus Christ in opening the first seal of the Scroll of End Time Events, has released The Rider on the White Horse, who has a bow, without any arrows, symbolic of economic sovereignty, to effect a global coup d’etat, to transfer sovereignty from bankers and nation state democracies to nannycrats and regional bodies such as the ECB, to bring forth the Beast System of Revelation 13:1-4, as a replacement for the libertarian despised Creature from Jekyll Island, that is the US Federal Reserve led democratic nation state and banker regime.
The focus of the paradigm and age of liberalism was on world central bank policies seeking maximum returns for the investor, who was made extinct, just like the wooly mammoth of prehistoric times who got frozen in place by a sudden shift in climate; the investor got wiped out by the rise in the Benchmark Interest Rate on October 23, 2013, from 2.48%.
Now, under the paradigm and age of authoritarianism, the focus of attention is on regional governance policies seeking regional security, stability, and sustainability, which assure debt servitude of the debt serf.
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