Is it a coincidence that Greece, a country with a 40% smoking rate, has dug itself into such a financial mess? What is fiscal irresponsibility, if not an unwillingness to deal with discomfort today in exchange for future financial health? [Let me explain why an analogy to a country’s addiction to smoking is so appropriate when considering the Greeks’ attitude to their country’s sovereign debt woes.] Words: 650
So says Vedran Vuk (www.caseyresearch.com) in edited excerpts from his original article which Lorimer Wilson, editor of www.munKNEE.com (Your Key to Making Money!), has further edited below for length and clarity – see Editor’s Note at the bottom of the page. (This paragraph must be included in any article re-posting to avoid copyright infringement.)
Vuk goes on to say, in part:
Recently, Bloomberg had an interesting article on Greek cigarette smokers titled Cigarette Taxes Can Help Cure Two of Greece’s Ills. The piece focused on the extremely high rate of smoking in Greece and the ability of taxes to lower both the country’s deficit as well as its bad habit. Here’s an excerpt of the some startling statistics:
“In 2009, a shocking 40 percent of Greeks smoked. That is almost twice the Organization for Economic Cooperation and Development (OECD) average of 22 percent. In France and Spain, the smoking rate was 26 percent. In the U.S., the rate is half that in Greece. The Greek rate was six percentage points higher than even Russia, the only other developed economy whose rate was more than 30 percent. In Greece, smoking rates exceeded 30 percent even for medical students, a study by Constantine Vardavas and Anthony Kafatos of the University of Crete found.
Perhaps even more troubling is that, in the past decade, the share of adult Greeks who smoke rose by almost 6 percent. Over that period, in the OECD as a whole, smoking prevalence declined by 18 percent. The only other developed country that experienced an increase in smoking was the Czech Republic – but Greece’s rise was larger…
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One of the causes of high and rising smoking rates in Greece has been relatively low cigarette prices. In 2011, a pack of 20 premium cigarettes cost a little more than $5 in Greece, compared with more than $8 in France and more than $11 in the U.K. and Ireland, according to the Tobacco Manufacturers Association. In the U.S., prices vary significantly by state; in New York, a pack costs more than $10.
The prices in Greece have reflected relatively low tax rates compared with other European countries. Before the recent policy changes, that pack of 20 cigarettes carried a tax of less than $4. In France, the tax exceeds $6. In the U.K., it amounts to almost $9.”
There are other factors to consider – healthcare costs, for example. With a universal healthcare system, the average Greek smoker has little concern for the financial impact of his habit [on the cost of such care to the state and, in addition,]… many smokers will pay big out-of-pocket expenses for the habit. The other issue is a cultural one involving tobacco. [In much of Europe, there is a]…café culture of coffee, beer, and cigarettes as a daily social activity for practically everyone aged thirteen through death…
To sum up tobacco addiction, it’s an unwillingness to face discomfort today in exchange for future health and years of life. I don’t intend to demean any smokers among our readers, but that’s just the honest truth – I’ve been there myself as a former smoker. So, what’s that got to do with Greece?
With today on their minds rather than tomorrow, the Greeks spent like crazy on universal healthcare, pre-60 retirement benefits, and innumerable other government programs. This is really the same as the mentality behind smoking. You put off quitting because it isn’t convenient. Then, you half-heartedly quit for a week only to find yourself smoking again. Similarly, with its finances, the Greek government kept smoking through piles of money and kept putting off its responsibilities for a later date.
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Much of what we see and don’t see regarding the modern-day tragedy that is Greece, is all about perserving the dream of a pan EU/European nation state, a United States of Europe if you will, rather than about bailing out the foreign bank holders of European sovereign debt. Let me explain my perspective. Words: 627
If the implications of the current Greek tragedy were not so serious it would have been seen more as a Greek comedy (of fiscal errors). In fact, however, to deploy another metaphor, Greece’s sovereign debt is seen as the proverbial canary in the coal mine – a microcosm of the relentlessly growing sovereign debt that has taken much of Europe by storm and is threatening to spread to the U.S.. Words: 1008
For decades, the governments of the western world have been warned that they were getting into way too much debt. For decades, the major banks and the big financial institutions were warned that they were becoming way too leveraged and were taking far too many risks. Well, nobody listened so now we get to watch a global financial nightmare play out in slow motion. Grab some popcorn and get ready. It is going to be quite a show. [Let me explain.] Words: 1075
A predictive software program called Senturion, developed for the U.S. military and sporting a 85% accuracy rate, has concluded that Greece is going to default. [Let me explain further.] Words: 244
Are we about to see a huge push for a “United States of Europe”? As the sovereign debt crisis in Europe continues to spiral out of control, suddenly this term is popping up in the New York Times and in major newspapers all over Europe. Is this by accident? Surely not. The truth is that there is an overwhelming consensus among the political and financial elite of Europe that a “United States of Europe” is what would be best for the eurozone. However, they are likely going to need a massive financial crisis in order to reach their goal. [Let me explain.] Words: 1639
The inability [of Congress] to reduce spending and tax its citizenry represents a competitive disadvantage for the U.S.. It is the mark of a country that cannot keep its fiscal house in order, does not care about repaying its debts and, [as such, it] may well be heading for collapse. Words: 978
Greece is going to default and even take the euro, and maybe the EU, with it. There will be 5 investment opportunities should that unfold as expected and one of them will be the U.S. dollar. [Let me explain.] Words: 1187
What event could trigger an unstoppable domino affect leading to a financial meltdown? You may think [that such a possibility is extremly unlikely] but daily we move closer to the real possibility that a major fiat currency such as the US Dollar or the Euro could collapse in the blink of an eye. [Let’s take a look […]
The magnitude of current private and government debt, coupled with massive unfunded contingent liabilities for promises of future services to their citizens, will prove to be impossible for many nations to fund. Massive inflation in the money supply will become the preferred vehicle to deflect the default monster and will result in vastly devalued currencies and price inflation as a prelude to default. Such action will be a desperate attempt to buy time to stave off the inevitable and will result in social unrest caused by persons whose comfortable lifestyle and elevated standard of living is about to disintegrate before their very eyes. Words: 1525
It is clearly evident that America’s debt picture is truly astronomical and, like the situation with Greece, the debt cannot, and never will, be repaid. Indeed, any way you look at it, the consequences for the United States, let alone the many other haunted economies, are grim, dismal – even disastrous. Words: 1166
It is appropriate that the fiscal crisis of the West has begun in Greece, the birthplace of Western civilization. Soon it will cross the channel to Britain. The key question, however, is when that crisis will reach the last bastion of Western power, on the other side of the Atlantic. Words: 609