657. Ouch Spain

Austerity programs always hurt. But Spain has just committed to another Greece uprising with their latest measures of austerity: Increase Value Added Tax (VAT) on products and services AND cut unemployment benefits and civil services pay. Now, I'm not saying its all wrong. I kind of like the emphasis on GO BACK TO WORK rather than here's a welfare check, and I like the government paying less to THEIR employees to make their wages commensurate with the private sector. Whoa, am I talking about America or Spain?  I saw some interesting statistics on the tube this past week correlating unemployment to the length of time the unemployed are allowed to get a check. In several nations, Denmark one of them, the mass of unemployed people get jobs ONLY when the duration of the welfare program ceases for them. In Denmark's case, they had a 5-year program and sure enough the charts showed that ONLY when the end of the 5 years was upon them did the unemployed get a job. When the cut the program back to 4 years, the people ONLY got a job when 4-years came around. This was consistent with other nations. Is our government interested in these statistics? Of course not, we are run by Socialists. My hypothesis has always been: Stop the hand outs and they will work! As far as increasing the VAT in a time  when growth is just as important, I'm a doubter if this will help in any way other than making the government richer. This austerity change in Spain is going to cause rain on the plains!  I don't know what the solution is -- I don't know the details. All I know is that we as investors and living in OUR economy need to understand what chaos is coming down the line -- from where and how much. Spain isn't doing us a favor and the ECB really needs to evaluate this last measure.