by Mish
Let them. The outcome will be a catastrophic downshift in the economy, or an eventual repudiation of the official money by the citizenry.
What these politician-morons don’t get: the average citizen is not as rich as they are. The “gray” economy is far bigger than they think, and without it, living standards of a vast swathe of the population will nosedive.
This soon affects the formal economy as well, because a lot of purchasing power then disappears. Instead of more tax revenue, they will collect less.
Why do you think all those reforms Renzi introduced in Italy could neither save the economy nor his ass? It all goes back to Monti’s shadow economy crackdown, which has continued. Ever since, Italy’s economy has been unable to get back on its feet (compare to Spain, where they have had the fastest growth of the big EZ countries for 3 years running now).
It is not the euro that is Italy’s problem, that is a mercantilistic fallacy. It is the fact that they have killed that part of the market that was free.
Indeed. The euro is a scapegoat for Italy’s real problem: over-regulation of everything. Greece has the same problem.
In India, a majority of the lower-class low-pay individuals misguidedly cheer the attack on cash. Those cheering will be the ones most affected.
The government will now find every penny. And government will tax that penny. And the poor will be worse off.
The same will happen in Australia and eventually the US.
The neighborhood kid, will have to pay Social Security on the $15 or whatever he gets for mowing the lawn.
If the home owner hires the same kid to mow the lawn, clean the garage, babysit, and help paint, is the kid now an employee or a business?
Mike “Mish” Shedlock
