France ran out of money last Tuesday — and within days, so will the rest of Europe

France ran out of money last Tuesday — and within days, so will the rest of Europe, by Matthew Lynn.

There are lots of dry ways of pointing out that governments are spending a lot more money than they raise in tax revenue. Economists and statisticians wheel out debt to GDP ratios and chancellors and finance ministers set targets for deficit reduction. Those, however, usually come in hard-to-follow percentages, or else the billions and billions involved pile up so quickly that most of us simply glaze over.

But in France, the Institut Molinari has come up with a very neat way of illustrating the issue in simple terms. It works out the moment in the calendar after which everything the government does has to be financed through borrowing. If you wanted to, you could call it the day the money runs out. …

France, perhaps not very surprisingly, turns out to be the country that is out of cash first. A government which last managed to balance the books in 1980 used up all its money with 55 days of the year still left. That was a day earlier than the year before, and four days earlier than back in 2014. France is not only living beyond its means, but it is now doing so at an accelerating pace. And that was despite the fact that taxes and social security charges have gone up. Once those charges are combined, the state is raking in 53 per cent of GDP in revenues – its problem is that it then spends an even more massive 56 per cent of GDP over the same period. …

Spain ran out of money on Saturday. Over in Romania, the bank account was empty as of yesterday. Next week, Poland will be out of cash, followed by Italy, which will be officially skint on Nov 26. In the UK, our politicians will have officially spent all the income tax, corporation tax, VAT, fuel duty they take from us by Dec 7.

Across Europe as a whole, central governments will be out of money on Dec 6. …

The money is largely spent on paying people who aren’t working, bringing in migrants, and supporting those two groups to breed. The hardworking people in Europe are subsiding everyone else, as well as their own replacements. Meanwhile they haven’t got time and money to have enough of their own kids. To top it off, when the ever-growing government debt blows up the money system, as it inevitably will, their savings will be worthless and their assets will be worth less. Brilliant.

Those deficits are not coping with a sudden emergency, and they are not paying for investment that will help them grow faster in the future. The most persistent deficits are in social security schemes (and many would be even worse if pension liabilities were properly accounted for). …

Finally, governments have run out of room for any kind of fiscal boost when there is another recession. The economy will inevitably turn down at some point, and there could be a major crash. When it happens, you’d hope the government could respond with increased spending. But it can’t do that if it is already locked into permanent deficits.

Then the governments will print, inflation will ramp up, and the money system might blow up.