I’m a bad person. I know it’s not nice to take joy in the misery of others, but I can’t help but smile when I see a story about bad news in France.
In my defense, this is not because of hostility to French people, who have always been friendly to me. Instead, France has become the global symbol of statism (particularly since Sweden has been moving in the right direction). The French, for instance, are increasingly infamous for class-warfare tax policy and onerous levels of intervention.
And since it’s my job to promote liberty, I’ll confess that it’s easier for me to convince non-French policy makers that free markets and small government are the right approach when there’s more evidence that statism is failing in France.
So why am I smiling? Well, France wasn’t doing so well under the de facto socialist Nicolas Sarkozy, and it seems that things are looking even worse now that the de jure socialist Francois Hollande is in charge.
Here’s some of what Reuters recently reported.
The French are bleaker about their country’s future than at any time since 2005, a new poll showed on Saturday, with 68 percent saying they are “rather” or “very” pessimistic… Hollande’s government has been reeling from unemployment at a 13-year high and a rash of job cuts in recent weeks at top employers like carmaker Peugeot and retailer Carrefour. The government launched a plan this week to create 150,000 state-sponsored jobs for youth. Only 34 percent of those surveyed were confident in the government’s ability to battle unemployment, and just 20 percent expect the government to be able to improve their buying power. …The poll found that the pessimism extended even to 58 percent of Socialist party supporters.
I’m wondering when the pessimism will spread to investors. France recently lost its triple-A credit rating, but the rating agencies don’t do a good job, so I think it’s much more important to look at the prices of credit default swaps.
In other words, how much does it cost for an investor to insure debt from the French government? According to this CNBC site, France isn’t viewed as being as creditworthy as nations such as Switzerland, Germany, and the United States, but it is closer to those countries than it is to Spain, Italy, or Portugal.
This is just a guess on my part, but I think France is reaching the point where investors are suddenly going to get concerned about the government’s ability to fulfill its promises.
If Hollande follows through on his threat to impose a “patriotic” 75-percent tax rate, for example, that could be the trigger that makes the bond market a lot more skittish. Particularly since it will result in fewer rich people in France.
I’ve already written about French entrepreneurs and investors leaving the country because of Hollande’s class-warfare tax agenda. It’s gotten so bad that even Hollywood types are packing their bags.
Actor Johnny Depp has moved out of France and returned to America because he didn’t want to become a permanent French resident and pay income tax there. …Depp has now moved his family out of France after government officials asked him to become a permanent resident, as he feared he would end up paying tax in both countries. He tells Britain’s The Guardian newspaper, “…France wanted a piece of me. They wanted me to become a permanent resident. Permanent residency status – which changes everything. They just want… Dough. Money… ” Depp goes on to explain that if he spends more than 183 days a year in France he will have to pay income tax in both Europe and America, adding, “So you essentially work for free.”
Wow, complaining that he doesn’t want to “work for free.” What is he, some sort of radical libertarian from the Tea Party?
But he may want to chat with fellow tax-averse actor Jon Lovitz before moving back to America. Obama’s class-warfare agenda isn’t as bad as what Hollande is trying to impose, but it’s not Hong Kong or the Cayman Islands either.
P.S. Here’s a very good Chuck Asay cartoon about the French economy.
P.P.S. In a few areas, France has better policy than the United States.
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@crisbd
Sorry, I wasn’t clear. By statism I meant the natural French aversion to free markets when it comes to economic evolution.
For the rest, comparing companies and countries, resuming the euro crisis in a “spending more than you earn” vision, or even comparing the euro crisis and the difficulties England are having are plain intellectual laziness. I don’t even have time to argue this. Just read the news.
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@Xavier. Actually, it’s NOT that “the statism… has helped us to avoid a long lasting recession.” It’s that statism rather than free markets has got France into the same hole that England and most of the EU is in.
How much effort does it take to fail to understand that when you spend more than your income, you eventually run into trouble. This is true for individuals as well as companies as well as companies.
Germany is close to having a balanced budget, and their currency is not in difficulties… But there are even better examples such as Switzerland, Hong Kong and the various tax-havens. Look at these countries to see the real effects of more laissez-nous-faire free markets…
Interesting, that’s a French phrase…
I am French and liberal.
I agree about the statism. I regret it. However it has helped us to avoid a long lasting recession. If we were more open to free markets, my guess is that it would have been worse (see England).
In the last 20 years we’ve always been pessimistic, so that’s not a result of the crisis nor the government. We’ll probably always be.
France is rated amongst the best country for living, it seems normal that Depp wants to live here. There is a lot of demand to live in France, it seems obvious that we’ll cash in on that. Simple law of Offer vs Demand. We don’t see the departure of Depp as a sad thing, he has never been an investor here.
Our borrowing costs have never been lower. Investors even have to pay us for short-term obligations. At the moment, investors see France as a safe country in their portfolio.
The “patriotic” descriptor of the 75% tax rate reminds me of the quote, “Patriotism is the last refuge of a scoundrel.”
I hate that quote, because it’s so obviously false; it’s just something authoritative-sounding that people use to bolster vapid arguments. However, since I’ll never be able to train humanity to avoid meaningless claptrap, I might as well enjoy it when I can.
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Time to Start the Countdown for France’s Fiscal Crisis