governments can go broke, but not all governments
Iceland suffered the worst banking crisis in history; all three of its biggest banks failed, its total debt jumped to 800% of GDP – far worse than what any European country faces today, relative to the size of its economy. And under pressure from public protests, its president put how to deal with the crisis to a vote. Some 93% of the population voted against paying for the bankers’ recklessness with large cuts to their health and social-protection systems.”
And what happened?
Under Iceland’s universal healthcare system, ”no one lost access to care. In fact more money went into the system.
Iceland now is booming; unemployment fell back to below 5% and GDP growth is above 4% – far exceeding any of other European countries that suffered major recessions.”
It is important to note that the neo-liberal thinking behind austerity plans envision that one day Governments will go broke unless we cut government spending.
Well, governments can go broke, but not all governments.
That thinking only applies to governments whose monetary systems are commodity-based, such as those on the gold standard, which most has left behind long ago.
It is also the case with governments using fiat money if that official fiat currency is issued by another authority, such as the eurozone, or if they owe debts in a fiat currency issued by another governmental authority.