Sovereign Debt Crisis not caused by the Welfare State : The rush by the rich and powerful to punish the trouble-causing working poor goes against strong evidence that the current sovereign debt crisis is not caused by high social welfare expenditure, but by a sudden drop in government revenue due to economic recession caused by credit market failure under fraudulent accounting allowed in structured finance for which the financial elite are directly and exclusively responsible.
Through devious “special purpose vehicles”, the sole special purpose of which is to treat proceeds from debt issuance as revenue from sales to remove financial liability from government balance sheets to present a deceptively robust picture of public finance, phantom profits are siphoned off from the general economy into the pockets of greed-infested financiers while pushing the real economy out of balance, resulting in high real public debts that inadequate aggregate worker income cannot possibly sustain. As a portion of GDP, wages and benefits have been falling in past decades while the public debt has been rising. Transnational financial institutions routinely generate profits larger than government revenue of small economies.
Despite propagandist distortion, the sovereign debt problem has not been caused by the high cost of a welfare state; it has been caused by deregulated financial markets that allowed governments to borrow huge sums against future revenue from public sector enterprises without showing the liabilities on government balance sheets. Structured finance was providing participating governments with up-front cash while hiding the sovereign debts that had to be paid back in the future. But the bulk of the borrowed money went to the pockets of deal-makers of public sector privatization while the debts were left with society at large. A large amount of the national wealth is transferred from the local economy to international speculators through legalized manipulation made possible by deregulated financial market globalization. It is a new form of synthetic financial manipulation against weak economies through a scheme of naked shorts against the currencies and equities of vulnerable nations.
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