The Effect of Government on the Economy of a Country

I believe government is an important institution to keep order in a society of a country. It should focus mainly on the country's defense and should obey the constitution of the country. By no means it should involve with the economy of a country as the government is always less efficient as free market capitalism. Governments should be as small as possible, in order to let the private economy flourish. Today, governments are standing in the way of free market capitalism through taxation, regulations and counterproductive measures. What governments don't know are the unintended consequences they cause. I'm sure that governments are the root cause of all the problems in Europe and soon in the United States.

In this article I want to give an overview of several countries and their government involvement. The best measure to rate government involvement would be the amount of spending as a percentage of the country's GDP. We will discuss the effects of a big government on the country's economy and give advice to investors on how to act on this knowledge. We will see that there is a direct correlation between government size and unemployment/debt/tax rate.

To read the article go to: The size of governments and the effect on their economies.

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Spain's government bonds shoot up above 6%

Spain's government bonds shot up today to 6.1%. At this rate we're rapidly approaching the "danger zone" of 7% and above, often mentioned by James Turk. You can easily see LTRO I and LTRO II in this chart 1. Maybe Spain will need LTRO III to make the yields drop again...

Chart 1: Spanish Bond Yields (10 YR)

Meanwhile, people keep fleeing into German bonds, which dropped to 1.5%.

Chart 2: German Bond Yields (10 YR)

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