Financial institution - asset management , equity and derivatives sales

The great classical economist D. Ricardo is regarded as the father of the Equivalence Principle: When the Government borrows in order to spend, the citizens will reduce private consumption since they can be certain that they will be taxed in the future. Therefore, we have an equivalent reduction in private spending, irrespective of whether government spending is financed by present taxation or issuance of bonds (future taxation). Consumers are either perfectly rational or care about the future generation.

As contemporary Greeks we presented our own version of the Equivalence Principle: We will consume today together with the Government and the equivalent payment will come from our children, grandchildren and European partners. Was it lack of rationality, lack of concern about the future generations or …something worse ? Unfortunately for the present generation, the long term party, where of course some had greater appetite than others, was abruptly interrupted by the markets.

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