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France deathwatch

There is a good bit of anticipatory gloating and schadenfreude about France in conservative Anglo-Saxon circles

We enjoy the spectacle of the French people electing a socialist government in the midst of a sovereign debt credit crisis. We are excited by the new government’s array of taxes which will throttle any prospect of animal spirits in that lovely country. We are amused by the government’s new law against plant closings. We await impatiently the inevitable “missed” fiscal targets, the “unexpected” decline in revenue and the “unexpected” rise in spending. We gnash our teeth at the bond market’s dereliction, refusing to rise up and do to France what it is doing to Italy and Spain. But we know, in our heart of hearts, that France is going down.

No one wants to see Hollande fail more than I do. But I have to be honest: it isn’t really his fault. Yes, of course raising taxes and cutting spending may help to keep the bond market happy, but it will not succeed; France is going down.

Thanks to the wonderful folks at the St. Louis Fed, we can readily access French financial and economic data in God’s own language. The picture isn’t pretty. Yes, debt/GDP is headed in the wrong direction, and yes, the public sector is gigantic. But that’s not the problem. The problem is nominal growth (real growth plus inflation). Nominal money is the currency in which the world does business; “real” money isn’t real.