Final Word from Monday, August 18, 2014

When Finance Minister Andrej Babiš announced in late June that there would be a Kč 100bn budget deficit next year but that the national debt would not rise, it left some people scratching their heads? How would he do this? Use some sort of super-duper financial derivative to package together part of the debt and sell it on to gullible investors at a premium? He explained the conundrum in Právo on Sat. The deficit will hit Kč 90bn this year and Kč 100bn next year, he said, but the public deficit as a percentage of GDP will fall to 40.3% (currently 47.13%, according to Aleš Michl's debt clock), because GDP will increase. So that's Babiš's trick. The country will borrow more, but as a percentage of this fuzzy thing called GDP, its total indebtedness will decline. That's a standard deception of Keynesian politicians, but it wouldn't work in a company's loan negotiations with a bank. Babiš the politician is forgetting how to be a businessman. [Czech Republic ANO Agrofert gross domestic product]

Glossary of difficult words

super-duper - very good; marvelous;

financial derivative - a financial product having a value deriving from an underlying variable asset;

gullible - easily persuaded to believe something;

conundrum - a confusing and difficult problem or question;

fuzzy - difficult to perceive clearly or understand and explain precisely; indistinct or vague.

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