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TMFPostOfTheDay (< 20)

Greece Must Choose



November 02, 2011 – Comments (2)

Board: Macro Economics

Author: WatchingTheHerd

No one expected Prime Minister Papandreou to come up with a totally unexpected event. But lo and behold, he did!

When Greece started unraveling in February of 2010, someone here posted a link to a blog on the Asia Times site:

I forwarded that link to some friends on 2/14/2010 under the subject "Want To See the Future? Watch Greece" with the following bullet points:

The above link is to an interesting blog post from the Asia Times about some secondhand -- but astute -- observations on what's happening (or not...) in Greece right now. If you haven't been following the story, Greece is literally days or weeks away from a sovereign default -- a situation in which the country defaults on debts racked up by the government to foreign countries. The situation poses particularly dire problems for the bigger picture because:

* avoiding a default will require outsized capital inlays from other members of the European Union
* no other members of the EU have excess currency to burn by tossing it to Greece
* because Greece uses the Euro (common currency), solutions involving a severe currency de-valuation that would more quickly correct the problem can't be used without tanking the Euro all over, jeopardizing other EU members that aren't doing well either
* Germany in particular will face major political issues with bailing out Greece which has a retirement age of 61 and is fighting efforts to raise it to 63 while Germany raises its retirement age from 67 to 69 to ease its fiscal crisis -- yea, that will play well with workers in Wolfsburg having to work an extra two years making Volkswagens to fund the EARLY retirement of corrupt government workers in Greece
* the International Monetary Fund is starting to get involved but conditions imposed by the IMF will make mobsters look like pikers
* Greece is so corrupt, an audit of government expenditures couldn't account for THIRTY PERCENT of expenditures -- it literally vanishes in the downward pyramid trickle of corruption
* Greece has never been a terribly stable democracy nor a terribly peaceful country -- when this **** hits the fan, there WILL be larger problems in the Mediterranean region


I quote all of the above as a reminder to Americans. If you think that somehow our companies, banks, economy and political system are somehow immune to the effects of this giant black hole of unpayable, bogus debt, THINK AGAIN.

The move by Greece's Prime Minister to put consent to a "solution" to their debt crisis to a vote should surprise no one. In reality, this "referendum" is the only real solution to the problem produced by a worldwide system that mixes

* financially irresponsible politicians who promise ever more government with ever-lower taxes
* financially ignorant citizens who believe it and vote for it
* giant multi-national banks in the middle helping to dig the hole of debt and making additional money on side bets on when the hole caves in on the politicians and citizens alike

The referendum cuts through all the posturing and boils the situation facing the Greek people down to two alternatives:

A) impose cuts yourself to your bloated, corrupt government and start living within your means and your willingness to pay for government services
B) continue the charade and trigger outside players to impose their own cuts and conditions

Either way, the Greek people will face a huge economic decline. The only difference is what will happen economically and socially to Greece afterward. Choose (A) and after the dust settles, investors will likely return once a stable currency re-emerges. Choose (B) and brand your country as an economic twilight zone and kiss off recovery for possibly decades.

Americans need to pay very close attention to these events. I suspect we will be facing similar choices within 2-3 years.


2 Comments – Post Your Own

#1) On November 02, 2011 at 5:59 PM, miteycasey (29.06) wrote:

The difference is America can print it's own money, dollars. Geece can no print more Euros.

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#2) On November 03, 2011 at 12:46 AM, cbwang888 (25.71) wrote:

USD is going down along with euro. For those watch only EUR/USD will not even notice ... 

Swiss Franc to peg with euro and Japan intervened Yen.  Australian cut rate and soon EU will follow... 

Gold and silver will continue to shine either way: Greece out and default or take the bailout package ... Uncertainty is the only thing keep the market gyrating ..



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