Monday, May 21, 2012

My Big Fat Greek Meltdown

By: T-Rav

While we’ve been distracted this past week by claims of Cherokee ancestry and Obama’s new status as “the first gay president,” the status quo in Europe has finally reached the end of the road. The only question now is whether the leaders over there realize this and are prepared to take the necessary steps to save their countries—and the signs aren’t promising.

By “status quo,” of course, I mean the overarching, overbearing welfare state apparatus found nearly everywhere on the continent, and also the cessation of much national authority to the technocratic EU government in Brussels. It’s a grand dream, really—the idea that a “United States of Europe” could be created, based on social democracy, multiculturalism, and other cherished principles of the Left. But when they tried to implement this dream through their transnational government and a common currency, the euro, Europe’s leaders, like all utopians, forgot the realities on the ground.

Take Greece. Greece is traditionally one of the smaller, poorer economies in Europe, but in recent years it has benefited from membership in the EU and the use of the euro. Wealthier nations, such as the UK, France, and Germany are able to invest in it, which helps it pay for public projects and thus maintain a much higher standard of living than it normally would. Simply put, Greece for the past decade or two has been a welfare state in every sense of the word. And it was a fun little deal while times were good. The global economic slump of the past few years, though, has caused the government’s high debt and precarious finances to catch up with it. To prevent a total national collapse (which would also hit the aforementioned investors hard), EU leaders cut a deal with the Greek government earlier this year, in which it got a bailout package of 130 billion euros from Brussels (in addition to other, previous aid packages); in return, Athens was required to go full austerity, drastically cutting expenditures and raising revenues (i.e. taxes) across the board, in order to repay this loan in a timely manner. In other words, a country which for the past generation has enjoyed relative prosperity by kicking its expenses down the road was now required to pay for everything itself. Right now. What could go wrong?

Plenty, of course. Between then and now, but especially over the past few weeks, Greece threw a very violent fit. In between periodic riots, national elections were held on May 6, and the two coalition parties, the Conservatives and the Social Democrats (and that right there should tell you all you need to know about European-style conservatism), who had signed off on the deal, took a shellacking, totaling less than a third of the vote. A much larger share went to fringe parties on the left and the right—including the Greek Communists and something called “Golden Dawn,” a neo-Nazi extremist group which has as its logo a modified version of the swastika and which advocates putting immigrants in work camps and turning the Turkish border into a minefield. As if that wasn’t bad enough, talks for forming a new government with either side of the spectrum have collapsed—proving how much they have in common, both the far left and the far right are adamant that the bailout deal with the EU be scrapped because it’s too detrimental to the Greek people. So now there will be a new round of elections next month, in which “Golden Dawn,” the Communists, and others are widely predicted to get an even larger share of the vote. So it might not be long before we see a black-shirted torchlight parade through downtown Athens. Either that, or civil war. It’s kind of 50/50 at this point.

Regardless of what happens, though, Greece’s exit from the euro is only a matter of time, and probably not much time at that. All of these bailouts have been bankrolled, more or less, by Germany, which is currently just about the only state in Europe with a decent economy. In fact, it’s practically the only thing holding the Eurozone together at all. But Deutschland’s pockets aren’t infinite, especially not now, and it wants a return on its investment, demanding that the Greeks either undergo a thorough restructuring of the economy, including a continuation of austerity, or drop the euro as its currency. Given that the Parthenon pols have basically responded by calling the Germans latter-day Nazis and such, it’s not hard to see which way the wind is blowing. A month ago, you couldn’t find anyone among the elites who would admit that any Eurozone country could depart from it; now, it’s being openly discussed.

So why is this such a big deal? Well, that’s the tricky thing—after reading numerous articles on the subject, I have concluded that no one really knows what would come next. It will probably cause short-term havoc. Over the past week, a major bank run to the tune of over a billion euros has taken place in Greece, as citizens anticipating a change in currencies have been withdrawing their money. This is not something you ever want to see, for obvious reasons. It’s also not too hard to imagine that European unity will be severely fractured by this process, especially since Greece is hardly the only nation in such deep trouble. Ireland, Italy, Portugal, and Spain are all in similarly dire financial straits, and are likely to demand bailouts themselves in the near future. Indeed, Italy just had over two dozen of its banks’ credit ratings downgraded, and Spain is now seeing the first signs of a Greece-style bank run. Their economies are also much larger than Greece’s, though, and the other EU nations combined don’t have the resources to bail out even one of them, let alone all.

This isn’t the real problem, though. The real problem is that their populations show no more interest in facing the reality of austerity than the Greeks do. This is true on both sides of the money transfer, and if you want proof of that, just look at France, which had its own round of elections the same day as Greece. The new Socialist president, Francois Hollande, has proposed a domestic policy that includes a 75% income tax on the rich and a reduction in the retirement age, among other things. The point isn’t that these suggestions are idiotic, it’s that a plurality of Frenchmen would rather embrace them than face up to the reality that the welfare state is officially unsustainable. And as long as that mindset persists, we will not see any progress made in Europeans’ efforts to combat this international crisis.

More likely is a slow disintegration of the euro, as country after country is forced to stop using it; at which point they’ll all return to their individual currencies and the EU is left with considerably less leverage over any of them. What we’re really seeing here, then, is the return of the sovereign nation-state, for better or worse—possibly much worse, depending on how unstable the situation continues to be. As the Chinese curse goes, “May you live in interesting times.”

78 comments:

LL said...

I expect to see the Drachma return to Greece in 2013. It's a foregone conclusion now that the SYRIZA (Coalition of the Radical Left Party) is set to take control from PASOK and New Democracy Party in the upcoming elections.

When you look at the history of Greece and Greek Currency over the past 100 years, this is a familiar pattern - and the news reports a run on the banks in Greece as people withdraw their Euros out of fears of immediate conversion to what will be the worthless Drachma.

Tennessee Jed said...

well researched and written. Great job, Rav. The Greeks remind me of the occupy crowd, don't they.

Vasos Panagiotopoulos said...

The Leftist elites who have dominated Greek politics for over a century
shamelessly drove their Trojan Horse into Brusselles and are now
incredulous they have been
caught. Click
and read this
to see how 1893 and 1453 were very similar.

DUQ said...

I agree, I don't think Europe has the moral courage to do what they need to do to turn all of this around. They're just going to keep trying to throw more good money after bad in the hopes the problem eventually goes away.

tryanmax said...

As well as I can recall, (I was in high school at the time) this is exactly what the Euro's critics foresaw when it was being put in place in the late 90s. I'm sure the details weren't there, but the admonitions against artificial value certainly were.

Of course, there were intelligent-sounding excuses for the value inflation, designed more to confuse than enlighten, I'm sure. And once the Euro made it past five years, and again at ten, all the supporters crowed over how wrong the detractors were. I don't think I need to go on...

BevfromNYC said...

Two comments:
1. Great article! When one thinks of the once great Greek empire, the center of Western philosophy, art, commerce, and humanity and how far it has fallen.
2. The Great Irony that in less than 75 years, the great Allied nations who once fought the scourge of Germany are now begging Germany to save them. Germany couldn't defeat them militarily, so they will defeat them economically.

Okay, I have three comments -
3. Russia has a national debt in the millions, not billions. What do we think the possibility of a Russian bailout? Pretty scary thought if the Communists command a bigger seat at the table, especially with Putin reasserting an old-style dictatorship-ish hold on the government.

T-Rav said...

LL, that's exactly what's going to happen, in both cases. Frankly, I believe the currency switch is going to happen this year, maybe even this summer, due to how fast the pace of events has accelerated. Once that mental barrier of not talking about leaving the euro was crossed, the clamor for doing so has built and built ever since.

Less clear is exactly who wants to do so. I don't think Syriza really wants to, or even expects it to happen. I think they really believe that the EU leaders will fold and give them another bailout. But if the rhetoric from Cameron in Britain and Merkel in Germany is any indication, they've seriously miscalculated.

T-Rav said...

Thanks Jed! Yeah, Greece right now seems like a version of what would happen if OWS was able to win elections. Anyone wanna take bets on how soon this all blows up in their faces?

AndrewPrice said...

T-Rav, Well done! Excellent article. I agree with you entirely and I think this whole thing will blow up on them.

AndrewPrice said...

In term of exiting the euro, by the way, I think they would have been smarter to kick them out earlier. The longer they wait, the more dramatic this will get, the more money they will waste, and the bigger the damage they will do. Greece needs to devalue it's currency badly and they can't if they stay in the euro.

T-Rav said...

Vasos, I can't comment very well on that article, but I agree that this is the result when leftists dominate the government for an extended period of time.

I take it you are a Greek native? Any ideas on how this will pan out?

T-Rav said...

DUQ, I was hoping that between Cameron, Sarkozy, and Merkel, Europe's leaders would recognize what needs to be done and have the fortitude to do it. But now Sarkozy's been kicked out for trying to impose austerity at home, Merkel may be about to follow him, and Cameron's Tories make the Bush administration look like penny-pinchers. No, they don't seem to have the courage to tackle the problem.

It really is laughable, the decisions made by the electorate over there. If they think they can vote austerity out of existence, they're about to have a very rude awakening. Austerity is coming for everyone in Europe, and no amount of elections or protests will change that.

T-Rav said...

tryanmax, I've been actively reading political stuff for a decade or so (I was even nerdier as a kid than I am now), and I can just remember the introduction of the euro and the glib predictions that eventually, Britain and the other holdouts would be compelled to join and form a continent-wide bloc of currency. The last time I checked, the pound is now either nearly even with or slightly beating the euro, and after years of malaise, our own dollar is very competitive against it once again. I can't imagine many of those still outside the eurozone are very eager to join it.

DUQ said...

T-Rav, I think Europe is sick. They have reached a point where difficult decisions are simply impossible.

LawHawkRFD said...

So where does The One stand on all this (rhetorical question). He meets with the new socialist leader of France and they almost shared a French kiss. Then he meets with Chancellor Merkel, and attempts to convince her that Germany is demanding too much and should continue to throw good marks after bad at Greece and the Euro.

LL said...

LL, that's exactly what's going to happen, in both cases. Frankly, I believe the currency switch is going to happen this year, maybe even this summer, due to how fast the pace of events has accelerated. Once that mental barrier of not talking about leaving the euro was crossed, the clamor for doing so has built and built ever since.

When it goes into place, it will happen very quickly. Likely over a long (national holiday) weekend because all holdings in Euros in Greek accounts will be instantly converted to Drachma.

T-Rav said...

Thanks Bev!

You're right, the biggest irony in all of this is that the Germans ended up taking over Europe after all; they just did it with bullion instead of bullets. (Hey, I just made that up! I'm trademarking that.) Apparently someone figured out you don't make an empire by crushing your subjects, you do it by making them reliant on you.

As for Russia, I don't know what their economic outlook is like; they're even more confusing now than they were under communism. But from the image Putin projects of himself, I get the feeling he would just directly confiscate the necessary funds before he let it come to a bailout. And he'll probably be applauded for it.

Germans said...

Who needs bullets when you can use dependence?

T-Rav said...

Thanks for the compliments Andrew!

I kinda wonder if the best thing to do (from the EU's point of view) might have been to put a six-month hiatus on Greek use of the euro a year or two back, while they did an internal restructuring and tried to get back on track financially. But I think everyone's fallen victim to the "too big to fail" mindset: We'll muddle through somehow, we can't admit defeat, talk of switching currencies is overblowing the situation, etc. Once you fall into that line of thinking, it's almost impossible to face up to reality until it's exploding right in front of you. Thus the sudden ramping-up in rhetoric--at least through late April, I couldn't find anyone in the papers (at least the British ones) talking seriously about a Greek departure from the euro. Then suddenly, once the Greeks made it clear they wouldn't accept an austerity program, lots of people were talking about it, and now you have prominent politicians saying it may have to happen.

And you're absolutely right; it's now reached such proportions that the departure will have even bigger effects than it perhaps should.

T-Rav said...

DUQ, that's what happens when you have multiple generations wedded to the welfare state. If our politicians were smart, they would be taking notes right now. If they were smart, of course.

T-Rav said...

LawHawk, I have it on good authority that the new entry in Webster's Dictionary for "chutzpah" contains a clip of Obama lecturing European leaders on their need to face facts and make "hard choices" in order to end the recession. Or maybe I have that confused with the new entry for "hypocrisy."

AndrewPrice said...

T-Rav, It seems to be a universal facet of human experience that the longer you wait to solve a problem, the bigger it gets. And they have waited far too long to solve this one.

And you're right, they have been unwilling to address reality here. They all act like they can solve this by just avoiding the problem long enough. That's how disasters happen.

AndrewPrice said...

The other thing I find amazing is that I'm hearing lots of Europeans saying "no one could have foreseen these problems" and acting very surprised at the weakness in the Euro. Well, duh. American conservatives were warning about this long before they ever passed the Maastricht treaty. You just can't create a currency without a central controller and without control to keep each of the governments in the currency in line. What has happened in Greece (and Spain and Italy) is exactly what people were saying would destroy the Euro. So running around whining that no one could have foreseen this is just a flat out delusional lie.

T-Rav said...

LL, assuming there are any holdings left by that point. And that's becoming a bigger and bigger assumption.

Benito Mussolini said...

Dear Germans,

Make sure the trains run on time as well and you're set for life!

T-Rav said...

Andrew, I recommend this Yahoo article on the utter breakdown of the political process in Greece over the past couple weeks: LINK

The most obvious example of how out of touch with reality everyone is is this leader of the Left coalition (and former Communist) who claims he can get the austerity measures dropped and simultaneously keep Greece on the euro, with a continuation of bailout spending. And he's going around meeting with leftist activists in France and Germany, rather than the heads of those countries. Moron.

It will be interesting to see what transpires in the next few months. The Left coalition is in a position to win the next elections, but if they do, then it's all on them. And if the collapse everyone is expecting comes to pass, they may have a real political/constitutional crisis on their hands: the kind that gets settled by the people with the guns.

tryanmax said...

T-Rav, Is it possible that you are no less nerdy now than you were then? Only that your nerdiness has become more age-appropriate. ;-)

I definitely remember the glibness. Some of my teachers and college profs were even eager to tell us how international business would all be done in Euros in our lifetime. (Funny, in the ‘80s it was all going to be Yen.) Fortunately, few of my business profs were taken in, though I struggle to recall their contemporaneous analysis. For me, it was enough to know that artificially overvaluing anything is bad. (Economics is much simpler than it’s made out to be.)

tryanmax said...

LL, T-Rav, Once that mental barrier of not talking about leaving the euro was crossed, the clamor for doing so has built and built ever since.

A marriage counselor told me that once the word “divorce” is brought up, more often than not, the marriage is as good as over. I think the concept applies almost everywhere. Decisions are made before they are ever floated as possibilities. The expression of uncertainty is merely a consensus-building tool.

As it relates to Greece and the EuroZone, I suspect the guys in charge are just working on the PR now. Everything else has probably already been decided.

ellenB said...

Excellent article T-Rav. I have relatives in Greece and they really don't want to believe that they did this to themselves. They are blaming the Germans, even though they are the ones who spent way beyond their means.

ellenB said...

tryanmax, Divorce is good for marriage. LOL!

Actually, I've heard that people who never fight are the ones who end up divorcing. I think that's in evidence here too where everyone in Europe just kept saying "it's all ok, no one is to blame, it will solve itself."

T-Rav said...

tryanmax, I think one of the underlying stories of the past 20 or 30 years has been the continuing relevance of the dollar, despite all portrayals to the contrary. First we heard that the yen was going to replace it as the primary form of currency. Then it was the euro. Now some say it's the Chinese dollar, and I'm sure we'll eventually be hearing about the peso or something. And yet, the US dollar is still here.

Okay, maybe I'm no less nerdy now than I was then. I'm just less introverted. ;-)

T-Rav said...

tryanmax and LL, I doubt anyone among the European elites wants Greece to be pushed out, but I'm sure they've decided that it will have to be. As mentioned, the fact that an exit is being discussed is the clearest possible indication of how they're thinking. The Athens government would have to move heaven and earth to convince them otherwise--and right now, they don't seem capable of moving anything.

The only question now is how soon a similar decision will be made about the other PIIGS.

T-Rav said...

ellenB, in all fairness, the Germans aren't entirely innocent here. They're largely responsible for the artificial overvaluing of the euro tryanmax alluded to, so that their own industries would be partially protected from international competition.

But this has nothing to do with an individual country. This is about where overspending and financial irresponsibility gets you, and at the end of the day, Greece is going to have to pay for its own mistakes. And it's refusing to do so.

I would love to hear how your relatives are rationalizing all this, though. Are they aware of what the rest of the world thinks of their country?

tryanmax said...

ellenB, I wouldn't know. My ex and I fought a lot. In the end, anything was excuse for a fight. But I can see the adage holding true either way. In a situation like mine, divorce gets brought up and it sounds like a better idea each time sparks fly. In a situation where no one fights and it just comes out of the blue, it would just be too shattering.

The fact is, I can pinpoint the moment when it became inevitable. I don't mean to hog the floor, it's just that so much of politics is like a marriage. A sharp analyst could tell you when the exact point was (and I guarantee it's already happened) that the Greece/Eurozone divorce became inevitable.

Koshcat said...

In the weekend edition of the WSJ, there was an article regarding the rebound of Iceland. There were several things they did, but the most profound was devaluing their currency by about 50% that was probably the most effective.

What amazes me is the psychology behind austerity. If you ask the people to take a 50% paycut, you have street riots and elect communists (or Nazis), but if you devalue your currency 50% nobody seems to get as upset although you did the exact same thing. It's as if people really don't understand what just happened.

"Well, goat milk went up to $5/gallon from $2.50 but at least I'm still making $50,000/yr." Even the writers of the article don't seem to get it. They make statement such as "the government continued making investments and even increased welfare payments." If you were paying somebody $10,000 per year in welfare and after devaluation you are in essence paying them the equivilent of $5000, then increasing payments to $12,000 is still a 40% cut. I know, almost like democrat math.

I think the Euro people did screw up the PIIGS problem. Instead of bailouts, it would have been more effective to devalue the currency significantly along with long term austerity plans. It would have decreased the debt/GDP ratio and changes could have been more gradual thus preventing a complete overhaul of the governments.

ellenB said...

tryanmax, My relatives rationalize it by saying that everything was all right until the Germans imposed austerity on Greece. They've conveniently forgotten that the crash happened before that.

ellenB said...

sorry, I mean "T-Rav" not tryanmax.

ellenB said...

tryanmax, I think it's inevitable now too in Europe and the rest is just for show.

ellenB said...

Koshcat, Devaluation is how these countries have always dealt with this problem. The problem is that now that they are in the Euro, they can't devalue. So they are stuck with the consequences of their actions.

The reason devaluation doesn't draw complaints is because while people can no longer afford foreign goods, domestic goods don't get much more expensive. Plus, it creates jobs for domestic industry. So a lot of people benefit and the pain is rather small.

AndrewPrice said...

T-Rav, So basically, the leftists are hoping to turn Greece into true dependents of the big countries? Good luck.

AndrewPrice said...

tryanmax, Economics is simple. It just gets complicated when economists get involved. Usually, they are trying to come up with way to justify something rather than prove something.

Koshcat said...

EllenB, you're right about these countries and devaluing their currancy in the past, but the problem was that was all they would do. So they would get into trouble again a few years down the road. Kind of like the Obama economic plan.

ellenB said...

Koshcat, That's true. And I don't condone devaluation either because it makes a country more poor. But that is how these people saw it, as a way to get out of their problems without having to pay the real price. And as we all know, there's no such thing as a free lunch.

AndrewPrice said...

T-Rav, I agree about the dollar. It's stood through thick and thin and I think it will continue to endure, though we need to fix it up a bit by cleaning up our economy.

Koshcat said...

I agree. It is a tool that used carefully as part of a larger plan can help get a country out of trouble.

Why can't Greece declare bankruptcy? Another no free lunch, but may have allowed the government to renegotiate their "contracts".

AndrewPrice said...

Koshcat and Ellen, I think devaluation is a trap because it allows politicians to promise that everything will get better (debt goes away, more jobs created) without ever fixing any of the underlying problems in the economy. It also slowly impoverishes a country.

AndrewPrice said...

Koshcat, I'm not sure what rules the Eurozone has, but presumably Greece could just refuse to pay their bills (the sovereign version of bankruptcy -- default).

I think the problem in this case though, is that they need more money to keep operating because half their population works for the government and most of the rest rely on government money. In other words, the problem isn't just payment of debts, it's that they are running a HUGE deficit and they need foreign money to finance that.

Koshcat said...

I want to make it clear that I completely agree that devaluation is bad, but it is used so often because the electorate reacts so violently to paycuts. So as a politician, it is much easier to do this in the background all while promising pay increases. It works because the pay increase is much lower then the cut by devaluation. It only will work in the short run, though. To make it really work is you have to perform austerity as well but devaluation allows you to do it slower (and thus less immediately painful). Of course, in politics, it all goes to heck when some a$$ comes in behind you and gives the government union dudes huge pay increases and benefits because now the economy is doing fine.

AndrewPrice said...

Koshcat, That is how I understood you. And I agree. It's bad, but it's one of those tools which politicians can use to try to avoid making hard decisions.

T-Rav said...

Koshcat, humans rationalize things in funny ways.

I think you're probably right, a long-term gradual approach would have been best. But as I said above, everyone over there seems to have fallen into a pattern of "don't deal with it until you have no choice" thinking.

The big problem with devaluation is its inflationary side, which can cause some nasty immediate effects. When it gets implemented in Greece, I worry that the backlash will be so severe it takes down the government entirely and opens the door to army rule, or worse, some of those neo-Nazis. Maybe not, but that's how it went in Germany.

T-Rav said...

ellenB, they sound about as informed about their politics and economics as most of our fellow citizens are about ours. Great.

I knew who you meant :-)

T-Rav said...

Andrew, it's shameless and degrading, but when you have such a large chunk of the population working in the public sector and a large majority dependent on government benefits, the name of the game becomes "entitlement." Although I've pinpointed the Greeks, the fact is that most people today want to have their cake and eat it too--they don't want to be told what to do by the government, but they do want it to give them everything they want. You can't have it both ways.

T-Rav said...

Also, on the dollar, I think it's not so much that our currency is so much more awesome at the moment than everyone else's, it's that everyone else has managed to @#$% up their own currencies even worse than we have. Kind of a negative accomplishment, but an accomplishment nonetheless.

Koshcat said...

What's the point of having cake if you can't eat it?

mmmmmmm....cake

Homer Simpson said...

Mmmmmm.....doughnuts.....

Economist Simpson said...

Mmmmm, inflationary donuts.

T-Rav said...

Andrew and Koshcat, that's one of the questions I'm trying to research. It's difficult, because as I said, I don't think anyone really knows the answer to this, and frankly I struggle with economic jargon. But, as things stand right now, most of the bailout money Greece is currently receiving is going to pay off private creditors, at home and abroad (but mostly abroad). That's leaving most of the existing debt as is, which Greek taxpayers will have to pay off themselves. I don't think that would change in case of a default, whether they can declare one or not.

AndrewPrice said...

T-Rav, According to the Wikipedia, which has no reason to lie me, their deficit is 9.1% of their economy -- about 19 billion euros. That means if they defaulted, they would need to raise taxes by 10% of their economy just to afford what they spend right now. In American terms, that would be like a tax hike of about $1.5 trillion.

And that is before any other considerations like the displacement effect of those tax hikes or of all the people who lose their jobs bringing imports to the country.

The bailout money is going to guarantee private debt, which they are using to finance that deficit and keep rolling over their debt which has become due.

T-Rav said...

Most likely, the Greek government will not declare a total default, because that would completely screw them over for the foreseeable future. Other countries and foreign investors can't make them pay their debt off--they are, after all, a (sort of) sovereign state--but they would certainly cut off all credit to Greece for the foreseeable future, and maybe seize some of its overseas assets. In general, confidence in the government, domestically as well as internationally, would collapse. For those reasons, a total default is unlikely.

More likely is a partial or "orderly" default, which some economic experts have been advocating. That would be Greece paying off only a portion of its debt, mainly to earlier creditors such as the IMF, and simultaneously going back to its old currency. The only problem with this scenario is that the major European banks would take a serious hit as a result, which could have all sorts of knock-on effects with investors. Either way, it's kind of a crapshoot.

AndrewPrice said...

T-Rav, I can't see a full-on default either. I could see a partial default though where they take it out on some of the big banks that are holding their sovereign debt. Frankly, I could even see the IMF still floating more loans at the same time... kind of a shell game.

T-Rav said...

Andrew, yeah, I won't lie, I cribbed some of this from Wikipedia.

Those tax hikes you mention would come on top of some draconian revenue-raisers already implemented as part of the austerity measures. If that happens, the centrist parties' support would disappear and throw the government into the hands of the Left coalition. And at that point, we're probably looking at some amped-up internal disorder, if not outright civil war.

As you allude to, though, this is all dependent on what the IMF and other institutions do.

AndrewPrice said...

T-Rav, There's nothing wrong with the Wikipedia so long as you know which kinds of information you can't trust. It's actually a heck of a lot better than encyclopedias ever were.


It will be interesting to see what happens in Greece. A civil war is certainly not out of the question, though it won't do them any good really. My guess is that they are more likely to end up ungovernable for about a decade. And if Europe isn't careful, they're going to have Greek terrorists blowing up German banks in revenge.

Individualist said...

T-Rav

Very informative article. My worry is this....

Did not a debt crisis in Eurpoe lead to WW2.

Oh how we never learn form history.

AndrewPrice said...

Indi, Humans are big on repeating history. We seem to treat that like sport... like Russian Roulette.

But in this case, I'm not worried about a European-wide war because there aren't really two sides. There is Greece trying to get out of its debt and everyone else wishing they just went away. And Greece lacks the military power of a Germany even circa-Weimar Republic because Greece is just too small to threaten anyone.

LL said...

The problem today in Greece - and it's likely to continue, is that there are runs on the banks with people withdrawing Euro as if there is no tomorrow. One way to put a stop to it is to change the currency to relatively worthless Drachma.

No matter what, for quite some time there will be a black market economy with Euro as the currency. Two prices at the store. One for customers paying drachma and the other for customers paying with Euro (or dollars, or Swiss Francs).

AndrewPrice said...

LL, I would be trying to get all my money into Euros too -- and maybe a German bank. That way you're safe no matter what happens in Greece. If they leave the Euro and devalue the Drachma, then you can buy back in at a great price. If they manage to stay in the Euro, then nothing happens. So it makes sense to get your money out of Greece asap.

And unfortunately, that's exactly the kind of thing Greece needs to avoid if they want to have any chance of getting through this.

T-Rav said...

Andrew and Indi, I agree that there really isn't that much to fear for the rest of us from whatever happens in Greece. With this caveat: it's not the only place having or about to have a debt crisis. If more powerful countries, namely Spain and/or Italy, have a Greece-style meltdown, things could get dicey, especially since both have a--complicated political history, to put it politely.

T-Rav said...

LL, I think one of the growing wrinkles in all of this is that the impression that Greece will be returning to the drachma is becoming locked in--that is, people are starting to make their decisions with that as a core assumption. If this particular feature continues, the bank runs will go on and the Greek economy will hemorrhage money at an increasingly alarming rate, until the nation has to get off the euro just to stay solvent. That's something else it has to avoid.

AndrewPrice said...

T-Rav, That's true. The real risk isn't Greece, it's the domino effect of the other countries. If Greece falls apart, Spain is primed to as well, so is Italy. And if they go down, France would probably be next. And once things like this begin, there's no telling what could happen or where events might end.

Individualist said...

Andrew and T-Rav

The Golden Dawn take over Greece, they immediately begin exiling Turks and end up in a war with Turkey......

Small thing really but it could have big implications.....

Never underestimate the Human Capacity to FUBAR small things into big ones

AndrewPrice said...

Indi, Isn't that the truth! How many really BIG things have started very small?

Tunisia, c. January 2011 said...

My ears are burning....

tryanmax said...

I've just been following the convo silently. I no is smart like yous guys. Very insightful.

AndrewPrice said...

tryanmax, That's because we all went to night-school and majored in Euro-nalysis. :)

Basically, the instructor makes you pee away your prosperity into small cups so they can test it and throw it away.

T-Rav said...

I don't know what night school you all went to, but that was nothing like what I experienced. It was very pleasant and I remember it fondly, no matter what those malcontent classmates with their joint lawsuits might allege. (The ball gags didn't even taste that bad, for Pete's sake....)

rlaWTX said...

I'm gonna go with... It's all Greek to me!

AndrewPrice said...

Greece is the word rlaWTX!

obiwan2009 said...

People mention the possibility of war: if this provokes a little thought, is it possible that the financial meltdowns could accelerate our going to war with Iran?

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