Greece Redux Again…

Ελευθέριος Βενιζέλος

Ελευθέριος Βενιζέλος
Eleftherios Venizelos


Original Image from https://en.wikipedia.org/wiki/File:Ελευθέριος Βενιζέλος.jpg

I ran into an interesting article at Bloomberg:

http://www.bloomberg.com/news/2012-06-01/history-offers-ugly-precedent-for-greek-euro-exit.html

It is written from an historical perspective, so lacks a small amount in the Economics department (but not much, really). The basic story is about the last time Greece had the present problem. It’s fascinating to read (as I was only dimly aware of Greece in that era, and the history of it). It also adds some perspectives on the issues that lead to the problems of W.W.II.

The basic points the writer makes are that the Gold Standard, in the 1920s and 1930s, had much the same function as the Euro Zone does today in that it tied regions into a common money bases despite very different economies. I’d not considered that before. The USA is so large that the Gold Standard here doesn’t cause much regional friction. Only on the international stage do those things impact, and in the years prior to 1960 we didn’t have that much external trade, it external to internal ration was small enough to make it a very manageable issue. Not so for small countries in Europe.

The rest of the story is that the economic strains then, much like now, pushed Greece into abandoning the Gold Standard (as the Euro abandonment is likely now) and that, then, had consequences. There is a semi-oblique reference to the Fascist government that replaced a Classical Liberal one; with the predictable insinuation that Fascists are right wing conservatives (missing that they are in fact Authoritarian Socialists – just not International Socialists AKA Communists). But such is the standard metaphor of the press.

At any rate, other than that flaw, the article is pretty good and worth a visit / read. A couple of excerpts:

History Offers an Ugly Precedent for a Greek Euro Exit

(Sean Vanatta is a graduate student in history at Princeton University. The opinions expressed are his own.)
To contact the writer of this post: Sean Vanatta at svanatta@princeton.edu.

Looking over the precipice of national default and an untimely exit from the international monetary system, the Greek leader issued a somber warning to Europe’s economic leaders: “Bear in mind that if you leave the small states without assistance, a black future awaits Europe.”

Delivered by Prime Minister Eleftherios Venizelos on April 15, 1932, less than two weeks before his nation would suspend loan repayments and exit the gold standard, the prescient remark and the trials that followed offer urgent lessons for the current Greek crisis.

Before the euro bound the continent’s disparate economies into one monetary system, European governments relied on the gold standard to direct international monetary flows. This promised stability, but also required the vigorous coordination of each country’s central-bank policy. The turmoil of World War I disrupted the international order, pushing Greece and the rest of Europe off the standard, a blow from which the monetary system would never fully recover.

The Wiki on Ελευθέριος Βενιζέλος has some interesting bits too.

Eleftherios Venizelos (full name Elefthérios Kyriákou Venizélos, Greek: Ἐλευθέριος Κυριάκου Βενιζέλος; pronounced [elefˈθerios ciriˈaku veniˈzelos]; 23 August 1864 – 18 March 1936) was an eminent Greek revolutionary, a prominent and illustrious statesman as well as a charismatic leader in the early 20th century. Elected several times as Prime Minister of Greece and served from 1910 to 1920 and from 1928 to 1932. Venizelos had such profound influence on the internal and external affairs of Greece that he is credited with being “the maker of modern Greece”, and he is still widely known as the “Ethnarch”.

His first entry into the international scene was with his significant role in the autonomy of the Cretan State and later in the union of Crete with Greece. Soon, he was invited to Greece to resolve the political deadlock and became the country’s Prime Minister. Not only did he initiate constitutional and economic reforms that set the basis for the modernization of Greek society, but also reorganized both army and navy in preparation of future conflicts. Before the Balkan Wars of 1912–1913, Venizelos’ catalytic role helped gain Greece entrance to the Balkan League, an alliance of the Balkan states against Ottoman Turkey. Through his diplomatic acumen, Greece doubled her area and population with the liberation of Macedonia, Epirus, and the rest of the Aegean islands.

In World War I (1914–1918), he brought Greece on the side of the Allies, further expanding the Greek borders. However, his pro-Allied foreign policy brought him in direct conflict with the monarchy, causing the National Schism. The Schism polarized the population between the royalists and Venizelists and the struggle for power between the two groups afflicted the political and social life of Greece for decades. Following the Allied victory, Venizelos secured new territorial gains, especially in Anatolia, coming close to realize the Megali Idea. Despite his achievements, Venizelos was defeated in the 1920 General Election, which contributed to the eventual Greek defeat in the Greco-Turkish War (1919-1922). Venizelos, in self-imposed exile, represented Greece in the negotiations that led to the signing of the Treaty of Lausanne, and the agreement of a mutual exchange of populations between Greece and Turkey.

In his subsequent periods in office Venizelos succeeded in restoring normal relations with Greece’s neighbors and expanded his constitutional and economical reforms. In 1935 Venizelos resurfaced out of retirement to support a military coup and its failure severely weakened the Second Hellenic Republic, the republic he had created.

Interesting fellow. This gives a bit more context to the story from Bloomberg. There’s still a missing bit between him running things, and a return from ‘retirement’ to help a ‘military coup’. But some mystery is always a good thing in a story, so back to the Bloomberg article:

The Great Depression, though, came at an inopportune time for the fledgling Greek financial system. When the world economy began to decline in 1929, Greek exports dwindled, creating an acute imbalance — more foreign currency left Greece through the purchase of imports than came in through the sale of exports, draining the currency reserves of the Bank of Greece. This situation was exacerbated by the country’s foreign debts, which also had to be repaid in foreign currencies, such as the U.K. pound and the French franc. As effectively gold equivalents, these monies undergirded the drachma; as they left Greece, each successive loan payment made defending the currency more difficult.
[...]
By April 1932, Greece was out of options. Without substantive foreign intervention, the combined pressures of foreign debt service and hemorrhaging currency reserves finally forced Greece off the gold standard and into default.
[...]
Coup, Fascism

After default the Greek economy actually began a steady recovery as the nation turned its efforts toward self- sufficiency outside the global market. But in this case, the inward-looking recovery was a false friend, and the political instability that followed the drachma’s devaluation paved the way for a successful coup by General Ioannis Metaxas. Whether his regime was a fascist one or merely conservative- authoritarian is an academic debate that accepts a simple fact: It wasn’t democratic.

I’ve deliberately left out some good chunks, so go read the original, OK?

Greece is nailed to The Wheel and will continue making it’s rounds. I see nothing that has changed in the Greek character nor in the economic context around it that will change the path. The EU is different in some forms from an Austo-Hungarian Empire or a Holy Roman Empire or even a Third Reich; but not in function. A large central controlling body with a coordinated financial system trying to issue orders to a far flung set of disparate economies. Little devolution of power to the local decision makers. Little freedom and autonomy to the subjugated states. Each flourished for a while. Each failed. The more authoritarian and those with the most drive for Central Authority failed the fastest (and in the most spectacular fashion) while those with more liberty and more local control took much longer.

Greece is not Germany. It can not be.

Greece must make it’s own decisions, not be bullied by those in Brussels (as it was bullied in the 1930’s) for ever more “Austerity”. While I might think such financial discipline a good thing; it will not work with the people of Greece today. Nor the folks of 1932.

The only real questions are: “How much more ‘good money after bad’ before the Greeks default or the Germans give up?” and then “What government follows?” Either they can have democracy, and a drachma that evaporates with great speed shortly after printing (as that is what democracies do “Vote for themselves the largess of the public purse.” or they can have an authoritarian regime. One that enforces the fundamental reality of small incomes in the face of large promised expenditures.

It doesn’t matter much if the Authoritarian comes with the face of a Peoples Party communist, a National Party fascist, or a General In Charge (or even a King or Emperor). The incomes and outgoes will need to balance and that can be done by deception (via inflation) or by force (via Authoritarians – be they Dear Leader, President For Life, or Herr EU Commissar).

In the first case, Greece leaves the Euro. In the second case, it might stay in under Herr Commissar, but otherwise it exits as well, IMHO.

My fear would be a return to the kind of Greece we saw in the movie Z.

What surprises me is that for all the times this movie (not Z, the real life Greek Tragedy) has been re-run, folks don’t remember the plot or how it ends…

I’m betting it’s about 1931 now in our Greek Redux. Perhaps a load of pretty pieces of paper from other bankrupt governments, like the USA or the EU Central Bank, can give them until 1933 this time…

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About E.M.Smith

A technical managerial sort interested in things from Stonehenge to computer science. My present "hot buttons' are the mythology of Climate Change and ancient metrology; but things change...
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29 Responses to Greece Redux Again…

  1. rogerh says:

    A Gold Standard has the advantage of being ‘outside government’ – you as a nation are perfectly free to dig it up if you can (most places can’t). Running your own currency allows the illusion of self-worth inside a country whilst allowing everyone to be gently and slowly skinned by the price of oil etc as you devalue. Running a common currency looks good for a while but requires either a strong economy (never in Greece) or strong self-control (never anywhere) or strong external control (makes politicos look pointless).

    The central difficulty is how to make a Greek hotel look cheap to a German tourist whilst building hospitals and roads that come up to Western European standards. The old days of poor peasants living on bread and olives and living in picturesque villages have gone. The answer is cross subsidy – I am pretty sure areas of the USA get subsidised by richer regions – and I am sure it seems more or less acceptable politically. The trick is to manage the same federal cross subsidy in Europe whilst maintaining the illusion of self government. No man is an island – not even a Greek or a German or a British island.

  2. EM – economics is not my strong point, but it seems to me that the recurrent problem is those small countries voting themselves more material gains than their income will support. The debts rise until the interest payments exceed their income, after which it’s a spiral into oblivion.

    I recognise that this is a simplistic view, and that it’s really a lot more complex, but surely a balance of income and expenditure (like Mr. Micawber) is overall a reasonable solution? I’m reminded of my ex-wife, though, who thought that certain things just had to be bought whether the money was available or not, so her credit-card got to maxed-out status and stayed there. Her available money was limited by how much she was below the limit, and reduced by the interest payments. Overall, she paid out more to live at a reduced standard, and I think she still does.

  3. oldtimer says:

    That is a very pertinent article. I linked to the original and below it there was another link to Merkel saying that Germany would not back eurobonds. This does not surprise me – she would not survive politically if she did.

    The other alarming prospect is that for Greece, read Spain and read Italy.

    It exposes the fundamental flaw that fiscal union cannot work without political union with the attendant provision of transfer payments from poorer to richer regions and without full freedom for people to move from poorer to richer regions. The USA has both of these. The EU and in particular the EZ does not. In the UK, among the contingency plans in preparation by the government, the Home Secretary has said she is looking at the suspension of freedom of movement presently embodied in EU treaties.

    People are voting with their wallets and, when they can, with their feet. Ireland has and is witnessing a loss of the skilled, young who are able to emigrate elsewhere. I believe the same has been reported from Spain.

  4. adolfogiurfa says:

    It was the same with the artificially Argentinian “peso” anchored to the value equal to one dollar….but the other extreme it is happening now, there, with a closed tight economy…which will be the alternative for an economy like the US where the people is used to a standard of living related to a reality which not longer exists there: When the US supplied everything to the world. Now when when everything is imported from abroad, how can it keep it?.

  5. Adam Gallon says:

    Greece is a bit of a side-show.
    Spain’s where the real problems will come from!
    However, our Euromasters, have used these various events as “Beneficial Crises”. to further their great project, of a United States of Europe”.
    This time, however, they may have cocked up.
    http://www.eureferendum.com/blogview.aspx?blogno=82739

  6. adolfogiurfa says:

    In every bankrupt somebody has the money, somebody profited.

  7. E.M.Smith says:

    @Simon:

    I think your grasp of economics is just fine…

    Economics is really just “Who, makes what, for whom?” In the case of debtors, they try to be more “whom” and less “who”. That can work to the extent that “who” is willing to loan them money. Eventually it ends / breaks.

    Basically, the political class responds to public pressure just as though they were your spouse, but with a much larger credit card.

    The only thing to add to it, really, is that the time interval runs in years to decades, rather than months, so sometimes one group spends and creates the bills while another group pays them…

    @Adolfo:

    Not always does someone profit…

    Example:

    I, a tin pot dictator, borrow money to build a Grand Economic Park. Companies then stay away in droves. Eventually the park is rotted and bulldozed, and I’m shot. The bank loan in repudiated.

    Essentially, the money was pissed down the waste hole. Like our program to pay people to crush cars. Net wealth destruction as the cars had actual embodied value left in them.

    The bank loses the loan. The country loses the economic benefit of the loan (as it was spent stupidly). The dictator gets shot. You could try making the case that the Friends Of The Dictator who built the place got the construction money so benefited, but often they end up losing everything in the economic collapse that follows. (And often were invested in the Industrial Park too).

    Basically: Some ideas are just stupid and squander the wealth instead of just changing in who’s hands it is held.

    So while you are correct for the “often” class, there are exceptions.

  8. adolfogiurfa says:

    This article really take us to the question: Is it possible a global market without winners and losers? You take all production to Asia then you don´t have neither jobs nor money anymore…What is it the perspective? China the factory and the US a Big Mall?, will such a Big Mall provide enough jobs and income for all the US citizens?

  9. Mike Churchill says:

    I agree with E.M.’s fundamental analysis of the Greek situation, but Adolfogiurfa, I don’t think the answer you give to your own question is a necessary one. But first, before one can answer whether it is possible to have a global market without winners and losers, one must define “winners” and “losers”? Are you referring to nations, companies, industries, or individuals? And over what time scale? Whenever economic changes occur, there are short run “winners” and “losers” at all levels. If people are allowed to live their economic lives in relative freedom, history has demonstrated that the former will greatly outnumber the latter over any “long” term as innovative men and women create new products, new industries, and new ways of doing old things–and disrupt the old ways while they are at it.

    As explained by the theory of “relative advantage”, the long term trend for manufacturing to shift from the developed world to lower cost sites–e.g., first Mexico, then various spots in Asia–is partly natural and a good thing. As labor costs rose in the developed world as a result of rising productivity, manufacturing operations sited in lower labor cost locations became competitive for those products or industries for which the lower cost offset the lower productivity of their workforces (productivity differences that existed due to educational differences, lower levels of capital investment–e.g. local or national infrastructure differences, lack of existing plant investment, etc.–local taxes and regulations, perhaps some cultural differences, or other factors). This allowed more folks in the U.S. and Europe to specialize in doing things we had a relative advantage at: engineering, design, sophisticated manufacturing, knowledge based industries, etc.

    However, as demonstrated most clearly here in California, our “brilliant” overlords have artificially and painfully accelerated this trend by drastically regulating and raising the cost of hiring employees and building anything here. To paraphrase Mary Nichols, the chairwoman of the California Air Resources Board, “There are just some jobs we don’t need here.” Those artificial costs make all of us in California big losers–along with everyone else with whom we could be trading the stuff we don’t produce. The rest of the U.S. is losing out for similar reasons–not because jobs are going to Asia, but because more and different jobs than the market would send are going there due to artificially high costs and regulatory barriers to production.

    China has the reverse problem: the policies of the Chinese government to promote exports are effectively hidden taxes that hurt the Chinese people for the benefit of Americans and Europeans by enabling us to buy cheaper clothes and electronic goods.

    E.M., have you spent any time over at Cafe Hayek since I pointed you to it last month? They discuss the Greek situation fairly regularly. Pertinent to Adolfo’s question, CH occasionally references an American economist by the name of Arnold Kling. Kling insightfully analyzes the economy in terms of “Patters of Sustainable Specialization and Trade.” Back on February, 3, Kling had an Op-Ed in the Wall Street Journal that explained that idea very well. I don’t think I managed to drag a live link to it here, but it is: http://online.wsj.com/article/SB10001424052970204740904577197044156250870.html

    Briefly, PSST is an “Austrian” concept: all economics that matters is really about “micro”, not “macro.” In other words, what matters is the extremely complex pattern of economic relationships that exist between economic actors–individuals, businesses, unions, etc.–their specializations and the patterns of trade they engage in. Those specializations and patterns include what skills they have, what capital stock they control (including buildings, machines, financial instruments), what contracts they are party to, etc, and what particular knowledge about economic conditions each person has. Those specializations and trading relationships cannot all change overnight: some can change quickly, some more slowly, some hardly at all. Importantly, no central planner will ever have a fraction of the knowledge that tens or hundreds of millions of individuals will.

  10. Pascvaks says:

    The problem with Greece is Greeks, the problem with Ireland is the Irish,… etc., etc. Greece and Ireland are two farmers who sold their harvest and walked into a bar, had a beer or three, and some Dude in the corner at a table with a French-German accent asks them if they want to play a little cards. The problem with the US is Americans. A Yank has just sold his harvest, etc., etc., and this Chinese Dude asks him, etc., etc.,…

    The long and short of it is, “It’s OK to have a Beer but don’t play poker with anyone but your wife and kids.”

  11. p.g.sharrow says:

    Pascvaks says “that the trouble with Greece is Greeks” etc.

    The trouble is, far too many people think that the world owes them a living.
    The only thing the world owes them is death. Anything else must be earned by someone. pg

  12. JP Miller says:

    PG is certainly correct, but why it took China only 50 years to experience the truth in this point (that individual incomes cannot be given by the State, only earned by the individual), and to put action to that truth (i.e., a fairly free economy, with little government transfer-of-wealth through taxes), while Europe is still locked in the embrace of failed late 19th/ early 20th century economic philosophers — despite ample and repeated evidence to the contrary — is hard to understand. How many times must people go through the cycle of believing that governments can and should provide directly for citizens (from the wealth of others), to experiencing the fallacy and failure of that belief system, before they relegate government to the few roles it can and must play in support of citizens’ freedom?

  13. Pascvaks says:

    @ PG & JP – Really, it is Poker, people can’t resist the temptation to score a BIG one, it’s that old “Don’t Eat the Apple” thing from the very beginning. But, knowing human nature is a lot like water isn’t enough. Countries, indeed Civilization itself, when graphed in terms of Up and Down, Grow and Decline, all show the same failure points, weaknesses. We just don’t seem to realize that WE are the problem (as well as the answer;-). Human Nature is like water, unless there’s a real and intelligent effort to keep it at a High Level it’s going to find a way Down the Mountain. When systems become currupt, and it’s every man for himself, look out below!

    As the Glory of Greece was Greeks, the problem today with Greece is Greeks! Etc., Etc. Today, we’re all Greeks.

  14. oldtimer says:

    This writer has a good grasp of what is happening in Europe:
    http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9309669/The-week-that-Europe-stopped-pretending.html

    PS My earlier post disappeared into moderation because I mangled my user name when trying to post via a tablet. Probably best to bin it entirely and read Ambrove Evans-Pritchard instead.

  15. E.M.Smith says:

    Having ploughed through the GHCN v1-v3 compares and then taken a break… I found a couple of new comments stuck in moderation… so my apologies and for everyone else, you might want to do a quick scan up thread as a couple of new voices have joined…

    @RogerH:

    That is the major advantage of gold. “Supply” is not under the control of politicians. The old Soviet Union had a large influence (and part of why the USA left the gold standard was their tendency to bunch up gold sales in a way that screwed with our economy via bouncing gold price) but no one controls it.

    FWIW, the USA doesn’t really have any ‘cross subsidy’ process. (California is asking for one…) We get our “subsidy” via the Federal Government spreading around where it buys things as payola to Senators to sign bills. So someone says “Sure, I’ll vote for the Space Program… as long as some of it is from {Texas, California, Washington, Kansas} and we get Boeing in Washington making some parts and electronics from California and JPL and Johnson Space Center in Texas and avionics from Kansas and… Federal highways get built with local contractors in each state. Etc. There are some “subsidies” in the way transfer payments happen, but they are more accidental. Folks from all over the country get Social Security checks, but large numbers of them are cashed in Florida and The Sun Belt…

    All in all, it isn’t what would be called a ‘cross subsidy’ in European terms.

    We do have “dirt poor” places and they complain about the way they don’t get subsidized or how Federal policies are not sized for them. I grew up in a farm town where minimum wage was thought of as a very good wage. We exported rice and peaches. A strong dollar made for harder exports. I grew up and moved to the city…

    See the shrinking of Detroit to about 1/2 it’s prior size as an example of how we “cope”… Do you think folks in the EU would accept Munich shrinking by 1/2 and decaying into slums and abandoned property? How about Athens? Maybe we just accept the lumps more quietly…

    @Oldtimer:

    Fished the old one out of the bin…

    Eurobonds are just a way of saying “My credit is crap and my credit card is full, mind if I borrow yours?” Germany would be crazy to do it.

    FWIW, the Irish have always “moved on”…
    Much as MY Irish ancestors left Ireland for better places.
    Much as they left Iberia about 800 AD to go to Ireland.

    I’m not so sure that one can’t have monetary union without political union and have it work. A large number of countries in the world use the US Dollar as their national currency and do OK.

    I suspect it is more about the willingness to accept what that means (no printing your way out of excess spending).

    @Adolfo:

    Yes, the USA is slowly learning that “import everything and have a service economy” doesn’t work…

    @Adam Gallon:

    Side show or appetizer? Perhaps “warm up act” is more accurate. Canaries and coal mines come to mind…

    Yes, it’s about 1/3 the size of California (that is in worse condition in some ways) and yes, Spain and Italy are the big lumps.

    I expect the EU to break up into individual nation states again. About 60 / 40 odds. We’ll see.

    @Mike Churchill:

    That pretty much sums it up.

    Per Cafe Hayek – no, I’ve not had time. I keep it in an open tab, but have been occupied on some other things ( that ibuprofen event and the tour of the world as dP/dt v1 vs v2) but I will get back to it… What I did read has me hooked.

    The complexity problem is one folks really don’t quite ken. Just look at the posting about electric power in California http://chiefio.wordpress.com/2012/06/03/strange-how-economics-works/

    That’s all a minor study in ‘detail the PUC does not see’. So we have Learned Commissions with Big Egos making grand pronouncements – then the actual economy has a web of adjustments they didn’t expect, so the do more Grand Pronouncements… and the cycle repeats.

    We are much better off with a stronger web of relationships and less government pronouncements…

    @Pascvaks:

    I don’t play poker with MY kids… they beat the pants off me… (Never play poker with an Honors Math student who got A’s in University… and knows how to bluff…)

    ;-)

    @P.G.Sharrow & JP Miller:

    That’s a question I’ve often wondered. Near as I can tell, it comes from the fact that all families are communist enterprises (from each according to his ability, to each according to his need) so we have a fundamental bias toward thinking it will work at large scale, too (and want a Sugar Daddy to give us stuff). We don’t realize that the Evil Bastard does not care for us the same way as a parent cares for their own child. They see us more as the farmer sees the livestock…

  16. p.g.sharrow says:

    Even farmers care for their livestock. You can’t starve production out of livestock.
    These are Educated people that were taught how and what to think. They were taught all the wrong answers and are sure of a good outcome. Ben Bernanke says he studied the depression and knows how FDR and company got us out of it, except everything they did made things worse and they knew it. But the “Official” history books, that Ben studied, claimed that the efforts worked. So everything that he knows is wrong. As is the knowledge of most of government bureaucrats.
    At the end of WWII, most of the FDR era controls were lifted in a grand reorganization of Federal Departments and the economy took off. We need a grand reset of the philosophy of government as well as a grand cleanup of text books to teach reality instead of wishful thinking. pg

  17. adolfogiurfa says:

    @P.G.: As FDR last name means “Field of Roses” perhaps everything was interpreted according to it: “Just Roses, Roses”

  18. p.g.sharrow says:

    “Field of Roses” or “Brier Patch”. Lovely “smell” but don’t try and walk thru it! pg

  19. E.M.Smith says:

    @P.G.Sharrow:

    A good farmer cares for their livestock…

  20. Peter Dunford says:

    I like the reference to fascists being authoritarian socialists. Nazis, or as I call them “Germans”, were National Socialists. The weren’t “right wing” in the commonly accepted sense.

  21. E.M.Smith says:

    @Peter Dunford:

    Then you might find some of these prior articles of interest:

    http://chiefio.wordpress.com/?s=Liberal+Fascism

    especially:

    http://chiefio.wordpress.com/2011/01/20/nationalist-socialists/

    @All:

    FWIW news flow is about how the EU is really going to bail out Greece, Spain, et.al. “This time for sure!”… not realizing that the money pit has not bottom… There’s about a 25% unemployment rate in Spain, 50%+ among the young. Greece is paying a load of pensions and has little in exports. Then the new Socialist Dear Leader in France has announce a roll back of retirement from 62 to 60 as though that will fix things.

    Socialisms always spend more than they have, borrow to the limit, then try to ‘third party the costs’ to anyone else around them. Never cutting back on the expenditures until forced. Always taxing more until private enterprise capitulates and fails. (Then they cut back; but by they the parasites have killed the host and sucking less does not bring them back to life…)

    So Greece, Spain, Italy, et. al. are looking to who can give them more money to spread around the cost of their social programs. A major Spanish bank was just nationalized (again…) as the grand plans with respect to real estate have left them once again with no money.

    At the same time, there were dismal numbers on sales of furniture today. The folks who would pay those monies to the Spanish and Greeks are themselves, out of money. The USA is $15 Trillion and rising (or is it $16 Trillion by now, it’s been a couple of months… ) so we don’t have it. We’d just be lending our credit line with China to the IMF, to then hand it over to the PIIGS.

    No, the simple fact is that China is pegged low to the $US and is driving most manufacturing to China. That money then stacks up in China. There isn’t money to hire Spanish kids to make Spanish goods when China already makes them all. Having a society that provides nursing to old folks, cooks meals for each other, and does each others accounting and counseling; sells nothing to China. Having a Green Mandate to build monuments to stupidity in the Spanish countryside also exports nothing to China. In the end, there’s just not enough Net National Wealth created in Spain, so it slides to poverty. There just isn’t enough actual investment in real wealth creation via industry to employ the population.

    In the end, you can only consume as much as you really produce. And the PIIGS are not producing nearly as much as they are consuming. All else is exposition.

  22. Pascvaks says:

    Lemmings! The World is full of Lemmings! But, the way of Lemmings (the human variety, that is) is to quickly “..reduce the surplus population” as Old Scrooge was want to say, so soon that little problem will fix itself. We always have before.

    When we start fighting the rats for the last few grains of seed corn you’ll know the end is neigh. What we need is someone with a Vision for tomorrow. (Not the future, tomorrow, as in ‘tomorrow’ morning;-)

  23. “I see skies of blue
    And clouds of white
    The bright blessed day
    The dark sacred night….”

  24. Pascvaks says:

    “And I say to myself,
    Which way to the bathroom?”

    (-;Unless you wear Nappies;-)

    and then you may sing..

    “And I say to myself,
    What a wonderful world.”

  25. E.M.Smith says:

    Just a note that Greece ought to be voting “today” and we’ll find out fairly soon which way all the panic is likely to run. Markets will be volatile, one way or the other, and then when “nothing changes” will end up realizing that The Story just didn’t matter all that much after all. Sigh.

    The Greek Vote won’t really matter much either. They still have the debt. They still have little effective industry ( tourism and some shipping near as I can tell). They still have a load of folks wanting a nice fat Euro check in their retirement and the Germans to pay for it. The Germans want power and control and are throwing money at buying it. Well see which gives out first, the German wallet or the Greek mouth…

  26. Pascvaks says:

    Prediction:
    The Greeks will be Greeks and do nothing effective or dramatic.
    The Spanish will be Spanish and follow the Greeks.
    The Italians will be Italians and follow the Spanish.
    The Germans will be Germans and, once again,
    blow their wad on a pipe dream.

    In the End:
    The EU will be a shambles; as it was a little while ago.

    PS: Some day, in a Europe far, far away, the Clans and Tribes will get tired of all this and pack up their belongings and, reversing their march, return to the Steppes. Of course by then there will be far fewer of them. Some will remain behind, they always do, and the ice will return.

  27. adolfogiurfa says:

    @Pascvaks: and the ice will return…….. Back to the caves… :-)

  28. Pingback: Greece Votes to Kick The Can and Accept German Money | Musings from the Chiefio

  29. E.M.Smith says:

    @Pascvaks:

    Um, I think they will find the way to the Steppes blocked by a large and industrialized nuclear China. WHEN the ice returns, Europe is screwed.

    @Adolfo:

    But South America will do great… Got room for 300,000,000 new European Refugees?

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