August 21, 2010

Greece: Microcosm of What's Coming to America?

In terms of economic importance relative to the world, all by itself the insolvent nation-state of California is the 8th largest economy in the world. Its the size of France. According to the CIA Factbook, Greece is number 34. Additionally, in the U.S., we have 43 of the 50 states in some form of financial distress. - Barry Ritholtz, Insolvent European vs American States, The Big Picture, February 10, 2010

Greece is showing us just how fantastic socialism is. When you give your citizens a free ride at the expense of a few hard working folks, at some point the money runs out. That is the crux of socialism as we know it today. In the case of Greece, they do not want the free ride to end. They don’t want their benefits cut. Don’t cut six weeks vacation, generous pensions, free health care. Retire at 55? Yes please. So they riot. Socialist paradise indeed. And it gets even better because they will be bailed out by the IMF. Guess who contributes far more than anyone else to the fund? Yep. We Americans. And the world will continue to hate and vilify us. Figures. I don’t care about Greece. Let it burn. They voted these socialist assholes into office and deserve what they get. Just like we Americans -- who, by the way, nobody will save when we burn -- will get what we deserve with the free spending, high taxing, entitlement-loving statists. - Greece Socialism Turns to Rioting – This Should Be a Teachable Moment For America, Political LipSkip, May 8, 2010

If one understands that socialism is not a share-the-wealth programme, but is in reality a method to consolidate and control the wealth, then the seeming paradox of super-rich men promoting socialism becomes no paradox at all. Instead, it becomes logical, even the perfect tool of power-seeking megalomaniacs. Communism or, more accurately, socialism is not a movement of the downtrodden masses, but of the economic elite. - Gary Allen, None Dare Call It Conspiracy, Concord Press, 1971

Tensions Rise in Greece as Austerity Measures Backfire

Entering a Death Spiral?

By Corinna Jessen, Spiegel
August 18, 2010

The austerity measures that were supposed to fix Greece's problems are dragging down the country's economy. Stores are closing, tax revenues are falling, and unemployment has hit an unbelievable 70 percent in some places. Frustrated workers are threatening to strike back.

The feast of the Assumption of Mary on Aug. 15 is the high point of summer in the Greek Orthodox world. Here in one of the country's many churches, believers pray to the Virgin for mercy, with many of them falling to their knees.

The newspaper Ta Nea has recommended that the Greek government adopt the very same approach -- the country's leaders have to hope that Mary comes up with a miracle to save Greece from a serious crisis, the paper writes. Without divine intervention, the newspaper suggested, it will be a difficult autumn for the Mediterranean state.

This dire prognosis comes even despite Athens' massive efforts to sort out the country's finances. The government's draconian austerity measures have managed to reduce the country's budget deficit by an almost unbelievable 39.7 percent, after previous governments had squandered tax money and falsified statistics for years. The measures have reduced government spending by a total of 10 percent, 4.5 percent more than the EU and International Monetary Fund (IMF) had required.

The problem is that the austerity measures have in the meantime affected every aspect of the country's economy. Purchasing power is dropping, consumption is taking a nosedive, and the number of bankruptcies and unemployed are on the rise. The country's gross domestic product shrank by 1.5 percent in the second quarter of this year. Tax revenue, desperately needed in order to consolidate the national finances, has dropped off. A mixture of fear, hopelessness and anger is brewing in Greek society.

Unemployment Rates of up to 70 Percent

Nikos Meletis is neatly dressed, and his mid-range car is clean and tidy. Meletis used to earn a good living at a shipbuilding company in Perama, a port opposite the island of Salamis.
"At the moment, I'm living off my savings," the 54-year-old welder says, standing in front of a silent harbor full of moored ships.
Meletis is a day laborer who used to work up to 300 days a year; this year he has only managed to scrape together 25 days' work so far. That gives him 25 health insurance stamps, when he needs 100 in order to insure himself and his family -- including his wife, who has cancer.
"How am I supposed to pay for the hospital?" Meletis asks.
Unemployment benefits of at most €460 ($590) per month are available for a maximum of one year -- and only if he can produce at least 150 stamps from the past 15 months.

There's hardly a worker in the shipbuilding district of Perama who could still manage that. Unemployment in the city hovers between 60 and 70 percent, according to a study conducted by the University of Piraeus. While 77 percent of Greek shipping companies indicate they are satisfied with the quality of work done in Perama, nearly 50 percent still send their ships to be repaired in Turkey, Korea or China. Costs are too high in Greece, they say. The country, they argue, has too much bureaucracy and too many strikes, with labor disputes often delaying delivery times.

Perama is certainly an unusually extreme case. But the shipyards' decline provides a telling example of the Greek economy's increasing inability to compete. Barely any of the country's industries can keep up with international competition in terms of productivity, and experts expect the country's gross domestic product to fall by 4 percent over the course of the entire year. Germany, by way of comparison, is hoping for growth of up to 3 percent.

Sales Figures Dropping Everywhere

Prime Minister George Papandreou's austerity package has seriously shaken the Greek economy. The package included reducing civil servants' salaries by up to 20 percent and slashing retirement benefits, while raising numerous taxes. The result is that Greeks have less and less money to spend and sales figures everywhere are dropping, spelling catastrophe for a country where 70 percent of economic output is based on private consumption.

A short jaunt through Athens' shopping streets reveals the scale of the decline. Fully a quarter of the store windows on Stadiou Street bear red signs reading "Enoikiazetai" -- for rent. The National Confederation of Hellenic Commerce (ESEE) calculates that 17 percent of all shops in Athens have had to file for bankruptcy.

Things aren't any better in the smaller towns. Chalkidona was, until just a few years ago, a hub for trucking traffic in the area around Thessaloniki. Two main streets, lined with fast food restaurants and stores catering to truckers, intersect in the small, dismal town. Maria Lialiambidou's house sits directly on the main trucking route. Rent from a pastry shop on the ground floor of the building used to provide her with €350 per month, an amount that helped considerably in supplementing her widow's pension of €320.

These days, though, Kostas, the man who ran the pastry shop, who people used to call a "penny-pincher," can no longer afford the rent. Here too, a huge "Enoikiazetai" banner stretches across the shopfront. No one wants to rent the store. Neither are there any takers for an empty butcher's shop a few meters further on.

A sign on the other side of the street advertises "Sakis' Restaurant." The owner, Sakis, is still hanging on, with customers filling one or two of the restaurant's tables now and then.
"There's really no work for me here anymore," says one Albanian employee, who goes by the name Eleni in Greece. "Many others have already gone back to Albania, where it's not any worse than here. We'll see when I have to go too."
No Way Out

The entire country is in the grip of a depression. Everything seems to be going downhill. The spiral is continuing unabated, and there is no clear way out. The worse part, however, is the fact that hardly anyone still hopes that things will improve one day.

The country's unemployment rate makes this trend particularly clear. In 2009, it was 9.5 percent. This year it may rise to 12.1 percent and economists expect it to reach 14.3 percent in 2011. Those, though, are only the official numbers, which were provided by Angel Gurría, secretary general of the Organisation for Economic Co-operation and Development (OECD). The Greek trade union association GSEE considers those numbers far too optimistic. It considers 20 percent to be a more likely figure for 2011. This would put the unemployment rate as high as it was in 1960, when hundreds of thousands of Greeks were forced to emigrate. Meanwhile, purchasing power has fallen to its 1984 level, according to the GSEE.

'Things Are Starting to Simmer'

Menelaos Givalos, a professor of political science at Athens University, has appeared on television, warning viewers that the worst times are still to come. He predicts a large wave of layoffs starting in September, with "extreme social consequences."
"Everything is getting more expensive, I'm hardly earning any money, and then I'm supposed to pay more taxes to help save the country? How is that supposed to work?" asks Nikos Meletis, the shipbuilder.
His friends, gathered in a small cafeteria on the pier in Perama, are gradually growing more vocal. They are all unemployed, desperate and angry at the politicians who got them into this mess. There is no sympathy here for any of the political parties and no longer any for the unions either.
"They only organize strikes to serve their own interests!" shouts one man, whose name is Panayiotis Peretridis. "The only thing that interests me anymore is my daily wage. A loaf of bread is my political party. I want to help my country -- give me work and I'll pay taxes! But our honor as first-class skilled workers, as heads of families, as Greeks, is being dragged through the dirt!"

"If you take away my family's bread, I'll take you down -- the government needs to know that," Meletis says. "And don't call us anarchists if that happens! We're heads of our families and we're desperate."
He predicts the situation will only become more heated.
"Things are starting to simmer here," he says. "And at some point they're going to explode."

Greece to be Bankrupt by August; What Would Happen?

By The Coming Depression
June 21, 2010

Why is it that most folks, in their quest to blame capitalism for all that ails global economies, they fail to notice it was actually the outrageous socialists governments policies that brought counties like Greece to the brink of financial disaster?

When citizens of Greece take more from the economy than they put into the economy, countries at some point become insolvent. Instead of attempting to clean up the widespread corruption that the citizens were engaged in for years and years, cutting back on the outrageously generous socialists programs the government provided to their employees, other workers and senior citizens, the government for years has been borrowing non stop. Indeed, other socialists countries such as Spain and Portugal are next to fall victim to insolvency.

Take Iceland -- another country with too generous social programs they cannot afford -- their economy fell bankrupt very early after the global financial crisis hit Europe big time.

For those who are a bit confused, yes the bailout is recent but the new Greek government, which came into power in late 2009, announced the fiscal imbalances then. It was still tapping the markets for debt for some time and had started making changes within the month of power. Changes that could easily be implemented in certain expenditures. Then when it announced it could no longer afford to go to the market, it still had some time until the bailout without the need of getting money but had already announced certain austerity measures such as public wage cuts and social spending.

It still has many problems and difficulties coming to agreement with certain important reforms such as pension system, and will have to wait at least till end of 2010 to see statistics with its crucial austerity measures such as tax increases, collections from tax evasion, and health costs and elimination of subsidies. These things take time to see effects and its still in the danger but has the cushion of a three-year bail out. If they can’t make the necessary corrections and implement important reforms to change the public sector and hows its managed, and its citizens and businesses need to start feeling comfortable, then it will be in big danger.

It’s pretty much do or die for Greece. So they can either get it right and make things work for the better for the whole nation hence forth, or destroy themselves completely where Greece becomes like a weak Eastern European nation.

US Economist Fears Greek Debt Default in August

Greece will eventually default on its debt because the country is highly indebted and the euro zone’s approach towards saving it is the wrong one, Carl Weinberg, chief economist at High Frequency Economics, told CNBC Friday.

A restructuring of Greek debt could happen as soon as August, when the Balkan country is due to receive another tranche of funds from its lending agreement with the International Monetary Fund (IMF) and the European Union, according to Weinberg.

“You can’t take a country that’s over-borrowed and make it more creditworthy by lending it more money,” he said. “They’re throwing Greece further and further and further in the hole by not addressing the problem directly and properly.”
Asked when a Greek default could happen, Weinberg answered:
“At High-Frequency, we are advising people to take their cell phones on their August vacation.” He said a Greek default would be “harsh” for the euro.
A lot of people are advocating higher taxes in many countries as methods to vanquish obscene spending and subsequent debt, but these people should be careful what they ask for. In the 1970’s, the UK reached the limit of this with 95% taxes for the “rich.” Debt continued to increase because no matter how high the taxes, any new money was put towards more government, rather than reducing debt.

Now dollars are worth much less than they were then. If you have/had a defined contribution pension plan, it will/would be worth a lot less when you retire, if inflation is allowed to increase (inflation is entirely under control of the government). If you want a gauge of inflation, consider oil: 10 to 20 barrels of oil has always bought one ounce of gold; 10 to 20 barrels of oil has always bought a nice wool suit. The value of goods doesn’t change; only the price. Today, you need $2,000 while in 1940 you needed $20. Same stuff, same hours to earn the money, just different numbers for the money.

It is time to go back to the tax structure we had fifty years ago. The debt rightfully belongs to the less than 1% of wealthy people who now own 90% of everything in the country and the corporations who have been on welfare too long. Working people in all western countries have paid for their pensions and benefits.

Argentinians Have First Hand Knowledge

In Argentina, our people ended up getting used to being much poorer, so when “normal” times returned, the Goldman Sachs- and Citicorp-controlled local media were able to ensure that a new puppet regime subservient to the money interests should come to power: i.e., the husband and wife pro-banking mafia team of Néstor and Cristina Kirchner… And the merry-go-round keeps turning and turning, whilst the Argentine people keep paying and paying…

Today, we look at Greece and see the same tell-tale signs:

  • The IMF imposing strict austerity measures as a condition for the banks to lend more money to them (as if a country collapsing under the burden of debt can overcome that by getting into even more debt!!);

  • The mainstream media speaking vociferously on the need for “Greece to do things correctly and responsibly” (as if the US FED, the Bank of England, Goldman Sachs and the US Treasury, Greenspan, Bernanke, Paulson, Brown, Geithner, Blankfein, Greenberg were examples of responsible accountability);

  • Local caretaker governments doing all they can on behalf of banking interests (George Papandreou is a regular at the Bilderberg and Trilateral Commission meetings, as was Fernando de la Rúa, a founding member of the local chapter of the Council on Foreign Relations in Argentina called CARI;

  • Major banks such as Goldman Sachs trying to collect their pound of flesh in the midst of all the turmoil and hardship.
All of this against a backdrop of desperate citizens taking to the streets to express what is obvious to all: that international bankers and local caretaker government form a complex association of thieves and robbers.

What would happen if Greece defaulted?

If Greece defaults, 7 percent of the entire European Union financial institution liquidity disappears. Likewise, you cannot get paid in drachmas (Greece’s original currency) that are worth next to zero, and the Greek economy would likely still operate on Euros with or without EU approval. In fact, they’d be a constant 6% pain to the system through arbitrage.

Bond holders, including foreign governments, pension plans (including Canada’s major plans, although a very small percentage amount), and other savings vehicles would be decimated. People in European Union banks would lose their deposits — unless the taxpayer bails out the banks through deposit insurance — which has nowhere near enough in the coffers to make up for these staggering losses.

Therefore, bond holders will take massive haircuts, losing both their clients’ equity as well as future interest yields. They will never get their savings back again. This includes mutual funds, ETF’s, and so on. Either way, taxpayers will foot this bill or people with pensions (including state pensions) and bank deposits will lose their assets.

Obamaism Following Greek Example Spells Disaster for America

By Ken Taylor,
May 9, 2010

... Are we watching Americas future being played out in the streets of Athens, Greece? If Barack Obama has his way the troubles that are now destroying the Nation of Greece could very well be what lies ahead for The United States. In fact during his campaign Obama used Greece as an example of his vision for America and his idea of fairness for all citizens of our free Republic. A vision that if fulfilled will be the end of our “free” Republic and the creation of a total nanny state where Americans are dependent on government for everything.

Obama’s “vision” of cradle to grave government dependency for Americans plays well for many in our country who already see government as the answer to all of their problems. Who can ever forget the video of the lady taken on election night as she rejoiced in Obama’s election by gleefully stating that she would no longer have to worry about paying her mortgage or car payment or electric bill or buying groceries. All because of the “vision” of socialist nanny Barack Obama.

Some may think that we will never see violent reaction from Americans like we are seeing with Greece just because government programs are cut, because after all Americans love our freedoms and we will never allow what is happening in Greece to reach our shores. Think again! Remember the College students in California who recently violently protested because their government provided tutitons were being cut due to the states near bankruptcy?

Unfortunately in a real sense some of the Greek troubles have already reached our shores. We have had this nanny state in several forms in our Nation long before Obama took office. Social Security is one form of our existing nanny state, a sacred cow which everyone is afraid to touch or try to “fix” because of a fear of citizen backlash due to the millions of seniors who totally depend on Social Security for their retirement.

Another form of our nanny state are the welfare programs which are portrayed as compassion for those who have less but, in actuality, create a trapped dependency; because in most instances when one becomes a welfare recipient, in order to continue receiving help a recipient must abandon every avenue of bettering ones self in order to remain at the level in which eligibility for welfare assistance is available. So the fear of NOT succeeding outside of the system creates a total dependency in order to remain eligible within the system.

This nanny state is the dream of Barack Obama who once stated that the flaw in our Constitution of “negative liberties” is that our Framers stated what the government cannot do but did not state what the “government must do” on behalf of the people. Of course we who understand the concept of a free Republic and a free people with a limited government know that this “omission” by our Framers was intentional BECAUSE the Constitution was written to limit governments involvement in the freedoms and individual ability of our citizenry to prosper without government interference.

Barack Obama, in stark contrast, not only wants the government to interfere, but believes that it is government's responsibility and purpose to provide for the people and for the people to be dependent on the government for their every need. He condemns those who protest against government growth and interference in our lives. In fact, in recent speeches Obama has criticized our protests because we consider big government bad for the people. So he used examples of how those who were attending his staged town hall meetings traveled to those meetings on “government roads” and praised government regulations that “protect” Americans from evil Wall Street investors.

On April 30th, in one of these staged town halls, Obama stated,
“I mean, I do think at a certain point you’ve made enough money.”
Why would a President of a free nation even think this? There can only be one answer to that question. If citizens continue to “make money” and strive to better their own situations, then the need to look to the government for answers becomes not only less but completely unnecessary. In Obama’s government utopia this just will not do.

So he takes over health care. He takes over business and seeks to gain the power through a financial “reform” bill to take over more business in order to control how much individuals in that business can earn. He seeks to take over our energy consumption and control how we use it. He seeks to stifle investment through regulation to prevent “greedy investors” from collapsing our economy. Totally ignoring the nanny state entities of Fannie Mae and Freddie Mac, which caused the 2008 economic collapse in the first place by giving mortgages to people without the ability to pay (a share-the-wealth programs).

A government-dependent people become lazy and become slaves to government control and government power. When, like Greece, the inevitable happens -- the failure of cradle-to-grave system collapses due to lack of funding -- those who have been made lazy by their dependency on government rise to protest because their meal ticket has disappeared; and the fear it creates for the future causes a violent reaction -- much like a child who cries when feeding time comes and mommy is not able to get the bottle, so the baby has to wait.

Is this the direction that Obama is taking our Nation? Absolutely. Is this what we want for our country? For the majority of Americans the answer is, “of course not;” which makes our stand for our freedom and the continuation of our free Republic in opposition to Obama’s move toward a Greek-style nanny state all the more important. We cannot rest in our protest and in our quest to take back our country lest, in few short years of continued Obamaism, we find our Nation bankrupt and our dependent populace violently protesting when the coffers become empty.

Will California Be Our Greece?

By Gary Shapiro, The Daily Caller
May 27, 2010

Although Greece’s output is just over two percent of the European Union economy, its financial collapse roiled continental markets and required an international bailout package. Imagine what would happen to U.S. markets if California, which is 13 percent of the national economy, experienced a Greek-style implosion.

Far-fetched? The similarities in fiscal irresponsibility are hard to miss.

California and Greece have massive unfunded liabilities. A recent study by a group at Stanford University pegs California’s unfunded pension liabilities at $500 billion. But that only includes state debt for California. When you factor in California’s 13 percent stake in the U.S. economy, which is saddled with $13 trillion in debt, the state’s total debt liability is over $2 trillion. Some analysts peg Greece’s unfunded liabilities at a similarly astronomic level. And these numbers only tell a piece of the story.

In many ways California as a state has bigger problems than Greece as a country. The unemployment rate in California is higher than that of Greece. And California spends more on many government programs. For example, the 167,000 inmates in California prisons occupy 11 percent of the budget, or $8 billion. By comparison, Greece prisons hold only 12,300 prison inmates.

Both California and Greece suffer from a huge number of unionized government employees accustomed to large defined benefit packages, including annual salary increases and lifetime pensions. Much has been made of the ability of Greek government workers to retire at the age of 53. In California, government workers can retire at 55. As Republican gubernatorial candidate Meg Whitman has noted, the amount California spends on its pension programs has increased by 2,000 percent in the last decade to over $7 billion annually.

The Greek unions took to the streets when asked to contribute to minor austerity programs. California’s 350,000 government employees are also likely to resist any effort to cut their entitlement packages, much less their jobs. The best scenario political leaders plan for is modest attrition.

California’s problems are being compounded as businesses leave the state. Last month’s announcement that Northrup-Grumman was shifting its headquarters to Virginia followed HP’s announcement that it was also moving out. Maybe these departures have something to do with Chief Executive naming California as the worst state in which to do business, and with the Tax Foundation ranking California as the 48th worst business tax climate in the nation. California also insists on its own rules for gas mileage, silly ubiquitous pregnancy warnings, and even its own TV energy usage standards. The message California sends to businesses is clear: Stay away.

California issued $3 billion of scrip last year because it couldn’t pay its bills. Standard and Poor’s responded by downgrading the state’s credit rating from “A” to “A-minus.” This year, Gov. Arnold Schwarzenegger is valiantly trying to close a $20 billion budget deficit but his lame-duck status and a partisan legislature make real change all but impossible. Even the governor’s obvious but modest trial balloon about taxing marijuana sales was shot down by Californians, who refuse to accept the need for triage.

In 2011, California’s new Governor will face bigger challenges. By then, most of the nearly $300 billion given directly to the states in cash as part of the 2009 stimulus package will have ended. California’s new Governor will likely ask the feds for more money. But it may be that the new, and possibly Republican, Congress will be less willing to bail out states which managed to avoid necessary spending cutting cuts.

What will happen? States cannot go bankrupt under our law. They can just stop paying debts owed. If things get worse, bond ratings will continue to drop, payments will not be made, and the new governor will have to choose between paying government pensioners and cutting services and government employees.

We saw what decades of fiscal irresponsibility have led to in Greece: Fiscal collapse, billion-dollar bailouts and violent riots. In late February, the Telegraph reported that JP Morgan head Jamie Dimon said that California is a bigger risk than Greece. I think he is right.

The Road to Greece and Rome

By Jacob G. Hornberger, Hornberger’s Blog
May 7, 2010

Leave it to the Greeks to expose American liberals and the road to statism they continue to take our nation.

Over the past 20 years, how many times have we heard European statists extolling the virtues and benefits of the socialistic welfare state? Europeans have proven that socialism works, the statists have repeatedly claimed over the years. Just look at how successful all that free government dole has proven to be in Europe.

And then there is Greece, which everyone is conceding is only the first socialist European domino that is set to fall. Notice that there’s no talk about how deregulation, free enterprise, free markets, the bankers, the speculators, profiteers, or greedy people are responsible for the Greek debacle. Everyone concedes that the core of the problem is debt, massive amounts of debt that the Greek government has incurred to fund the ever-growing demands of the parasitic class; that is, those Greek people who are on the government dole.

Let’s go back to economic basics. The only way that government gets its money is through taxes and borrowing. If it borrows, the way it pays back its debt is by taxing people and then using the tax revenues to pay off the debt.

So, government is not like a private business, which creates wealth by producing goods and services that other people are willing to pay for. Instead, government confiscates wealth that is being produced by private entities in the marketplace.

Thus, a welfare state is based on the notion that the government should seize money from people who have produced it in the marketplace and give it to people who have not produced it.

Not surprisingly, given human propensities, over time the number of people who are seeking to go on the dole increases while the will of public officials to tax people diminishes. Giving out the dole to more people is fun but collecting the taxes to fund the dole is not so much fun because people tend to get angry over that sort of thing.

So, to fund their welfare state Greek public officials just began doing what U.S. public officials have been doing to fund their welfare-warfare state. They embarked on a massive borrowing spree, borrowing ever-increasing sums of money. Needless to say, Greek statists said the same thing that their counterparts here in the United States say about the national debt — that it’s no big deal because “we owe it to ourselves.”

But as the Greeks are discovering, it is a big deal precisely because “we don’t owe it to ourselves.” One group of people — the bondholders — are owed money by the government. And the only way the government can pay off the bondholders is by taxing another group of people — those in the private sector who have wealth.

The Greek welfare-state debt has grown so large that investors no longer want to invest in Greek bonds. Investors fear a default, meaning that the Greek government would not pay back its creditors in full. Why invest in debt instruments if you are confident the debtor isn’t going to pay you back?

There is an obvious solution: dismantle the welfare state and the massive spending and borrowing it requires. But that’s anathema to statists everywhere, including Greece. Meanwhile, Greece’s dole recipients are on the rampage, refusing to accept even modest reductions in their dole. Moreover, to pay off the massive amounts of accumulated debt will require the imposition of massive taxes on those Greeks who have money, thereby causing even greater economic burden on the country.

What to do?

Not surprisingly, every proposal involves keeping the welfare state in existence. What the Greeks are proposing is that German and American taxpayers (through the IMF) help them out with foreign taxpayer money. But even if that works, lurking in the background are more welfare-state dominoes, such as Portugal and Spain. Who’s going to bail them out? And who is going to bail out the bailors, such as Germany and the United States?

So, what are American liberals proposing? They’re proposing what they’ve done for decades here in the United States: Inflation! Consider, for example, the following two articles: Bold Stroke May Be Beyond Europe’s Means and The Greek Crisis by Dean Baker. The first one is a New York Times news article and the second one is a commentary on the liberal website Both articles lament the fact that the Greeks lack the means to do what American statists have done for the past several decades — pay off government debt by inflating the currency.

The following is the essence of their argument: government has incurred massive amounts of debt to fund its welfare-state programs and lacks the financial means to pay off its debts. So, why not simply have the central bank (i.e., the Federal Reserve or the European central bank) simply print up the money and use it to pay off the debts? Voila! Problem solved!

So, why can’t the Greeks do that? Because they’re part of the Euro zone, which the Germans control. Germans have traditionally been ardent opponents of inflation, especially given their horrendous experience with hyperinflation after World War I. Thus, the German mark, which preceded the Euro, was always much more solid and sound than other European currencies. When Germany agreed to surrender the mark for the Euro, the last thing that Germany was going to do was accept a weak currency in place of the mark.

But American liberals think that such a sound-money policy is ridiculous. Baker himself chides a German official for saying, “Inflation never solves anything.”

Harkening to the standard Keynesian notions that American students are subjected to all across the land, Baker’s ideal would be for the Greek government to inflate at least part of that debt out of existence. It would revitalize the economy, he says. I wonder if he’s heard of Zimbabwe.

But wait a minute! Does that mean that there are no costs to inflation? Is it “free,” just like all the other benefits of the welfare state?

Alas, Baker doesn’t talk about the costs, perhaps because the consequences of inflation have historically fallen most heavily on the poor, the sector in society that liberals claim to love and be concerned about. For example, people on fixed incomes and low incomes. They’re the ones whose incomes are devastated by the ever-increasing prices that inflation produces.

Inflation is nothing more than a tax, but the reason that statists love it is because they know that the poor and ignorant won’t figure out that it’s a tax on them. They’ll inevitably blame rising prices on big business, free enterprise, private owners, free enterprise, greed, OPEC, service stations, speculators, bankers, capitalists, and maybe even illegal aliens.

Moreover, liberals simply block out of their minds that inflation is just another form of legalized welfare-state stealing. By intentionally paying off creditors with debased money, the government plunders and loots people who lend money in order to help out the entities, including the government, to whom they lent the money. Where is the morality and justice in that?

Inflation is just part and parcel of the big fraud and scam known as the welfare state, a way of life that is bankrupt in every sense of the word — morally, financially, and economically.

And that’s the road that American statists have taken us and continue to take us — the road to serfdom, the road to bankruptcy, the road to moral debauchery, the road to Greece, the road to the Roman Empire.

Jacob Hornberger is founder and president of The Future of Freedom Foundation.

A Message from Argentina: Our Sympathies to the People of Greece!
How Big Banks' Greek-Style Schemes Are Bankrupting States Across the US
Socialist Bankruptcy in Greece
The Bankrupt PIGS (Portugal, Ireland, Greece, Spain) of Europe
Analysts Fear Bailout Won't Keep Greece From Bankruptcy
16 Countries will go Bankrupt: The elite are bringing the system down
How do countries like Sweden and Denmark provide so many social programs and carry so little debt?
Greece’s Socialist Candy Jar Runs Out
How The Greek Communist Party Plans To Solve The Crisis
Greece Money Problems vs. United States Money Problems
A New “Greek Tragedy”
Greek unions launch national day of mindless protest
As Greece Suffers More Strikes, Liberals Should Watch Closely
Europe and America Morally and Financially Bankrupt
Greek profligacy, pensions and perks cost nation dear
Why America Faces a Big Fat Greek Bankruptcy
Greek Tragedy and Global Crisis

1 comment:

  1. Socilaism may have caused the Greece problem but capitialist republicanism a.k.a Bush and his banking mates has caused the forthcomming US crash While you an economy with 70% consumerism si is the US and as workers [consumers] are laid off, the spending goes down in the US as well, or If you get a republican majority in November and consequent fiscal tightening then you are really in for a depression.
    Obama has at least tried. None of this is his doing although some people with a short atention span would have you believe it was
    The President doesnt run/control the banks, nor did George Bush. Your problems in the US are just starting and you havent yet realised the real cause. As usual in the American way, you shoot the messengerand never learn


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