It’s All Greek

The Greek crisis seems to me something like the mortgage crisis, in which all kinds of people were encouraged to saddle themselves with junk mortgages. Then they lost everything when the economy took a dive and they fell behind on payments. Greece, I understand, has a humongous debt that even the International Monetary Fund has concluded can never be repaid. And this is partly because the Greek government of awhile back borrowed irresponsibly, but it has to be said the lenders were being irresponsible as well. That may not be what happened, but that’s how I understand it.

The Greeks have suffered terrible deprivation doing what the Eurozone nations told them to do, which was to reduce government spending and pay down the debt. But the austerity cuts, cuts, cuts had the effect of killing their economy, so the debt couldn’t be paid down. And then the Greeks voted in a government that said, bleep austerity. And yesterday they voted to reject Eurozone austerity demands. Without more money coming from the Eurozone partners, Greek banks may collapse.

There’s a lot of clucking about What It All Means, and What Should Greece Do, and What Should Europe Do. I think it’s all just wrong. There’s something basically wrong when people are impoverished not because of anything they did or because of natural calamity, but because of the way economies work.

I’ve never been to Greece, but everything I’ve heard about it says it is very beautiful, the climate is lovely, and there’s a large agricultural area. And of course it has a rich and ancient civilization. There’s no reason I can see that people in Greece can’t have everything they need to live perfectly satisfying lives. If they can’t, it’s not because there’s something wrong with the geological entity of Greece and its people. It’s the System that got them into this mess.

Professor Krugman has been largely sympathetic to the Greeks and thinks the only way out of the mess is for them to bail on the Euro and set up their own monetary system. He wrote,

And let’s be clear: if Greece ends up leaving the euro, it won’t mean that the Greeks are bad Europeans. Greece’s debt problem reflected irresponsible lending as well as irresponsible borrowing, and in any case the Greeks have paid for their government’s sins many times over. If they can’t make a go of Europe’s common currency, it’s because that common currency offers no respite for countries in trouble. The important thing now is to do whatever it takes to end the bleeding.

Professor Krugman also said,

Jared Bernstein weighs in on the big No, hopes that it leads to a change in Europe’s approach, but acknowledges the political difficulties:

To be fair, it’s not that simple. There are structural political factors in play, endemic to the fact that the currency union is not a political union, nor a fiscal union, nor a banking union. As one German economist put it to me, “How do you think the people of Manhattan would like bailing out Texas?” Fair point, and a non-trivial challenge, for sure.

Ahem. As it happens, the people of Manhattan did bail out Texas, big time. I wrote about it here. The savings and loan crisis, which was very costly to taxpayers, was mainly a Texas affair:

The cleanup from that crisis cost taxpayers about $125 billion (pdf), back when that was real money. As best I can tell, around 60 percent of the losses were in Texas (pdf). So that’s around $75 billion in aid — not loans, outright transfer.

Texas GDP was about $300 billion in 1987. So this was equivalent to giving — not lending, not even taking an equity stake — Spain 25 percent of its GDP to bail out its banks.

But of course Manhattan was never asked to bail out Texas; we had a national system of deposit insurance, and the big Lone Star bailout was automatic.

… and the people who brought on the crisis because they were recklessly playing the system to enrich themselves were given slaps on the wrist and told to never be naughty again. Neil Bush, for example, was fined $50,000; Republican supporters chipped in to pay it. Meanwhile, taxpayers shelled out $1.3 billion to clean up Bush’s Silverado mess..

In short, I don’t blame the Greeks for telling the Eurozone to go bleep itself.

20 thoughts on “It’s All Greek

  1. TX’s Cruz-ader – among many other sociopathic/psychopathic GOP politicians – is like Merkel.
    When NY, NJ, and CT were devastated by Hurricane Sandy, Cruz-ader – among many other Republican Congressmen and Senators – didn’t want to approve sending Federal aid money.

    Yet when TX has a hurricane or some other natural disaster – or a manmade one like some completely unregulated factory or plant exploding, killing people – they’re the first in line, screaming, “Give me! Give me!! GIVE ME!!!”

    European Banksters need to look at the big picture:
    Lend, and heal.

    And they also need to remember that despite ALL of the horrendous damage that Nazi occupation did to Greece and its people, the Greeks FORGAVE Germany the debt that was owed after WWII!!!
    How about you MFer’s pay that back with interest, and recalibrate everything!

    What a bunch of greedy…
    I won’t say what, lest I get banned.
    But, you get the idea!!!

    JAYZOOS KEEEEEEEEEEEEEERIST looking down from the cross, and saying, “Don’t forgive them, Father!
    Destroy them, and start the f*ck all over again!!!!!!!!!!!!!!!!”

  2. Greece will always be special for me, because we spent our honeymoon there and returned a few years later to center on Crete. I have only spent six weeks there total, but, we had the good fortune to have the hospitality and guidance of a very old friend who is a professor of philosophy at the University of Athens. He and his wife were doing very well back then before they entered the Eurozone. As chance would have it we just got some news about them. It seems that they haven’t been paid in sixteen months. But, they were far from the most vulnerable people.

    I remember him observing way back in the ’90s, that Greece’s main economic problem was a lack of a competitive manufacturing sector. So, I still have the seed in my mind that Greece would be a prime test ground for the sort of “enterprise zones” that are so highly touted. The Greek people are a very industrious lot. Any small town, mainland or island is always bustling with people making something or making deals. There is always a flurry of activity and spirit. It’s pretty easy to fall in love with them.

    Curiously, we visited Athens on both trips. The first time in ’92, there was a little vegetable stand up the street from our lodging (Marble House on Zini street). We walked up to it at night and the entire stand was open, with all the stock still on the shelves and a few tarps thrown over them to protect them from the elements. They weren’t worried about someone clearing them out over night. Our second trip was after troubles in the Balkans sent waves of refugees into Greece. The same vegetable stand had a steel cage constructed around it.

    The Greeks were open people, it’s true that they treat strangers better than their neighbors, but their hospitality had been strained. It was more a question of resources than will.

    Their recent stand for democracy makes perfect sense. I remember being in a shop and asking the shopkeeper if he was going to be open the next day. “Sir, I remind you where you are. You are in Greece, the birthplace of democracy. I will open tomorrow if I choose to be.” Actually, he was only trying to goad me into buying something on the spot rather then waiting, but, it was an impressive act. They have a lot of pride in making their own decisions.

    The memories are flooding back, maybe from a place that will never be again. I never felt more alive than when we left Santorini at midnight in gale force winds on one of those heavy gauge sheet metal ferry boats. The gypsy families were raising a ruckus, the waves were crashing on the decks and the boat was pitching wildly nearly all the way to Athens. When I am dying and my life flashes in front of my eyes, that’s going to be right at the top.

    I have to say Maha, a trip to Greece should be on your agenda. Delphi would be a must, and so would Crete and Santorini. — Well fortunately, I can’t go on, I have been informed that It is time to hang out a wash of clothes and cocktail hour approaches.

  3. I was going to link to the Piketty article too. (See Lucilius above.) Those Germans and their sense of cosmic superiority and entitlement! Yikes! And I say this being 3/8th German myself.

    Granted, the only thing I understand less than international economics is professional sports. “My eyes glaze over.”

    Hey! Here’s a thought, speaking of glaze– what if we Americans each chipped in 5 bucks and the Greeks paid us back in baklava? Mmmmm… delicious honey glaze!

    Alternately… half-Greek Tina Fey in a fight with all-meanie Angela Merkel. Tina wins, Greece’s debt is forgiven; Angela wins, Netflix cancels “The Unbreakable Kimmy Schmidt.” I’d feel confident for Tina, as long as handbags are not allowed as weapons.

    OK, out of ideas now, thank heaven.

  4. Looking at this from the 100k foot macro level, it seems the only thing stopping a solution that doesn’t destroy life in Greece for a generation is greed and the “need” to maintain an established order that requires pain along with penance for help. Given the history of these situations going back to WWI there is precedence for forgiving this debt. And Germany if any should be leading the call.

  5. The one thing I don’t understnd is why Greece can’t tell Germany to deduct what Greece owes from what Germany still owes Greece for their help after WWII.

  6. I believe that the greek leader has already played the WWII card, and I think germany just pretended not to hear.

  7. I am reminded of a tale about Plato and Diogenes. One day (so goes the legend) Plato and his friends were visiting Syracuse. They were walking together along a riverbank, towards the tyrant’s palace to have dinner; then who do they see but Diogenes, standing in the river. The Cynic was up to his knees in the icy water, washing cabbages, for he needed the money.

    Plato said, “Poor Diogenes! If only he knew how to flatter the tyrant, then he wouldn’t have to wash cabbages!”

    Diogenes replied, “Poor Plato! If only he knew how to wash cabbages, then he wouldn’t have to flatter the tyrant!”

    It seems that the Greeks would rather wash cabbages than flatter the tyrant. Bankruptcy in drachmas is better than debt-enslavement in euros.

  8. In order to be part of the Euro, one’s debt cannot be over 3% of the economy. It seems Greece hired Goldman Saks to do some clever accounting to make that happen. As I understand it, Goldman bought that debt, called it something else, and Voila! Greece now fit the criteria. Only problem, there was still debt under another name out there.

    It seems to me that the idea of Greece calling out Germany’s debt from WW2 should be paid before any deal is to be struck. But Germany seems to believe it isn’t them that owes the money, but the Nazis. At least, that’s how I understand it to be.

    Regardless, Greece would be best to reinstate the drachma, devalue it, then watch tourism double, triple or more to help get its economy rolling again. It would mean more pain for the Greeks, but at least it would be an uphill climb rather than a continuation of the downward spiral.

  9. Sorry to have gone on so long about personal experiences, Greece evokes some strong emotions and memories.

    The Greek tax problem is very real and sooner or later they will have to reckon with that.

    About twenty years ago, there was an article in the NYT. Greece was willing to give away homesteads on Greek islands in exchange for improvement. As beautiful as the islands are, they recall Jerad Diamond’s “Collapse.” They’ve lost so much of their topsoil, probably due to the ravages of goat and sheep farming. The ferry boats carry trucks filled with produce and other supplies, including water. Few, if any of the islands could survive without the supply line. There are other problems like rainfall patterns, etc, but the main problem is deforestation and loss of topsoil.

    They also have resources, the soil they do have is volcanic, very good for grapes, and they have the wind energy that made Mykonos famous for its windmills. I hope that’s being exploited more these days to replace the diesel powered energy that fouled the air back in the ’90s.

    So, the article in the NYT sparked some interest and we had some long conversations with some friends, an environmental scientist and a botanist, basically, about “terraforming.” There was a “plan” and contact information in the NYT. So, we were giving the idea some serious consideration. After a few weeks of calls and waiting for responses, a man at the embassy told us that the program had been dropped. It had seemed pretty shaky from the beginning, since there was literally one woman handling the whole program and she never seemed to be there. It was just a pipe dream and big false start on both sides.

    If they leave the Eurozone, they will see an increase in tourism. It was always a bargain. If any of you Floridians have ever been to Tarpon Springs, you’ll see the same cheesy tourists items for sale as you would in Greece. The food will be consistently better. But, that’s a hardscrabble road, and they deserve more. Maybe we have the technology to address some of the basic dependencies and deficiencies that the Greeks have lived with for decades, maybe not. But, it will take a long term commitment on both sides, and that doesn’t seem in the cards just yet.

    One thing for sure, plunging a generation of Greeks into economic crisis as punishment for failing to conform to the economic model favored by the masters of the universe is gratuitously mean spirited and fruitless.

    I’ve done it again, haven’t I?

    • “One thing for sure, plunging a generation of Greeks into economic crisis as punishment for failing to conform to the economic model favored by the masters of the universe is gratuitously mean spirited and fruitless.”

      Exactly. Sums it all up for me.

  10. Well said, Goatherd!

    I’ve never made it to Greece and likely never will, so your memories of visits there are priceless. Thank you for sharing them.

  11. As Conan O’Brien said: “Poor Greeks they’ve had a rough couple thousand years”!

    The way I understand the situation the Greeks were too far in dept when the joined the EU, so of course some banksters said oh don’t worry we’ll assume your dept then when your in the EU everything will be great, well it didn’t quite work that way, I’m sure someone got rich just wasn’t the Greeks!

  12. Thanks, guys, actually, I was feeling like a codger telling long pointless stories about his younger days.

    But, most of us know, that sort of thing just comes along with being “of a certain age.” I appreciate your patience.

  13. I’ve done it again, haven’t I?
    Yes you have!.. Building community? I enjoy your commentary,goatherd.

  14. Here’s my $0.02’s worth, now that the European Banksters don’t seem to want to move from being parent’s perfecting corporal punishment on their undisciplined children:

    An earlier version of European “Austerity” was tried after WWI.
    They loaded almost the entire cost of the war on Germany.

    What happened?
    Well, before Hitler and WWII, there was mass unemployment, uncontrollable inflation, the fall of the Weimar Republic, a world-wide depression, and the rise of Fascism and Nazism.

    After WWII, the Allies – especially America with the Marshall Plan – practiced Keynesian Economics.
    Despite massive debt of its own, the USA helped to rebuild Germany, and all of the European countries – regardless of whether they were Allies or part of the Axis powers.
    We also helped Japan and Asia.

    The result?
    Sure, a “Cold War.”
    But, also 70 years of relative peace in Western Europe and Japan.

    But, the European Banskters prefer to punish Greece with even more Austerity.
    They’re greedy and short-sighted sociopaths and psychopaths.
    I can’t draw any other conclusion outside of that.

    Austerity must be a lot of fun!

    As long as you’re the one administering it, and not on the end which is the victim.

  15. Goatherd: And to all other codgers and even curmudgeons: When I worked as a nurse, especially in home care, my favorite patients were the seniors. They always had such wonderful, interesting stories to tell about their lives. Now that I’m a senior I still appreciate them, maybe even more. This seems to be the time in one’s life when there is a lot of reflecting to be done. There is so much wisdom floating around in those gray heads. (Well, maybe not all of them) One thing that is so great about this blog is that people do get to know one another and become friends. That is what I feel. I’m not on Facebook and really think it’s foolish to “collect” friends like they seem to do. On this blog, it is genuine and I love being a part of it. So, I’m with the others, I love hearing about your experiences.

  16. Well done Cundgulag, I have some right wing friends who seem to have some sort of fixation on corporal punishment. Maybe it’s better to avoid thinking about it at dinner time. But, it’s skeevy to say the least, and it often seems to be a metaphor for their problem solving strategy, if you call dignify that sort of thing as a strategy.

    I have an acquaintance who has a Ph.D. in German history (Wha?) He got his doctorate at a German university, which is remarkable since German was a second language for him. We met at a holiday celebration. He was described as someone “kind of weird, whom no one really got along with.” We broke a bottle of sweet French brandy and got on famously. He was explaining a few things from a perspective that I had not encountered before. (This is hardly surprising, since my German history is abysmal.) But, one of the interesting items was that Germany had engineered historically severe inflation as a strategy to make paying off the reparations that resulted from the Treaty of Versailles. It makes perfect sense, but it also makes the current German position against Greece even more hypocritical.

    The genius and necessity of the Marshall Plan was that we had “won the war,” but laid waste to our major market. (It’s hard to recall the salad days of our manufacturing sector.) So, there was a sound bottom line to rebuilding Europe, because we were rebuilding the demand for our goods and services. Looking backward, it seems that there was little choice, but only because it was so successful and one of the cleverest gambits in history. It also made moral sense.

    Well, I just want to say, I appreciate the community here. You guys are all right.

    In another ten years, here I’ll be:

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