The current Greek tragedy

[kizellParticipant 368]

Greek unemployment is now approaching 30%.  A staggering number when you really think about it.  When this many people go hungry or homeless, history tells us that bad things happen.

Many people like to say that the Greeks are lazy, don’t work enough, and that socialism can never work.  But this is folly.

The problem lies in the failed Euro experiment.   When a country runs trade deficits (as Greece does), it must make up the difference by printing and exporting it’s own currency.   This is why the United States stays afloat.  The power of the USD allows us to run up huge trade deficits.

The problem with Greece is that it cannot print it’s own currency and account for trade deficits.  In order to get money to make up for its trade imbalance,  it must receive loans from foreign countries, each time greatly expanding its national debt and harsh austerity measures.

Basically,  Greece cannot stay in the Eurozone and ever see its trade imbalances cured.  It must leave, and Tspiras folds to the Troika and EU, he (along with parliament assuming they go along with him) will further the pain of the Greek people.

[EdogParticipant 254]

Printing money is actually the heart of the matter. When society began taking paper as currency instead of tangible assets, these scenarios are unavoidable and seem inevitable for the most part.

“[Our] great industrial nation is controlled by its system of credit. Our system of credit is privately concentrated. The growth of the nation, therefore, and all our activities are in the hands of a few men who, even if their action be honest and intended for the public interest, are necessarily concentrated upon the great undertakings in which their own money is involved and who necessarily, by very reason of their own limitations, chill and check and destroy genuine economic freedom.

“We have come to be one of the worst ruled, one of the most completely controlled and dominated, governments in the civilized world–no longer a government by free opinion, no longer a government by conviction and the vote of the majority, but a government by the opinion and the duress of small groups of dominant men.”

These are the words of Woodrow Wilson, the man who was president when the Federal Reserve came into being. Subsequently, we can see the result of going from an industrial nation that was independent and had huge potential for exportation, to a much more dependent society that makes almost nothing and imports almost everything.

I hate the topic of money. I have enough problems paying bills that the subject alone irritates me.

[kizellParticipant 368]

Yes Wilson sold the US out with help from Nelson Aldrich,  and I believe the control of a national currency should be in the hands of government and not private banking criminals.

However I don’t think actually printing money is the problem.   Money is an idea invented by humans, and this idea required trust, no matter whether you print paper, use gold,  or tally sticks.  If the currency holds faith for its users, it can work.  It’s who controls it that is the problem.

The natural limitations of real world assets does not care what form of payment we use.  The finite planet will always dictate when things fall apart to a certain extent.

[RennieParticipant]

Socialism doesn’t work, it’s been tried over and over again and never does. In theory it should, but human nature prevents it.

[FrankOneParticipant 1435]

Government benefits, what used to be called the dole in the US, play a huge role.  Since these are funded by payroll taxes, the dole decreases both supply AND demand for labor in Greece.

Couple that with an oversize public sector (nearly twice the size of the US Chart, overly generous retirement benefits for public sector workers (just like in the good ‘ole USA), and it’s a recipe for disaster.  Government comprises over 50% of GDP in Greece; combined Federal, State, and Local extortion/expenses in the US is about 40% by comparison.  It’s hard to vote out deficit spending and shrink government when a significant percentage of the electorate, is comprised of a parasite class that depends upon private sector employees (their taxes) for its sustenance.Chart And all the public sector employee dependents who get equal votes to taxpaying, private-sector employed citizens such as myself — add it all together and that’s a lot of people in support of supersize government and budget deficits.

I agree with the other posters, this can only happen with borrowing.  That is why in the US we crucially need to balance the budget.

I would disagree on who sold out whom; Alexander Hamilton sold us out when the Central Bank was established, Nixon sold us out to fiat currency…  So there were a lot of sell-outs along the road to serfdom (Hayek allusion intentional).  Obviously, the creation of the Fed was another traitorous part of that sell-out process.

Paper money is fine as long as it’s backed by gold, silver, platinum, real property, etc.  Governments hate that because then they can’t print more to win votes and bribe the private sector.

Should government manipulate interest rates, or should a free market set them?  Is it better to allow the creative destruction of free markets to best utilize resources (i.e. close businesses/economic innovation), or to attempt to dampen the business cycle which reduces innovation and growth?  I would make the case for abolishing the Fed, in addition to fiat currency.

As for ‘criminal bankers’, you have to consider root causes.  The government and its policies have created or exacerbated most boom-bust cycles.  The government backed all those home mortgages — without government backing, would the private sector have taken the risk?  Shouldn’t the first reform have been to ABOLISH Fannie & Freddie after the crash?  Think about that.  I’d rather have private banks issuing their own notes, than a Fed that arbitrarily determines interest rates.

As the Economist noted in its most recent issue, the Greeks lied about their deficits to get into the Eurozone.

Many Greeks are actually employed in small businesses, so even though the public sector is oversized, the fault is not people being lazy in my opinion.

If they had their own currency, they’d default on their debts.  Either way the deficits must be reduced.  Defaulting/exit from the Euro/’Grexit’ is probably better for long term growth, but brutal in the short term — so I suspect bailouts will win out in the short term since it’s less punishing to the citizens in the short term.

[Crazy CanuckMember 4215]

Smart people will buy gold and silver because the Greeks are f~~~ed.  How are they going to trade for goods?  The world’s gold is hidden in Philippines, these bankers did this so we can not create own currency.

"If pussy was a stock it would be plummeting right now because you've flooded the market with it. You're giving it away too easy." - Dave Chapelle

[kizellParticipant 368]

Rennie wrote:

Socialism doesn’t work, it’s been tried over and over again and never does. In theory it should, but human nature prevents it.

First of all, ALL systems are failing.   That is what the planet is telling us.

Secondly,  socialism is not why Greece is falling.  If it had control over its own currency,  then you could make this argument.   Pretty soon, italy, spain, and France will be in the same position as Greece.   Having a single monetary unit for a multitude of countries is at fault here.

 

[kizellParticipant 368]

To Frankone

The part about government causing boom and bust cycles I vehemently disagree with.   The boom bust cycle is caused by nothing other than the expansion and contraction of money.  How does this happen?  Raising and lowering interest rates.  Who does that? The fed.  However,  this process in itself is not evil.  In many cases it is necessary to curb inflation.   What does make it evil however,  it keeping interest rates at zero for 7 years so wall street corporations can pump their stock prices while simultaneously paying poor wages and allowing a massive amount of wealth to be transferred to a few.   This has been conducted by the fed and it’s banking cartel.  The only place where government has gone wrong is being complicit in this wall street takeover.

Furthermore,  the government is only partially to blame for the housing market crash.  It was the bankers who bribed Congress into repealing the glass Stegall act which separated investment banks from commercial banks.  It was bankers who pushed to give out loans to unqualified buyers so the investment banks could continually push for more yield.  It is they, in their greed, that pushed the Global economy to the brink of disaster.

Prior to that, government actually did have decent checks and balances against wall street corruption (I say decent, definitely not good).  Now there is virtually nothing standing in their way.

[FrankOneParticipant 1435]

The largest owners of gold reserves are national governments; even the U.S.’s holdings, only amount to about $1,000 per citizen.

kizell: Government didn’t cause the financial crisis by insuring mortgages?  It certainly increased the magnitude — booms/busts will occur independently of government, but time and time again, government policy has caused a much more severe SWING.  Take, for instance, the easy money Fed policy of the 1920’s — certainly a contributor to the Great Depression.

There are a lot of factors that cause booms and busts beyond the supply of money.  Take disruptive technologies; internet stocks boomed, the general public made investments in said stocks, and then a bust occurred.

Glass Steagel wasn’t repealed in 1999; the sections that prohibited insured banks from being affiliated with investment banks, was repealed.  This is a commonly held myth that this was somehow substantively causative in the crisis — indeed, insured banks were NOT investing in lesser rated instruments, despite all the hoopla about ‘greed’; if they were greedy they would have been buying AA securities not AAA securities — but the issue of ratings entities and the role they played is an interesting aside…

Both before AND after 1999, [insured] banks were permitted to buy and sell bonds and other fixed income assets for their own account.  The problem wasn’t that banks could TRADE MBS’s (mortgage backed securities); the problem was they bought and HELD these securities, which dropped rapidly in value when the bubble burst.

One alternative system, would be one in which government insures NO bank deposits and backs NO mortgages.  Instead, independent private sector firms would compete to offer insurance, just as they do for auto, life, and home insurance.

Whenever the government has gotten into insurance, it’s been a disaster.  Take the National Flood Insurance Program, passed by our Honest Congressmen in 1968.  It basically shifted costs from people who live in flood prone areas, to taxpayers who don’t — encouraging further development in such coastal areas — a poor use of resources.  Contrast that with private sector insurance, where owners would have to pay the true cost of building in flood-prone zones… Which is more economically efficient?  Isn’t that the inevitable outcome for ALL government insurance programs, including the Affordable Care Act?  Is the private sector more efficient and better able to manage risk, or the public sector?

Bear in mind these MBS’s were rated triple A before the crash. While bankers certainly made money in the housing boom, as did realtors, title agents, etc, the ROOT CAUSE of allowing people to buy homes with minimal deposits with mortgages that were too high a percentage of their income, was the government insuring the whole mess eliminating risk to the banks and the investors in said banks.

kizell, one other comment: Inflation is not inevitable and governments have no business trying to ‘control’ it since, indeed, TYPICALLY they CREATED it.  The consumer price index was relatively flat between 1800 and 1925. Plot it.  Of course, it really took off when the most recent traitor, ‘I’m not a crook’, Tricky Dick [Nixon] put the final nail in the gold standard’s coffin in ’71.  Of course, the Uber Traitor, FDR (12-year President for Life and the man who brought us the Social Insecurity Ponzi scheme), is singularly the man most responsible for abandonment of the gold standard in ’33. though the Congress passed the resolution..  So, Crazy Canuck, it wasn’t the bankers that did this to us, WE did it when we elected these jokers.

Of course, this was also a time period in which government extortion was held in check (combined fed, State, Local spending at 10% or less of GDP or economic output).  We’re presently at 40%.  A big deal since it doubles the number of years we must work to retire, accounting for time value of money.

Kizell, I agree completely, a single monetary system for multiple countries doesn’t work… unless there is also political integration — i.e. on spending, deficits, and debts.  I would say all systems are failing that are based upon unsustainable debt, and that would include where I live, the USA.  Credit is much easier than it used to be.  Decades ago, when my Mom bought a house, she had to put 10% down and get a male relative to sign the mortgage or they wouldn’t give it to her as a single woman.  When the mortgage crisis hit, you could get a mortgage even if the payments were going to comprise a huge fraction of your income… Personal and unsecured credit is too easy here and that leads a huge fraction of the population to be indebted…

[sidecarParticipant 35844]

kizell wrote:

The problem lies in the failed Euro experiment.

The problem lies with governments spending more money than they have. Greece has simply run out of other people’s money. When you do that, you have to tighten your belt. Greece thought they could vote their way out of that. They can’t. They might as well have been voting to outlaw gravity.

When a country runs trade deficits (as Greece does), it must make up the difference by printing and exporting it’s own currency.

This is so stupid I don’t even…

It’s not even a matter of trade deficits, though the trade deficit isn’t helping Greece.

kizell wrote:

However I don’t think actually printing money is the problem. Money is an idea invented by humans, and this idea required trust

And when you print money out of nothing you throw that trust straight into the toilet. How can someone write what you’ve just written and not understand that basic principle?

no matter whether you print paper, use gold, or tally sticks.

Wrong. Gold is different. Governments can’t just print more gold out of thin air. And it matters.

Do you know why gold has been the fundamental monetary standard since pretty much the beginning of history?

[Author]

Posts