The can is being kicked more frequently these days but only moves by inches. On a British television financial show there was a German commentator telling us that the all the Greeks had to do was do as they were told by the IMF and the ECB and the EU, and all would be well. The British commentator was trying to explain that it really wasn’t that simple. Then on another blog site, another individual made the point is not economic (I think he really means financial) but political. Well, yes, finance is or can be a political football to kick around and see where it bounces. Economics not so much. Why should there be much difference? Ah, that is the question most economists can’t answer. Economics is not a science. There is no law of motion where we put in the numbers in the appropriate spots in the equation and the answer comes out all nice and neat. The moral philosopher, Adam Smith referred to Political Economy. Back during the enlightenment, the philosophers and great thinkers and not so great thinkers of the day believed that the study of politics, that is, political interactions and governments and so forth, was a science and if one could just discover the right formulas the world would be run correctly and there would be no more strife, warfare, or other such problems. Even today one can get a degree in political science and then a job with some government because one is assumed to know how to run local, state, or national governments. I mean, it’s all fill in the blank, right?
Then why is Greece a political problem and not an economic or financial one? Well, you see, the people want an end to austerity and they want their supersized pensions back and they want their free lunches returned, and the list is endless. But those countries who first lent Greece money and then found the financial solution of bailing the Greeks out with loans they really never could pay unless the entire nation became the ideal debt slave, are afraid they won’t get their money. Let me get this straight. You lend a country money that you know they can’t possibly repay and not you want your pound of flesh (oops, wrong country, that’s Italy as written by an Englishman). Now the country, meaning those who are getting the free lunch and those who are serving it up, don’t want to part with that pound of flesh nor any of the blood that is sure to result from the cutting that cube of flesh. Ah, the cast the EU creditor countries and Shylocks, well that is special. I’m sure we are allowed some literary license. And then there was the big restructure back in 2012, which all that did was to repackage the loans into English Bonds, meaning that they had to be repaid in Euros and not Greek Drachmas. But we loaned you Greeks billions of euros? Except almost all of it went the the creditor banks and only a few cents went to the Greek government or people. Are you starting to smell a rat?
Ok, so the Greeks repaid the IMF except they didn’t. They used their drawing rights on the IMF basket of currencies, to which they never paid into that fund but had an allotment (go figure the logic) to make about 700 of the 750 million euros they owed the IMF. But that is really a credit and now has become a 30 day loan. The the IMF has now paid the Greek debt with the credit that the Greeks had but never had any of their money on hand in the bank. That’s not politics or economics or finance, that’s stupidity. I bet I could get some brothers out of the hood to run an international bank better than that. In the meantime the Greek people don’t want to be debt slaves, they want to stay in the euro zone, and they want an end to austerity. They also don’t want to pay their taxes, they don’t want to take pension cuts nor work longer before they are eligible for their pensions. The EU and the ECB want pension cuts, an increase in age eligibility, they want taxes paid, and they want services reduced so Greece can pay the EU banks and the ECB. Do you really believe someone will find a middle way? There really isn’t any more time, there isn’t any more money to pay the loans, and there is no wiggle room to even pretend and extend. It’s no longer a political problem, it is a mathematical one. No time, no money, equals default in any language.
Then we have those commenting on the disturbances in Baltimore that the problem is racism and lack of jobs and white privilege, and gods knows what. Okay, so people who don’t have jobs can only buy stuff it the government hands them money. And the government should get the money from taxes but the government spends way too much money so it has to borrow against future tax revenues, such as Chicago has been doing for decades and is about to run out of time and money. Obama’s choice of cities for his presidential library is symbolic of his administration, bankrupt and still pretending. Well, China is the mighty power house that will lead the world to wealth except it too is almost tapped out at the loan window. Well, certainly Russia will drive the world’s economy. Don’t count on it. got to find people who can afford to buy. But they will sell lots of oil and gas to western europe. Western Europe is about to go down the financial rabbit hole because it is so over extended and literally the EU countries who have borrowed from each other can’t repay each other because they are mostly broke. But Germany has a really strong economy. Yeah, well that was built of selling stuff on credit to everyone else while not buying everyone else’s stuff, thus creating a creditor debtor relationship with Europe and the rest of the world. Life’s a bitch when you can collect the money owed you for the stuff you made and sold on credit. It’s just like borrowing too much. You become just as poor as your creditor. There is no more fudge factor, everyone is all tapped out. Deficit spending in government, in business, and in your personal life means that your future is in hock and you may not have the where-with-all to redeem it.