Thursday, July 02, 2015

Greece, What Happens Next?

Greece over the last 50 years has implemented a retirement and government bureaucracy that has become a very large portion of their tax expenditures. Notice one thing, retirement and government expenses contribute nothing to the economy. They are like leaches that live on a host. Like most governments, the bills got bigger and bigger and the bureaucrats figured out a way to pass the financing of these contracts of debt into the future. Why does that mythical country, Obamaland come to mind, for some reason?

Greece is about to have a referendum on whether to accept the terms of the EU or to refuse them. It doesn’t really matter. All transfer payments that deal with support for non-working citizens will be eliminated or reduced by about 70 percent. The Army will get paid either way. If the vote is yes, I expect a rebellion with the military taking control. If the vote is no, expect everyone on a pension or government subsidy to be out of luck, no more funds. Savings in the banks will go poof.

So next Sunday with Greece, it really doesn’t matter how the vote goes. If you are retired, you will pay for passing this mess onto the youth of your country. Their banking system is in ruins. Their educated youth has fled to other countries.

The preservation of the Euro is a Non-Sequitur for Greece. The old “farts” need to realize that they can’t tax the youth of their country for their future retirement. They can try, but I think it will fail this time. Let's not single them out as the only guilty country; it was the world bankers that "Cleaned their plow." The PIIGS as a group will fall together, one at a time.

The vote on Sunday revolves around; "Do you want to keep your government pension" or "Do you want to default on the EU loans?" Greece is in a depression. Chancellor Merkel of Germany is demanding repayment from Greece --- funny, how in 1933, "someone" in Germany repudiated the war reparations that had impoverished their country. To say that solution worked OK for them is a gross understatement of fact; it eventually led to a world war.

Moral: Don't expect a politician to get you out of a problem they helped you get into.


Paul Taylor said...

good clarity what we have here is a worldwide credit expansion which has been extended to a point where it may get out of control. Debts can always be recast. But at this point at great cost

dearieme said...

The EU, and the euro in particular, is a custom-made amplifier of an economy's problems. So all the well-rehearsed defects of Greek culture and government are made a hundred times worse by Brussels and Frankfurt.

Meantime the Germans moralise about defaulting on debt, which of course Germany did on a huge scale after two world wars, and about not sticking by the eurozone rules ... which Germany was the first country to break.

What a bloody mess.

dearieme said...

Come to think of it Mrs Merkel herself did well from a third financial rescue - of the old East Germany.

Jim in San Marcos said...

Hi dearieme

Your memory of history is better than most.

A thing not considered by many, is that a lot of this debt is unloaded to speculators that buy it at 5 cents on the dollar and hold it, demanding full payment.

Wealth is concentrated with the elderly, and they just don't have the time to wait and get paid, so they sell at a discount to survive -- Or die holding onto it, only to have the relatives sell it for what they can get.

If Greece drags its feet much longer in this mess, the French may beat them by leaving the Euro first.

The odd thing about the news reports, this is the second week that News sources have stated that Greece has been in a depression for 5 years. They waited until now to admit it? The EU is beginning to resemble a cesspool covered with rose petals.

dearieme said...

have a look at the cartoon while it is still the current one.

Jim in San Marcos said...

Hi dearieme

Thank you for the link. Cute!

dearieme said...

I suspect that what happened next was that the Greek PM was told to back down or his wife would die in a car crash. Something of the sort. Extraordinary.

dearieme said...

From the Telegraph:

This is not really different from the International Committee for Greek Debt Management in 1898 imposed on Greece after the country went bankrupt following a disastrous Balkan war.
A six-power league of bondholders, led by British bankers, impounded customs duties in the Port of Piraeus, and seized revenues from stamp duty, tobacco, salt, kerosene, all the way down to playing cards. But at least there was no humbug about solidarity and helping Greece on that occasion.