George Rebane
[This is the transcript of my regular KVMR commentary broadcast on 4 Novemeber 2011.]
Greece is the latest socialist country to illustrate the results of not living within its means. There is a long line of other European countries right behind Greece, ready to follow it off the cliff. And then there are we, having followed the same course, planning on more of the same, and sitting on the other side of a wide ocean, firm in the belief that none of that will reach across and hurt us.
In Europe politicians like Merkel and Sarkozy have cobbled together a bailout of cash to Greece that will postpone collapse until they can retire from office with minimally bruised legacies. Then that cradle of western civilization and democracy can crash and burn for all they care. And you can bet that it will, if not before.
In modern times Greece has had a muddy history that became more muddled after the end of WW2. When Germany was defeated, Greece entered into a decades’ long conflict between its communist and fascist factions. Ultimately, the former communists won and put the country on a socialist path of government entitlements and corruption that drove out its capitalist wealth producers and created one of the world’s worst business environments. Taxes were then increased, driving much of the economy underground, and state revenues never came close to paying for the goodies demanded by the unions and dispensed to buy votes.
To make ends meet, Greece started borrowing from its eurozone neighbors. Countering their own agreements, European banks started lending the amounts required to build and maintain Greece’s Ponzi economy. Europe’s banks were lending to Greek banks, which then bought government bonds guaranteed by the Greek government. Except that someone, actually a lot of people, forgot that Greece could not work its way out from under its growing mountain of debt. And it could not print any of the faith-based money needed to even pay interest on that debt. Its currency was the euro, and only the European Central Bank in Frankfurt could print that stuff. So what to do?
Well, they raised taxes and cut government spending. Doing that convinced big guys like Germany and France to continue lending, but after a while the pain in Greece became so bad that, led by unions, people took to the streets and gave us all those flaming and smoky videos on the evening news. This was definitely not kicking the can down the road, so Germany and France got worried that Greece might default on its loans, and prematurely pull out of the eurozone, thereby making the current spate of politicians look bad.
Instead, they settled for a halfway solution, letting Greece stiff its lenders at 50%, and guaranteed more loans from northern European banks to the same guys who sometimes wear tutus and powder puffs on their pumps when they’re not rioting for more government entitlements. Angie and Nicky figured that they’d have the muscle to print more euros when it comes time to bail out their domestic banks now papering their restrooms with Greek bonds.
In the meantime Greece’s Papandreou threatened a referendum on the next round of austerity and borrowing. After all, it’s the democratic solution, and we all know where democracy came from. This caused everyone who owns stocks and bonds to run in circles scream and shout. What if those damn Greeks reject the whole bailout deal and say to the world, ‘If a can must be kicked down the road, we’ll do it ourselves, thank you very much. We’re going back to drachmas, which we can print to our hearts desire.’
Of course, Greece will then have trouble borrowing from the corner paycheck cashing outfit. But at least they’ll be able to go down the tubes doing it their way. Now what does all that have to do with the price of beer in Brooklyn?
When Greece chucks the euro and defaults on its European bank loans, more euros will start rolling off the presses in Frankfurt and inflation takes off. And remember, Italy, Spain, Portugal, Ireland, and others are still standing in line for their bailouts, because they also ran out of other people’s money, and had to pile on huge debts. In the meantime our banks have loans to European banks, so their bad debts will also hit our banks, and require another round of bailouts, or we suffer the fallout from their failures.
Bottom line? No matter how much you think you deserve other people’s money, you can’t demand your way out of debt. Those now occupying our streets have yet to learn that lesson.
My name is Rebane, and I also expand on these and other themes in my Union columns, and on georgerebane.com where this transcript appears. These opinions are not necessarily shared by KVMR. Thank you for listening.
rebanesruminations.com 
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