Drunk on Debt: A Greek Tragedy (and lesson for America)

If you pay attention to anything outside of TMZ or other fluff “news” channels, you’ve most likely heard that Greece is in the midst of another financial crisis, and one that many of us saw coming as soon as the anti-bailout Syriza party began running on a platform of cancelling the austerity measures put in place to save Greece.

If you’re not up to speed on what’s going on, I’ll use this article as a quick summary to catch you up on how this happened in the first place, what’s going on now, and why this may be a terrifying glimpse into the future for the US economy.

While the Greek financial crisis (or Greek Depression) came to light in 2010, it has been on the Greek horizon for a very long time. Greece operated with budget surpluses from 1960-1973, but has run at a budget deficit ever since (sound familiar?). Greece was the fastest growing economy in the Eurozone from 2000-2007 at a rate of 4.2%, but did so by bringing on an alarming amount of debt (operating at a deficit greater than 3% of GDP per year…sound familiar?).

Greece has long been a country with governmental and bureaucratic positions being highly coveted, not because of a sense of patriotism but rather because governmental jobs paid the highest salaries with the most vacation time in the Greek economy (sound familiar?). This inflated government was a large part of the crisis, and was one of the main points required to change for the IMF and Eurozone to provide a bailout to Greece.

So we know that Greece was operating at high deficit levels for a long time, but what was the straw that broke the camel’s back?

I’m not sure who you idolize, but in my book Mark Cuban is one of my favorite human beings on the planet for his insight, drive and determination. I recently saw an interview in which he was asked “what piece of advice would you give a younger version of yourself if you had the chance?” The Cubes’ answer was to stay away from credit cards, and while a governmental deficit is different than your personal credit card, it’s much the same on the macro level.

And with the evolution of credit and debt, most of the world’s currencies have gone away from a currency backed by anything tangible (we used to be on the gold standard) and instead now utilize a fiat currency. The important difference between a gold standard and fiat currency here is that fiat is based solely on the full faith and credit of the nation printing that currency (there is a difference between “money” and “currency,” but that’s for a different article).

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So when word leaked in 2009 that Greece had extremely high debt levels, many structural weaknesses within its economy and may have issues repaying its debt obligations, the credit agencies began to question the very faith and credit that gave Greece any value or ability to take on more debt.

The Greek government debt was downgraded below junk status (remember the downgrading fiasco here in the US a few years ago?), which scared away almost all private investors who had been keeping the country afloat by purchasing their debt (in the form of government bonds).

This put the already weak Greek economy into a freefall, causing the Eurozone to form the Troika (a conglomeration of the European Central Bank, Eurozone countries (most notably Germany) and the International Monetary Fund) to put together a bailout package.

The Troika outlined three main requirements for Greece to receive their bailout:

1. Implementation of austerity measures, to restore the fiscal balance.
2. Privatization of government assets worth €50bn by the end of 2015, to keep the debt pile sustainable.
3. Implementation of outlined structural reforms, to improve competitiveness and growth prospects.

It’s interesting to note that every one of these requirements essentially calls for the reduction of government and a move to private enterprise.

You see, bureaucrats will tell you that government is the panacea of all and will save you, but that is only to save their own neck and job security. In the US the media falls lock step in place with whatever a Leftist administration tells them to say (much like Greece), and leaves our people grossly misinformed.

But the people with money, the investors, the lifeblood of capitalism and credit, don’t pay attention to the fluff or misinforming media; they know the truth, and don’t buy into the lies.

They understand that government is the most inefficient organization ever created by man, which is why the Left is so fervently anti-business.

Greece agreed to the measures outlined above, and the people used to an entitlement system rioted and were understandably angry in realizing their government had done as much as it could to wreck their country. Things seemed to settle down for a bit in the last few years, with the country working its way back out of the hole.

And then last year it came time for elections (sound familiar?). The people rejected the government’s candidate for president (they use a parliamentary voting system), and so another vote was held in January of this year (2015).

The Syriza party ran on a platform of anti-bailout and anti-austerity measures, and of course won on promises to bring the Greek people back to the land of milk and honey without having to work for it or pay off their debts.

This scared the Troika and world’s investors, as the first action of the Syriza party in office was to claim the prior bailout agreements were canceled, asking for new rounds of negotiations.

And now, it seems, Greece is on the precipice once again. The money people want nothing to do with a people wanting to vote themselves into prosperity, or a government deceitful enough to promise it to them (sound familiar?).

At the current time, there are talks going on in very small circles in closed rooms as well as public forums about whether to kick Greece completely out of the Eurozone, and what consequences that would have for the system in general.

But for us here in the United States, it paints a very bleak picture of what could come.

We like to sit in our ivory tower and think that because we are American we are immune from the ills that would topple other countries, but the path we are currently on is very much the same as the path Greece was on; we just have more people willing to continue extending us debt, for now.

An election season is brewing in our country again, and it is almost time to make the decision to continue “kicking the debt can down the road” as Greece chose to, or to grow up and realize the peril our country has been put in.

Mark Cuban isn’t a politician, but rather a very wise money man who has done extremely well in his career. I would advise more of you to listen to him rather than the talking heads on Fox or MSNBC for wise advice. If a man that has made as much of an empire as he has says staying away from credit is the most important advice he could give, maybe we should all listen.

Robert Patrick Lewis was a Green Beret OIF/OEF combat veteran with 10th SFG(A), is an award winning author of “The Pact” and “Love Me When I’m Gone: the true story of life, love and loss for a Green Beret in post-9/11 war” and the host of “The Green Beret MBA” and “Center Mass with Rob and Silent J” programs on Vets on Media.

 

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