From the Publisher Arnold G. York


What’s the big deal with the Greeks?

Like many of you, I can understand and appreciate the impact of Greece on Western civilization. The literature, the architecture, the very foundations of democracy flowed from Greece. What I can’t understand is why the possibility of Greece defaulting on its debt is so earth-shattering that the entire economic system of the world will likely come crashing down.

Let’s start out with some basic facts and then try and plug those facts into this crisis to see if it makes any sense.

Greece is a very small country and part of the European Union. Like almost every country in the European Union, Greece uses the Euro, which took the place of all of the individual countries’ currencies. The Euro was going to be the path to Euro-zone prosperity, and with any respects it was, until the path got rocky the last few years.

To give you some sense of proportion, Greece has a population of 10,700,000 people, which is No. 76 in the world, according to the International Monetary Fund. It has a few thousand people less than Belgium and a few thousand more than Portugal. All three countries are in the European Union. If we were to compare Greece to the states in the United States, its population is somewhere midway between the population of Ohio, No. 7, and Michigan, No. 8. Now if Belgium, or Michigan, were to go bankrupt, the consequences would be serious. However, I doubt if the financial world, either here or abroad, would collapse. So the population numbers don’t tell us a heck of a lot.

Next, I tried looking into the Gross Domestic Product (GDP), which is kind of the gross revenue of the country. Greece, with its 10.7 million people, has a GDP of $305 billion. Belgium, with about the same population, has a GDP of $457 billion. And on our side of the Atlantic, Ohio, with a population of 11.5 million, has a GDP of $483 billion. So we’ve probably hit on part of the problem. The Greeks are not as efficient as countries like Belgium or states like Ohio, which is probably one of the reasons it’s having so much difficulty in paying its debts. It simply doesn’t make enough money to cover what it’s borrowed, unless it just cuts down enormously on what it spends on its people and uses the money to pay off the debt. The problem is, when you make those kinds of cuts you end up with riots in the streets as has happened in Greece, or, as in the U.S., groups like the Tea Party take up arms and threaten to lynch anyone or everyone from the nearest lamppost.

That brings up the $64,000 question. If there is nothing secret about these numbers (anyone can look them up on the Internet), and those numbers are available to all of the world’s bankers, many of whom are very bright people, why were they willing to lend money to countries that obviously are not going to be able to pay it back. The answer is simple. They all got rich making those loans and they didn’t figure to be around when time came for those borrowers to pay it back.

That being the case, why should the rest of us, whether it is the European Union or the U.S. government, be bailing anyone out now?

Let me preface this. In 2008 when we had the bailout, we truly were looking at the possibility of a total market collapse and perhaps a depression. The bailout was a sensible move and the proof of it is that despite the posturing, both Democrats and Republicans agreed to it. Since then, most of the money has been paid back. But now it’s three years later and this wonderful free market that everyone holds up as a model hasn’t been able to work out all this indebtedness, whether here or abroad. Maybe it’s time to let failure happen. The fear of failure, at least large-scale failure, puts in mind the old Domino effect. If Greece goes, then it’s Portugal, then Spain, then Italy and then the entire ball of wax. Oh my god, the sky is falling! Quick, sell!

The problem I have with this theory is that I can remember the old Domino theory. We were in Vietnam and we couldn’t leave because, if we did and South Vietnam fell, then all of Southeast Asia would fall, and the entire Asian continent would be communist. Well Vietnam did fall and today there are Wal-Marts in China. I’m not sure what that proves, but it’s made me very skeptical of theories.

To sum it all up, in the globalized world we live in many of us, and that includes countries, operate on data that we learned in schools decades ago. It may no longer be applicable. In fact, it may be dead wrong. I have little expertise in economics, but I’ve been reading and asking around a great deal, and what I hear sounds like baloney, in fact old baloney.

Some of you out there are in the money or banking business.

Let’s hear from some of you.