Talk about an economic coup! When I think about it I realize just what a miracle the tiny little nation of Greece has managed for its citizens over the last half a century.
First of all the country has had free education and free healthcare for all of its citizens for decades. I may be off by a day or two or a country or two, but I believe the Greeks have afforded themselves the longest paid vacations of any country on the planet; and to think they get the spend their vacation on the Mediterranean.
On top of that they have also afforded themselves the smallest income and property tax rates on their continent. As a consequence the Greeks have had the largest growth in personal wealth in the world recently and, per capita, Greek citizens are among the worlds richest.
Now you may ask yourself how the Greeks afforded all these benefits and growth in personal wealth since they manufacture very little, export less than they import, and their only claim to fame is their shipping industry, which they tax at a ridiculously low rate.
Well the answer obvious once you think about it. They borrowed the money.
Talk about brilliant, wow. Greece muscled its way into the top 10 best standards of living on the planet for over half a century on other people's money. Smooth operators! But now what? You can stiff the fiddler but Shylock, the banker, sooner or later will have his pound of flesh.
Now the entire continent is forced to share in Grecian deflation and they are not pleased about it. Greece is like a close friend or relative who invites everybody to dinner at a really classy restaurant and then slips away before paying the tab, or leaving a tip.
On the other hand, the whole continent, with a few exceptions, primarily in the North, has been treating itself to the best that socialism can offer at the bequest of the best that capitalism can offer. Humm. So, have the European peasants finally managed to slip it to their gold plated masters?
Ironically, it is the richest in Europe who'll end up standing good for the largess the entire citizenry has enjoyed. People with little stand to lose little, but the poor have still enjoyed the benefits provided by their most generous leaders over these past decades.
The common, middle-class man will have gotten away with a far greater standard of living than he could've afforded for himself and yet he has no worry about future recourse since it is not possible to place a claim on past healthcare, educational, and other social benefits.
How it will all play out is hard to say. If the truth be told all countries have been borrowing to provide a better standard of living for their citizens. In Europe the whole structure of the euro community trembles at the first sign of a leak in the dyke, AKA the Greece default trap, for good reason. My bet is that the stronger European countries will have to bail out the weaker ones for their own good; it is also their cheapest alternative by far. No country, let alone an entire continent, can afford a deep depression without a revolution.
So just how bad is a Greece default? When you put it into perspective, just one of our companies, Apple, has more cash in the bank than the entire Greek default debt. Apple could buy Greece lock stock and barrel. So a default is not that tragic really. AIG, Lehman Brothers, and a few national banks have had far more impact than the entire Greek debacle ever could. Ireland survived, and so will Greece.
What scares Europeans most is that the Greek debt problem exposes the entire continent to Greek style belt tightening measures since they all have been living beyond their means. No one wants to give up steak for beans.
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