We Hopped on a Plane to Athens …
ATHENS, Greece – “It’s finished. The euro finished. Greece finished.”
With this apocalyptic shorthand, our taxi driver described the situation in Athens. The banks here have been closed for two weeks. To try to prop up the crumbling banking system, the government has banned Greek citizens – but not tourists – from withdrawing more than €60 ($67) a day from the ATMs.
The breaking news this morning is that the government and its creditors have cobbled together a deal to keep Greece in the euro zone.
Prime minister Alexis Tsipras has caved in to creditors’ demands on economic reforms. Trouble is his countrymen voted to reject almost the same deal in last weekend’s referendum.
And Tsipras still has to push the reforms through the Greek parliament on Wednesday. Otherwise all bets are off…
Clinging on to the euro train
Cartoon by Ingram Pinn
Like a storm chaser, on Saturday we hopped on a plane from London to Athens to study the tornado moving through downtown Athens. It would be fun to see so many vanities and pretensions fly high, we thought. At the very least, it would be instructive – useful training for the storms coming elsewhere.
But nothing happened: No twister. No train wreck. No panic in the streets. From our explorations in the historical Pláka neighborhood – on the slopes of the Acropolis – we found only tourists. And they seem to have no idea that there is a financial crisis going on.
Last night, we went over to the Syntagma Square – the city’s central square – to look for mayhem and chaos. All we found was a squad of police dozing in an armored bus. ATMs were working; no lines in front of them. Restaurants were about half full.
Nor did we see signs of extravagant spending or reckless investment. In Athens there is no equivalent of the Arc de Triomphe. No Eiffel Tour. No Louvre. No fancy apartments. No gleaming offices. At least, none that we saw…
Its main achievements were completed more than 2,000 years ago. You wonder how Ancient Greeks did it. The Parthenon – a temple on the Acropolis dedicated to the goddess Athena – required huge investment and meticulous organization.
The Parthenon: a building from better-organized days …
Photo credit: Steve Swayne
It is breathtaking… an architectural masterpiece. There is no sign of such capability here today. Instead, Athens is a washed-out, slightly trashy Mediterranean burg.
“Hey, can I help you?”
A seedy-looking man approached. We didn’t know what he was offering, but we didn’t want any.
“No… thanks.”
We turned to walk in the other direction. He followed.
“Hey… what are you looking for? I can help you find it.”
“Well, I’m looking for signs of financial breakdown.”
“Oh, I can help you find drugs… women… gambling. But I don’t know anything about financial breakdowns.”
We gave the man another “thank you” and went off.
Makers and Takers
As you know, Greece is just another front in the Great Zombie War. The real issue here is the same as all the other fronts: how to keep the credit flowing. Honest people make. Zombies take.
They take what they can from earnings and savings. But it is not enough. It is credit that keeps them alive. Zombie businesses borrow more and more to keep the lights on. They pay out big bonuses, and their stock goes up!
Cheap credit keeps the feds in business, too. Practically every government in the world is operating in the red. Take away the red, and zombie programs would have to be curtailed.
Cheap credit funds the layabouts, the chiselers, the lobbyists and lawyers, foolish wars and foolish investments, and all the many millions of people who live at the expense of others. Want to know if you’re a zombie?
Sometimes, looking into a mirror will do …
Image via memecenter.com
In theory, the test is simple: If no one were forced to support you, would you still have the same income? If this answer is no, you have been zombified. But in practice, it can be hard to tell a zombie from an honest living, breathing human being.
Often they don’t even know themselves. Some honest professions, for example, have been almost entirely zombified. So have entire countries. Greece, for example, has been able to live beyond its means – on credit provided by Northern Europeans.
Many of its people – especially those who work for the government – have gotten used to earning more than they’re worth. There were few zombies in the world of Pericles, Aristotle, and Euclid. The economy could not support many parasites. Now, the world is full of them.
Sophocles invents the referendum to spice up his tragedies
Cartoon by Tom Toro
The above article originally appeared at the Diary of a Rogue Economist, written for Bonner & Partners. Bill Bonner founded Agora, Inc in 1978. It has since grown into one of the largest independent newsletter publishing companies in the world. He has also written three New York Times bestselling books, Financial Reckoning Day, Empire of Debt and Mobs, Messiahs and Markets.
So what happens if parliament says “oxi” to the “deal”? Any guesses?
Military Coup, perhaps…
Greece is overwhelmed by high unemployment, endemic corruption, and about-to-be severe disillusionment with the political establishment…social unrest could easily mount.
If voters refuse to abide by Tsipra’s latest agreement (“Hello, Neville Chamberlin…”), the military won’t site idly by if they believe the result ultimately ends with Greece’s exit from the EU.
Point being, no country is allowed to belong to the EU with a military dictatorship in place, so if Greece gives the appearance of heading effo-bazoo in the streets, the military won’t see any downside to seizing control to maintain order.
Hopefully not, but it would seem a 50-50% proposition if a voter revolt gets ugly.
Go back to the drachma. Don’t aspire beyond your current capabilities, Greece. Hopefully it gets super cheap. It’ll be the Mazatlan of Europe, but with snow skiing.
“Prime minister Alexis Tsipras has caved in to creditors’ demands on economic reforms.”
——– from the article
No, he did not “cave in”. He was FORCED by the Troika.
Also, I wouldn’t be all that surprised if sometime in the near future Mr. Tsipras suffers a “mysterious death”.
It’s obvious that the conditions required by Germany and Finland are so stringent (for the lazy / socialist Greeks) that Germany is hoping they won’t be accepted, and thus Greece will exit the Euro on it’s own.
One thing I don’t get is that there are trillions and trillions of debt already on this planet. What’s the big deal about Greece and a measly $100 billion?
I just bought a jar of Kalamata Olives – almost $8. If Greece goes to the drachma I bet you’ll be able to buy it for $2.
Dutchman- You need to shop at Trader Joe’s, those olives are a fraction of what you paid.
** The beginning of the article stated the ATM’s are working for the tourists which leads me to believe that a tourists are retrieving cash from said machines. If that were any large shitty in Merika blacks would beat down that tourist in around 5.5 seconds and the cash from the ATM would be just a memory.
The riots have started. If the Greek legislature accepts the “bailout,” we may see a full blown civil war being born by the end of the week.
http://www.theguardian.com/business/live/2015/jul/15/greek-crisis-mps-bailout-imf-debt-relief-alexis-tsipras-live
AP is reporting the Greek legislature accepted the “deal,” and passed the mandated austerity bill.
http://hosted.ap.org/dynamic/stories/E/EU_GREECE_BAILOUT_THE_LATEST?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2015-07-15-19-04-27
We’ll need some popcorn, I suspect.
I clipped a headline from a mainstream online financial news network on June 29, that read,
“Why Greek Financial Crisis Won’t Hurt US Economy.” I did this because in 2007 the talking heads were babbling away about “containment” in the subprime industry, when anyone with any inkling of how we’d arrived at where we were, knew and had known for several years it “absolutely was not contained” and would lead to a major economic crisis, which it did. Why? Because the The Powers That Be refused or were simply so far removed from the reality of everyday life that they were incapable of recognizing that they’d tapped out main street borrowers. They’d quite literally used up the carrying-capacity of middle class America by massively indebting them and simultaneously vaporizing the very equity needed for them to ever be able to borrow more. It wasn’t rocket science.
This exact same process has been repeated in Europe, only it doesn’t involve homeowners, it involves entire nations and their massive debt loads. Eliminating current-account deficits within the euro area by fiscal bailouts of all deficit-member countries has been estimated to require the surplus countries (the German Bloc) to make payments equivalent to 16% of their total government revenues (7% of their GDP). The Germans are dead-set against this.
There’s no way to make deficit-members competitive under a single currency and these same members are going deeper in debt every year. The concept of an EU with a single currency was rigged from the outset to the benefit of Germany. As the dominant mercantilist (net-exporting) economy on the continent they want to keep it this way, and who wouldn’t?
But it won’t matter. Sooner or later the math will catch up, as it always does, and just as with Greece there will be cascading member-nation defaults. The ECB can’t backstop all of it and it won’t have to – once a Spain or Italy have serious problems, sheer size alone means “game over.”
Meanwhile as to whether the Greek situation ultimately affects the US economy? Personally, I’m guessing it’ll be either derivatives or foreign exchange mechanisms that precipitate a worldwide crisis. One that in the short run may benefit the US dollar as the world comes piling in seeking shelter, but in the end it’ll still be the same result. Default.