The Greek Crisis

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This might not completely float your boat, but here are two articles that give a little insight into the Greek economic crisis.

The first one, titled "11 Things About the Greek Crisis you Need to Know" tries to explain what is going on from the point of view of a Eurozone Agnostic; in other words, somebody who thought the Eurozone was a bad idea from the start.  Given that, he tries to explain how various interest groups are reacting (and over-reacting) in ways that make sense to them.  This is excellent reading, because we need to know what the assumptions of these people are, before we decide on our own positions.  The Greek Crisis is important to all of us, and the article goes some distance towards explaining why.

The second article "Thomas Piketty Explains the Greek Crisis" I have not read yet, but the comments accompanying it declare that the author has strong feelings about income inequality, which in my book means that he can't be all bad.  OK, I just hopped over and read a summary of it.  It is a report of an interview of Thomas Piketty which was conducted in German, and someone who has translated it into English is still working out how to publish it without violating copyright laws.

The whole business has to do with the mechanics of modern post gold standard economics.  There are a number of things that go up and down with time: bond prices, gold prices, stock market, and exchange rates, not to mention rates of inflation and tax rates.  All these things are given symbols, such as x and y and t, and Economists have equations that say what each of these things should do: go up, go down, etc, depending on the values of the other things.

The relationships are not rigid; they are somewhat fluid.  Economists however go on the assumption that the relationships are a lot more rigid that the rest of us believe, and they have observed how, for example, a poor state such as Kentucky, manages to stay above water, while still owing tons of money to a rich state such as, for example, Massachusetts.

Within a single country, the first article explains, it can all be managed.  The debt is never paid off, but we carry on.  Between countries, there is inflation, and the currency is devalued, and we carry on.  But with a single currency, devaluation is not possible, so the country that is under-performing gets screwed into the ground.  Read the article; it helps you get your head around all this sort of thing, using classical economics.

Many countries will never be able to be the economic powerhouses that the industrial countries are.  This does not mean that agriculture should be completely abandoned and industry must be the only way.  (The industrial nations will be least happy with that eventuality; after all, everyone has to eat.)  Even in the US, agricultural states always have deficits relative to the industrial states, hence the need for government subsidies.

The second article is even more interesting.  Mr. Piketty points out that Germans, who are being hard-assed about the lending, is a country that has never paid its debts.  It was forgiven enormous proportions of its debt by international agreement, and paid of the remaining debt using a variety of methods which are not available to Greece right now, because, I suppose, we cannot tinker with the currency.  (After this, the Brits will never agree to using Euros.)

One of the available solutions is to simply and painlessly encourage Greece to leave the Common Market, and give them their own currency, and give them massive international aid.  Ireland, Portugal, Spain and Greece are also in trouble, and the same prescription might be necessary for them as well.  However, the writer of the first article opines, the other countries of the Eurozone will make an enormous fuss about how Greece will leave the common market, to make an example of Greece to scare Ireland and Spain and Portugal (and Italy) into better fiscal behavior.  But better fiscal behavior is really not possible.  The Common Market (a.k.a the Eurozone) is a lovely idea in the abstract, but in practice, the economies are too unequal to be able to compete in the same league.

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