Greece in freefall

George Rebane

[This is the transcript of my regular KVMR commentary broadcast on 4 Novemeber 2011.]

Greece is the latest socialist country to illustrate the results of not living within its means.  There is a long line of other European countries right behind Greece, ready to follow it off the cliff.  And then there are we, having followed the same course, planning on more of the same, and sitting on the other side of a wide ocean, firm in the belief that none of that will reach across and hurt us.

In Europe politicians like Merkel and Sarkozy have cobbled together a bailout of cash to Greece that will postpone collapse until they can retire from office with minimally bruised legacies.  Then that cradle of western civilization and democracy can crash and burn for all they care.  And you can bet that it will, if not before.

In modern times Greece has had a muddy history that became more muddled after the end of WW2.  When Germany was defeated, Greece entered into a decades’ long conflict between its communist and fascist factions.  Ultimately, the former communists won and put the country on a socialist path of government entitlements and corruption that drove out its capitalist wealth producers and created one of the world’s worst business environments.  Taxes were then increased, driving much of the economy underground, and state revenues never came close to paying for the goodies demanded by the unions and dispensed to buy votes.

To make ends meet, Greece started borrowing from its eurozone neighbors.  Countering their own agreements, European banks started lending the amounts required to build and maintain Greece’s Ponzi economy.  Europe’s banks were lending to Greek banks, which then bought government bonds guaranteed by the Greek government.  Except that someone, actually a lot of people, forgot that Greece could not work its way out from under its growing mountain of debt.  And it could not print any of the faith-based money needed to even pay interest on that debt.  Its currency was the euro, and only the European Central Bank in Frankfurt could print that stuff.  So what to do?

Well, they raised taxes and cut government spending.  Doing that convinced big guys like Germany and France to continue lending, but after a while the pain in Greece became so bad that, led by unions, people took to the streets and gave us all those flaming and smoky videos on the evening news.  This was definitely not kicking the can down the road, so Germany and France got worried that Greece might default on its loans, and prematurely pull out of the eurozone, thereby making the current spate of politicians look bad.

Instead, they settled for a halfway solution, letting Greece stiff its lenders at 50%, and guaranteed more loans from northern European banks to the same guys who sometimes wear tutus and powder puffs on their pumps when they’re not rioting for more government entitlements.  Angie and Nicky figured that they’d have the muscle to print more euros when it comes time to bail out their domestic banks now papering their restrooms with Greek bonds.

In the meantime Greece’s Papandreou threatened a referendum on the next round of austerity and borrowing.  After all, it’s the democratic solution, and we all know where democracy came from.  This caused everyone who owns stocks and bonds to run in circles scream and shout.  What if those damn Greeks reject the whole bailout deal and say to the world, ‘If a can must be kicked down the road, we’ll do it ourselves, thank you very much.  We’re going back to drachmas, which we can print to our hearts desire.’

Of course, Greece will then have trouble borrowing from the corner paycheck cashing outfit.  But at least they’ll be able to go down the tubes doing it their way.  Now what does all that have to do with the price of beer in Brooklyn?

When Greece chucks the euro and defaults on its European bank loans, more euros will start rolling off the presses in Frankfurt and inflation takes off.  And remember, Italy, Spain, Portugal, Ireland, and others are still standing in line for their bailouts, because they also ran out of other people’s money, and had to pile on huge debts.  In the meantime our banks have loans to European banks, so their bad debts will also hit our banks, and require another round of bailouts, or we suffer the fallout from their failures.

Bottom line?  No matter how much you think you deserve other people’s money, you can’t demand your way out of debt.  Those now occupying our streets have yet to learn that lesson.

My name is Rebane, and I also expand on these and other themes in my Union columns, and on georgerebane.com where this transcript appears.  These opinions are not necessarily shared by KVMR.  Thank you for listening.

Comments

[Michael Anderson]

George,

Heard your report on KVMR tonight. I might have to respond to this on the radio. Should be fun. Paul Emery, what's the process?

Michael A.

[George Rebane]

MichaelA - looking forward to your response. In the process, you might also want to inquire how many of the station's liberal commentaries and featured programs have similar invitations to respond as their codas.

[Michael Anderson]

You wrote: "...you might also want to inquire how many of the stations liberal commentaries and featured programs have similar invitations to respond as their codas."

I don't need to inquire, I know the answer, which is: none mostly at present, but longtime listeners know that the offer has been longstanding, regardless of the political persuasion of the commentator. This is a community radio station, the offer is always implied, as in tacitly understood. At least that's how I've always taken it.

Your mileage may vary. I'm looking forward to our dialogue, George.

[George Rebane]

MichaelA - then I'm sure there's a good answer to what happen to all that good ol' 'tacit understanding' by the 'longtime listeners' when subjected only to my commentary. But hey, don't strain yourself.

BTW, I am curious as to what your contention about my rather non-contentious commentary will be.

[bill tozer]

Now who would be dumb enough to buy Greek bonds? Only a total moron would buy bonds that no bank would ever issue default insurance on. Wait, there is one dummy I read about. Heard he is a former US Senator, lib to the max. I heard he later became governor of Jersey until he got the boot by the voters after leading that state to near bankruptcy. Then he started some kind of hedge fund that invested pedal to the metal in Greek bonds! Think his name is Jon Corzin (Lib, New Jersey). His fund went belly up last week and 630 million of clients' money is missing. Hmmm, seems when the mula dried up, Corzin raided clients accounts without their pre-approval or foreknowledge. Just like a lib. Spend recklessly other people's money. Now the SEC and the FBI are trying to find the missing dough Corzin hid, spent, or can't account for. Seems he understated the debt of the fund, exactly as the libs in Congress do. So typical of that mind set. Well, I will give him credit for being at least smart enough today to hire one of the best defense attorneys around. Heard the bankrupt man child is now praying to the Universe for Obama to win a 2nd term. Nothing like a Presidential Pardon to keep one's hopes up.

[bill tozer]

This Greece thing got me thinking of the origin of the word bankrupt. Means broken bench. Seems when the money changers and merchants could not pay their debts, their tables were smashed (broken) and they were given the boot. Call me when you got the mula. http://www.bankruptcylawnetwork.com/origin-of-the-word-bankruptcy/

[Paul Emery]

George writes

"When Germany was defeated, Greece entered into a decades’ long conflict between its communist and fascist factions. Ultimately, the former communists won ......"

You are way off base on your look at modern Greek history. The Communists were firmly defeated in 1949. However, in the 1950’s, Greece went through a growth of development, both socially and economically. From 1960 until 1974, Greece was ruled by Georgios Papandreou. Finally in 1974, Greece was restored as a democracy by Konstantinos Karamanlis.

Your lack of accuracy taints the whole message you offer. Please review modern Greek history and set the record straight

Here's more

"The Greek Civil War was fought from 1944 to 1949 between a government backed by British and American support and Greek Communists. American intervention resulted in the Truman Doctrine, the U.S. policy of aiding nations defending themselves against Communist forces.

During German occupation of Greece, much of the resistance consisted of the Communist National Liberation Front (EAM) and its military, the People's National Army of Liberation (ELAS). The Germans left Greece in September 1944 and Great Britain brought the former government of Greece, along with the now included EAM, back into power. Some of those in the ELAS, however, would not cooperate with the British-supported government and threatened to take control of Greece. When Great Britain suggested disarming the ELAS, a proposal that Communists were against, a general strike in Athens was declared by Communists on December 2, 1944. The next day, police and the ELAS came into conflict with each other. After Winston Churchill visited, a truce was signed and ELAS guerrillas withdrew from Athens. An agreement was reached on February 12, 1945 which called for the the ELAS to turn in its weapons within fourteen days.

However, the fight continued for two reasons. The Greek government was unstable and Greece also had territorial conflicts with Yugoslavia and Albania. Josip Broz Tito, the leader of Communist Yugoslavia, gave his support to the EAM-ELAS. The Communist forces of Greece retreated north into the mountains where they could be supported by the neighboring countries of Yugoslavia and Albania.

Britain sent 40,000 troops to Greece and gave financial aid to the government, which became dependent on Great Britain's military and financial assistance to stay in power. Unfortunately, Great Britain possessed its own financial difficulties and would not continue its support after March 31, 1947, the day of Greek elections.

On February 21, 1947, the United States was requested by Great Britain to give support to Greece and Turkey. President Truman asked Congress for $400 million of aid to Greece and Turkey.

In response, the ELAS announced the formation of a Communist government, the "Free Greek Government." With about 20,000 to 30,000 guerrillas, the ELAS fought its way south, nearly to Athens.

But U.S. financial aid stabilized the Greek government and its military assistance helped force the ELAS back to the north. Furthermore, a Communist party split ended Yugoslavian support. Yugoslavia disagreed with the Soviet Union on certain issues, dividing Communists into supporters of Tito and supporters of Stalin. The Greek Communist Party came to support Stalin and subsequently, Yugoslavia ended its support of the Greek rebels in July 1948.

The last significant refuge of the Greek Communists was captured on August 28, 1949. On October 16, ELAS announced its surrender."

http://library.thinkquest.org/10826/greek.htm

[George Rebane]

PaulE - In the brief summary of Greece's history possible in the commentary, my representation of the actual winners nails it. You cite the pro forma events of post-WW2 partisan actions that did NOT affect the form of governance that Greek finally accepted. I cite the actual 'rehabilitation' of Greece's communists coming out of the woodwork into the newly painted and pressed socialists who came to dominate the government and then also reestablish themselves as the legitimate (though never formally dominant) Communist Party (cf KKE) in Greek politics whose members are now urged to riot in the streets carrying their banners.

BTW, your statement about "restoring democracy" is a red herring in your argument. All communist governments have claimed to be democracies. A government's ideological basis and its process of popular selection of leaders are orthogonal. And that is one reason why I said that Greece's post-WW2 history is "muddled", because the liberals have wanted to diminish its regression back to collectivism ever since, hence its true roots of socialism cum communism must ever be challenged, else the sheeple will wise up.

In sum, interpreting Greek history as a long term victory for free market capitalists is an error - socialism inching back to communism has been Greece's road to ruin where now more than one in four workers work for the state, and the state effectively owns major sectors of production that the Greek economy can still claim.

[Paul Emery]

Inching into Communism is a familiar path for you to embrace which historically has shown itself not to be true. Socialism is not Communism and not necessarily a gateway drug so to speak. Many "Socialist" governments have come and gone through the election process something that does not happen in "Communist" dictatorships. Papandreou and the Socialists may well be elected out of office displaying the weakness of your personal opinion in this matter, that being that historically Socialism does not lead to Communism.

Please show me one country in the last 30 years that has gone from Socialism to Communism through the election process.

The head of government (since October 2009) is the Prime Minister Georgios Papandreou.

The president is elected by Parliament for a five-year term. Parliment members (300 seats) are elected to four year terms by direct vote.

[George Rebane]

PaulE - Communism has been laying low since the USSR collapsed. Only third rate countries like Venezuela and African countries not worth mentioning have adopted the trappings of communism without calling them that. However, historically the proto-socialist and collectivist governments of central Europe between the wars were ripe for going from socialist to communist after WW2.

It will be more than of academic interest to keep our eyes on Greece after they forsake the euro. We recall that Papandereou the socialist was not able to satisfy the ever growing demands of a country already soft on socialism, and had to give (redistribute) them more and more. Soon, the communists will have the only acceptable answer to a population of gimmes. We'll see what they do.

[Paul Emery]

George

"Lying low" is an opinion that does not equate the sure thing that you expostulate when you state as a fact:

"When Germany was defeated, Greece entered into a decades’ long conflict between its communist and fascist factions. Ultimately, the former communists won ......"

For the record then you believe that Greece is NOW a Communist country.

It is that type of hysterical exaggeration of history that affects the credibility of what you say.

For the sake of clarity can you describe what is Communist and what is Socialist country.

[Dixon Cruickshank]

Honest Paul at this point does it really matter? whatever it is may not be whatever it is a year from now - so whatever it has been will be history. picky picky

Oh BTW your Norweign's are getting pretty antsie about these immigrant rapiest lately too

[Todd Juvinall]

Sweden too.

[George Rebane]

PaulE - "former communists" were the winners. By then they had changed their stripes to socialist and other lesser forms of collectivism. I totally reject your representation of this summary description as an "hysterical exaggeration of history". You don't have to believe a word of it, just recollect what has actually happened in Greece during the last decades and where that has brought it. It didn't get to where it is through libertarian principles celebrating enterprise and individual freedom. But it did get there through enthusiastic application principles of governance which derive from socialism and communism.

http://rebaneruminations.typepad.com/rebanes_ruminations/2010/07/who-is-a-socialist.html

[Todd Juvinall]

George, do old communist just fade away? Paul seems to forget the recent demise of the USSR. Did all those Communist Party members just fade away or are they still there? They morphed into other things politically speaking but they are still communists aren't they?

[George Rebane]

That is a good point ToddJ. PaulE's attempt to skewer my view of Greece's history contributing to its current and potentially future form of governance is based on a broader argumentation tactic by the Left which I need to address. My previous responses to this tactic (cf The Liberal Mind category) were, perhaps, not as focused and clear as they should have been. Thanks for the goad Paul, I'll take another cut at it.

[Douglas "Better Ideas" Keachie]

An important part of Greek history, as written by a Greek and filmed by Greeks, involving the military junta, can be found in the movie, "Z!"

http://en.wikipedia.org/wiki/Z_%28film%29

[Paul Emery]

George

Is Greece a Communist country or not? Just because they did not pursue "Libertarian Principals" doesn't mean they're Communist.

If indeed Greece is a Communist country as you imply does that mean Norway, France, Spain, Italy and all other European countries that have Socialist policies are also Communist in Socialist clothing. Is Greece different from those countries?

[George Rebane]

PaulE 304pm - Delightful comments. BTW, there is a big difference between principals and principles, the latter I used in my 1104pm. And I never made the connection you imply in your 304pm. I believe Greece is headed for communism in all but, perhaps, in name. And even that may be straightened out later. Can you imagine the socialists (and sub-rosa communists and communists) in the unions that dominate the country ever allowing Greece to become a free-swinging capitalist country again. Since that is the only thing that has a smidgeon of a chance of generating enough wealth to start paying off the country's bills, the alternative is a collectivist misery for which it is solidly headed. No one in the EU will help, although they may launch some sort of military action there to keep the country from falling to mid-east interests.

Re your inquiry about Norway et al, let's talk about this after, or in conjunction with, my tomorrow's post entitled 'The Liberal Mind - how much socialist before being a 'Socialist'?' And again, thanks for highlighting this ongoing aspect of the Left/Right dialogue.

[Douglas "Better Ideas" Keachie]

The following indicates that there is more than the communist party in Greece:

Panhellenic Socialist Movement
Πανελλήνιο Σοσιαλιστικό Κίνημα PASOK
ΠΑΣΟΚ Social democracy George Papandreou 153 8
New Democracy
Νέα Δημοκρατία ND
ΝΔ Liberal conservatism Antonis Samaras 85 7
Communist Party of Greece
Κομμουνιστικό Κόμμα Ελλάδας ΚΚΕ
ΚΚΕ Communism Aleka Papariga 21 2
Popular Orthodox Rally
Λαϊκός Ορθόδοξος Συναγερμός LAOS
ΛΑΟΣ National conservatism Georgios Karatzaferis 16 2
Coalition of the Radical Left
Συνασπισμός της Ριζοσπαστικής Αριστεράς SYRIZA
ΣΥΡΙΖΑ Democratic socialism
Anti-capitalism Alexis Tsipras 9 1
Democratic Left
Δημοκρατική Αριστερά DIMAR
ΔΗΜΑΡ Democratic socialism
Social democracy Fotis Kouvelis 4 0
Democratic Alliance
Δημοκρατική Συμμαχία DISI
ΔΗΣΥ Centrism
Liberalism Dora Bakoyannis 4 1
Ecologist Greens
Οικολόγοι Πράσινοι OP
ΟΠ Green politics 6 member committee 0 1

[Paul Emery]

Yes Douglas

The complexity of Greek politics is something that George doesn't have a grasp of. The current government can be elected out by the will of the people. In a true Communist dictatorship the "elections" are rigged. I wish we had the same diversity in our system. We are essentially a one party system with two wings, Republicans and Democrats, that serve the same masters, those with money and power.

George likes top use the healthy devil (communism) splat to preach his gospel. Like they say there's nothing better for religion than a good healthy devil.

[Douglas "Better Ideas" Keachie]

You mmight want to check out Reuter's today and this little gem on the evils of socialism/state-run-enterprise/communism , orwhatever the ism of you displeasure for the day is.

"Contrast the U.S. and its free market economy with China’s system. For years now, that country has experienced double digit growth. Many observers would say that China’s embrace of capitalism since 1978, and especially since joining the World Trade Organization in 2001, has been responsible for its boom. They would be mostly wrong. In fact, a new study prepared for the U.S. government says it’s not capitalism that’s powering China, but state capitalism — China’s massive, centrally directed industrial policy, where the government positions huge amounts of capital and labor in economic sectors it intends to nurture. The study, prepared by consultants Capital Trade for the U.S.-China Economic and Security Review Commission, reads in part:

In a world in which central planning has been so utterly discredited, it would be natural to conclude that the Chinese government and, by extension, the Chinese Communist Party have been abandoning the institutions associated with the communist economic system, such as reliance on state‐owned enterprises (SOEs), as fast as possible. Such conclusion would be wrong.

In a G-zero world where no country can claim the mantle of international leadership, China has pulled an accomplished head fake. While the media focuses on China’s special economic zones, like Hong Kong and Macau, and the rise of the banker class and Chinese tech industry, state directed spending is the real engine of growth. Capital invested in infrastructure like factories, heavy industry, roadways, and high speed trains continues to power annual double digit growth in GDP. Reliable data from 2004 shows that 76% of Chinese non-financial firms are classified as State Owned Enterprises (firms with government ownership of greater than 10%).

In short, while the U.S. has spent decades and vast treasure building up its defense system (and yes, by extension, the sectors of the economy that service it), China has spent its time and money building up control over the broad direction of its entire economy. In today’s world, where the first sentence of this essay rings true, which country currently looks better positioned to, pardon the pun, capitalize, in the years ahead?"