Wednesday, July 1, 2015

Hope Springs Eternal

Markets are rallying this morning.  Commentators are suggesting a deal on Greece may be in the offing.  Really?

The issues are really, really simple.   Will bondholders give money to Greek citizens who show little or no interest in providing for themselves?  Ask yourself.  Are you willing to work hard, pay taxes and delay retirement, so that the average Greek citizen can do just the opposite?  That is the political issue for the average German voter.  The answer is completely obvious.  There will be no Greek bailout deal.  Greece is gone.

Since most of the rest of the western economies have exactly the same problems as Greece, except they are simply at the point where Greece was ten years ago, the Greek fiasco provides a helpful clue as to the future of the rest of Europe and the US.  Bondholders will not indefinitely finance folks who are doing little or nothing to sustain themselves.  It is really just a matter of simple arithmetic.

Whether you have a concern for the poor, or want to battle income inequality, or want to right the various perceived wrongs of society, you will still come to a bad end if no one is willing to work to produce the necessary goods and services to finance this largesse.  That is where Greece is.  It's over.

Fast forward to the future plight of Europe and the US.  Exactly the same fate lies ahead and for exactly the same reasons.  The US is not yet where Europe is today and certainly not where Greece is, but the US is rapidly moving in the direction.  The Obama Administration has dramatically sped the process of obliterating free markets and incentives in the American economy, paving the way along the route to an ultimate Greek-like ending.

Just as in Greece, the American political class thinks bondholders have an unlimited appetite to fund other people.  They don't, as the Greek crisis so clearly demonstrates.

2 comments:

Ebin Mathew said...

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Helen Konnor said...

Greek crisis was not upon bondholders, first of all, they have a political crisis!(big strikes where left and rights groups fight each other) and most of this problem that government is fully corrupted and funds tons of companies which wash money from EU, you can read more about their political and economical lobby!