Grexit Feels Like a Pro Draft

Greece voted NO.  They didn’t like the terms of the deal with the EU and IMF.  Cool.  Now they figure out a way out of the mess, but it’s not as if the way out won’t be painful.  Do they continue to negotiate?  Communist Greek Prime Minister Alexis Tsipras might have created a bigger mess because now Greece could be forced to go it alone.  Last night, the Greek finance minister resigned.  He didn’t resign because he was dismayed by the referendum.  He resigned because no one would negotiate with him in good faith anymore.

Who in their right mind would buy Greek debt?  Who in their right mind would invest in a Greek owned business?

What it feels like to me is a pro draft.  Portugal, Italy, and Spain are on the clock.  To a certain extent, France is on the clock too but it just doesn’t have a lottery pick.

The EU and the euro don’t allow the full economic effects of their policies to work given the different government policies at work.  The invisible hand is handcuffed.   It’s not a free market system.  It’s a bureaucratic centrally planned system that is doomed to fail.  Germany has 6% unemployment.  The PIGS all have unemployment that would be considered a Depression anywhere else.  Yet they have the same price system and currency.

The communists in those countries are watching closely.  July 20, the Greeks owe the EU 3.5 billion euros. I don’t think there is a chance that they pay it.   If the EU caves, look for the communists in other countries to make a move.  The long term political fallout could be even worse than the financial fallout.  The joke right now is that the Germans finally won WW2 without firing a shot, but maybe it’s the old Soviet Union.

My friend Yra Harris says the same thing,

What will prevent the other countries in the EU from seeking the same approach in an effort to enhance their bargaining positions on issues of fiscal policy? IT IS NOT ECONOMIC CONTAGION BUT POLITICAL CONTAGION THAT STRIKES FEAR IN THE HEART OF ANGELA MERKEL. Again, would the good Burghers of Bavaria vote to provide monetary transfers to the European periphery in perpetuity?

I agree with Yra.  If you really want to understand the undercurrents of what’s going on, read the Rotten Heart of Europe.  Bernard Connolly exposes the double-talk surrounding the efforts of politicians, bankers and bureaucrats to force Europe into a crippling monetary straitjacket. Hidden agendas are laid bare, skulduggery exposed and economic fallacies are skewered, producing a horrifying conclusion. No one who wants to understand the workings of the EU, past, present and future can afford to miss this enthralling and deeply disturbing book.

Another point I am seeing across my Twitter feed is that Bitcoin could solve this.  In the short run, it most certainly cannot.  In the long run, the blockchain is a decentralized system that might be able to solve a lot of the problems we are seeing because it is more powerful than the self appointed kings that run the EU.  But, there would need to be a lot of different software programs developed to make it happen.

If you are a US Citizen, the Greek crisis is worth paying attention to for a lot of reasons.  There are many lessons to be learned.  The obvious one is the irresponsible spending by government that has caused it to go broke.  Another is the result of that profligate government, and the hardship that is being endured, and will be taken on by Greek citizens. Still another is that centrally planned bureaucracies always create economic imbalances that wouldn’t happen in a decentralized free market system.

There are plenty of examples one could point to in the US at every level of government that mimics Greece.  The “noblesse oblige” are very much alive here.  It is time to get rid of each and everyone of them and create the right environment where it can’t happen again.

UPDATE

All you have to do is look to South America to the governments of Chile and Argentina.  Argentina chose the path that Greece is on.  Default after default.  The country is an international business pariah.  It’s citizens are constantly in fear that their savings will be attacked by the government.  Chile is doing well economically.

thanks for the link Glenn Reynolds of Instapundit