Tuesday, May 11, 2010

Greek Tragedy

Paul Krugman

The bad news is that Greece’s problems are deeper than Europe’s leaders are willing to acknowledge, even now — and they’re shared, to a lesser degree, by other European countries. Many observers now expect the Greek tragedy to end in default; I’m increasingly convinced that they’re too optimistic, that default will be accompanied or followed by departure from the euro.

I remember when people talked up the Euro against the dollar and the moneyman at Berkshire was betting on the Euro. Hope he got he money out.

I expect the Greek tragedy to end in default. At some point you simply rack up too much debt. Here in America, I fully expect us to just print money to pay off our bills. For Greece that is not an option.

Robert Samuelson

What we're seeing in Greece is the death spiral of the welfare state. This isn't Greece's problem alone, and that's why its crisis has rattled global stock markets and threatens economic recovery. Virtually every advanced nation, including the United States, faces the same prospect. Aging populations have been promised huge health and retirement benefits, which countries haven't fully covered with taxes. The reckoning has arrived in Greece, but it awaits most wealthy societies.

Coming to a theater near you!

Samuelson's closer:

If only a few countries faced these problems, the solution would be easy. Unlucky countries would trim budgets and resume growth by exporting to healthier nations. But developed countries represent about half the world economy; most have overcommitted welfare states. They might defuse the dangers by gradually trimming future benefits in a way that reassured financial markets. In practice, they haven't done that; indeed, President Obama's health program expands benefits. What happens if all these countries are thrust into Greece's situation? One answer -- another worldwide economic collapse -- explains why dawdling is so risky.

The collapse is going to be spectacular.

I have often joked (darkly) that it is wishful thinking when conservatives complain that our children are going to be paying off the debts that we are incurring today. I think that assumes that we can keep spending like we do and just hand it off to our children. I think the reality is that WE are going to be paying off these bills, and that the due date is going to come sooner rather than later.

Like everything else, in hindsight it will be abundantly clear for all to see. Life isn't lived in hindsight though, and it is going to be one collasal clusterfudge when we hit the wall. At this point I am convinced that neither political party has the will to cut the size of government until it is too late.

"Things that can't go on forever, don't"

20 Things You Will Need To Survive When the Economy Collapses and the Next Great Depression Begins

The New York Times on Health Care Reform:

Another reform high on the list is removing the state from the marketplace in crucial sectors like health care, transportation and energy and allowing private investment. Economists say that the liberalization of trucking routes — where a trucking license can cost up to $90,000 — and the health care industry would help bring down prices in these areas, which are among the highest in Europe.

It looks as if the New York Times doesn't support socialized medicine, at least when it comes to the Greeks. Maybe they should have told us a little about this when Obamacare was making the rounds... Sphere: Related Content

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