Another day, another bailout. What else is new?
European Union (EU) leaders have agreed to a multi-billion aid package to prevent Greece from declaring bankruptcy. Yes, countries can go bankrupt!
National bankruptcy mechanisms are no different for nations – spend more than you earn over an extended period of time and the bills add up. Creditors boycott debt (i.e. credit cards are maxed out!) and start demanding repayment.
Greeks have a good life with a relaxed work culture. In the past, tourism, shipping and tax evasion were some of their biggest businesses. Oh, I am sorry did I forget to mention olive oil?
With the advent of the EU, tourism, shipping tax evasion and spending EU subsidies are some of their biggest businesses.
Before the internet and globalization, the Greek system worked well. Greeks showed up at work, enjoyed themselves and took home Drachmas as payment for their toils.
Remember the Drachma? Unlike the Deutschemark, the Drachma was never a favourite of currency traders. In fact, it was pretty much a controlled currency much like basket case Latin American currencies of the day.
Well, whenever the Greek government could not honour its obligations it did what any self respecting nation does (check out a twenty year graph of the USD - Yen exchange rate for further confirmation!): it devalued its currency. Lend me one hundred Drachmas and I will repay you one hundred drachmas. However, the Drachmas buy you only one litre of olive oil today, versus three when you lent me the money.
Ah, the good old days when life was simple.
Fast forward to the new millennium and olive oil farmers have to deal with speculators trading in instruments that, well, no one understands.
Comprehending the investment securities does not really matter because someone else will be holding the bag when it comes time to pay the piper. Why worry about the future? Churn the security, take the bonus and let the government bail out the aggrieved party whenever social unrest requires severe action.
The only problem is the Drachma does not exist anymore. And, Greece is part of a 'civilized' club of nations. Greece can't 'devalue' its problems away anymore or it gets blackballed.
Hence, the European taxpayer picks up the tab. The Greeks continue to retire at 62 with some of the healthiest pension benefits in the world – if they are lucky enough to receive them.
Of course, for the 'Big Boys' of the European Club, including the Germans, French and British the Greek bailout is small change. European imperial possessions in Africa and Asia generate more cash than their respective Royal Families can spend renovating their castles and palaces.
The US Dollar replaced the British Pound as the world's international reserve currency several decades ago. The US Dollar is slowly being eased out of its privileged position as surely as I write this post.
However, there is one major flaw in my theory: there is no ready replacement for the US Dollar. A Pepsi may substitute for Coke, or a Whopper for the Big Mac but reserve currencies are not so easy to swap.
All currency candidates have some serious drawbacks.
The Euro, well not only Greece but the rest of the PIGS (Portugal, Italy, Ireland and Spain) must be reckoned with. The Yen, the Japanese need to lop off a few zeros and maybe the Yen can be a serious contender! The Yuan has too many controls and a general lack of faith in China's policy continuity.
List the currency and I'll state its shortcoming. Nevertheless, let there be no doubt the US Dollar is on its way out.
(Colonel) Georgios Papadopoulos President of the (Greek) National Government
Several centuries ago, Greece introduced representative government to humankind. In 2010, Greece is perhaps the harbinger of another new era: the post-internet society. After a period of tremendous growth and innovation brought about by information technology, society may have to wait for the next major technological breakthrough to start another virtuous cycle of growth.
Or maybe we just watch CNN and wait for the breaking news that, following months of civil unrest, a Gang of Colonels has taken over Greece and declared martial law. The military government's first act to restore national pride: the revival of a strong national currency called the Drachma.