TIMEO DANAOS, ET DONA FERENTES, PARTEM SECUNDUM

A good friend, smart guy, and regular reader, after seeing yesterday’s post on the situation in Greece, drew an historical analogy between Greece in 1948 and Greece today. My response is worthy of sharing with my readers:

5/7/10

The "Red Menace" that loomed so large and powerful back when "Give 'em Hell Harry" was president has been sufficiently tamed, even to the point of assuming room temperature, that that particular manifestation of going off the deep end is beyond the realm of possibilities. But the appeal of various other leftist, or extreme rightist, parties has to intensify in Greece in the wake of the unrest. Ironically, though, it was the more conservative (whatever that term means in most of Europe, especially on the periphery of Europe) New Democracy Party that got Greece into most of its fiscal problem and Papandreou’s Socialists who are at least making a feint at addressing these problems, so maybe not. However, I fear that the groups and parties that might benefit from the unrest would be far outside the spectrum delineated by the NDP and the Socialists. Come to think of it, this might not be a fear in all cases; it could be a hope if a sufficiently strong, free market oriented party (clearly outside the aforementioned spectrum in Greece) were to somehow benefit. But that looks like a very long shot.

At this point, though, who knows what could happen? Even though the Greek parliament has shown courage in passing the austerity measures, implementing them is another matter. And if they are implemented, how will the populace, which has been quite fat and happy on other people's dimes for a long time, react? On the international front, if things get much worse, countries like Portugal and Spain could say something like "Heck, we'll take a default before we’ll put up with this nonsense; it’s just not worth it.” The Greeks may yet come to the same conclusion.

One more thing…Greece isn’t experiencing a liquidity problem; it is experiencing a solvency problem. Greece is broke and these austerity measures will not address the problem. Greece restructures, defaults, or becomes a permanent ward of France and Germany. The really scary thing is thing is that, in pure numbers (deficits as a percent of GDP and even, in a stretch, debt as a percent of GDP), we’re not far behind. Fortunately (?), we do our fiscal mischief in the context of a currency we can print.

O tempora, o mores!