Saturday, 21 February 2015

Mike Shedlock (Mish) made good comments on a Howe Street podcast about Greece and the Eurozone.

I was interested to hear Mike Shedlock (Mish) talking on a Howe Street podcast about Greece and the Eurozone and the possibility of a default.

and the fact that Greece is running a primary account surplus now.

It brought to mind some similarities and my comments were thus:

Well said Mish about how unreasonable it is for Greece to be required to suffer for decades to pay back these debts. Who else is paying back their debts?
This is similar to Germany’s World War I reparations debts iin the 1920s and we all know how that ended politically. Germany’s WWI reparations payments would have lasted into the 1980s if my reading is correct. Financially, I think Germany never paid back the vast majority of its reparations debts, which were eventually forgiven but it was too late to prevent a certain individual from taking power with all the dire consequences that caused in the 1930s and 1940s.
Also, Greece is nor a belligerent nation – these are just the debts for disastrous socialist policies and Mish is correct about the credits – they should take losses more making stupid loans.

It’s fascinating because Greece is one of very few Western countries that is running any kind of surplus I would bet.
This is completely contrary to the currently accepted Keynesian interventionist economic theories worldwide, where a nation would run a deficit in a recession to support the economy and a surplus in a boom when there is more tax revenue. However, Greece is being made to run a primary surplus in the teeth of a real economic depression with 30% unemployed (a similar level to the unemployment in Germany in 1931).
However, I don’t hear Paul Krugman the ultimate post-modern Keynesian criticizing this situation that is being imposed upon Greece. He should be screaming from the rooftops that this is totally against the economic theories that he worships!

No comments: