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“A harder Default To Come”
Wolf Richter www.testosteronepit.com
“We owed it to our children and grandchildren to rid them of the burden of this debt,” said Greek Finance Minister Evangelos Venizelos about the bond swap that had just whacked private sector investors with a 72% loss. While everyone other than the bondholders was applauding, the drumbeat of Greece’s economic horror show continued in its relentless manner.
In central Athens, a stunning 29.6% of the businesses ceased operations, up from 24.4% in August; in Piraeus 27.3%, a 10-point jump since March. The whole Attica region lost 25.6% of its businesses. “This worsening of the survival index in the commercial sector ... shows that resistance is waning,” said Vasilis Korkidis, president of the National Confederation of Hellenic Commerce. And fourth quarter GDP was revised down to -7.5% on an annual basis. The Greek economy has shrunk about 20% since 2008.
Unemployment is veering toward disaster: 21% in December, announced Thursday, was horrid enough, but youth unemployment rose to a shocking 51.1%, double the rate before the crisis. A record 1,033,507 people were unemployed, up 41% over prior year. Only 3,899,319 people had jobs—a mere 36.1% of a total population of 10.8 million!
No economy can service a gargantuan mountain of debt when only 36.1% of its people contribute (by comparison, the US employment population ratio is 58.6%, down from 64.7% in 2000). Hence, another bout of red ink. The “cash deficit” at the end of 2011 hit €24.9 billion, 11.5% of GDP, far above the general budget deficit. Government-owned enterprises, such as the public healthcare sector, couldn’t pay their bills. Total owed their suppliers: €5.73 billion.
Yet, forcing down the deficit is one of the many conditions that the bailout Troika of EU, ECB, and IMF have imposed on Greece. And: "If the Greek people or the Greek political elite do not apply all of these conditions, they exclude themselves from the Eurozone," said Luxembourg’s Finance Minister Luc Frieden. All of these conditions. Then he added the crucial words: "The impact on other countries now will be less important than a year ago." Read.... Firewalls In Place, Markets ready: Greece Can Go To Heck.
Under pressure to cut its healthcare budget, the government reduced the prices that the industry can charge state-owned insurers. So wholesalers are selling their limited supply outside Greece, while out-of-money state-owned insurers delay payments to pharmacies and hospitals, which then can’t pay their wholesalers for the medications they do get. Wholesalers turn off the spigot. And the system locks up.
Even Health Minister Andreas Loverdos conceded that there were shortages, but that they were limited to lower-priced medications. Of the 500 most common drugs, 243 have disappeared from the shelves, including antibiotics. The Panhellenic Association of Women with Breast Cancer, for example, received many complaints from patients who claim they weren't treated due to lack of oncology drugs. And the world’s largest pharmaceutical companies are worried that Greece might not be able to pay them at all.
A bright spot: tourism. In 2011, receipts rose by 9.5% over prior year as the Arab Spring scared tourists away from destinations such as Egypt and Tunisia. In October, receipts jumped 15%. Alas, in December they declined 4.9%. And that reversal has now infected 2012. Tourist arrivals so far this year are down 10.7% in Athens and 6.7% for the country. Greece's last growth industry has hit the skids.
With unemployment climbing, production and consumption tanking, businesses shutting down, and tourism nose-diving, there is only one way for tax revenues: down. Budget deficits will be worse than promised. Greece’s debt—now largely to taxpayers of other countries—will continue to balloon. The standard of living of the vast majority of Greeks will get slammed, though the elite that are negotiating these deals will do just fine.
“We still don’t have a solution for Greece, so there will be a harder default to come,” predicted Charles Wyplosz, director of the Geneva-based International Center for Money and Banking Studies. Yet, in a bitter irony, Germany—the country where tax dodging is a national sport—decided to send 160 employees of its Ministry of Finance to Athens to fix the tax collection system. For that whole debacle that will endear the already reviled Germans even more to the Greeks, and for just how long a tax dodger can abuse the courts, read.... Final Bout of Spastic Greco-Teutonic Wrestling.
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Its true that in a fiat system money is only backed by government debt-and not enough politicians(Ron Paul excepted) understand that. So, destroying (paying down/defaulting) that debt destroys money. However, considering the underlying principles of socialism and capitialism there are very fundamental differences:
1)Prices can only be set by markets (capitialism) {History shows wage and price controls always fail}
2)Competition and the profit motive are more fundamental from an evolutionary standpoint. Even, so called altruism is motivated by self-interest.
3)The individual is the engine of innovation. The entire history of science from Galileo (acutally Archimedes) on) supports thiis. Collectivism in science (i.e. consensus) leads to failed models (e.g. climate change "science") which rapidly becomes a bad joke. Note collectivism is fundamental to most organized superstition (i.e. religion) so its easy to understand why groupthink is bad.
Thus a system based upon the collective vs the individual is doomed to fail as it violates these principles.
If you've read Hayaik and Keynes you can't possibly believe there is no difference between economic systems either. Its all about the primarcy of freedom and the individual.
So, capitialism remains, "the unrealized ideal" as Rand has written. Great ideas lead to better but flawed sytems (see the US constitution). That's because flawed humans are always involved in their implementation.
I do indeed believe in Capitalism and have strived in my personal life to live "as if" thats the system we've lived under.
And thats the rub, while good honest folk have been working their tails off, the people who control the system have and are taking advantage of them. I've come to believe that it is our very belief in that moral system (Capitalism) that has made us ripe fruit for the picking. Just like the sheep that think Socialism is about a "chicken in every pot".
We have all been waiting for Mr. Market to take these fiat printers to the woodshed, but what exactly makes you think that will ever happen? If Mr. Market was as powerful as we make it out to be, this would have never happened! The fact is, Mr. Market is made up of it's participants, who have been corrupted.
I think it all needs to burn down before it can be fixed, there needs to be culling all across the social spectrum. We all have to go back to understanding that the only responsibility I have to my neighbor is make sure I dont infringe on his rights and to hold him responsible when he infringes on mine.
"I've come to believe that it is our very belief in that moral system (Capitalism) that has made us ripe fruit for the picking. Just like the sheep that think Socialism is about a "chicken in every pot"."
I've come to think the same thing. They depend on our honesty in order for them to take advantage.
From filling out documents (proper name, address, SSI number etc.) to swearing an oath to tell the truth in a court of law.
Meanwhile, billions (excuse me, trillions) can be stolen and no one is charged, let alone stands trial, for any crime. Let one steal a loaf of bread or a six pack of beer to feed themselves or deaden their senses to a system turned upside down and in the clink they go.
Would I then judge them as guilty for perjury for giving a false name and address if fingerprints turned up nothing on who they were and they were released?...never.
They were playing by the same distorted rules and got to walk away.
It's come to this.
The same thing is happening in Illinois and California. The solution is to cut back on federal taxes and let the states tax and spend as they please.
This will be coming to the whole U.S.
Thanks to the vampire squid bankers
The socialist states are just a year or two ahead in comparison to rest of the pack.
How much more borrowing can be supported?...
What do you mean borrowing? Aren't we getting paid to breathe and go to school?
CORRECTION: The "takers" are the ones getting paid by Obama to not only breathe, but buy everything (foodstamps)!
Didn't you hear Obama's economic csar? She's an educated liberal you know. She says people draining resources and luxuries out of the economy while putting none back themselves helps!
Maxine Waters, yeah!
Maxine, former hair dresser in Pasadena with a pretty healthy line of bill collectors on her tail.
A truly brilliant woman.
...And a long time defender of Franny and Freddy. 'Cause housing is a right, ditto health care, day care etc."
And it's money well-spent for every vote it buys!
You are so right! Power is everything, fuck the rest of you chumps. Or, as they say in Chicago: "Cut me in or cut it out".
Human welfare bribery for votes is nothing compared to corporate welfare bribery for campaign money.
Not saying corporate welfare is right, but at least those corp.s produced, traded or serviced something to earn the money they used to bribe the politicians.