Guest Post: Greek Theater Double-Feature: A Farce And A Tragi-Comedy

Tyler Durden's picture

Submitted by Charles Hugh Smith from Of Two Minds

Greek Theater Double-Feature: A Farce And A Tragi-Comedy

The "narrative" of Greece is simple: no entity, be it a household or nation, can live beyond its means indefinitely.

Imagine a ship with 100 passengers and crew drifting down a river that eventually cascades over a 1,000 foot waterfall. It's easy to plot the ship's course and the waterfall ahead. You might think 100% of those onboard would agree that something drastic must be done to either reverse course or abandon ship, but before we jump to any conclusion we must first identify what each of the 100 people perceive as serving their self-interest.

If life onboard is good for 55 of the 100, they may well rationalize away the waterfall dead ahead. Indeed, they might vote to maintain the current course, thus dooming the 45 others who can hear the thundering cascade ahead but who are powerless to change course in a democracy.

This is the "tyranny of the majority" feared by some of the American Founding Fathers. I cannot locate reliable statistics on what percentage of the Greek population is dependent on the State for a paycheck, entitlement, retirement, disability, unemployment, etc., but I suspect the number exceeds the full-time private payroll of that nation. It seems likely that the number of voters in Greece who draw a check or benefit from the State exceeds the number of privately employed voters whose perception of self-interest is radically at odds with continuing State borrowing to fund the Status Quo.

If 55% of the voting public is dependent on government spending, then they will vote to continue that spending regardless of its unsustainability.

This is a variation of The Tragedy of the Commons, where the self-interest of each individual is served by stripmining the public commons for their individual gain. When everyone sees the commons as "free for the taking," then the commons is soon destroyed for all.

To the degree that Central State revenue is a form of public commons, then the siphoning of that resource to serve individual gain leads to the loss of the commons, as well as the loss of any notion of the "common good."

With 55 of the 100 voting to continue the present course of State borrowing and spending to support their piece of the largesse, the ship is doomed to end up in pieces at the bottom of the waterfall, despite the utter obviousness of the catastrophe just ahead.

Self-interest is often distorted or short-sighted, something I analyze in depth in Resistance, Revolution, Liberation: A Model for Positive Change, for without an understanding of distorted self-interest, we cannot understand why people will continue supporting a visibly imploding Status Quo: they will do so as long as they are getting a "free" piece of that Status Quo.

This chart is a bit dated, but the trends haven't changed. According to Wikipedia's entry on Greece's economy, public debt is now $355 billion and its GDP is $215 billion, though those numbers have probably drifted higher/lower along these trendlines:

Here is Greece's Central State budget, which sports an annual deficit of roughly 10% of GDP. This is about the same as the U.S., but the U.S. has the privilege of printing/ borrowing its own currency into existence. Greece does not have the luxury of printing euros. It seems likely these tax revenue figures are wildly optimistic, and so the actual current deficit is probably much higher.

Most of those collecting a piece of the 96 billion euros in annual State spending appear to have voted to keep the ship firmly heading for the waterfall, because they fear the consequences of changing course or abandoning ship. A "tyranny of the majority" voted by all the recipients of Status Quo deficit-spending is a form of farce, while the chosen course--off the waterfall--is a tragi-comedy.

There is only one productive path forward for Greece:

1. Renounce the unpayable debt and cease paying interest on all sovereign debt.

2. Live within the means generated by the nation's enterprises and workers.

3. Stop consuming/living off borrowing money.

A government can only spend the surplus generated by the nation's private sector. Ultimately, all government expenditures are paid from the surplus generated by the private sector. If that surplus is modest, then government expenditures must be modest as well.

This means that all those individuals who have been paid with borrowed funds will experience a decline in their State-provided income when the borrowing ceases. The "standard of living" will decline until the cost-basis of the economy declines as demand contracts.

When street upon street of commercial spaces are vacant, eventually the owners of those empty spaces will go bankrupt or lower the rents to what the economy can sustain. This reduction in price from a decline in demand plays out in a number of domestically supplied cost structures.

The "narrative" of Greece is simple: no entity, be it a household or nation, can live beyond its means indefinitely. If consumption is paid by borrowing, eventually the interest payments on that ever-rising debt feed a financial death-spiral of ever-higher interest, taxes, austerity and ever-declining investment in productive assets.

Greece is not alone in living beyond its means. This chart is a bit dated, but it usefully poses this question: if these massive bond maturations continue month after month as far as the eye can see, exactly what miracle source will roll over all this debt *and* fund the vast new debt that is sold every year to fund massive deficit spending by these nations?

The Chinese have an apt saying: when you're thirsty, it's too late to dig a well. We're not yet thirsty in America, so we have no interest in digging a well. That's a bother; it's so much easier to borrow 10% of our GDP every year to fund our deficit spending. We too face a "tyranny of the majority:" there are only 115 million full-time private-sector jobs in the U.S., and a far greater number of recipients of government funding who will vote to continue their share of the borrowed money, regardless of the waterfall just ahead.

The double-feature farce and tragi-comedy is currently playing at the Greek Theater, but it will soon be opening in every debt-dependent nation on the planet.

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hedgeless_horseman's picture



Here is Greece's Central State budget, which sports an annual deficit of roughly 10% of GDP. This is about the same as the U.S....

The U.S. is not Greeece.

The U.S. does not have a budget.

d_taco's picture

Yuo are spoiling the party. In the US and the UK all is OK.

battle axe's picture

"The U.S. does not have a budget". No truer statement has ever been said on ZeroHedge.....

RiverRoad's picture

Who needs a budget when money grows on trees?

malikai's picture

The U.S has Bernanke. We need to clone him and send his clones to every country on Earth. Goldman, are you listening?!

Cognitive Dissonance's picture

A (wo)man cannot see what s/he is paid to ignore.

LongSoupLine's picture




Imagine that same ship has jet engines that are fueled by corruption, total bullshit rumors and anti-capitalism...those engines would be ES.

d_taco's picture

It is not the Euro area that is colapsing it is the UK

UK Banks on the brink of colapsing:

d_taco's picture

It is not the Euro area that is colapsing it is the UK

UK Banks on the brink of colapsing:

battle axe's picture

d_taco: I think I will take the bet that the Greek/Spanish Banks implode first.......

NotApplicable's picture

Since the real answer about insolvency is "All of the above," it's just a bankster shell-game at this point.

I too will take the bet on the Old Lady of Threadneedle St.

Zaydac's picture

Of course the British banks can be saved by freshly-printed money from the BoE - but ONLY up to the point where the marginal effect on the currency is less than the marginal cost of settling foreign liabilities. I have a queasy feeling about this - i think it is going to go horribly wrong - and I think that Mervyn King knows in his heart that he has destroyed the propensity to save (and thus create capital) without securing the future of the institutions he seeks to preserve. I think that man faces a miserable retirement with all voices against him.

midgetrannyporn's picture

Voting doesn't matter. The big money maggots need gubbermint spending as much as anyone. They have set us adrift while they watch from their villa on the hill.

Not Too Important's picture

No, voting does not matter in any country where SCYTL is in charge:


I wouldn't invest a dime in any country whose electoral system was run by SCYTL. If private interests can steal elections, they can change investment laws at will.

I hope someone with more resources than I have can compile a list of SCYTL customers. Then get out your red Sharpies!

Mercury's picture

If 55% of the voting public is dependent on government spending, then they will vote to continue that spending regardless of its unsustainability.

That, in a nutshell is the OBAMA 2012 campaign platform.

"The private sector is doing fine..."

Democracy: It's who's for dinner.

NotApplicable's picture

That, in a nutshell is EVERY campaign platform.


skistroni's picture

Things are actually much worse. Until 2009, 70% of the GDP came directly or indirectly from government spending. And more than 50% of Greek businesses was dependent on public sector projects, subsidies, research programs from the EU and so on. 

So it's more like the Pareto numbers. 20% have been working and the rest 80% have been living from the state in one way or another. 

Way to go. Down.

Debugas's picture

i was hoping ZH can give more analysis on e.g. why and what greece was borrowing money for all those 10+ years ?

JamesBond's picture

charles smith -

my favoritre economic writer/author.



midgetrannyporn's picture

It is every banker's right to lend money which they create from nothing and lend it to gubbermints of the world while exacting interest from the "loans". It must be nice to pull fiat from your ass and get a bonus and call it an "industry".

gaoptimize's picture

How about a quote: "A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy, always followed by a dictatorship. The average age of the world's greatest civilizations has been 200 years.” - Alexis de Tocqueville

Uchtdorf's picture

Actually, those words have been attributed to others.

Mercury's picture

The Chinese have an apt saying: when you're thirsty, it's too late to dig a well.

If they Chinese had any sense of humor they'd replace all our fortune cookie papers with annoying bits of wisdom like this just to piss us off.

Your unlucky number: $15 trillion!

Biosci's picture

+1.   That is brilliant.

the 300000000th percent's picture

Maybe we ARE the dumbest animals on the planet

carbonmutant's picture

" I need to flag down a flying saucer, it's imperative that I get off this planet? ASAP." -anon

walküre's picture

What ignited the markets today? Spain's borrowing costs are higher than ever. Soon to face BK according to "Der Spiegel". Nothing concrete in terms of funding or easing from G20. USD down vs. currencies but up vs. gold. Oil catching a bid but nothing to get excited about.

Just another day in the park?

RiverRoad's picture

Apparently they're all buying shares of Rockerfeller & Rothschild, Inc. in a dark pool somewhere.

AbbeBrel's picture

I gotta believe that there are two forces at work here - the easy one to see is Politician endlessly pandering to the Sheeple for votes - thus promising pensions that surprise never get funded while loading up on government debt.

The part I can't quite get is how the Banksters do the same thing - creating WAY too much money from fractional reserve lending in this WW spasm of liquidity.   Either "They" are siphoning off a bunch of wealth from all of this before the crash happens (this makes sense from a global conspiracy point of view) or the WW Banksters are incredibly stupid - i.e. either they are the Butcher or the Turkey in Taleb's mixed up metaphor.   I gotta think that the Banksters think they are the Butcher.   But could they be the Turkey??


The main idea in Taleb's book is not to attempt to predict Black Swan Events, but to build robustness to negative ones that occur and being able to exploit positive ones. Taleb contends that banks and trading firms are very vulnerable to hazardous Black Swan Events and are exposed to losses beyond those that are predicted by their defective financial models.

The book's position is that a Black Swan Event depends on the observer—using a simple example, what may be a Black Swan surprise for a turkey is not a Black Swan surprise for its butcher—hence the objective should be to "avoid being the turkey" by identifying areas of vulnerability in order to "turn the Black Swans white".

Umh's picture

Short answer: it has worked for so long that they are absolutely convinced that it will always work. That reminds me of kids on a rope wing they goes briefly over an abyss on the way to the swimming hole.

Miles Kendig's picture

CHS, what private enterprise and private employment dependent do you speak of?  From where I'm sitting nearly all enterprise is dependent upon the state for its survival.  In fact, most prime movers of the status quo are all about making the state as convoluted as possible to further enable their manipulation of the same.

Remember Charles, state dependency is a fact of life for nearly everyone.

Welcome to the global Mafia State.

walküre's picture

Exactly 100%. Government is the biggest employer direct and indirect. Reducing government spending equals a reduction in government contracts to private enterprise. Many of the contracts would not be substituted with contracts from the private sector. When governments go broke, the private sector goes right with it.

As much as Conservatives and Libertarians would like to reduce the size of government and reduce the budgets, they are aware that it would translate into economic mayhem. Last time I checked, it wasn't the public sector employee or executive who earned multi million dollar bonuses and paycheques. Where do these people think that money is coming from? Growing on the trees of a private sector nirvana?

GeneMarchbanks's picture

'Growing on the trees of a private sector nirvana?'

Believe it or not the answer is yes. Thirty plus years of anti-government propaganda has unleashed an army of self destructive idiots. Not to mention cleverly disguised corporatist movements like the Tea-Party have set in motion a complete perversion of logic.


NotApplicable's picture

There is nothing "self-destructive" about the idea of living within ones' means.

The perversion of logic is the idea that these people had anything to do with it.

You might as well blame Mises, and his recognition of the fact that there is no escape from the consequences of a crack-up boom.

walküre's picture

Let's follow the money and put the blame accordingly.

We always hear about these "risks" that entrepreneurs have taken when they're embarked on a "venture". The amount of time and effort they've put in. What we don't hear about is how these ventures would have developed with a lack of government assistance in one form or another. Be it direct subsidies, contracts or simply lobbyism.

If your business sells 100% exclusively to the private sector but your private sector clients are living 50% or more directly from government, you're still a government funded business - indirectly.

GeneMarchbanks's picture

You won't have this acknowledged as fact simply because the 'Austrian School' has its premises shaken to the core if government is actually an admitted necessity. Private ventures have been supported in the background by governments since always. It's always an extremely rare instance when a new business can thrive immediately without some assistance along the way.

walküre's picture

The bandits and pirates will show their true colors this fall and if we get real austerity and no further funding from the Fed and other CBs, it's because the bandits are fat and lazy and don't see any point for themselves to keep it going.


Umh's picture

Please remember that government is funded entirely by the private sector & deficit spending.

Miles Kendig's picture

Where do these people think that money is coming from? Growing on the trees of a private sector nirvana? - walkure

Great comment!

The "Money Tree" or "manna from heaven" economy is a constant of both general monetary/fiscal constructs currently in use.  The key to the current circumstance is that the free,  or nearly free money is generated by the banking cartel under license from the state.  The lynchpins being that all economic activity is good activity especially those high margin activities like human trafficking, running dope, siphoning energy, blood diamonds, guns or whatever that Moises Naim speaks to (that have kept the current construct viable) and that these activities are somehow independent from state activity.

These activities are now so ingrained, as you note, that any effort to restructure away from it will lead to a M.A.D. moment.  The same holds true of the other side of the monetary/fiscal coinFact is that any move away from the current M.A.D. course, especially in the US would lead to a global realignment since the globe is tied in to the reserve currency like it or not.  It seems that hardly anyone be they so called libertarians, liberals, socialists, fascists, neo-anything or supposed capitalists can actually articulate a pathway to the potential of regaining sustainability in finance, law and other key elements of civil society.

Free lunch, like free parking or collecting a fat check just for passing GO is fools gold.  General Obligation (GO) is now subordinate to cash flow.  No amount of wishful thinking about risk free return, the supposedly inviolate notion that sovereigns and by extension their cross border money center institutions are the foundation of risk free can change objective circumstances.  That goose, and its golden eggs are well and truly cooked.  The foundation of risk free now makes up the foundation of rot.  Our "leadership" can print all it wants to and will while furiously selling the populace on the concept that the only thing that matters is the nominative.  Fact remains that the current structure is no longer viable and there are no replacements available since the Mafia State is all about subjugation in the name of charity while its parasitic nature sucks all life out of its host.

walküre's picture

And more and more people are catching on to this which will force a change or solution of some sort upon the system..

Fact remains that the current structure is no longer viable and there are no replacements available since the Mafia State is all about subjugation in the name of charity while its parasitic nature sucks all life out of its host.

This system has run its course and is out of gullible suckers.

We all know the Emperor has no clothes. It's not talked about. Until that defining moment when not even innocent kids are willing to believe and then all hell will break lose.

Interesting times.

Vince Clortho's picture

I prefer the "Gangsta State".

Miles Kendig's picture

Gangsta geeks rock!

While the down home country folks contribute their rhymes to the times...