Greek Chaos Ripples Across Globe

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For anyone wondering what happens to an institution loaded up on CDSs if the “unthinkable” happens–like a decline in American real estate prices for example–three words should suffice: American Insurance Group (AIG). AIG cost the American taxpayer $182 billion, the largest federal bailout in history.

Thus, the pressure to keep Greece afloat is enormous. But is it the correct path? That depends upon which side of the political divide one chooses to place oneself. The combination of national European leaders, led by France’s Nicolas Sarkozy and Germany’s Angela Merkel, and EU leaders, European Commission President Jose Manuel Barroso and European Council President Herman Van Rompuy, apparently believe the concerns of the EU as a whole outweigh the concerns of individual nations themselves. For them, the better path to eventual prosperity is to loan individual nations funds staving off bankruptcy, under the condition that such nations embrace severe austerity programs, which will theoretically reduce national debt levels to manageable proportions over an extended period.

The problem with this approach is two-fold under the best of circumstances. One, as Greece has already demonstrated, missing debt reduction targets precipitates more bailouts, which precipitate greater austerity, which lowers economic output, which makes missing future debt reduction targets more likely. Why the best of circumstances? Because as Greeks and other Europeans have amply demonstrated, severe austerity measures have been met with riots, strikes and other acts of violence, which are, unfortunately, a likely reaction by people long used to the sense of socialist-induced, self-entitlement nurtured in Europe for decades. Second, while bailing out a nation like Greece is relatively cheap, the trillions of dollars needed for bailing out larger EU nations, such as Italy, which may be forced into default if borrowing costs continue to rise, may be impossible amass, as a more detailed analysis here reveals.

The other approach? A partial or total breakup of the European Union, in which many or all of the EU nations return to their sovereign currencies. The currencies would then be devalued to make investing in the such countries more inviting. Doubtlessly, there would be fiscal pain, likely of depression-level severity, but at some point the markets would right themselves.

The potentially multi-trillion dollar question: which is worse: fiscal austerity and debt reduction targets mandated by the EU, or pain self-imposed by sovereign nations coming to grips with individual bankruptcies and re-capitalization? The most honest answer? No one knows for sure.

Yet perhaps the economic argument is secondary to the real one, not just in Europe, but in the United States as well. What the EU represents is the ascent of the kind of top-down, command-and-control bureaucracy that socialism’s champions inevitably produce. Yet what has such centralization of power–and money–produced? Entities that are “too big to fail.” Privatized profits, but socialized losses when those losses threaten not only banking systems and/or nations, but an entire continent as well. Crony capitalists protecting their interests with government’s help, and millions of people who feel entitled to a lifetime of well-being enabled by government, even as that government largesse bears no relationship to productivity and fuels massive amounts of deficit spending.

All of this undermines the fundamental notion of individual liberty. Liberty which is best served when government functions from the local level outward, not the federal or EU level inward. It’s as simple as understanding that it is far easier to get a stop sign installed on a corner in one’s neighborhood when one can call a local alderman–instead of a bureaucrat in Washington, D.C.

One may argue with Prime Minister George Papandreou’s intention of letting the people themselves decide their own destiny as an abrogation of responsibility on the part of the Greek government. But the idea that other Europeans see such an exercise in direct democracy as tantamount to heresy is quite revealing. Apparently Greeks are supposed to take the bailout, like it or not, and remain tethered to a supra-national bureaucracy in which failure must be eliminated, at virtually any cost (currently including bank recapitalizations and a scaled up European rescue fund), lest it become “contagious.”

Yet the possibility of such contagion reveals an uncomfortable truth about such interdependency: the “too big” in too big to fail is getting smaller every day.

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  • Larry

    Greece can't pay its debts, no matter how much slack it gets cut. It is as simple as that. The only way out for Greece is to default, in other words, declare itself bankrupt.

    Pouring more money in only delays the inevitable and makes the default much, much bigger.

    Italy could probably get out of its problems if they ditched the south, which is the money pit that sucks from the north and never produces anything, and Spain could turn itself around with a decent conservative Govt. Greece, however, is gone.

    • Fred Dawes

      You are right about Italy; but that will not happen.

  • Fred Dawes

    The big boy bankers have stolen 180 trillion dollars we all stand on the hill readly to fall off.
    The bankers are doing the same thing Right now to all of us. Stand up remove the governments and banker rats by tree and rope and we all can have a big party on the dead rats, as you see Greek you will see the world.

  • Herman Caintonette

    Greece should tell the banksters to take a long walk off a short pier, like Iceland and Ireland did before them. The alternative is the death of the West as we know it, and that probably would not be a good thing. The sense of disenfranchment is as universal as it is understandable; this quote should freeze your blood:

    “You’re speaking to someone who was a Greek, but I’m not a Greek anymore. We’ve given up everything—flag, traditions, family, pride—for money. There is no state, no borders. They brought in 4 million migrants so they could have cheap labor for the Olympic Games and created an unemployment problem.” …

    "As the authorities abdicate from policing parts of the city, the task of “keeping order” is assumed by vigilantes affiliated with the neofascist party Chrysi Avgi, or Golden Dawn, which last year won its first seat on the City Council. Chrysi Avgi patrols large areas of Athens, with the explicit or tacit support of many Greek residents and often of the police, staging pogroms against migrants and pitched battles with bands of anarchists who oppose them; on May 19 more than 200 people rampaged through the center, smashing shop windows and kicking or beating every dark-skinned man they saw while the police stood by. A young sympathizer described the group’s activities to me, proudly lifting his shirt to show a scar on his back inflicted, he said, by an Afghan with a knife. “We go into the basements where they have illegal mosques to check their papers, clear them out. They could be Al Qaeda; they could be anything. It’s not chance that they’re Muslims; they’re coming on purpose to undermine the country. There’s a plan, a secret funding mechanism, and there’s no state to protect us. The police are on the side of the migrants. We had to liberate Attica Square with our fists."

    The Nation is too PC to use the term "illegals," but fascism is on the rise in Europe, and a second Krystallnacht may not be that far away.

    "The story of the financial debacle will end the way it began, with the super-hustlers from Goldman Sachs at the center of the action and profiting wildly. Never in US history has one company wielded such destructive power over our political economy"

    "Goldman Sachs" is the lightning-rod. "Is it legitimate to think of Goldman as a Jewish firm? Messrs. Goldman and Sachs, who founded the firm in the nineteenth century, were Jewish, as have been most of its partners since then, almost all of its leaders, and its current CEO (Lloyd Blankfein)." … "Rush Limbaugh brought it up the other day. He said on his radio show that President Obama may be appealing to anti-Semitism with his recent populist criticism of banks and bankers. "There are a lot of people," Limbaugh said, "when you say banker, people think Jewish."… While there is enough blame to go around, the fact that the Jewish banksters at GS are at Ground Zero (they had their fingers in the Greek mess, as well) is decidedly problematic. The Nazis made scapegoats out of communists, trade unions (Team Horowitz hates them already), and Jews for a lot less the last time.

    OWS should be embraced, because the alternative is truly frightening. There will be a resolution to this imbalance of wealth; I'd prefer it to be reasonably peaceful.

    • Joe Doakes

      I read Mein Kampf too! Don't forget Nazi means National Socialist and you qualify. And Obama takes more Wall Street tnah all Republicans combined. Here's something you don't know, fool, and that is many Wall Street types (and most lawyers, who are Obama's second largest source of cash) are DEMOCRATS.
      P.S. Thank Barney Frankenstein for the FannieMae & freddieMac debacle. Just wait till GinnieMae hits the fan!!!

    • UCSPanther

      "A second krystallnacht may not be that far away"

      Sounds like you want to see the rise of another Nazi Germany. A lot of leftists loved those freaks in the years leading up to WWII…

  • crackerjack

    This is a crisis of Capitalism and the notion that the markets will regulate themselves.

    Without a global crackdown on finance "instruments" such as credit default swaps and subprime deals, that create trillions of virtuel cash, this crisis will just be passed on to the next soverign state in line, perhaps the USA, and its taxpayers.

    • Larry

      It's a crisis of socialism, with 65% of Greeks getting their prime income from the Govt, which has been running deficit spending for decades to provide for them. If Greece had actually had some capitalism it wouldn't be in the situation it's in.

    • Larry

      It's not a crisis of capitalism, it's a complete and utter failure of socialism.

      When over 60% of a population gets its income from the Govt, and the rest avoid taxes because they don't want to pay for the spongers, you get an economic meltdown.

    • Kevin Stroup

      A crisis of capitalism? Are you insane? These problems are caused by the government interfering with the so-called "free market". When the government forces banks to give loans to people who cannot pay them back (Freddie Mac and Fannie May) or bails out failing banks, how in the hell can this be called "free market"? Show me any aspect of business that the government does NOT meddle in? Just one. You cannot. Please be silent.

  • SHmuelHaLevi

    The Greek people must not cow to the Germans or anyone else.
    Regretfully many will suffer as consequence of the hegemonic plans into which smaller nations fell.
    Iceland and others correctly assessed the condition and performed as required.
    Good luck Greece!

    • Herman Caintonette

      Iceland got it right, Greece is getting it right, and OWS has it right. Salud!

      • Western Canadian

        Again, you demonstrate your utterly mind-boggling ignorance and stupdity. And you manage to be proud of yourself while doing so. Typical leftist loon.

  • WilliamJamesWard

    I wonder how long it will be before we are talking about New Jersey, Alabama,
    Ohio , California, Montana, Florida et. al.,…………………………..William

  • Gamaliel

    The biggest threat to liberty is that the lender China will take control.

    • StephenD

      No, they won't "take control" because they won't have to. We're practically giving them everything they want; trade agreements, their falsely deflated economy, silence on Human Rights, etc.
      Besides, if they got too pushy we could just go bankrupt. What would they do, come in and kick us out? Tell them we just aren't going to pay them anymore. What then? LOL

      • Herman Caintonette

        Moreover, China has its own housing bubble, which is in the process of bursting. They may (no one really knows, because their financial system is opaque) be in even worse shape than we are.

  • Robert A. Hall

    In WWII Budapest, it is reported that the Nazis (doubtless to the approbation of their Islamic admirers) would line up Jews who were chained together on a bridge over the Danube. They would shoot the more fortunate one on the end, who would fall into the river, dragging the others to their drowning deaths one by one. The US economy is chained to other economies, eventually to Greece, Spain, Ireland, and the rest of the EU disaster states. It’s hard to see how their collapse doesn’t drag the rest of us into the abyss with them. We are close to fiscal collapse, followed by political and social collapsed. Meanwhile, everyone in Washington is demanding, “Borrow what you must, tax who you can, but don’t cut me!” I will link to this from my Old Jarhead blog.

    Robert A. Hall
    Author: The Coming Collapse of the American Republic
    (All royalties go to a charity to help wounded veterans)
    For a free PDF of my book, write tartanmarine(at)

  • tagalog

    I wish Greece well, and I hope that they will have the integrity to get out of the European Union and deal with their economic problems effectively outside of the so-called "Eurozone."

  • Mr Myxplyx

    Re: Herman Caintonette: I've read your unintelligible and bigoted rantings for several months now. It is obvious to me that you are a PC bigot of the worst sort, and an anti-semite to boot. You also casually attack anyone who dares to either speak about or criticize Islam. You also know nothing about economics. The "banksters" did not bankrupt Greece and neither did Jews; their socilaist gov't did it. In Europe, banks are ATM's for gov't spending. Since greece can't print it's own money, Greece prints bonds, which they then sell to euro banks. They receive the money, they damn well know they can never pay back.

    • Herman Caintonette

      Since I've only been around for a week or so, you are quite obviously a liar. But don't let mere facts get in the way of your unintelligible and bigoted rant.

      • Western Canadian

        You may have been reducing the level of discussion on this (and probably numerous other boards) for only a week or so, but the absurd number of your ill-informed and utterly pathetic rants, has made it seem much, much longer than that. He is not quite obviously a liar, but may have just read your posts (sickening experience that it is), and has assumed the seeming months it takes to go through them, and the massive waste of time they are, would naturally seem to be much, much longer.

  • Mr Myxplyx

    Churchill was correct when he said socialism works until you run out of other peoples' money. Greece has been living off of the rest of Europe's money; they did it to themselves; they have no one to blame but themselves and their wasteful, profligate spending. Germany should tell them to go jump off a cliff. Germany is economically responsible; Greece was not (& still is not). The biggest threat to European liberty (if there's any left) is the unelected bureaucrats in Brussels, who decide every matter big & small. They even regulate the size of lawn mowers. Capitalistic democracy works; socialistic democracy is an oxymoron.
    P.S. Herman Cain is a decent man. Your vile user name is a denigration of his character
    and his family. A more accurate nom de guerre for you would be: Josef Goebbelsonette.
    You dopn't know what you're talking about, you make vile comments and spread disinformation; you are anti-semitic & you also practice character assassination. Don't forget Nazi means National Socialism, and you qualify.

  • ebonystone

    Both the EU and the Eurozone were mistakes from the start. Responsible Europeans turned over control of both their borders and their finances to the least responsible members.

  • Hercules

    Here's another illustration of how social welfare spending can produce disastrous results. While Neville Chamberlain was Chancellor of the Exchequer and the Prime Minister of Britain, Churchill was warning anyone who would listen about the sinister provocations coming out of Nazi Germany, that if Hitler were not confronted in time Europe would go to war and Britain was not prepared militarily to do so. GB had adopted socialist welfare by then to the extent that Chamberlain refused to fund the military buildup that Churchill was advocating. He preferred to delude himself that Hitler's voracious appetite would eventually be surfeited. GB very nearly collapsed from the German onslaught in the Battle of Britain. Its salvation was probably one of the miracles that sporadically occur in history. Because of its committment to 'social justice' and 'economic equality' England didn't have enough money to protect itself against the German Monster. Socialism nearly resulted in its extinction. Its depredations are about to be inflicted on the socialist coteries in Europe and the US for the same reason: exorbitant, irrational entitlement spending.

  • Hercules

    European countries have surrendered their national sovereignty to supranational elitists. The citizens of these countries are that much further removed from those who increasingly govern them from afar. Their national legislatures and governments will cede more powers to the Euro Elitists who created this grand scheme not for anyone's benefit but their own. At least the Greeks will get a chance to decide whether to be completely enslaved or only to be ruined financially. They may be the last peoples in Europe to ever express their feelings on an issue which the elitists will insure is never again subject to any referendums by plebeians. Americans once revolted against monarchists and plutocrats. It may happen again but the results will not resemble those of the American Revolution, but instead the French and Russian Revolutions.

  • mrbean

    Listen my non colleagues and learn. we do not live in a capitalist society but rather in a mixed economy comprising elements of both a free market and government control. As capitalism is the system of freedom and rights, it cannot be mixed with socialism and remain free any more than food can be mixed with poison and remain nutritious. Quasi-governmental entities like Fannie Mae are a manifestation of the poison of socialism in our society. In a free market, Fannie Mae would have crumpled under its own ineptitude and corruption long ago. But in a mixed economy, a few cronies in Congress is all it takes to secure the taxpayer-funded bailout that will keep Fannie afloat until its next crisis. It is not capitalism that we should blame for today's headlines, but rather the destructiveness caused by government interference in the economy. If these problems are ever to be resolved, the markets must be liberated from the poisonous mixed economics of government controls.

  • Herman Caintonette

    "The reality is simple, though rarely admitted – except maybe by Yiannis, who seems to know exactly what’s happening. The “bailout" of Greece is really a bailout of big European banks. A game of smoke and mirrors leads us to think that Greek indolence led to financial ruin. The Greeks have done some things wrong, to be sure. But it was a dangerous mix of stupid economic theories and high-flying finance, fueled by a corrupt government, that exploded the economy. If all this sounds sickeningly familiar, it should. We’re witnessing Round 2 of the Great Global Shakedown by the banks."

    Maybe the Greeks will have the cojones to tell the banksters to take a long walk off a short pier. The PIIGS should all Invoke the Romney Rule, and let those on the wrong side of CDS's to take a scalping. The sooner that Goldman Sachs goes bankrupt, the better off everyone will be, as the big money men will be the ones taking it in the shorts for a change.

  • Herman Caintonette

    citizen65: "So where does your hatred of the Jewish people come from?"

    Have you stopped sodomizing your children? A yes or no answer will do.

    I reject your unexamined premise: that refusal to support the land-theft deal known as "Israel" is necessarily anti-Semitic. Unlike you, my position would be the same if the Zionists had been displaced by the Palestinians. Under Anglo-American law dating from before Magna Carta, the right to use lethal force against an oppressor in defense of one's lives and liberties is absolute, and the moral responsibility for any death lies at the feet of the oppressor. How is that in even the slightest way "anti-Semitic?"

  • Western Canadian

    Your constant smears of israel, such as the ‘land-theft deal’, alone are prrof that you are ill-disposed to jews. Your response? Typical alinsky.

  • StephenD

    "when more than 50% of the people become recipients of the government dole, there is no longer a corrective mechanism available to re-introduce fiscal order…" And this is why it is only FAIR that the right to vote; the right to have say in how OUR money is spent should only be available for those that put into it. If you pay no taxes you should have no say on how it is spent. Sorry. I'm not "blaming" you for being poor. Should I have a say in how you spend your money? Of course not. Neither should you have a say in how my money is spent. No Taxes ~ No Vote. THAT will cure the problem you speak of my friend. The only ones that will willingly suffer through the necessary austerity measures will be those of us that are paying into the system.

  • PhillipGaley

    In part, the two-pronged problem which your rationale and this article fails to mention has to do with the fact that, in division, the national problem is not that, a relatively few "fat cats" have siphoned off some few billions, rather, that, a great many of the lesser known "fat cats" who constitute the public bureaucracy are continuing to siphon off way too much in wages, benefits, and retirements. The public sector employees now gobble up an inordinate and unsustainable amount of GDP, but they have "jobs", and they will be voting and, according to you, are to have the say-so, which exacerbates the problem of the dog eating its tail for which "austerity" is supposedly designed.

    In every nation, it is as though the dog has caught its tail, is eating it, and wants the producers to pay the medical costs, costs for vacations to salve the pain and suffering, and increase of their wages, the while, . . .

    The vote of public sector people should be appropriately limited, . . . as it once was, . . .

  • StephenD

    Even so; with the Public Sector folks able to vote, there isn't enough of them to adversely influence the necessary changes. Add them with those taking a chunk out of "Free America" and you've got yourself a fierce voting block. I give you…the Democratic Party.

  • Herman Caintonette

    Islam is not really a high-priority concern for me. The Muslims I have met on both hemispheres are decent and lucid, which is more than I can say for some of the truly unhinged Christians and hyper-Orthodox Jews I have encountered on right-wing nutter sites. Fortunately, I've had plenty of interaction with sane Jews, and I know why most of them want nothing to do with the Rocky Horrorwitz Paranoid Show.

  • Western Canadian

    Your constant comments on islam demonstrate a level of ignorance that is almost frightening. Either that or you are a follower of mo, and are a liar. No third alternative. Your ignorance and bigotry towards jews and christians, strongly suggests the latter of the two. Or you are just a hate filled jerk when it comes to the basis of western culture.