Monday, May 3, 2010

Greek Lessons

For centuries, the Greeks have been some of the greatest educators in the world. Their philosophers like Socrates, Pythagorus, Aristotle, Plato and my favorite Agrippa the Skeptic helped to found the basis of modern math, the scientific method, democracy, and ethics. Aesop used the fable to teach lessons of morality and practicality. And now the Greeks are teaching the world the dangers of government debt.

Greece--in a word--is beyond broke. Their national debt is 113% of gross national product--meaning they could take every Euro produced by their citizens this year, and it still wouldn't cover the national debt. Greece also has to borrow 13% of their annual budget to cover its deficit.

Greece is a Keynsian-based economy--with giant Federal Government spending meant to prop up the economy, and huge entitlements and pensions that created massive structural deficits that the government no has no hope of ever reducing without gutting programs. Federal employees work 12-months a year--but get paid for 14 (the 13th and 14th Month "bonuses"). It didn't help that the government lied about its deficit when it joined the European Union (claiming to be at 5% when it was actually 12%).

Now that the Global Recession has crippled the private industries--mainly construction and tourism--there isn't nearly enough Federal money available to keep the Greek economy afloat. To keep the Eurozone solvent, Germany and other EU countries are coming in with a huge bailout--opposed by most of its residents. Unfortunately, other socialized economies in Spain, Portugal and Ireland are in just as bad a shape and really can't afford to help--setting up a potential "domino effect" in Europe as country after country goes broke--pulling down their economic partners one-by-one.

So let's take a close look at our Greek teachers one more time. Let's avoid making the mistakes of putting so many people on the public dole, promising entitlements that we cannot ever hope to pay for, using Federal spending as a "stimulus" for economic growth and digging ourselves deeper and deeper into debt.

Maybe Aesop should have written the fable of the Socialist and the Capitalist.

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