Hi everyone, welcome back! This is Bess Byers, Greek Goddess of the Fiscal Fridays. For thousands of years we learned from the Greeks, architecture, mythology, the Olympics and War, but over the last few years we’ve learned something else, eventually you can’t bailout.
Greek citizens rejected bailout terms by international creditors on Tuesday and the country defaulted on a $1.7 billion debt repayment to the International Monetary Fund.
How does a first-world country like Greece default on a multi-billion dollar loan?
The January ’99 intro of the euro tied 19 nations into a single currency monitored by the European Central Bank, but left budget and tax policy at the discretion of each country.
The 2008 crash hit Greece hard and by ’09, the country admitted understating deficit figures. In 2010, and headed towards bankruptcy, the European Central Bank, European Commission and IMF intervened with a $264 billion bailout.
Bailout conditions included major budget cuts and tax hikes, but even austerity measures couldn’t save this big, fat Greek crisis.
On Wednesday, the Greek Finance Minister requested a third bailout in exchange for immediate action on taxes and pensions.
If Greece leaves the EU they’ll return to their original currency, the drachma. This would result in a GDP decline, unemployment increase and overall political unrest. However economists believe the dip is temporary.
As politicians scramble, Greek citizens suffer. Starting Monday, banks imposed $66 daily withdrawal limits resulting in long lines and empty ATMs.
I’m an American 6,000 miles from Athens. Why does their crisis matter to me?
Ian Daily of the Mises Institute nailed it in his comparison of private and government debt.
Private debt is a choice made by the citizen. They can review the terms, decide how money is spent and agree on repayment. Government debt, however, is repaid by citizens through taxes. Tax evasion results in prison. Current debt is another name for future taxes, and citizens do not control the terms of this loan.
The Greek Crisis should serve as a wakeup call. US Treasury Secretary said Greece’s “debts are not sustainable.” Ironic? America, like Greece, cannot sustain high debt indefinitely. Millennials will bear the tax burden of Social Security, endless wars, Obamacare, public pensions and every other *free* program, whether they like it or not. When high debt is paid, or defaulted, it’s citizens who foot the bill.
Merriam-Webster defines slavery as “the state of being owned by another person.” What about being owned by the State? Americans are so divided over feelings from a flag, yet we’re missing a major issue that unites us all: mounting national debt. Politicians need to implement financial reforms now, before we learn another lesson from the Greeks.
This is Bess Byers signing off, and remember, it’s your generation and you’re empowered!