The Financial Nightmare of Greece

Finance 101 is something I can teach every fifth grader: When you buy something, you have to pay for it. Either you pay for it right away, or you pay for it later at a lot higher price.

That, essentially, is the problem in Greece playing itself out with riots and deaths as protestors fight that basic logic of going in debt. When full pension retirement comes in the mid 50s, their utility company loses money, taxes are low, they have a huge underground economy, and massive social programs are so-called “free,” eventually the tab comes due. That’s now.

There was a protestor quoted yesterday as saying they’re being bled to death. No, that’s just stupid. You’re being forced to pay for what you and your countrymen have enjoyed for decades that your country never could afford – period.

Greece owes hundreds of billions of Euros to bond holders, lenders, and other governments. Now they’re asking for more and more bailouts. But others have money – the Greeks don’t. So, if I’m borrowing money I get to set the rules. Same as when we apply for a loan. YOU don’t set the terms – the lender does. You can say no, but you don’t get a vote in the rate, etc.

Right now, Greek bonds are at 30% for two years. Imagine that! That’s how risky the investment world thinks Greece is. And the $17 billion the European Union is asked to advance right now is just to cover the next few months! It isn’t solving a thing but treading water. But they won’t write the cheque if the Greek government doesn’t sell their money-losing public utility, increase tax rates, and do some other austerity measures.

When there’s financial trouble, whether it’s you, me, or governments, you can see it coming years in advance. Ignoring it means somewhere down the road, it’ll be hugely painful. Greece is there. The US has another two or three years, based on the estimates of a number of experts.

One thing you can bet on is that the Greek government will fall and there’ll be an election. And the next party elected will be one that’ll promise to ease up, reduce taxes, and the likes. People want to hear what they want to hear. Even today, Greeks are still in denial. I would suggest they haven’t learned. But then, I’d suggest we also don’t learn from others until we, as individuals, are in the same place. How sad. How stupid. How unnecessary.

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