Running out of other people’s money …

Markets worldwide are tanking today because of the financial crisis in Greece. 

In very short, extremely simplified strokes, Greece is out of money. Because it’s in the Eurozone and has the Euro as its currency, it can’t just print more Euros. It’s already borrowed billions of Euros from the central banks, has no way to pay that back, and wants more bailouts. 

Stronger economies in the Eurozone – like Germany – wanted concessions from Greece before they coughed up the first round of relief. Those concessions included austerity measures such as fixing a corrupt and largely ignored tax system, reducing government spending, pension reform, and privatizing some government assets. In return for those concessions, Greek debt holders took a serious haircut of more than 53%, and Greece ultimately got almost €250 billion in bailouts. 

However, the Greek people rebelled. Accustomed to generous early retirement entitlements, a corrupt and laughably ineffective tax collection system where almost 25% of the GDP is off-the-books, and massive government spending on public works projects to boost employment, they decided they weren’t willing to give up anything. 

In a snap parliamentary election, they elected a government that flat refused to honor the prior agreements made to secure all the bailouts. That government’s leaders said they would make those agreements subject to a popular referendum, and that wouldn’t happen until well after a deadline set by the European Central Bank (ECB).

In essence, the new Greek leaders were going to ask the Greek people if they wanted to cut their own standard of living, pay higher taxes, and take smaller pensions.

Yeah, that's not likely to happen. The ECB – so far – is deciding to keep its purse strings closed.

And world markets are tanking.

So why am I even bringing all this up? 

Because this is our future.  For everyone here who sees Europe as the shining example of what the US should aspire to be, they should take another hard look. Greece, Spain and Portugal are all in the same situation, and for pretty much the same reasons. 

To paraphrase Maggie Thatcher, socialism and government-driven economies are great until they run out of other people’s money. Greece is running out of other people’s money.  We as a nation are also running out of other people’s money.

We cannot afford to fund a socialist utopia where everyone is cared for by the government from cradle to grave, with free healthcare, free college education, subsidized food and energy prices, early retirement with generous government pensions, and protection from job loss.  We can’t keep giving away the store with tax breaks and tax credits to just about everyone. We can’t afford welfare programs that spawn generations of dependence. And we can’t use massive government spending on public works projects as a substitute for real economic growth.

At some point we will run out of other people’s money, as Greece has.

We are well on our way.  Our voting public is electing leaders who promise to keep the gravy train rolling, no matter what, whether that’s through pork projects at the state and local level, increasing public sector employment, awarding overly generous benefits and pensions to government workers, sweeping new entitlements, or ever-expanding tax breaks and credits. 

It makes no difference which party is in power, the result is always the same: higher government spending and fewer people and businesses paying taxes.

Our politicians are no different from those Greek politicians who mortgaged their country’s future for short-term political gains. The result of their actions will be similar as well. 

The only difference between the US and Greece today is that our government is papering over the widening gap between revenues and expenditures by printing more money and selling more of our debt to the Chinese. Our Federal Reserve and most international central banks keep downplaying our financial house of cards, probably because if they conceded that our debt is out of control it would set off a worldwide depression. So mums the word.    

For now.    

Greece gave the world the concept of democracy.  It’s now giving the world yet another example of what happens when democratically elected politicians sell out their country’s future to appease an electorate that votes exclusively for its own self interests.       

Sound familiar?