Greece and Europe: Lessons for America

The opening of a new Tom Hanks movie this past weekend got me to thinking how Forrest Gump would analyze the current Debt Crisis in Greece and what it portends for the United States. Gump, you’ll recall, could get right to the essence of life.

The Greek citizenry is in the streets of Athens armed with Molotov Cocktails.  They don’t understand and virulently oppose the austerity measures that the Greek Parliament just imposed. Greece teeters on the brink of economic collapse.  Its banks will soon fail in the absence of an enormous injection of cash from the European Union and the International Monetary Fund.  And the EU and the IMF will not come to the rescue unless Greece imposes severe austerity measures.

Income, property, and excise taxes will be increased by billions of euros.  Public sector wages will be cut by 15%. Social Security will be cut, means tested, and the retirement age increased by four years.  Health spending will be cut by 2 billion euros by 2015.  Only one in ten retiring civil servants will be replaced.  And the Government will be forced to raise additional money by selling some it its prized national assets such as its gambling monopoly, its stake in Athens Water and Hellenic Petroleum, as well as ports, airports, mining rights, state lands and pristine beaches.

It ain’t a pretty picture.  And the Greek people, long in denial, are coming to the party long after it’s too late to forestall Armageddon.  Forrest Gump would look at this and say, “Stupid is as stupid does.”

In case you haven’t noticed Greece is not alone.  Sovereign debt crises have also infected Spain, Portugal, Ireland and England. And the banks that are the most exposed to the risk of a Greek default are in France and Germany.

Any chance the contagion could come to America?   From late 2007 until well into 2009 the United States experienced a punishing recession.  Credit markets froze up, housing collapsed, unemployment skyrocketed, the FED had to inject over a trillion dollars that we didn’t have into Wall Street banks, more than $14 trillion in personal wealth vanished, and the stock market tanked.

Today the nation is more than $14 trillion dollars in debt and by August 2^nd the full faith and credit of the Government will be breached.

But not to worry.  The President won’t risk a second term by proposing cutting Medicare or Social Security, while the Republicans and the Tea Party won’t permit any increase in taxation.  They are able to get away with what amounts to treason because we permit it. Thus, we need a gimmick in order to continue our destructive national denial.

We need to learn from Greece. How about we sell the Los Alamos National Nuclear Laboratory to Iran in a Fire Sale?  They would and could pay our $4 trillion asking price.  And once they began to install it near Teheran, the Israelis would bomb Iran back into the Stone Age. The $4 trillion fixes our budget crisis and at last we’re rid of our real enemy in the Middle East.

Stupid is as stupid does.

LeRoy Goldman

June 30, 2011

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