Friday, June 17, 2011

Indebtedness

The drama that is unfolding in Greece is an exemplar of that cliche, 'a slow motion train wreck'.

Everyone 'knows' that a sovereign default is high likely but everyone is in denial.

As you push back the likely default, it both becomes more likely and its consequences become more awful to contemplate; thus, you push it further back, trapped in a vicious circle or, more likely, a downwards spiral.

I have every sympathy with the protesters at one level - this is not a crisis directly of their own making. The political class of all persuasions has conspired to have Greece live beyond it means and with entry to the euro make it less possible to escape the consequences through devaluation.

But at another level methinks they protest too much - anyone who knows Greece knows the collective collusion of a bloated state and a tax evading public. If the British sin has been easy but expensive credit and a mass religion of shopping, Greece's has been imagining that you can be employed by the public sector while somebody else is not paying for it (unless maybe it is an EU subsidy).

Meanwhile, at a meta-level, virtually nothing has been done to mend our financial architecture to either resolve our current difficulties or prevent future crises.

I am all in favour of pumping money into the system (if invested in the right places, as Keynes, noted to generate future revenues) rather than imagining that you can cut yourself out of a deficit (as if a government budget behaved like a household one). But at the same time you have to change the architecture of finance - making it, once again, as boring as a utility for making and doing things in a real economy (rather than speculating on itself).

At the moment, we appear to be pumping money in one end and taking it out at the other - like pumping up a punctured tyre without  ever repairing it and wondering why everything remains precarious!

If ever there was a time for political leadership this was it but we appear to have abdicated to the unfathomable mysteries of 'the market' (not apparently realizing that it is something made by human hands) served by that strange priesthood called 'economists' whose language has the coherence of the failed builders of Babel!

2 comments:

  1. First time I've actually read your blog Nicholas. Intelligent work. Enjoyable to read. I'll start paying more attention. cjr

    ReplyDelete

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