by Eric Margolis: Into
Africa – Uncle Sam Goes Colonial
A lot of angry
Greeks must be recalling 1922 when a military coup overthrew the
incompetent royalist government that had just lost a catastrophic
war with Turkey and seen over a million Greeks flee Asia Minor.
men arrest the cabinet, tried them and then had most of them shot.
Last week rumors of a military coup swirled around Athens.
But the tragi-comedy
in Greece, as it gets no closer to rescue from financial disaster.
So why should
330 million Europeans face a financial and likely political meltdown
for the sake of 11 million profligate Greeks?
The best thing
for the Greeks and for Europe is for Greece to be asked to quietly
leave the Euro club. That’s the simple, brutal solution to the current
financial crisis that is threatening to tear apart the European
Union and provoke a global financial crisis.
As the old
New York expression goes, "first loss, best loss." Meaning,
the longer one delays taking a loss, the worse it gets.
recall, wriggled into the 17-member Euro zone by faking its accounts
and falsifying economic and tax figures. The EU closed its eyes
to these frauds because of a desire to unite all of Europe.
So, it seems,
did Italy, which currently owes money lenders $2 trillion and must
borrow $300 billion this year alone just to service its gargantuan
Italy’s awesome debts has now begun, as Prime Minister Silvio Berlusconi
– who has done a pretty good job of managing unmanageable Italy
– clings to power by his well-manicured finger nails. Unlike the
EU’s mostly dreary leaders, at least "il Cavaliere" has
style and panache.
other nations, Romania, Bulgaria and Cyprus, were also admitted
to the EU for similar bad reasons. Greek Cyprus is in the Euro zone;
Romania and Bulgaria are not, though euros are widely used by both
and political crisis has infected Europe and threatens to ignite
a banking crisis as destructive and dangerous as the 2008 collapse
of Wall Street’s Lehman Brothers.
It’s very sad
to see this disaster. For me, Greeks are delightful people: fun-loving,
zesty, smart, hard-working. The problem is that many of the most
capable, industrious alpha Greeks long ago decamped to the US, Canada,
Australia and the Mideast to escape their corrupt governments and
unfriendly business environment. Greeks own many of America’s restaurants
and the world’s ships.
in Greece were too many lazy public sector workers and do-nothing
bureaucrats who owed their sinecures to political patronage. Dynastic
political clans rotated in power, weaving Byzantine intrigues as
the economy went to the dogs.
and conservatives both stuffed government with supporters to buy
their votes. Since few Greeks paid any taxes, Greece’s corrupt political
class had to borrow from abroad to keep the lights on in Athens.
lemming bankers poured into higher-yielding Greek debt, heedless
of the dangers, believing the old truism, "governments don’t
go bankrupt." But they do.
no austerity, there is no way Greece can ever make good on its debts
unless Europe uses financial smoke and mirrors to sustain its massive
borrowings. Few Europeans, however, are eager to support Greece’s
"dolce vita" when they themselves face growing austerity.
Besides, Greece will never be able to pay off its debts from tourism
and exporting olives.
out of the Euro zone will obviously create a huge explosion. Many
Greek banks, which are also active in the Balkans and Cyprus, will
go under. There will be runs on the banks by panicked Greek depositors.
Greek trade will be disrupted. Russian banks will be shaken.
bankers, particularly the French, will suffer major losses on Greek
public and private debt. They deserve it. The banking fools who
piled into Greek debt should be fired.
swallow bitter medicine. Doing so is absolutely vital if the poison
of too much debt is to be purged from Europe’s sickly body.
must be broken, both in Europe and the United States. Time for cold
the scourge of Europe but now hailed as its potential savior, will
have to join France in shoring up banks that are holding pots of
Some big banks
should be nationalized, if necessary. If too big to fail, they are
a national security risk and must be either taken over or broken
Now is a good
time to take action. The Greek debacle should be used by governments
to break the power of the bankers by imposing taxes on financial
transactions, heavily taxing banker’s unseemly bonuses, and sharply
limiting bank’s ability to lend more than they hold in assets.
Just this past
week, the shocking collapse of Wall Street trading firm MF Global
showed that even after the 2008 crash, US federal regulators have
utterly failed to assure the financial system’s safety.
We learn that
MF Global had leveraged its capital 35 or even 42 to 1, the same
perilous ratio that brought down Wall Street’s titans in 2008. That
means MFGlobal lent out or invested $35-42 for every dollar it held.
That’s crazy Las Vegas behavior and a formula for disaster.
In the United
States and many other nations, the cost of borrowing money is tax
deductible. This unwarranted subsidy to borrowers encourages the
dominance of finance over manufacturing, and encourages reckless
risk-taking. It has allowed big finance to buy politicians in the
US, Britain and Europe.
to the Greeks. They will be fine on their own once the poison of
debt leaves their system. Greece, always a poor nation, tried to
live big like North Europeans – on credit. Greeks should go back
to their former slower, more modest Mediterranean ways.
the dear old drachma, make Greeks work again at home, and relearn
to live within their means.
Meanwhile, those wild and crazy Italians are starting to eclipse
the disaster-prone Greeks. And don’t forget about bankrupt America,
now running on cash life support from China and Japan.
him mail] is the author of War
at the Top of the World and the new book, American
Raj: Liberation or Domination?: Resolving the Conflict Between the
West and the Muslim World. See his
© 2011 Eric Margolis
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