Oxi! Greece’s 9.0 Earthquake, by Robert Gore
It is impossible to overstate the significance of Greece’s “Oxi,” or No vote. It puts into stark relief a simple proposition: governments propose, the citizens whose labors fund them dispose. In this case the government in question was not the Greek government, but supranational institutions: the European Commission, the European Central Bank, and the International Monetary Fund, known collectively as the Troika. It is symbolically fitting that in a simple exercise of direct democracy, voters in its cradle rejected the Troika’s proposal of rescue loans without debt relief, coupled with a package of reforms. Leaving aside questions of fair dealing—neither side has clean hands—the vote shows that the financial foundation of government does indeed rest on the consent of the governed. Beyond the immediate chaos and longer-term ramifications, it was this realization that prompted the hysterical panic, prior to the vote, of the powers that be, in Europe and beyond. After the vote, panic gives way to terror.
Not that they should be surprised. History is littered with regimes in which the productive people who were to support the rulers’ grand schemes, burdened with too much debt and taxes, said “Oxi”. The joke in the old USSR: they pretend to pay us and we pretend to work. Usually there is no vote to register the sentiment—there certainly wasn’t in the USSR—but when work is punished rather than rewarded, people stop working and governments collapse. The Greeks watched their economy shrink and unemployment climb under Troika-mandated austerity, and were facing decades of debt servitude. A default and exit from the EU will be no picnic. Alexis Tsirpas' Syriza socialists will get acquainted with the realities of no credit (unless Russia or China comes through), reinstatement of a drachma that nobody inside or outside Greece will trust, and only what it can generate in economic activity going forward to fund their redistributive proclivities and the rest of the government, assuming Greek aversion to paying taxes can be overcome. In other words, Greeks will be starting from zero, but in their collective judgement, zero is better than negative—clawing out from a deep debt and austerity hole.
The key word here is repudiation, and the way is now clear for the government of Greece to repudiate hundreds of billions of euros of debt with the clear support of its citizens. For a breakdown of potential creditor losses, see “How a Greek Default Could Hammer Bonds, by Carl Weinberg” SLL, 7/5/15, and “Good On You, Greece—But Don’t Waver Now (Part 2),” by David Stockman," SLL, 7/4/15. For a description of the financial ripple effects, see “Crisis Progress Report (8): Acceleration,” SLL, 7/2/15. There is indeed a limit to how much debt and taxes can be piled on the serfs, in Greece and elsewhere. Governments propose; the serfs dispose, and the Greeks may have just disposed of not just a mountain of debt, but the whole creaky apparatus of the EU. They will serve as an example for other political parties across Europe—now termed extremist but perhaps soon to be mainstream. Will youth in developed countries around the world, faced with shrinking economies and bleak job markets, but also charged with paying their elders’ “entitlements” and servicing their elders’s debt, get ideas? Don’t bet against it.
SLL is going to venture out on a limb and predict that the Greek vote represents two apexes: peak debt and peak government. The people have spoken. Congratulations, Greece.
Not that they should be surprised. History is littered with regimes in which the productive people who were to support the rulers’ grand schemes, burdened with too much debt and taxes, said “Oxi”. The joke in the old USSR: they pretend to pay us and we pretend to work. Usually there is no vote to register the sentiment—there certainly wasn’t in the USSR—but when work is punished rather than rewarded, people stop working and governments collapse. The Greeks watched their economy shrink and unemployment climb under Troika-mandated austerity, and were facing decades of debt servitude. A default and exit from the EU will be no picnic. Alexis Tsirpas' Syriza socialists will get acquainted with the realities of no credit (unless Russia or China comes through), reinstatement of a drachma that nobody inside or outside Greece will trust, and only what it can generate in economic activity going forward to fund their redistributive proclivities and the rest of the government, assuming Greek aversion to paying taxes can be overcome. In other words, Greeks will be starting from zero, but in their collective judgement, zero is better than negative—clawing out from a deep debt and austerity hole.
The key word here is repudiation, and the way is now clear for the government of Greece to repudiate hundreds of billions of euros of debt with the clear support of its citizens. For a breakdown of potential creditor losses, see “How a Greek Default Could Hammer Bonds, by Carl Weinberg” SLL, 7/5/15, and “Good On You, Greece—But Don’t Waver Now (Part 2),” by David Stockman," SLL, 7/4/15. For a description of the financial ripple effects, see “Crisis Progress Report (8): Acceleration,” SLL, 7/2/15. There is indeed a limit to how much debt and taxes can be piled on the serfs, in Greece and elsewhere. Governments propose; the serfs dispose, and the Greeks may have just disposed of not just a mountain of debt, but the whole creaky apparatus of the EU. They will serve as an example for other political parties across Europe—now termed extremist but perhaps soon to be mainstream. Will youth in developed countries around the world, faced with shrinking economies and bleak job markets, but also charged with paying their elders’ “entitlements” and servicing their elders’s debt, get ideas? Don’t bet against it.
SLL is going to venture out on a limb and predict that the Greek vote represents two apexes: peak debt and peak government. The people have spoken. Congratulations, Greece.
