Letter: Greece, its debt and obligations
The Greek debt crisis should be seen in a slightly different light. Does the European Union decide to reward a country for its bad behavior or not? The media and many officials of political organizations liberally use the term “forgiveness” suggesting debt owed by Greece to the International Monetary Fund and European countries, with Germany as a major lender, and the banks within, be reduced or forgiven. The benefits include an ease to the pressure on Greece to change its policies toward early retirement, generous pensions and a bloated entitlement system, enabling past practices to continue. What is ignored is the source of the funds: the lending. Media refers to the lenders as the banks or foreign governments implying these institutions are independent sources of money and can afford, because they make so much, to take the hit, suffer the loss and move on without a significant impact on their future. Where does the money Germany or the banks or the IMF come from? Think about it.
Banks lend the money they receive from depositors. Depositors place earned money in banks to have it grow. It takes hard work and time to generate just $1 of savings. The value of that $1 is more than what it appears on the surface. It is reflected in education, hard work, dedication, loyalty and living within one’s means to generate $1 that can be saved and allowed to earn on its own. It might take $1 million to save $1. There is a threshold amount as dollars first earned are applied to activities of daily living — the needs for food, shelter and clothing. Then comes raising children and a few personal luxuries. Savings is a sacrifice with the objective to making what excess you can generate earn for you. It is a worthy objective and must be protected. Banks are entrusted to protect deposits and thus the depositors funds. Banks lend to earn for their constituency. When they take a loss, the depositors lose, as well. Greece, its government and its people, are asking those who have worked hard and saved to suffer so they will suffer less. The term “bank’ is a deflection of the truth, as the people of Greece are asking you and me to suffer for their inefficiency, their greed and their government’s failures.
Governments receive funds from people who pay taxes. We all know that and have felt the impact. If you make money, you pay taxes — the government preferring your excess funds in their hands than in your savings account. After taxes, you may save what you can. If governments lend to Greece, they are lending tax dollars. If the government forgives debt, then to make up the loss, they need to tax their people further. Governments have budgets, too, some ignoring the balancing act that most citizens must conduct to avoid personal bankruptcy. Thus, Greece is asking others to tax their citizens instead of Greece taxings its citizens, or both Greece and others taxing further, to enable Greece to skate from meeting its total obligations.
Greece far exceeded a normal appetite when borrowing from third parties and engorging itself. It now wants the better life of others to be less good so that Greece’s life can remain better. What’s better for Greece isn’t better for others. If Greece returns to the drachma, it might realize that to restore its credit it still has to do extensive soul searching and find a way to pay its debts. How else would it be credit-worthy? Ideological Greece is incompatible with the ideology of the European Union.
Regardless, would you extend credit to anyone in Greece? Visa, Amex and others will find it a daunting prospect to make loans to people, regardless of the interest charged, that have tasted the prospect of borrowing without a need to repay. Governments or banks that increase their lending at some point will have to give thought as to what was required to produce the funding enabling them to make loans. To whom are they responsible? It is their people!
There is more to gain by forcing Greece’s exit from the euro. Do not let the pigs continue to eat at the trough of the producers.
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