I’m done with Greece.
I was getting sick of it last week and now I’m really done after doing some research: First of all, Greece’s deficit (as we discussed last week) is a shocking 12% of their GDP and their national debt is 120% of their GDP (ours is about 100% now so something about glass economies and stones comes to mind) BUT, their whole GDP is $343Bn so we’re looking at a grand total of $41Bn to completely bail them out this year – the boyz at Goldman probably took about that much home in bonuses just betting on Greece to fail!
Do we really believe the $16,000,000,000,0000 EU economy is going to go down over $42,000,000,000 (0.26%)? Kind of hard to imagine when put in perspective. Of course it’s not just Greece, there’s Spain, Portugal and Ireland, although Ireland was last year’s worry with a $100Bn debt that they ended up fixing themselves by tightening their belts. For the Greeks, it’s more a matter of is there a will than a way as Greece has long been the EU’s least productive economy (followed by Portugal), which has historically made them uncompetitive with their northern cousins.
All it would take to fix Greece ($343Bn GDP) and Portugal’s ($220Bn) deficits is for Germany ($3,235Bn) and the UK ($2,200Bn) to buy a few extra Greek and Portugese goods and the factories would be humming again. The two countries each have about 1M people out of work (10% of the population) and if we assume 5% is close to full employment then we’re just talking about employing 1M people. Even if we pay those people $50,000 a year each, that’s “just” $50Bn and suddenly, everyone in Greece and Portugal is back at work, off the dole, paying taxes (iffy in Greece) and contributing to the GDP, which fixes the deficit.
$50Bn is just 1% of the GDP of Germany and the UK and back to 0.3% of the EU’s GDP. Hell, the global markets have lost $4,000,000,000,0000 in the last two weeks worrying about this $50,000,000,000 – THAT’s the magic of Credit Default Swaps – we get to leverage relatively small and correctable global problems into market catastrophes so fast that heads of state don’t even have time to call a meeting before the bankers have slashed and burned their economies.
So I was leaning this way at the end of last week and, now that I’ve had a chance to dig into it, I’ve decided it’s…
