Greeks still in denial that they can keep spending other people’s money with no consequences

Greece is about to tip over. The stupid socialist idiots running the place still think they can keep using other people’s money without there being any consequences.

They are wrong and about to find out just how wrong they are.

Allister Heath explains just precisely how bad the situation is for Greece.

Tragically, Greece itself is now very close to the brink. It is set to default on its €1.6bn payment to the IMF on Tuesday and its referendum will determine whether or not it quits the euro, or if it is able to cling on for a while longer.

There are generally four steps to social and economic collapse. First, the middle class loses access to its money, either because the banks shut or go bust in a mass, uncontrolled manner. Second, food and supplies start to run out in supermarkets as foreign suppliers slash lines of credit or domestic companies are banned from sending cash abroad.

Third, the state starts printing money uncontrollably, and hyperinflation sets in. Fourth, the lights start to go out, with power cuts and a generalised failure of the infrastructure. This process has now started, and could easily spiral out of control.

Greece is very much at step one, though it could end up in stage two much more quickly than many realise. In the short term, the public will probably put up with the limits on how much cash they can withdraw.

One week isn’t that long; and the money is still theirs. But businesses, as well as individuals, are also being affected, and it is here that the constraints could bite most dramatically over the next few days.  

A special committee has been set up to vet all significant corporate deals that involve spending cash abroad; but the bureaucracy involved in such a demented act of central planning is clearly extraordinary.

There is simply no chance that there will be enough time and manpower to process every transaction; and that means that it will soon become harder for Greek importers to purchase the goods and commodities that the public needs. At some stage, this will lead either to much higher prices or, if price controls are imposed, to crippling shortages.

If Greece votes yes on Sunday, the government will collapse and the EU will once again have succeeded in removing a government it doesn’t like. If Greece votes no, it will be out of the euro, at least in practice, this time next week. This will trigger stage three of the collapse: a new currency will be issued — perhaps in the form of state IOUs — and it will immediately start to depreciate against the euro.

When it becomes obvious that Greece no longer remains in the euro, the state will legislate to redenominate all euro assets and liabilities into the new drachma, which by now will be collapsing very quickly, while formally defaulting on what’s left of its euro-denominated debts. This will trigger another massive set of bankruptcies and ensure that, for a time at least, no foreign company will want to deal with a Greek company.

With nobody within or outside the country inclined to trust the government, the new drachma will plunge and the price level, measured in terms of the new currency, will start to shoot up.

At the same time, the banking system, which by then will no longer be propped up by the European Central Bank, will collapse, with all banks shutting indefinitely. By then, stage four will kick in: the public sector will down tools and key utilities will stop working, triggering all out social and economic chaos.

The rich can mitigate the effect of enforced bank holidays, capital controls and hyperinflation by holding assets or cash abroad; the very poor don’t have much to lose in the first place. It is always those in the middle — and especially what Marxist intellectuals call the petit bourgeois, the aspiring, hard-working workers and savers — who are hurt the hardest.

They will have worked hard to build a life for themselves, and will find it intolerable to see it all snatched away. These are grim days indeed for Greece.

Margaret Thatcher was right when she said that the problem with socialism is that eventually you run out of other people’s money to spend.

Everywhere around the world there are examples of socialism failing and yet the poor fools clutch to the dogma. It has never worked anywhere, yet still they persist.


– The Telegraph

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