Greekonomics 101

Until recently, most of us Americans knew Greece as the birthplace of Western Civilization (and an idyllic Mediterranean tourist spot.) Now there’s doomsday talk of Greece’s debt crisis causing another global recession, or a collapse.

But let’s set aside the apocalyptic rhetoric, and see what Greece’s problems can teach us about managing debt.

It starts with the euro. In 2002, Greece switched from its national currency, the drachma. By doing so, Greeks and the Grecian government could borrow money easier— they now had the stability of the European Union behind their economy.

So what did the government do? Not surprisingly, they spent. They spent a lot. They hosted the 2004 Olympics and spared no expense. Wages in the public sector nearly doubled.

Was government spending the problem? The Solvency Shark doesn’t want to enter a macroeconomic debate, but he would like to point out that spending what you can’t pay back never works.

And how do governments pay back loans? Two ways, like anyone else— cutting spending, and collecting taxes (or wages for us regular folks.)

The problem with Greece was that tax evasion was something of a national past time. And worse, the government didn’t seem to notice it, or even try to slow down their spending. So they had less money coming in, and more debt piling up.

See where this is going? It’s like taking out a mortgage based on your old salary after you’ve gotten a pay cut. There’s no way that it can work.

Then came the Great Recession, and Greece found that it could no longer get its easy loans, which meant it had to dig deeper into tax revenue to support itself.

But… jobs were being lost, so more citizens required benefits and had less tax income to give. And to top it off, the government overestimated its assets.

So today Greece has 400 billion dollars in debt, and less than 50 percent of a chance that it can pay it off.

So where’s the problem? Dishonesty. The crisis could have been prevented (or detected sooner) if the government had been honest about what it had in the bank.

Denying economic realities means paying for them later, threefold.

Alexander Carl

Alexander Carl

I find it difficult to brag about myself. Too modest? Perhaps.

Anyway: my name is Alexander Carl. I am a recent graduate of the University of North Carolina at Chapel Hill, where I spent four blissful years earning a degree in Communication Studies. Now I face the real world of economic downturns, student loans, and the absence of “academic” camaraderie.

Yet I refuse to be bummed. My economic philosophy is to live simply, save, and maximize whatever I can. Consumer culture is undeniably pervasive, but you don’t have to sell your soul to co-exist with it— there is great power from using your economic resources wisely.

I started writing when I figured out how to hold a pencil. Since then I’ve written short stories, poetry, screenplays, and have blogged. In fact, three of my screenplays have been produced into short films, two of which I directed. I’m no stranger to the media, having served as a DJ at a freeform radio station and worked as a crew member for live TV.

Pastimes include traveling (I’ll visit virtually anywhere), swimming, jogging, hiking, and hunkering down with a good movie.

Overall I’m a peaceful person, though not in a creepy New Agey way. I get my energy from music, good conversation, and the outdoors (I was an active Boy Scout, earning my Eagle). I consider myself “inquisitive” and “wry”, and for the sake of autobiography I’ll assume that I am.
Alexander Carl

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