"Money For Nothing..."

Debt as a Percentage of GDP (2010) Wikipedia

I have to say that its totally fascinating to watch the events in Greece unfold.

Here's a country with a huge sovereign debt which it cannot realistically repay (in 2009 Greece had a debt equal to about 125% of its GDP or some half trillion Euros).   Yet here are Greek youths and government workers out in the street beating on the police because of new government "Austerity Measures" - an effort by the Greek government to make some realistic cutbacks and payments on this debt.  (Click on the image at the right to zoom in and see Greece's debt.)

Over the last few decades Greece's economy has been growing - but not as fast as the efforts of its citizenry to cheat the country of revenue through a variety of means.

So now, with the country in effective default, the citizenry literally takes up arms against the government because the government is planning to reduce the benefits available to the citizenry.

Never have the Dire Straits lyrics "Money for Nothing, and Your Chicks for Free" had more meaning - except its no longer the 1980's.  Yet the Greek MTV and subsequent generation does not like the prospect of life without "money for nothing..."

So what's a 30 year old Greek undergraduate to do?  No more free tuition, free housing, free food, no more freedom to live off the credit of Greece in banks around the world.

Now, I would think that it should be clear to the Greek people that if their economy goes under the value of all the free tuition, food, benefits and so forth would simply go away - there would be no jobs, no opportunity, and, most importantly, no future.  No future to use that partially completed college degree for.

So what are they rioting for?  More debt?

I guess it would seem so - clearly they do not want to stop living as they have been - so no other conclusion is possible.

The problem is that much of the Greek debt is held by European banks - after all, who would have thought that a sovereign nation would be irresponsible and not pay its debts?  These European banks have their credit ratings tied up with this debt - hence a default by Greece may well lead to their own default.  And many countries, like France, have so many banks with so much Greek debt that they themselves may in turn face a financial crisis.

Now, interestingly, Greek ranks 22nd out of the 192 or so countries in the world in terms of the Human Development Index (HDI - where higher ratings mean a longer life expectancy, better food, living conditions, and so on).  The rest of the world's HDI looks like this:

HDI by Country (Greener = Better, Orange, Red, Black = Worse)

What's interesting here when comparing the above map to the one at the top of the post is that in general the higher the HDI the higher the debt.

So, one could conclude that HDI is acquired by borrowing money.

But borrowing money from whom?

Certainly not central African countries which themselves have no debt.  No, instead it would seem that the borrowing to create a high HDI comes from borrowing money from other high HDI countries.

In fact, upon reflection, its like a giant sovereign Ponzi scheme.  Greece can borrow from other countries to create a fabulous standard of living for itself without having the means to repay.  Of course they make interim payments so that it looks like they are solvent - but in the end they don't have the goods to pay - and their kind-hearted citizenry spits on their own countries obligations to others.

Sadly, the next dupes on the "money for nothing" list, France, stand to lose their collective shirts should Greece default.  Most other countries want to further extend Greece's obligations.  But France, face with its own potential default in the face of a Greek default - sees the writing on the wall - and wants to make them (the Greeks) eat their own debt...

The most striking revelation to me is that the wonder of advanced "human development" seems so tied up with sovereign Ponzi schemes - the US, with one of the highest HDI's - has unfunded debt obligations on par with Greece - as do many other high HDI countries.

Now the most interesting thing about all of this is the color of Asia (China, Russia) in the top map.

No debt- at least as compared to the the high HDI countries.

Now, as well as borrowing between each other, HDI nations also owe China big money (a trillion in sovereign debt the case of the USA alone, for example).

So good old China busily monkeys about with its currency so that it owes no high HDI country money while effectively creating huge account receivables (in foreign trade) with the rest of the world while simultaneously loaning them money so they can buy yet more Chinese goods at inflated prices.

When the debt sh*t hits the fan in the rest of high HDI countries and the defaults start to topple their economies like dominoes where will China be?

In charge, of course, holding trillions of world debt and receivables which it will collect on when the chips are down.  Since their own economy is not bound up in foreign debt (well, it is, but since they are owed receivables on trade and own sovereign debt in 90% of the rest of the world they will be in a good position to collect (and, after all, they do have an army, satellites, nuclear weapons, and all the rest...).

Gosh, wouldn't it be nice if our government and citizenry thought like the Chinese instead of the Greeks?  But no, just look at Wisconsin, Governor Walker, and the Greek-like demonstrations about debt this past winter.  This is just a preview of the future - debt riots over money for nothing.

Perhaps those loans on expensive college degrees could be paid off by working in China...?

Perhaps those teachers in Wisconsin (my home state) should be teaching the kiddies Chinese instead of how to draw mocking pictures of Governor Walker - then perhaps they will have a real future.