- The 'Attack" On Greece

By now any reader of this blog knows all about the impending Greek referendum. Or maybe it isn’t impending… who can tell. The Byzantine nature of Greek domestic politics obscures and clarifies it second by second.

Michelle Cabruso-Carerra who has been camped on a roof in Athens with a CNBC film crew watching the riots for the last three weeks, made an excellent point this morning. She thinks the Greek people will approve the referendum (and remain a part of the Euro) because there hasn’t’ been any runs on the Greek banks. It seems to me it could just as easily be that the Greek banking employees are all on strike and you can’t have a run on a bank that doesn’t’ open – but she does have a point.

Still, to get a perspective on this issue you have to think about it the way that the Greeks do. There is a substantial portion of the Greek people who believe that this would all work out just fine if it weren’t’ for all the greed of the foreign bankers. The ruling party in the Greek parliament is the socialist party for god’s sake. It’s a world where Nancy Pelosi would be considered a right wing radical, and Barak Obama is viewed as being entirely too comfortable with free market solutions.

In Greece, Spock always has a Goatee.

For people like that, the ‘bailout’ isn’t viewed as a bailout at all. It’s viewed as a foreign power imposing their control over a peaceful people through global finance. In their minds, it’s just a small step short of direct military intervention. Socialists are all a little fuzzy about cause and effect anyway. So to them, the fact that they borrowed more money than they could ever hope to pay back isn’t a problem at all. They were ‘entitled’ to that money. It was their right!

The problems began when the evil and greedy bankers began demanding that the money be paid back. But for that act of aggression, all in Greece would still be paradise, according to them. The cartoon above is an example of their view. To them the rest of the story is just petty details which interfere with the heroic narrative. Leftists don’t like details, but they love heroic narratives, so that’s what they’re focusing on.

Ask me to bet on the referendum’s outcome, and I’d bet on Greece leaving the Euro. And the reason I’d bet that way is that I have an absolute confidence in the ability of leftists to always make the choice that will harm their interests the most. They’ve been on the wrong side of history 100% of the time. The only real question is whether staying in the Euro would hurt them more than leaving.

My thinking is that the thing that will hurt them the most is whichever options puts the control of decision making in the hands of the people who are furthest to the left. In Greece’s case, that means local control and an abandonment of the Euro. After they return to the Drachma they’ll have Zimbabwe style inflation for a few months before the fabric of their society begins to fully unravel. Governments will rise and fall. At least one (but maybe several) military coup’s will take place. And eventually Greece will find itself excluded from the global capital markets (except at prohibitively high rates) and local misery and despair will be the order of the day.

The local leftists will blame it on others, as they always do. Who that is exactly is anyone’s guess. Whoever is most convenient probably. They don’t work any harder at finding scapegoats than they do at anything else. And while they preside over Greece’s descent from modern nation to pre-industrial cesspool, to a totalitarian nightmare ruled by a (probably crazy) military strongman, they’ll claim it was all someone else’s fault.

As to Michelle-CC’s claim about bank runs, I think it’s entirely possible that everyone in the country with the economic literacy to see that far down the chain of cause and effect, has already taken their Euros out of the banks. Their black market economy is so big already that the banks don’t exactly represent a full snapshot of what’s going on there. And it has probably never occurred to the union members, the communists, the 38 year old students, and the 47 year old retirees who represent the vast majority of the Greek population, that leaving the Euro would have any effect on the value of their savings.

I can’t really be sure about the referendum (that either is or isn’t happening), because the odds are very close to 50-50. But I can be sure that whichever way the vote goes, it’s that route which would mean the worse outcome for the Greek people. They aren’t so much running off the cliff as they are staggering off it. They’re stumble half blind toward the illusion of a rainbow that’s hanging off in the sky. They have a half century of economics to learn, and no interest in learning it. They prefer the fantasies of the 19th century instead.

But I’m sure they’ve got nothing to worry about. The unicorns will certainly catch them as they fall.