News commentary and predictions of political trends and what the future holds

Economic Maladies

June 23, 2011

The Greek Tragedy threatens to engulf Europe in a contagion of defaults, resulting in loans from other countries / investors not being repaid.

Does economic isolation logically follow a default? Would you lend to someone who never repaid their debts? Moreover, when a default occurs the overseas assets of the nation could be repossessed or nationalised by the creditor nation. Unable to borrow funds to finance Government spending could only be financed by printing money. And economies that inflate in this way render their currency meaningless. Like Zimbabwe.

The problem is that the trade between nations is the driver of economic wealth. The sudden cessation of the ability to import would hamper the capabilities for business growth as well as indulgence in the luxuries we can import. Exporting would also be limited as one could not expect payment from an erstwhile business partner to whom billions are not repaid.

Unemployment and criminal activity would follow.

So how can spiraling economies like Greece recover? When the bulk of Government spending is an ingrained bureaucracy without inherent value that can be exported, it does not provide much scope for a means to recover. And how does the unprecedented levels of imbalance become rebalanced?

The inherent force by which China forces its human economy to produce exportable goods for little pay has enabled it to outdo the West through sheer economic force. It is a flaw in values that money is a relativistic means of exchange, that economic prosperity can be distorted by risk to the degree it has and that greed should be the rationale over which economic decisions are reached.

Gambling produces nothing except increased risk. The only path out of this mess is to confront what is real, not what is imagined.

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