Knowledge Fight Interactive Search Tool

Jan. 26, 2015 - Freedomain Radio - Stefan Molyneux

26:54

2894 Socialists Take Greece: What This Means For Europe - And You!

Greece's far-left Syriza party swept to power supported by voters opposed to the terms of the nation's international bailout. Under Syriza, the Greek Government will refuse to pay bondholders what they are owed, which is similar to what happened in countries like Cyprus and Argentina. The European Central Bank will be threatened to buy up Greek debt under the threat of default: Pay up or the Euro dies!

Large

Audio Only |

Scroll

Time	Text
	Hi everybody, this is Stefan Molyneux from Freedomain Radio.
	I hope you're doing well.
	So if you've been following the Greek elections, you'll know that the socialist-slash-communist coalition has gained control of Greece.
	It still remains to be seen whether they get the 150 seats that they need for a clear majority, or whether they will continue to build the coalition that they've been working on for the past 10 years to gain power.
	This is, in my opinion, a turning point in the economic, and as is so often the case with an economic turning point, a turning point in the political fortunes of Europe, and not for the better.
	Of course, there are leftist coalitions all throughout Europe that are cheering in the streets tonight as the grip of the unbelievably undead zombie called Marxism continues to rise from the grave just when you think you've hammered a stake through its heart.
	It's like the end of that horror movie when you're walking away from the grave and the hand comes up and takes down another culture, another country, and another civilization.
	The people who have gotten into power in Greece today are unrepentant socialists slash Marxists.
	One of their chief economic advisors is an out-and-out Marxist, a PhD in economics.
	He's done papers on Das Kapital, and we will get to some of his astoundingly wily coyote paint a tunnel on the side of the mountain and run through it approach to dealing with these problems.
	But let's just do a brief history and Of course, Greece joined the euro in 2001 and immediately got access to cheap credit.
	See, in the free market, the more risky it is to lend to you, the more people are going to charge for lending to you, and that's what slows down your borrowing.
	That's how it's supposed to work.
	But of course, when Greece gave up its own currency, the drachma, and adopted the euro, It got access to cheap credit.
	Germany's credit rating AAA, Greece hovering around CCC, completely calamitous crap.
	I think I'm not a technical economist, but...
	They got access to cheap credit, largely because they were more responsible nations in the Euro.
	And what happened?
	Well, the Greek government went on a massive, unprecedented spending spree.
	$7.5 billion for the 2004 Athens Games.
	Now, after 2004 audit, Greece effectively admitted that it lied.
	To get into the euro.
	The Greek government's deficits had not been below the 3% of GDP since 1999 as the euro acquired.
	They just took stuff off books.
	They hid stuff and lied to get into the euro.
	And then their spending went on a massive decline.
	Splurge Fest.
	And they just spent like crazy.
	There are people all over Europe who are like, hey, let's go to Greece.
	Let's get a job in Greece.
	They have the most incredible benefits.
	I mean, what could be better than what Greece has to offer?
	And this stuff was kind of...
	Irresistible to everyone, and of course it seems that Greece had broken through the magical barrier of mathematical and fiscal reality and had mounted its way into the stratosphere of Harry Potterland magic finances.
	Let's just take a moment here.
	We're going to look at the...
	Greek government debt to GDP. This is a percentage of the GDP, so America is hovering around 100 if you don't count unfunded liabilities and so on.
	Greek government debt to GDP, this is from 2004 to 2014.
	So roughly, debt to GDP is your debts versus your income.
	So if you make $50,000 a year, And you owe $50,000, then you have 100% debt to GDP, analogous debt to income.
	And if you make $50,000 a year, you owe $10,000, you have 20% and so on.
	So here you can see that the debt to GDP It was 98.6 in 2005, 100, 2006.
	It goes up and up and up and then just goes completely haywire and was just going completely off the charts.
	Now, I want you to understand if you look at 2010, 129.7%, 2011, 146%, 2012, 171.3%.
	So, not far off from a doubling in eight years.
	Well, that's what happens when you get access to easy credit, when the costs of your borrowing are subsidized by more responsible people.
	And so, this is what is called, with a straight face, this is what is called austerity.
	Austerity is, from 2012 to 2013, the debt to GDP went from 171.3% to 156.9%, which was still way higher than anything that had come before.
	So this is really, really important to understand.
	So austerity sounds like monk-like.
	It sounds like you're living on, you know, your kitten cat food and water that you collect in a bucket outside your house.
	This is all nonsense.
	It's not.
	This is like somebody who's been eating 10,000 calories a day, going down to 9,600 calories a day and saying that this is a starvation diet.
	This is just how ridiculous what is called austerity really is.
	And of course, every time that this socialist party, this communist party is referred to, they're referred to as anti-austerity, anti-bailout, and so on.
	Whereas, of course, everyone who's right of somewhere between Karl Marx and Leon Trotsky is called a far-right Nazi-based idealist, ideologue, and so on.
	And this is just the way...
	That it is.
	And the Greek government basically went bankrupt around 2010, and they got bailed out by the European Central Bank, which basically was everyone in Europe, plus some money printing.
	And this, of course, exacerbates and prolongs the problem.
	It's called enabling, right?
	Since 2010, despite these supposed austerity measures, Greek debt to GDP has increased by 35%, which hit a new record in 2014.
	So Greece went bankrupt, and what did Europe do?
	Well, it tried to deal with a country going bankrupt by giving it the largest loan in history.
	It's madness.
	Now, it now owes more than $350 billion, not just to the European Central Bank, but to the International Monetary Fund, other European governments, and private investors.
	Now, what's causing this crisis right now to the European Central Bank in particular?
	Greece owes...
	27 billion euros or about 30 billion dollars in the form of bonds that were bought by the central bank in the open market back in 2010 and 2011.
	So, of course, as you know, governments issue bonds, buy $100 worth of bonds and we'll give you $105 next year or whatever it's going to be if it's 5% interest.
	It's a way of lending money to governments.
	People who buy bonds are just guaranteeing future tax increases because, of course, the government doesn't make any money.
	The only way they can pay you more Then what you give them is by raising your taxes or printing money or going into debt or some unholy trinity of all three.
	And under the former European Central Bank president, Jean-Claude Trichet, the Central Bank bought these bonds to lower Greek interest rates because nobody was willing to lend to Greek except at fairly ruinous interest rates, which is supposed to be the relatively soft landing and the relatively restrained way of slowing down government spending as you keep raising the price of lending to that government and then they will slow down their crazy spending.
	But the European Central Bank bought these bonds at very cut rates to drive down the price of lending to Greece.
	Now, of course, a lot of these bonds are coming due.
	There's a principal repayment of 3.5 billion euros, and other 3 billion euros are going on.
	And so John Milius, a self-described Marxist with a PhD in economics and magic, says the ECB, European Central Bank, can do a lot of things.
	One solution could be a swap.
	So what he says is, in exchange for the bonds currently held by the ECB, that the Greeks have to pay on, Milius wants to give the central bank a different kind of bond, which is called a zero-coupon perpetual.
	And the fact that people can say this stuff with a straight face is amazing to me.
	A zero-coupon perpetual is a bond that pays zero interest.
	For the entire duration of the bond, which in this case would pretty much be forever.
	And anybody who offers zero coupon perpetuals, if you're in a restructuring situation, they're generally referred to as, and snarkily referred to, but accurately, as wallpaper on otherwise known as Zimbabwe trillion dollar bills.
	Now, Milius, our fine Marxist economist friend, says, oh, no, no, the European Central Bank will totally get paid back.
	So we'll pay you back once the economy has grown so much that the country's debt-to-GDP ratio falls to 20%, down from the current level of 174%.
	Milius calculates this would only take...
	58 years.
	He's written a whole paper.
	We'll put the link to it below.
	And this really should be what should happen for all indebted Eurozone countries.
	So, you know, next time you have trouble with a visa, you can't pay your visa bill.
	Just write a note to them back saying, listen, I will write something that this note bears you.
	You can get the price of what I owe you, dear Visa, in 58 years, but don't charge me any interest in the interim.
	Just see how that works.
	So, what's happened over the past five years since the financial crisis, a quarter of the economy in Greece has been wiped out.
	Unemployment is above 25% and 50% for young people.
	And the average income losses for Greeks is about 30%.
	And that is, you know, heart goes out.
	That is tragic stuff.
	That is brutal stuff to have to live with.
	And, of course, all the young people, well, a lot of the young people with brains and ambition have fled from Greece elsewhere.
	The median age in Greece is 42.
	I said 42!
	Sorry for those Greek people who can't hear.
	And, of course, the median voting age is even older and continues to become so, and this is the usual socialist horror show where the elderly and the aged eat the young.
	And the odds that...
	When the crisis hit, there was going to be any impetus or approach to free market principles, to privatization, to regaining control and privatizing the currency and so on.
	There isn't even a Greek word.
	For libertarian.
	People don't even believe that there is such an ideology.
	In fact, there was a study that was done with Greeks.
	They put this line across and they said, you know, answer these questions about, you know, do you want more redistribution in your society, like government redistributing income, or do you want more freedom?
	And half the Greeks refused to even put themselves on that line because the idea...
	That there's any such thing as a trade-off is incomprehensible.
	I mean, this is the magic and reality that they've been brought and breaded to For decades, if not generations, and this of course is incredibly tragic from Greece, the birthplace of philosophy, for them to believe that they can have their cake and eat it too.
	I guess that's the price you pay for murdering Socrates 2400 years ago and never really understanding what kind of curse he was going to put on you for that slaughter.
	I mean, good heavens!
	I mean, even the Catholic Church apologized for torturing the aged Galileo, 400 years perhaps too late.
	So, who's got in power?
	Well, Siritza is the name, it's an acronym, which means the Coalition of the Radical Left, and the former socialist and communist parties.
	And so this is the kind of stuff that they're putting out there.
	I mean, they pump out the fogging promises to people like mustard gas on a World War I battlefield, except the death isn't quite as quick.
	Under this, the Greek government will refuse to pay bondholders what they're owed.
	And this, of course, is what happened in Cyprus last year, a year and a half ago.
	And this is what happened in Argentina.
	They simply stopped hanging.
	Argentina, of course, one of the great tragedies of 20th century economics.
	Up until the 1930s, Argentina had the same per capita income as America and then slid down the same socialist sinkhole as is taking down so much of the rest of the world.
	And so, if they're not going to pay the bondholders, and of course, one of the biggest bondholders, I imagine, is the European Central Bank, what's going to happen?
	Well, there are a number of Greek banks that are on the verge of bankruptcy, because, of course, there's a fear.
	With the socialists coming in, everyone wants to grab their property and run.
	I mean, you know, it's like Gollum slinking around a fishmonger, you know, he covers up the halibut.
	And so, billions and billions of dollars have left.
	Greece and Greek banks are creating fears of a bank run, and what's happening is the Greeks are saying, well, the new party has these slogans and these promises that they're not going to pay their bondholders, and this is a huge problem, could hugely destabilize the euro, which of course has recently plunged in value considerably.
	And so, they can very easily say to the Eurozone countries, hey, that's a nice little currency you got going there.
	It'd be a real shame if something happened to it.
	Now, how about you subsidize us some more?
	What do you say?
	Now, they also think that the European Union should fund a massive job creation program to combat this 25% unemployment rate and 50% youth.
	They also want banks to write off debt for those who can't pay for it, including mortgage debt.
	The Greek government would provide up to 30% of mortgage payments.
	These socialist communists also want to nationalize The banks, and they want to provide free electricity and water to people who can't afford to pay for them.
	They're going to nationalize electricity and water production.
	They're nationalized railroads, airports, mail, other subjects, free health benefits for low-income, homeless, or unemployed people.
	They want to double public health care funding, nationalize the remaining private hospitals, We're good to go.
	So this is going to be the usual socialist horror show of controlling, managing, and herding the tax livestock to make sure nobody tries to tear off a leg or two getting through the barbed wire fence of increasing regulations.
	Now, at the beginning of this year, the Euros hit a nine-year low against the dollar, and this is investors who were just nervous about the possibility of these bunch of economic primitives getting into power and fulfilling their promises.
	And this is why people are trying to get their savings out.
	January 16th, it was announced that all four of Greece's largest banks have filed for emergency liquidity assistance to prevent potential bankruptcy.
	Bloomberg estimates that withdrawals have exceeded 7 billion euros since speculation on these snap elections began.
	The Greek stock market is also tanked after the snap elections were announced and investors began fleeing the onset of Marxism.
	It was the worst fall since 1987.
	The leader of Saritza, Alexis Tsipras, has been...
	Oh, you see, he wants to run an economy, so the most important thing that you want to be able to do, or the most important thing on your resume if you want to run an economy, is to have never participated in any meaningful way whatsoever.
	He's been an activist his whole life.
	He's been organizing and participating in protests since he was 17.
	He joined the Greek Young Communists Society in his late teens, been a part of various Marxist movements and political parties since then.
	In a 2008 interview, Tsipras said that he admires Mao Zedong's political writings and believes the idea behind the Chinese Cultural Revolution was very important.
	There was a huge lack of freedom in communist regimes, but at least they had humanity at the center of their thinking.
	Humanity.
	Cultural revolution was, let's let a thousand flowers bloom.
	In other words, he was trying to lure any dissidents out of the woodwork, and then anybody who questioned or opposed or was skeptical towards...
	Chairman Mao's communist dictatorship were imprisoned, tortured, slaughtered, murdered by the millions.
	Chinese intellectual class was virtually decapitated.
	French scholars have estimated that the death toll of Chinese communism was 65 million people.
	65 million people.
	That's a World War II and a half.
	That's more than 10 holocausts.
	And, um...
	That, to me, would be more important than the fact that he's anti-austerity, as if austerity is even really occurring in Greece.
	I mean, if you imagine a European politician saying this about Adolf Hitler, well, there was a huge lack of freedom, sure, in Nazi regimes, but at least they had humanity at the center of their thinking.
	I mean, a man's either completely ignorant or a complete sociopath.
	Well, to be fair, he could be both.
	And he's been called Harry Potter.
	There's just magic.
	You know, we can give you all these free things and it's...
	I mean, it's madness.
	It's completely ridiculous.
	It's beyond insane.
	I mean, from 1946 to 1949, the Greeks fought and won a civil war against communist insurgents, and now they've elected basically a communist party.
	Yay, victory!
	And, um...
	I just want to leave you with a few final thoughts.
	I mean, joking aside, this is wretched and terrible and brutal stuff that is going to be occurring.
	These are the lights going out across Europe, and I do not know whether we shall ever see them lit again in our lifetime, to paraphrase Churchill.
	The shrinking of human potential that endlessly occurs when you are promised free things is a wretched, horrifying sight to behold.
	Murderous people, sociopathic people, control freaks and manipulators of every kind will always try to bribe you into submission and it is a tragic failing of the human soul that we are so tempted to give up liberty for temporary tchotchkes, for goodies, for the bribes which are unsustainable.
	Most people sacrifice enormously for their children.
	When the government comes in, that all just seems to vanish.
	It seems to just fade away.
	People are just, give me, give me, give me, gives me that, gives me that, give me that.
	And they know that they can't sustain it.
	They know that their children are going to suffer for it.
	But for some reason...
	These men and women who get up at night and nurse their babies when they have colic or when they have fever and take them to the hospital and take them to whatever the equivalent of Little League games is in Greece and other Eurozone countries, the parents who really do their best to take care of their children allow unbelievable levels.
	of debt to bury the future of their children.
	Do your homework, study well so that when you graduate there will be no jobs but rather a smoking crater of the former economy we were supposed to manage.
	You know, people say we borrow the environment from future generations and I think there's real truth in that.
	Equally and perhaps even more importantly for without wealth there cannot be environmentalism.
	We also borrow the economy from future generations.
	And that's something that really does not seem to be remarked upon much.
	When someone offers you something for free, they are asserting their authority over you, and they are tempting you with the avoidance of work and personal responsibility in return for them providing you something they stole from you.
	And this is a very, very important thing to understand.
	The degree to which our consciousness of ourselves as powerful, grand, important, vital and valuable human beings, independent, free, proud, the degree to which that gets eroded when we are endlessly offered free things.
	It's like water wears away stone.
	It's brutal what happens.
	Somebody who offers you something for free Is infantilizing you.
	They're taking a parent-child relationship with you.
	I mean, I don't charge my daughter for her meals.
	I don't charge her for playtime with me.
	You've got to get a face painter over and they'll charge, but parents don't.
	So being on the receiving end of an offer of free electricity, we'll subsidize your loans, we'll get your debts gotten rid of, we'll get you free help.
	I mean, they're putting you in the position of being a helpless child.
	And it is tragic that a once proud race, a once proud nation, and really the inverted pyramid foundation of so much of Western culture, I'm sorry, it's true.
	Listen, O Greek people, O European people, I'm telling you this.
	Free market economics have been around for hundreds and hundreds of years.
	You cannot fail to have heard of people like Milton Friedman.
	I mean, nobody's asking you to get into the Murray Rothbard But you will have heard of these free market economists.
	You will have heard of libertarians.
	You will have heard of Ron Paul.
	You will have heard of people who have striven mightily to bring education about the values and virtues of freedom to your shores.
	And as the birthplace of the New World, it was your ideas of freedom that first set the ship of state sailing to freedom.
	Freedom in the West.
	And the degree to which this has all been lost and forgotten and buried is really tragic.
	Governments have come with warning labels, particularly in Greece, ever since the time of Socrates.
	They made him drink hemlock.
	They said he was corrupting the young and failed to believe in the gods of the city, and they slaughtered him.
	They killed him.
	And he warned about the state.
	And Plato warned about the state.
	He said, we shall not have peace until the kings become philosophers or the philosophers become kings.
	That there was a dearth of wisdom among the high and mighty and powerful.
	Socrates and Plato and Aristotle.
	I mean, Plato had to flee.
	He was sold into slavery for attempting to get into politics.
	Narrowly escaped with his life.
	In Greece, of all countries, the warning labels that have been permanently affixed to the flags of the state have been visible for thousands of years.
	A smoker with those pictures of lung cancer and emphysema and a smoker can't say, I didn't know.
	I didn't know that giving all this power to the state was going to have a bad outcome.
	I didn't know that selling off the precious gift of freedom from force for the sake of some vitamin shots, maybe a flu shot and some rent subsidies, was an unwise idea.
	I didn't know that imagining that the government had any money of its own to give me was a bad idea.
	Everybody knows the government has no money.
	Everybody knows the government prints money or borrows, lies, cheats, and fustigates.
	I mean, the Greek government themselves said in 2004 after the audit, yes, we lied, to get into The European Union, because it was a lot easier to rest on Germany's AAA credit rating than to actually restrain our own spending and tell the truth to our population.
	So you Greeks, you have been thirstily drinking from this black fire hose of political lies for at least a decade.
	At least a decade ago, they told you they lied about money.
	I really, really feel sorry for what Greece is going to go through.
	But at the same time, There was an ancient Greek saying that will describe the next generation.
	Even the gods cannot break this rule, say the Greeks.

▲