Back... again!!!

For a variety of reasons I lost the will to write anything for a while… again… not the first time, won’t be the last… in fact… this will be one of those times… I think… well… something like that!

But I could not help but mull over the same old stories and consider, mainly for myself, how can this, the current debt crisis, be exaplained to people in a language they might understand. Thing is, I’m not entirely sure whether it is even more complex than I imagine in which case it’ll be even harder to try to make simple.

I find it increasingly difficult to balance the rhetoric that I listen to. On the one hand, most people, in the UK at least, are in work. They get up every morning, they go to work, they do their job and they come home. The money they earn goes to a bank account and bills get paid. Granted, they have not had much in the way of a pay rise for some years and the cost of everything else is erroding the free cash they have so spending on the new tv and a holiday in Oz is having to wait!

At the same time, credit is getting harder to come by. The banks are still lending but only if you have a really good credit rating. Not that anybody real ever checks, its all done by computer that checks other computers and a number comes back that determines whether Mr Bloggs gets his new jeans or not!

Most companies have, by now, revised down their forecasts in line with reality and reality is coming around to their way of thinking and obliging by hitting the downward estimates. Let’s not bother with the whole viscious cycle, or spiral, about less spending on goods, means less emlployees, means less spending, means less spending on goods argument… er… fact… not now!

Unempoyment is increasing, inflation is holding steady but relatively high against base rates, consumer spending is falling, savings are increasing (on some measures at least) and in fact being eroded as inflation is many times higher than even the best available rates… so not much point actually saving at the moment. That’ll be the first tricky issue to explain to people. You know that £100 you put in the building society for a rainy day… well in a years time it will look like £102 but in fact will only buy £96 of goods compared to todays prices… so why not buy them now and then you’ll have enjoyed them for a whole year.

And the Prime Minister wants you to pay off debt. Not a bad idea, for the individual, in principle… only if you pay off your debts (including the really big one you didn’t know you had but it is *your* debt whether you like it or not *and* you enjoyed spending it at the time only now you decided to ask where it came from when somebody asks you to pay the bill…) then you will have less money to spend on *stuff* and if you don’t buy *stuff* then somebody will be added to the unemployment figures… and maybe it will be you!

So… is the answer spend our way out of trouble… hmmm, well, what happens there then. You want a tv but you don’t have the money, you borrow, you get the money coz the computer says yes and you buy the tv. The money gets ditributed and a factory worker in Sheffield writes a letter to you thanking you for keeping them employed for two more days!

Your credit card bill comes and you can’t afford to clear all the debt so you roll some over. The rolled over amount is subjected to an interest rate that even the power companies would like to understand how anybody actually gets away with and suddenly you just became that little bit poorer. The tv just became a little bit more expensive than you calculated and something that you would have bought will now not get bought! Repeat this cycle until you have no money and people come to take away your tv because you failed to pay for it… or part of it… but that doesn’t matter because after you bought it, it became secondhand and instantly you took the wrapper off its value dropped by anything up to 75%! Crikey!

Does that wittering help?

Well… Greece did that. They had a credit rating. They borrowed money but they didn’t buy TVs. They bought, mainly, civil servants. The civil servants spent money and everybody was happy… until somebody said… we’d like some of our money back now please… and Greece looked in the cupboard marked ‘money’ and found it was bare, mainly because somebody else had written a work of fiction called ‘The Accounts’!

So Greece said… actually… we’d like some more please… and the computer said… no! Well, it kind of did, where the computer is the people that buy bonds. I’d call them Gilt Edge Bonds but, where Greece is concerned… that would be an insult to Gilt, Edges and Bonds!

So Greece can’t have any more money unless we all put our hands in our pockets and give them a fiver… each! Then they can keep paying the civil servants who will keep buying stuff and everybody will be happy! Oh… but wait… how many times do we have to give them a fiver… do we get the fiver back? Er… well… no… not unless we ask Greece, pretty please, with sugar on top… sort yourselves out ffs! So some of those civil servants have to take retirment or look for meaningful existence elsewhere and everybody else in Greece has to start paying more taxes, to pay *us* back!

I can smell your indignation already. I hear you cry, ‘fuck Greece, let it burn, it’s their problem, why should I pay???’ Excelent questions. This is possibly why… If Greece fails to pay its debts, they don’t get any more money. If they don’t get any more money then *all* of the civil servants will stop being paid.The civil servants will stop buying *stuff* and so everybody else will effectively stop working and stay home…

On the basis that most people kind of like a roof over their head and some food and water then relatively quickly people get a little upset… then they start to complain, often by burning things and they look for somebody who will lead them out of the trouble they are in. The person they will fnd will probably have a handy scapegoat ready for slaughter… that’ll be us then… they will point and shout and look very cross and everybody will follow and point and shout at us… this only becomes alarming when they point and shout and have a gun in their hand… fortunately… this is Greece… they are not so good at that kind of thing and haven’t been for a few centuries… although of course they did teach the rest of us a thing or two about fighting and conquering and taking on vastly suppierior numbers and winning… but that was a long tme ago!

Trouble is… this thing called contagion… so just like a stinky cold… the rest of Europe will start sneezing… the first few patients are already in the Drs surgery waiting to be seen whilst Greece is having her consultation… Ireland, Portugal, Spain and Italy… all just sitting waiting patiently like patients do and sniffling a little… until Greece comes out and falls on the floor dead! Then they panic, then they get very sick… very quickly!

So… why can’t Greece just print more money and pay the civil servants and keep everybody happy!. Er… because they are in the Euro and the other Euro members would be upset by that as it would affect them as well… and there are some rules that prevent such unsporting behaviour. Greece could revert the Drachma… but that’s a whole world of pain as well… what rate would it be introuced at, when would it happen, what would currency speculators do to it… etc etc… no fun! Anyway… let’s say they did. Greece quits the Euro and reverts to the Drachma. The currency finds a level in the market and Greece starts printing money! Everybody happy then… well… no… because Greece doesn’t actually produce very much… never really has… but if the government doubles the amount of money in circulation, well, one way or another, it halves the value of everything that exists in Greece. So an olive that cost £1 (a very very nice olive it is…) will now cost me £0.50… suddenly I love Olives… what happened???

Well… an olive is produced. It costs, for simplicity £1. £1 is, for simplicity, equal to 1 drachma (yeah right…). The governement of Greece doubles the amount of money in circulation. The olive is, for now, still 1 drachma. But the value of the drachma against the pound just became devalued and one drachma is now only worth 50p.

So I buy lots of olives at 50p… the olive grower is still getting a drachma a piece so what’s the problem. The olive grower needs some fertiliser to help grow the olives. The fertiliser is produced in the UK and cost £5 a bag, or 5 drachma… now it costs 10 drachma, still £5! So the olive grower starts to have less profit, to deal with this, he increases the cost of olives… they climb up to 2 drachma each… I now pay £1 for an olive again… parity has been reached… again… so… this little play continues for a while with the Greek government doing the same thing time and again until inflation runs faster than an olympic 100m sprinter and drachmas are carried around in wheelbarrows!

Surely there is another way… yes… suck it up and pay your debts… plus… start putting the unemployed to useful labour and/or re-education until the crisis abates. But one way or another, Greece will pay… one way or another we will pay too… it is unavoidable. One key thing to bear in mind is this… at the moment Greece has an elected government. Protest is tolerated and the police deal with it as well as they can… change the government for something more extreme, the problem will not go away, either policy will be more harshly enforced internally or the government will deflect attention and cause conflict elsewhere… one potential open sore is obviously with Cyprus… a hard line, right wing government would undoubtedly scratch that particular itch! Turkey has been dying for it to do so for many years… and Turkey would love that Greece left the EU and *then* started something!

Turkey could hardly be blamed for dealing with matters if Greece started. Although it had better start a second front in Kurdistan as they would take any conflict with Turkey as an excuse to pursue their aims.

Not to mention, it is only 37 years since Greece was ruled by a military junta. It could happen again.. unlikely… but possible. Also worth noting that Greece has not been spared from internal conflict and terrorism, there are a number of small cells withing Greece bent on bringing down the elected government and replacing it with Fascist/Marxist leadership. Times such as this make ideal recruiting sergeants!

So when people talk about this crisis potentially leading to war… this is what I think they mean. There are a million scenarios. And very much along the lines of of WarGames, all ending in conflict and a mutually assured destruction. That’s why the EU, IMF, World Bank etc… must resolve this problem, and pretty soon!