The Other McCain

"One should either write ruthlessly what one believes to be the truth, or else shut up." — Arthur Koestler

Greece Runs Out of Other People’s Money

Posted on | June 27, 2015 | 115 Comments

The Eurozone’s problem child throws a tantrum:

Two senior Greek retail bank executives said as many as 500 of the country’s more than 7,000 ATMs had run out of cash as of Saturday morning, and that some lenders may not be able to open on Monday unless there was an emergency liquidity injection from the Bank of Greece. An official with Greece’s Capital Markets Commission, the markets’ regulator, also warned that the Athens Stock Exchange may be unable to operate on Monday without a cash injection into the banking system. A Greek central bank spokesman said it was making efforts to supply money.
The European Central Bank’s governing council was expected to hold a conference call on Sunday to review the banks’ liquidity condition, said a Greek official, who asked not to be named in line with policy. The Frankfurt-based central bank said in a twitter post that it’s closely monitoring developments and would review the situation “in due course.” . . .
Euro-area finance ministers rejected Greece’s request for a one-month extension of its aid program, which expires Tuesday, shutting down any last chance for a financial stopgap until the referendum is held.
After withdrawing more than 30 billion euros as the anti-austerity Coalition of the Radical Left, or Syriza, took power, depositors are now reacting to the latest twist in the five-month standoff with European leaders and creditors.

(Via Memeorandum. More at Legal Insurrection.)

In addition to Margaret Thatcher’s famous maxim about socialists eventually running out of other people’s money, there is also Stein’s Law. This was coined by Herb Stein, chairman of the Council of Economic Advisers during Richard Nixon’s presidency: “If something cannot go on forever, it will stop.” And the problem of the Eurozone’s weaker nations expecting bailouts from their rich neighbors obviously cannot go on forever. So what happens when it stops? We don’t know.

Portugal, Spain, Italy and Ireland — the other fiscal weak sisters in the Eurozone — may manage to avoid default, and the richer EU nations may be able to stabilize the overall regional economy. If so, the Greek problem is just a Greek problem. On the other hand, who knows?

Greece’s European partners shut the door on extending a credit lifeline to Athens, leaving it facing a default that could push it out of the euro after the leftist government rejected tough lender demands and put their bailout deal to a referendum.
Finance ministers of the other 18 countries sharing the euro met for the first time without Greece and flatly rejected its pleas to extend an expiring bailout until after the referendum on July 5 and setting the stage for Athens to default on a crucial IMF payment on Tuesday.
The 18 pledged to do whatever it takes to stabilize the common currency area and said they were in much better shape to do so than at the height of the euro zone crisis a few years ago. In a formal statement, they also implicitly urged Greece to impose capital controls to stabilize its banking system.

We’ve spent seven years in a slow, weak recovery from the crash of 2008, and it might be that the Greek crisis will trigger a worldwide recession. Riots, famine, hyperinflation — anything is possible.

“Fire and brimstone coming down from the skies! Rivers and seas boiling! Forty years of darkness! Earthquakes, volcanoes! The dead rising from the grave! Human sacrifice!
Dogs and cats living together! Mass hysteria!”

OK, probably not that bad. But you never know . . .



115 Responses to “Greece Runs Out of Other People’s Money”

  1. ChristopherSSandberg
    June 29th, 2015 @ 4:04 am

    Your first choice theothermccain Find Here

  2. Chance Boudreaux
    June 29th, 2015 @ 4:33 am

    What can’t go on forever, won’t however. You can’t build a solid nation on worthless debt and paper printers.

  3. Michael
    June 29th, 2015 @ 7:33 am

    I was waiting for someone to call Rule 5 on her. If the view from the front is nearly as good as the back, and were I a politician, I would definitely entertain the idea of having her on staff, IYKWIM.

  4. rabidfox2
    June 29th, 2015 @ 7:39 am

    Tell Congress – PLEASE!

  5. Art Deco
    June 29th, 2015 @ 9:16 am

    The life expectancy of someone at age 65 increased from just shy of 12 years in 1940 to 19 years in 2010 and it’s a dubious proposition that this (or any other changes in mortality rates) is driven by the the changing character of labor. People are less worn out than they used to be (and still retiring earlier).

  6. Art Deco
    June 29th, 2015 @ 9:18 am

    It’s mildly overvalued now, I believe, so a 3% decline is no shock.

  7. Art Deco
    June 29th, 2015 @ 9:20 am

    There is a relationship between asset price declines and aggregate demand, but the latter tends (in most circumstances) to be fairly insensitive to the former. I don’t think it’s a disaster if China has an ordinary business recession. It’s hard to say what’s up, though, because their economic statistics are opaque and the internals do not match. Who knows what’s badly levered over there.

  8. Art Deco
    June 29th, 2015 @ 9:23 am

    A customs union with some co-operative projects worked passably. The trouble has been the monetary union and the Brussels fingers all over social policy.

  9. Matt_SE
    June 29th, 2015 @ 10:27 am

    The Chinese Shenzhen is up almost 100% on the year!!!
    No…it’s not hard to say “what’s up.”

  10. Matt_SE
    June 29th, 2015 @ 10:29 am

    You waited 18 hours to reply, letting the numbers come in in the meantime. How brave of you.

  11. Eric Brown
    June 29th, 2015 @ 12:20 pm

    We already have a program for men with broken bodies; it’s called Social Security Disability. It’s different from Social Security Retirement; one could easily modify one and not the other.

  12. Esau's Message
    June 29th, 2015 @ 5:58 pm

    The Brokest Nation in all of Human Civilization.

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