The ancient civilizations of Greece gave us the example that provided the foundation of our democratic government. Today, Greece is giving us an example of what happens when a country goes on a spending binge.
Greece currently owes 124% of its gross domestic product, or national income. Today’s budget estimates put the US debt at 94% of GDP. Just four years ago our debt level was at 64%. If the US continues to accumulate debt at our current rate, it is not inconceivable that what is happening in Greece will happen here before the end of this decade.
I’m not the only one thinking this way. The following paragraphs are adapted from an informal letter shared by a fellow financial planner from New York, Neal J. Solomon, CFP®. He points out that the information is not intended as a professional opinion or advice from his firm, but that it is unconfirmed and anecdotal, having come from Greek friends during a private conversation.
“It is interesting that Greece, the site of the world’s first democratic experiment, has in modern days seen its people irresponsibly vote themselves into the poorhouse. They have asked government to spend beyond its means. Government, with its politicians concerned mostly about being re-elected, saw fit to comply, and comply, and comply.
I have some good friends (dual Greek and US citizens) who live in Athens. They tell me corruption is rampant and every tax increase is met by an exponential increase in the underground, non-compliant economy. There is no sense of duty to pay taxes. There is no sense of dishonor asking someone to transact business outside of the system.
Greece’s healthcare system just about collapsed when it became socialized. First, long lines led to treatments being scheduled so far in the future that costs were reduced because patients routinely died before the treatment date. Citizens responded by taking paper bags filled with paper currency to doctors in exchange for prompt treatment.
When this practice became common, the government eventually began arresting doctors. Did this make the system function properly? Nope. The doctors simply used their nice European Union passports to leave the country and seek work elsewhere.
Nurses were then expected to provide medical care they hadn’t been trained to do. This at least made costs go down—nurses started fleeing, too, so that salary expense declined. My friends in Athens report many Greek hospitals are “just walls—no doctors, no nurses, not even anyone worth bribing. When we need care, we buy a ticket to the US.”
Prices have climbed in Athens. Unions are on strike more days than they seem to work. The Germans own paper on half of the country, having funded much of Greece’s Olympic Games a few years ago. The new Athens Airport, though, is not the result of German loans. The Germans own it outright.
Democracy works. But socialism and corruption doesn’t always have great results.”
“There are no good solutions here, only very difficult ones,” says John Maudlin, editor of Outside The Box. “In order to get financing, Greece must willingly put itself into a multi-year depression. And borrowing more money when it cannot afford to pay back what it has will not solve the problem.”
As reported in London’s Guardian newspaper, Greek Finance Minister George Papaconstantinou said, “We are trying to change the course of the Titanic, it cannot be done in a day.”