It can’t happen here

The impending Greece default has been overlooked in most of the news. I don’t know if this is that it is being crowded out by other items or if reporters don’t understand the implications of a Greek default, but it deserves more attention than it is getting.

Last year, the Greeks ousted their newly elected government that implemented austerity measures to try to stave off a default. These people were replaced with a government that promised business as usual, that is, no reductions in government goodies.

Last week Greece stiffed the International Monetary Fund (IMF) on a 1.6 billion Euro payment. Greece’s creditors insisted that Greece meet them halfway by offering an emergency loan if Greece cuts spending and raises taxes. On July 5, Greece held a public vote to decide if it would accept these terms. The vote was overwhelming “no,”

If you ask a child to vote on whether he should give back the toys he got for Christmas, how do you think that child is likely to vote? You may have overextended your credit card to buy him those presents, and the bank may be threatening to close your account if you don’t pay at least the minimum monthly installment.

But the child doesn’t care. He just wants to play with his toys.

Although this analogy may seem simplistic, it is basically what’s happened over the weekend in Greece.

Since I write this a few days ahead of publishing, I don’t know what will have happened in Greece by the time you read this. It really doesn’t matter. My point is that what caused the problems in Greece are alive and well elsewhere. Remember the PIIGS in 2012? That was Portugal, Ireland, Italy, Greece and Spain, all with similar problems and all teetering on the brink.

Stock markets worldwide dropped when Greece defaulted. This causes uncertainty in the investment world Greece may be booted out of the European Union and revert to their original currency. They will need to print money to pay their debt, which is inflationary. If the EU keeps them, then EU bonds will be less salable, which results in higher interest rates which may trigger deflation.

U.S. markets usually follow other world markets in a sympathy reaction mentality. U.S. Treasuries and the dollar will be affected. How, no one knows yet, but there will be an effect.

There are several possible effects on the U.S. from the Greece crisis. Greece or some other event could be the trigger for a major U.S. economic event, but the pieces are in place. Just look at what caused Greece’s problems.

First, a government grown too large, too intrusive, and too expensive. Second, ever increasing government benefit programs. Third, excessive borrowing to support that government. Fourth, no real economic growth to pay for the debt.

Do you see any parallels? We now have an uncountable number of federal regulations. Added to that are agency administrative edicts plus state and local laws. We have virtually no limits or caps on government aid programs plus a Social Security system that is broke, and unfathomable contingent liabilities. 93 million people are on food stamps. Added to that is the burden of Obamacare.

Our debt has increased $7.5 trillion under the Obama administration. It is now at record highs, even adjusted for inflation. Our economic growth is at its lowest level since the 1970s. Finally, the total percentage of American households receiving some sort of government assistance is now at 49 percent. When that tops 50 percent, look out. We could have a voting bloc like that of Greece. That is uninformed voters acting like kids with Christmas presents.

Economies are intertwined to a degree never seen before. A seemingly minor event elsewhere can affect markets internationally. Many say Greece, and now Puerto Rico, are just the beginning, with unknown effects. The U.S. economy house of cards could easily topple.

Can it happen? Many say no, but they said the same about other countries. Not that long ago Argentina was a model of prosperity. Now they have basically defaulted and nationalized much of their industry to try to stay viable.

It is true that the U.S. is a much larger economy and the dollar is the world trade currency. But China and Russia would love to see the dollar replaced with gold or a basket of currencies, and have already floated the concept. If that happens, the “word of the U.S.” won’t mean much. So never say never.

Tom Riggins is an LVN columnist and may be reached at


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