GREECE PROBLEM EXPLAINED
Way back when about 30 years ago (probably as far as history is concerned) politicians wanted to get themselves reelected to cushy jobs with big perks.
They figured out if they gave the voters more “stuff” before each election the voters would vote them back in and they did. This issued in the period of professional politicians who did not work and lived off the income of those who did.
Of course, their job was to protect the people and pass sensible laws, but this was forgotten as the pols pursued only one thing – staying in power.
The Greek parliament started creating laws that gave people more and more “benefits”. There was no thought of how these would be paid for in the future. At first the government was able to pay for these with reasonable taxes, but as time went on outgo exceeded income from the tax rate
The solution is simple. Raise taxes.
When an economy is growing as it was in Greece with ship building and tourists flocking to the country the debt burden was manageable.
Slowly, but surely as more was given as “benefits”taxes crept up and the people wanted more and more free stuff.
Politicians always promise bread and circuses and never care that they cannot be paid for.
Then the extra taxes that had to be added to both labor and products began to price the ship building business to other countries. Lower wages and taxes in Japan, China, Malaysia created new ship construction companies, but not in Greece.
In order to pay for all the free stuff and benefitsthey had created the pols started issuing government bonds. Then a coalition of European countries was created called the European Union and Greece decided to join. They had to cook the books to qualify. That means lie. The other countries bought their debt (bonds). When they could not pay the interest Greece borrowed money from the EU banks to pay the interest. And those other countries’ banks were stupid enough to give it to them.
Suddenly there is hundreds of billions of Euros (that’s like dollars) owed and the other countries continue to give them money so they won’t default on their debt.They know that every cent given will not be repaid. Greece is broke broke.
Because the banks in all those other countries are also broke for the same reason they realize if they let Greece fail then every other country will also have to declare they are bankrupt. And no one wants to tell the public the truth.
Let’s go one step further. The country of Italy is even broker than Greece, and they have billions of those worthless Greek bonds. If Greece defaults then Italy will go down also. Then every other European country will fall like dominos.
As bad as Greece is Italy is 10 times worse.
And did I mention it is going to affect the U.S. economy as well.
Have a nice day.