18 June 2012
Norman Pagett writes
When the cheering and flag waving and sighs of relief over the Greek ‘problem’ have died down, we should perhaps consider the unchanged reality. Greece has to import half its food, almost all of its energy and has a debt of around 180% of GDP. That’s the bottom line for Greece, and no bailout is going to alter that. Pumping money into the Greek economy merely ‘kicks the can down the road’. It will not create wealth producing industry, because Greece has no means of sustaining industry. Bailout money will keep the ATM machines full for a while longer and pay civil servants wages. The USA looks at Greece, deluded that ‘it cant happen here’ but borrowing has already reached $15tn. Just like Greece, America has hocked itself against the promise of future prosperity, borrowing yet more money just to service that debt, the only certainty is that that debt can never be repaid. Flat earth economists insist that borrowing and spending creates wealth…just like in Europe. It doesn’t, ask any homeowner with a sub-prime mortgage. This is about the world economy, not just the Greek problem, because we have all built our future expectations on the cheap energy we had in the past; now there isn’t any left so world economies are crashing. The Greeks are bankrupt, Spain’s banks are bust, the rest of the global house of cards is tottering
This is the beginning of the world plague that will wipe out the world economic system.
Europe has an energy problem, specifically the rising cost of it. When Greece entered the European union, oil was $25 a barrel, it was still $25 when they joined the Euro. Unfortunately when oil jumped to $147 a barrel, the Greek economy didn’t have the strength to expand at the same rate. Money is just a token of energy input, the Greeks couldn’t afford their necessary energy supplies, so their financial system crashed. Sounds familiar? The USA also built its infrastructure on cheap oil, now oil is too expensive to sustain it. Drill all you want, but cheap oil isn’t coming back. Take away cheap energy and Greece reverts to a peasant economy. The same applies to the rest of Europe and the USA. We are all staring into the abyss of a very different future.