Greetings Regular Joes,
As I mentioned before, I have some thoughts about Cyprus that I’d like to share before we get any announcements during the week. My early comments seem off by a longshot, as I share at the bottom of Friday’s entry. It just seemed impossible. But today’s thoughts are a bit more philosophical, considering instead the hearts and entrapment of the Cypriots, and Greeks by implication. Italy could be lumped into this group for various reasons as well, as could Spain, Portugal and, to some extent, France.
This commentary was born from some comments a man of Greek decent shared recently. He’s angry because the Greeks, and Cypriots, made this mess themselves and lived selfishly and slovenly, creating the whole conundrum. Unfortunately, while there is an element of truth to this, it’s only a slight shred of the story. And it really fails to examine cultural, philosophical and major economic differences and nuances that made the pursuit of fiscal union with Germany a form of economic suicide for these Mediterranean countries.
First, this really is sad. And it would probably help a little with perspective if the history was considered.
The euro has been dangled before countries like some panacea of perpetual wealth (did I say that right?). The ones that have taken the greatest hit from being in the euro are the ones who had fairly weak, but somewhat stable, economies, but a somewhat large tourist industry because prices were so low. The local currency exchange simply made it attractive to Europeans, Americans and Asians to vacation there.
But the German design wasn’t built with these countries in mind. It was built with a frugal and very industrious people in mind.
This is not a matter of right and wrong. It’s a matter of simply being different. It’s a clear fact that cultures nearer the equator tend to have a more relaxed perspective, living in the moment rather than planning diligently for the future. This is understandable, since basically every day is the same as the one before.
In cultures farther removed from the equator, seasons and temperature variants necessitate a different approach to life. You can only plant during certain times. You have to harvest at certain times. And, as the distance from the equator increases, you have to work harder during the warmer months in order to prepare for the colder months. You simply have no choice. But this breeds a people more focused on working their tails off when they can. This video is a fascinating study that helps put perspective on our perception and philosophy of time.
Again, this isn’t better. It’s different. Personally, I’ll take the warmer climate with the more relaxed culture any day.
So, the Germans draw Greece, Italy, Cyprus and other cultures into their fiat banking system, promising greater wealth as a result. Never mind that no fiat currency system has ever succeeded in promoting sustainable wealth. The idea of being part of a European economic powerhouse was simply too alluring and seemed, at the time, to have almost no risk.
The Greek people, accustomed to living from payday to payday, enjoyed an economy that catered to the wealthy, or wannabe wealthy, because it was a beautiful and yet very affordable location to vacation and/or have a second residence. It was appealing for many reasons, but the price was right. This provided a great benefit for both the locals and visitors.
The Euro comes along and they all of a sudden have more wealth. What to do? Well, increase your standard of living, of course. This euro thing seems great at this point, since they now are making more per unit than they were before. I remember hearing that many prices in Italy tripled when they changed from the lira to the euro. Is that sustainable?
Eventually, tourists begin wondering if they should continue with their Greek vacations. It’s becoming more expensive now since they have to pay in euros. So, they start looking elsewhere.
The Greek or Cypriot starts to notice that he’s not able to draw the crowds he once did. As a result, he’s beginning to struggle to maintain this better lifestyle he’s grown accustomed to. And, of course, with the euro comes a higher cost of living as well, since all his neighbors are charging more too.
What gives? Debt, that’s what. And, of course, along with the new currency comes increased ability to borrow these empty promises and maintain the status quo until the next wave of visitors comes and bails them out.
The wave never came. It wasn’t based on a wave, it was based on a monetary wall erected by the ECB. But few could understand this. It had never happened that way before. Before long shopkeepers are in the street, practically begging passersby to come into their establishments. Restaurateurs are getting into fist fights in the streets over customers.
The economy was somewhat weak, but fine without the euro. The culture was rich with history and a Mediterranean lifestyle. But the empty promises destroyed their economy, raped them of what wealth they had and enslaved them to debt. This is what central banks do. And, in cases such as this, it’s insidiously inevitable.
Blame the Greeks and Cypriots? Not really. Sure, they embraced the promise of riches and fell into a trap. But they really were trapped. And they’re victims as their economies are now enslaved to the ECB. The question is whether or not they’ll break their shackles and return to loving life.
This is basically a call to compassion. While there are degrees and there’s plenty of blame to go around. There is also the very real aspect that this was imposed upon a culture that was not prepared to sustain it. But also keep in mind that central bankers do not offer a sustainable currency. They offer a contrived one that systematically consolidates wealth among the elite. Cyprus and Greece never stood a chance as part of the system. But then, nobody does.
What now? That’s the question of the day. Likely we’ll hear something Monday (April Fools’ Day – oh the irony!) that will help us understand what to expect a little better. Of course, we can’t believe it all because it’ll be spun just right to make us believe what the powers-that-be want us to believe. But the truth of the matter will leak out a bit at a time.
Regardless, there’s only one good decision for these countries. They need to break free of the ECB chains. They simply will never succeed under the current system. It’s not only difficult. It’s impossible. They need to embrace this reality, tell the ECB to go jump in the Atlantic, and reinstate their own local currency. It would be even more beneficial if they’d do so with a gold standard, or at least a basket of precious metals. But that’s likely asking too much.
One step at a time, establishing credibility again, will go a long way toward rebuilding their economies, and their reputations. Until then, they’ll remain enslaved to a system never designed to do anything else.